The Battle between Boroo Gold Mine and the Mongolian Trade Union Reaches No Consensus

By Thomas Coffman

June 1st marks the sixth day since employees of Canadian Boroo Gold (operated by Centerra Gold TSE:CG), the largest gold mining company in Mongolia, announced and indefinite work stoppage after months of bargaining on severance pay. Stoppage was a backlash of union spurred by company sudden announcement to terminate 50 workers.

Although union delegates and company representatives are continuing talks on severance pay’s final amount, little progress was made. The company’s latest offer was three month’s pay to long-term workers, which adds up to be nowhere close to 9.4 million USD the union is demanding for the company’s 600 or so employees.

Large salary gaps and possible environmental leakage cover-up

Recent disclosure of employee salaries over the internet showed that expats get nearly 30-40 times more than the nationals. Boroo’s head John Kazakoff has been reported to receive a monthly salary of over $30,000, which excludes bonuses and additional benefits. “Expats are pampered—they even have personal bodyguards when they go out clubbing” one worker says.

Senior company officials have been reported to mistreat workers and threatened to fire. Kazakoff was alleged to say that worker would have been herding livestock without Boroo.

Recent Mongolian news reports have been alluding to a potential cyanide leakage cover-up from Boroo tails storage where toxic sludge is accumulated. Some workers saw water pumped out of a well and suspect that it was cyanide contaminated groundwater since the well was quickly covered up whenever inspectors were on site.

Initially a company’s internal issue is now expanding nation-wide as the union is successfully teaming up with political movements and environmental groups.

The general public largely agrees that the Stability Agreement signed in 2000 between Boroo and Mongolian government has only created favorable conditions for the company to evade from taxes and to produce gold at minimal costs. Much resentment and blaming is being expressed towards government officials, including the current Foreign Affairs Minister, who allegedly owns 5% of the company.

Company’s reaction or lack thereof

The firm says that additional wage demands are “unreasonable” and says that the stoppage is illegal.

Company heads argue that Boroo is an important contributor to local economy and is committed to seek future mining projects in Mongolia as evident in its ongoing explorations near Boroo. In addition to monetary donations and infrastructure development, representatives say that intangible benefits to locals such as work specialization and distillation of safe work culture cannot be ignored.

The company is officially willing to negotiate and promises to recruit terminated workers to its forthcoming project at Gatsuurt gold mine, which lies in a lush forest 60 km east of Boroo.

Company has been fervently fighting off negative publicity and even launched a series of programs on national television channels and newspapers.

Workers say that the company is simply trying to win time yielding nothing before all gold is dug out.

Deadlock

Over one hundred employees have already pitched their tents outside the gate and have blocked the main entrance. Another 200 are staging a stay-in strike. Some tension was in the air after the mine manager terminated all food provisions and workers backlashed by blocking internal roads. Meals were sent starting from May 31st, news reports say.

The union has long ago pledged assistance from the government asking to investigate all aspects of the company’s operations with a special focus on company profit allocation and toxic material management. The working group made up of Ministry heads and parliament members is expected to drive in anytime.

Gloomy future

Workers are convinced that raise in wages and increased severance pays are reasonable demands considering all profits the company gained from over 40 tones of gold exported in the last few year. 9.4 million USD accounts for less that one percent of the company profits, their investigation showed.

In light of glooming unemployment, mine workers are ready to put everything at a stake. They are likely to press their case anyway, and will probably have to do so on the main Sukhbataar square.

At the same time, it is clear that Boroo can ill afford a prolonged period of production loss.

Current battle sheds light on Mongolia’s flawed legal system, lack of technical ability and the need for stricter enforcement. One employee tells that inspectors spend more time familiarizing and touring the mine instead of “doing their homework”, since they have no expertise in this industry.

Also, deep-held national resentment toward massive mining sector growth and messy land ownership deals, topped by tense employee/employer relations is emerging.

In the meantime, foreign mining companies like Ivanhoe Mines (TSX:IVN), Rio Tinto (NYSE:RTP) and BHP Billiton Ltd. (NYSE:BHP) might as well keep a close eye on unfolding of this battle as it may jeopardize future investment opportunities in Mongolia.

Thomas Coffman
Independent Observer
Central-Asia Journalist

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