Business Opportunities with Oyu Tolgoi - 2010

By Dan


"There are going to be a lot of challenges, a lot of risks, we will not be able to manage the risks and

seize the opportunities unless we do it in partnership with qualified experts."

Says Layton Croft executive VP for corporate affairs and social responsibility for Oyu Tolgoi (OT) LLC. These were the greeting words at the open information session for the tender bidders for the consultancy for the design of a long-term Cultural Heritage Program.

OT is drawing both local and global attention of experts in many fields. Scholars and businesses are eager to take part in the development and expansion of the mining industry in Mongolia.

Today, February 26, 2010 proposals for two challenging tenders were submitted. The two are the Cultural Heritage Program and the Health Safety and Security Program. More than thirty groups, Mongolian and foreign, from nine countries intended to submit proposals for these tenders. Some of the teams are comprised of well-known and experienced experts, while others are comprised of new groups specifically created for the purpose of submitting proposals.

OT is the largest as-yet undeveloped copper-gold ore mine in the world. It is located near Khanbogd village in South Gobi province of southern Mongolia. Due to its scale and the nature of OT's operations, the project will have a variety of direct and indirect socio-economic and cultural impacts on communities and stakeholders, including both positive and negative impacts.

The design phase OT offers in it's tenders, is a unique opportunity for foreign experts together with Mongolian scholars to join in, and share the wealth the Mongolian land has to offer. The scope of research, analysis, survey, design and planning initiatives is vast.

Base Line

During 2008 OT together with the government of the Umnugovi Aimag (province), assisted by Responsible Mining NGO, conducted a base line study covering Umnogovi Aimag. The study was conducted by consulting over 40 regional and national level stakeholders. In 2009 OT narrowed the geographic scope, to the OT direct impact soum - Khnbogd, and to the indirect impact soums Manalai, Bayan-Ovoo, and Dalanzadgad. A Socio Economic Impact Assessment (SIA) report was published following the survey.

These two reports have become the guidelines for the next five years and the stepping stone for further design projects analyzing risks and planning risk management. A number of ongoing and future design projects have been initiated.

Macro Economics

This year OT is collaboration with the School of Economic Studies at the National University of Mongolia, with technical advice from Rio Tinto Economics Department in London. The team is preparing the "Macro Economic Assessment". This is part of what Rio Tinto names the "Multi Year Community Plan". The "Macro Economic Assessment" will analyze the impact of OT on the economy on the local, regional and national levels. This report will be made public and become an essential tool for economic planning in Mongolia.

Environmental Monitoring

Mining entails complex environmental challenges. The initial work regarding environmental issues will be the "Environmental Information Disclosure". Long term design of monitoring and preventive programs will follow.

Business Development

OT's Procurement and Commercial departments are engaged in long term local business and economic development initiatives.
The aim of these programs is to promote local entrepreneurship, and sustainable economic growth that is not dependent solely on mining companies.

It is a well known problem of mining towns worldwide. When the mining is terminated, the towns that were economically dependent on employment at the mines, begin to deteriorate and eventually collapse economically. In Mongolia it might be called the "curse of Mardai". Mardai in eastern Mongolia was a secret town designed and built entirely for Russian employees at the uranium mine in Mardai. It was one of the most beautiful towns in eastern Asia, complete with theaters, cafes, fashionable shops, large public gardens, a good education system, and an excellent health clinic. All the facilities and services were designed and created for the mining town. When the Soviet Union collapsed and ceased to import uranium from Mardai, the city collapsed within a few months. The remains of the city can be seen today, and still reveal the lost beauty of the town.

Regional Infrastructure

The OT investment agreement states the need for infrastructure planning and management. OT together with government agencies is engaged in long term infrastructure planning development and management on both a national and regional level. The team is focused on urban planning , infrastructure planning, public services, public service delivery issues, and influx management.

Community Health

OT is aiming to design and implement a Community Health, Safety & Security Program in an effort to insure to the greatest extent possible, the health, safety, and security of those affected by the OT operations. Work on this issue will begin within the next few months.

Cultural Heritage

OT project is seeking to understand and preserve the cultural heritage of those in the region. Work on this program will commence in May 2010.

Tender Process

I participated in preparing a proposal along with the TMGL team for the Cultural Heritage Program tender. My overall experience with OT related to this tender was a pleasant one.

OT is aware that there are excellent Mongolian scholars, but also aware that many have little experience in preparing proposals for tenders.

The terms of reference were clear and straightforward. Those with no previous background in proposal writing were given a fair chance. OT in collaboration with Open Society NGO and others, conducted a free of charge and very helpful workshop on how to write proposals.

OT launched an active discussion forum on the Internet, where bidders had the opportunity to ask questions and collaborate with each other. The official question and answer session held at Chinggis Khaan Hotel, was videotaped and available on the web for those who could not participate. (The photos are snapshots from the videotaped Q&A session).

The proposal evaluation committee includes a mixture of several stakeholders, including members from the Umnugovi Aimag. OT published the list of questions the evaluators will have to answer, the proportional weight of each aspect in the proposal, and the evaluation process itself. OT is interested in quality. Therefore the weight of the proposed cost is only twenty percent; forty percent is allotted for quality of proposed method, and forty percent for the quality of the team.

Social Relations Department


Rio Tinto which is the third largest mining company in the world became a strategic partner of Ivanhoe in 2006 after buying 20% of Ivanhoe shares. Rio Tinto has over 150 years of experience in mining, in 30 countries. In recent years Rio Tinto has put a lot of emphasis on social relations and social planning. OT has adopted the high standards of social relations and planning set by Rio Tinto.

Leading the initiative is Mr. Layton Croft, OT's VP for corporate affairs and social responsibility. Layton has many years of experience in Mongolia since becoming a Peace Corps volunteer in Mongolia several years ago.

Ms. Sugar and Ms. Tserennadmid are senior managers at the OT Social Relations and Sustainable Development (SRCD) department They are managing all the social and cultural impact consultancies. Ms Morgan Keay will assist as a consultant to SRCD. Morgan is the co-founder of the ITGEL foundation committed to protecting Mongolia's cultural and environmental legacy.

Related articles:

Oyu Tolgoi Agreement

Mining Conference

Mongolian Mythology

Gobi Treasure Hunt

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Archived Comments
R. Hanes
2010-03-30 23:28:23
There is too much risk for foreign investors. The Mongolian government keeps changing the rules ie the new Nuclear Energy Law.
business opportunities
2010-07-27 16:47:52
I agree with you Dan. I like your ideas. Yes, it's true. I love it. I learned a lot from you.