Ulaanbaatar /MONTSAME/ Mongolia’s economy has long been in a standstill due to the pandemic. This pandemic is a force majeure event that no one could have planned for. However, a major project, with a commitment made to the Government to boost economic growth and turnover, is now delayed due to the reckless and irresponsible operations of investors. That project is Oyu Tolgoi. The project’s underground development cost has blown through its budget by US$1.45 billion and its completion is delayed by two years. The investor, Rio Tinto, told the Government on multiple occasion that “The cost overrun and schedule delay are due to unforeseeable ground conditions, i.e., geotechnical issues.” The Government arranged for independent experts to verify the investor’s explanations, however, a team of world-renowned international experts concluded that the “cost overrun and schedule delay were not caused by geotechnical issues but were due to the management team’s lack of integration, knowledge and experience.”

Former Prime Minister of Mongolia, S. Bayar, who signed the agreement, recently told B. Nomin-Erdene, a journalist with “Daily News” that “independent experts seem to have issued a report on the Oyu Tolgoi project. They seem to have concluded that the many issues at Oyu Tolgoi are due to mismanagement rather than the agreement. If so, I believe the conclusions are accurate.”

Rio Tinto: Mongolian workers are to blame for cost overruns of the underground development

However, Rio Tinto, the Oyu Tolgoi investor, failed to provide concrete explanations in response to the findings of the independent experts. Kh. Nyambaatar, Minister of Justice and Internal Affairs of Mongolia and head of the Government working group to negotiate with the Oyu Tolgoi investor, N. Tavinbekh, Minister of Energy and other members of the working group held a meeting with representatives of Rio Tinto group on 6 October. During the meeting, head of the working group, Kh. Nyambaatar expressed his dissapointment with Rio Tinto’s inability to provide sufficient responses to the findings of the independent experts and he stressed the need for Rio Tinto to be more transparent and to implement good governance principles in order to build a mutually beneficial partnership based on trust.

While Rio Tinto has not provided concrete responses to the findings of the independent experts, Rio Tinto started to publicize their position on major global media outlets such as mining.com and financialtimes.com stating that “One of the factors that contributed to the US$1.45 billion cost overrun is the increase in investment costs for Mongolian workers.” In other words, while Rio Tinto initially explained “Cost overruns and project delays were due to ground conditions,” pointing at an inanimate object, they are now blaming their Mongolian workers. Outraged by the statement, the executives of Oyu Tolgoi’s mine workers’ trade union submitted a letter of demand to Kh. Amarjargal, Country Director in charge of Rio Tinto’s operations in Mongolia.

The union’s letter of demand says, “Rio Tinto has over the last few days, through major global media outlets, such as mining.com and financialtimes.com, expressed their disagreements with the findings of the independent experts who conducted a review of the undergound expansion project of the Oyu Tolgoi copper and gold deposit. We hereby officially notify you that the statement made by Rio Tinto, “One of the factors that contributed to the US$1.45 billion cost overrun is the increase in investment costs for Mongolian workers. Today, 96 percent of Oyu Tolgoi’s workforce is made up of Mongolian workers, which is higher than initially planned, and the investment in them has led to cost overruns and schedule delays”, is received with much skepticism and frustration by the many thousands of employees who are tirelessly working at the underground expansion project, and it is an irresponsible, disrespectful and ignorant attempt to make excuses and justifications through such media publications.

Rio Tinto’s comments not only undermined the confidence of all Oyu Tolgoi employees in the group’s operations, but were harmful insults to our professional reputation, social standing and employment opportunities. Therefore, as the organization responsible for protecting and improving the interests, reputations, social security and workplace environment of all Oyu Tolgoi’s employees, we demand Rio Tinto’s Country Director for Mongolia, Kh. Amarjargal, to clarify the abovementioned media publications and to provide detailed responses to the following questions, including:

1.    Data and research with numerical evidence to support the statement that 96 percent of all workers involved in the underground expansion are composed of Mongolian workers.

2.    Detailed financial analysis of what type of investments – other than salaries, bonuses, benefits and vocational training provided in accordance with applicable laws and employment contracts – were made leading to increased costs for Mongolian employees.

3.   What percentage of the US$1.45 billion cost overrun of the underground expansion project is caused by such factors as investment costs for Mongolian workers.

We demand an official response to the above questions, reported transparently with detailed statistics, facts and evidence to all Oyu Tolgoi employees as well as the public on 20 October 2021.”

As a result of the demand letter, in addition to providing explanations to the Government of Mongolia, Rio Tinto now needs to provide an explanation to their Mongolian workers. Last Friday, Rio Tinto’s Director, B. Bold sent an open letter to all Oyu Tolgoi employees, with a rhetoric difficult to work out in Mongolian, stating “We understand that the Oyu Tolgoi Trade Union has approached us on this issue and we will work together to reach a better understanding on this issue.” Moreover, Rio Tinto has made headlines in local news media with statements “We are disappointed that responses sent as formal communication were deliberately shared with third parties” showing that rather than being concerned with responding to the demands and questions of their workers’ union, they are more in a state of anxious panic that their pointing blame to Mongolian workers have been exposed.

Rio Tinto really seem to have been caught red-handed as an international team of experts refuted their explanation that “The cost overrun and delay to commencement of operations are due to unforeseeable ground conditions.” Backtracking from that explanation, they have now come up with a new excuse that “it is because of the large number of Mongolian workers.” Suppose desperate times really do call for desperate measures.

Actually, employing a higher percentage of Mongolian workers should reduce their costs because the salaries of Oyu Tolgoi’s expat and national employees have large disparities. This is particularly noted within the report prepared by the parliamentary working group entasked with assessing the Oyu Tolgoi project. According to the report, Oyu Tolgoi’s Mongolian workers earn around MNT2-5 million a month, while expats earn MNT20-40 million. On average, Mongolian workers receive salaries that are 5 to 15 times lower than that of expats. Such huge disparity between pay for Mongolian workers and expats indicate that the principles of the investment agreement are not applied. So why are Mongolian workers to blame!

  Source: 'Udriin Sonin' (Daily News)