China mines Tibet's rich resources

China mines Tibet's rich resources

The railway link to Tibet now appears to have been part of a broader plan to exploit vast deposits of metals in the disputed region, explains Fortune's Abrahm Lustgarten.

FORTUNE Magazine

21st February 2007

(Fortune) -- When China opened its controversial new railway to Tibet last July, international critics howled at the prospect that the region's culture and environment would be ravaged in search of resources. China repeated a solemn refrain, its officials insisting that the $4 billion project was aimed not at plundering the disputed territory but at bringing prosperity and economic development to Tibetan society.

So much for that. Now China's Ministry of Land and Resources is disclosing monumental new resource discoveries all across Tibet, and it turns out the findings are the culmination of a secret seven-year, $44 million survey project which preceded the railway construction in the first place.

In 1999 more than 1000 researchers divided into 24 separate regiments and fanned out across the Qinghai-Tibet Plateau, geologically mapping an area the size of California, Texas and Montana for the first time ever. Their findings: 16 major new deposits of copper, iron, lead, zinc and other minerals worth an estimated $128 billion, according to articles published last week on the website of the China Tibet Information Center, a government-run portal.

"Lack of resources has been a bottleneck for the economy," Meng Xianlai, director of the China Geological Survey, said in the statements. The discoveries in Tibet are prompting China to re-evaluate its potential domestic resources, and "will alleviate the mounting resources pressure China is facing."

In fact, if proven, the new reserves make Tibet one of the richest regions in China's territory and could shift the country's reliance on imports of copper and iron altogether, affecting international commodity markets way beyond China. Altogether Tibet is now said to hold as much as 40 million tons of copper - one third of China's total - 40 million tons of lead and zinc, and more than a billion tons of high-grade iron.

The announcement comes at a time when Tibetans are struggling to adjust to an astronomical increase in the number of tourists and Chinese settlers traveling on the 710-mile railway extention. In Lhasa last fall hotels were booked to capacity, the city's streets were clogged with bumper-to-bumper traffic, and a gold-rush mentality pervaded among newly-arrived entrepreneurs seeking at least a small-scale piece of the mineral riches.

One Chengdu-based hotelier blithely bragged he had invested $2 million to startup a private iron mining operation six hour's drive from Lhasa. At least six major Canadian and Australian mining companies also have stakes in Chinese consortiums set up to operate on the plateau. China is the world's largest importer of iron ore - 326 million tons last year - much of which feeds its insatiable steel mills and in turn its ballooning construction and auto industries.

High-grade iron prices have more than tripled in the last two years, driving up development costs world-wide, at least partially because of China's demand. Among the Tibet discoveries is China's first substantial rich-iron supply, a seam called Nyixung, which alone is expected to contain as much as 500 million tons.

That's enough to put an expected 20% of Chinese iron importers out of business this year and, according to China Geological Survey's vice director Zhang Hongtao, "may relieve the country's three-decade long dependency on iron imports."

The new copper reserves are no less substantial. A 250-mile seam of the metal has been found along Tibet's environmentally cherished Yarlung Tsangpo Gorge. One mine there called Yulong, already described as the second-largest reserve in China, is now estimated to hold as much as 18 million tons according to the government news site Xinhua and could soon become the largest copper mine in the country, helping to feed China's hyper-charged metabolism for the metal used for electrical wiring and generation.

In all, three new Tibetan copper finds increase China's total copper reserves by a third, according to the international mining industry website Mineweb, and, once production comes online, will decrease imports by the same amount. China, which until now has imported much of its copper from Chile, is estimated to hold 5.6% of the world's copper and is its seventh largest producer.

While transportation development continues - a fresh set of satellite images on Google shows a large increase in road construction branching off the new railway route - education and health care spending in Tibet continue to lag far behind the rest of China, provoking the ire of human rights advocates.

"Clearly China's leaders have never intended the railway to benefit Tibetans," says Matt Whitticase at the London-based organization Free Tibet Campaign. And future development priorities do little to alter that image. Last March China announced - among the national priorities listed in its 11th Ten-Year Plan - an extension of the railway from its present terminal in Lhasa to the western city of Shigatze, and beyond.

What's there? According to the Geological Survey's hopeful Zhang, "super-large" crude oil and gas reserves in Tibet's far-western Qiangtang Basin, as well as large quantities of oil shale deposits in areas west of the new train line.