China Update

Published by MAC on 2006-07-29

China Update

29th July 2006

Tibet railway opens the gates for mining

http://www.interfax.cn/showfeature.asp?aid=15593&slug=MINING

28th July 2006

Shanghai. July 28. INTERFAX-CHINA - With the opening of the new Qinghai-Tibet railway earlier this summer, an unhindered path has been carved to the lofty region that has long been wrapped in romantic ideas of isolation. And with the new access could come a rampage of exploitation by many Chinese companies chasing the expansive mineral resources hidden in the mountain province.

China's Tibetan Autonomous Region could be the largest mineral resource in the country, with a potential value of more than RMB 1 trillion (USD 125 bln).

Tibet has the largest chromium and copper deposits in the country, and prospecting has already discovered deposits of 101 other minerals and more than 2,000 more potential mining sites.

The potential of severe environmental impacts on the largely untouched region has even gotten the Dali Lama warning Western mining companies to stay out of the region.

Because of a lack of funds and transportation, few of Tibet's mineral deposits have so far been explored. In Tibet, less than 1% of discovered mines have been prospected, only 15% of mines under commercial operation have completed reconnoiter works, and only 10% of mining companies have passed resources assessment by local authority.

But this was all before the railroad came to town.

The newly opened Qinghai-Tibet railway will have a large impact on the development of the province's mineral resources, to say the least. Production output could surpass RMB 10 bln (USD 1.25 bln) and account for one-third of the province's GDP within five to 10 years, according to the Xinhua news agency.

During the past couple of years, prospectors and miners from Qinghai, Sichuan, Jiangsu, Zhejiang, Jiangxi, and Fujian have entered into Tibet. But now, the Qinghai-Tibet railway, opened this summer, can provide less expensive transportation, which will attract more miners.

The Tibetan government will focus on mineral deposits development in areas covering 100 to 200 km far from both sides of the railroad and areas nearby rivers. The Tibetan government plans to apply for RMB 1.5 bln (USD 187.5 mln) in financial support from the central government to use for prospecting for mineral resources in the next four years.

Mining companies in Tibet

Tibet Mining Co. Ltd. could be one of the mining pioneers in Tibet.

The company operates Luobusa ferrochromium mine in Qusong County Shannan Region, China's largest ferrochromium deposit contributing 80% to the country's total output.

The company owns interests at the Zhabuye Salt Lake in Tibet, which is planned to produce 3,000 tons of lithium carbonate this year and 5,000 tons next year.

Tibet Mining is now expediting construction and production of the Tingong Copper Mine located on a copper belt in the Yarlung Zangbo River region.

Ni La, an official with the company's project department, told Interfax the copper mine has started trial production with 1,000 tons of electrolytic copper annual capacity, although the mine is still being prospected.

She said the company's transportation costs have been reduced by 20% with the opening of the new railway.

"The company's development was restrained before the railway because of the high transportation costs," she said.

Another company, Tibet Yulong Copper Co. Ltd., officially entered Tibet in May 2005.

The company mainly develops copper mines in Yulong, which has proven reserves of 6.24 mln tons and prospecting reserves of 10 mln tons.

The first phase of the project is designed to produce 30,000 tons of copper, the second phase project will add a capacity of 100,000 tons.

But since the opening of the railway, new companies are lining up to get involved in the development of minerals in Tibet.

The Tibet Tianlu Transportation Co. Ltd (Tianlu), a road construction company, wants to set up a joint venture mining company for developing resources in the region.

"The company will benefit from the Qinghai-Tibet Railway and experience of infrastructure construction to pursue mining opportunities in Tibet. We are now talking with Tibet Geology Survey Bureau for prospecting rights," an anonymous Tianlu official said. The company participated in the construction of the railroad.

In addition, the Tibet Summit Industry Co. Ltd, another road construction company, announced at the end of June it has shifted its main business into mining sector. It aims to develop metal resources both in Qinghai and Tibet.

Environmental consequences

However, with more and more commercial mining projects coming on stream, Tibet is facing serious environmental consequences, in the region that was once mostly untouchable. But the government seems to at least have some understanding of the situation.

Lu Yan, the Chief Engineer of China's largest copper mine the Tibet Yulong Copper Mine, told Interfax that the mine had delayed opening operations because it failed to receive the environment approval from the central government.

Lu said that the central government has acknowledged the likely pollution to Tibet by increasing mining activities and is trying to protect it as much as possible from the very beginning.

Power is another problem.

Tibet Yulong Copper plans to use power from a proposed hydropower plant at the Zhaquhe River. However, if the proposal becomes practical, it needs to build 110kv power transmitting wires from the mine to the plant. The wire will go through a forest and the old trees need to be cut down.

Although the Tibet Forestry Bureau has approved the plan, Lu admitted that it would impact the local environment.

And as part of the preparation for mining, Tibet Yulong Copper has flattened the land for future mining and smelter construction.

Ni admitted the company's mining activities have caused pollution to local environment.

"Anyway, our mines are open pits and they have less impact on environment," she said.

She said the Tibetan government had higher environmental protection requirements for mining projects than other regions in the country.

"The Tibetan government prefers large mining companies to be involved in the exploration of Tibet because they are more aware of environmental protection and have more funds to afford pollution controls."

Environmental protection cost in Tibet accounts for more than 30% of total cost in mining projects, which is higher than mining in other regions of China.

The company has adopted scrap ore recovery systems to prevent the pollution of surrounding environment.

However, she claimed any mining project does hurt environment even if it takes control measures.

Foreign companies mining Tibet

Western companies have also begun exploration work and have acquired rights to mineral sites throughout Tibet, sparking protests from western activists.

The annual general meeting of Continental Minerals Corporation, a Canadian firm developing a copper-gold property southwest of Lhasa, was met with protests from 'Free Tibet' activists in June of this year.

And the Dali Lama has also gotten involved.

The Dali Lama urged western mining companies to reconsider their activities in Tibet in a 2003 letter.

"I appeal to all foreign mining companies, and their shareholders, who are thinking about working in Tibet to consider carefully about the ethical values when embarking on such a venture," said the Dali Lama.

Activists have reason to be concerned. In 1996, the head of a monastery was sentenced to six years in prison for protesting increased mining activity near the monastery.