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"Canada can, within a positive friendly atmosphere, ask the Chinese government to resolve the Tibetan situation."

Canadian mining company expands operations in Tibet conflict zone

November 9, 2015

By Gabriel Lafitte

Rukor.org, November 5, 2015 - Tibet is a conflict zone. The illegal or semi-legal extraction of gold from Tibet has gone on for decades, without a single instance of miners negotiating, in advance, the free, informed prior consent (FPIC) of local Tibetan communities. Disempowered Tibetans have, whenever possible, protested against gold extraction, whether by small operators using dredges that destroy riverbeds and riverbanks; or large operations digging deep to extract millions of tons of rock. [1]

Wherever gold is extracted, there is resistance. Tibetans have long understood that extraction is destructive, dangerous and contravenes local taboos on disturbing local spirits. These are not quaint prescientific folk beliefs to be swept aside. In scientific terms, Tibet is a young land, thrust into the sky by recent uplift which has brought to the surface, or at extractable depth, precious but toxic metals from deep within the planet’s molten mantle.

As a geologically new land, Tibet is still rising, with all the sudden violence of a young land in formation, such as powerful earthquakes and landslides, which can block rivers, leading to disastrous outburst floods. The great rivers of Tibet, drunk daily by one billion people across Asia, naturally carry a burden of dangerous metals, as a young land starts eroding. Any further burden, from mining and its vast dumps of tailings waste, would be disastrous. Yet the gold of Tibet is found either IN riverbeds (alluvial gold) or in big deposits close to rivers, especially the Yarlung Tsangpo river, whose bed is literally the collision point of India and Eurasia.

These are scientific reasons to be extremely cautious about mining Tibet. None of this was known, in scientific categories, by Tibetan villagers and nomad encampments, yet they instinctively recoiled from mining. Usually their aversion to breaking the grasslands or digging the mountains was reinforced by local lamas urging respect for the old preBuddhist gods of earth and water, still capable of causing trouble if disturbed.

There is a remarkable congruence between sacred sites, sacred forests and mountains; and areas of high biodiversity or natural values especially worth conserving.

In recent years, as extraction persists and intensifies, as TAR government bans on gold extraction are ignored, Tibetan communities have lost their fear of official repression, and spoken out, despite the risks. Even though the technologies of quelling the people are intensifying, and rapid response riot squads swoop quickly to silence Tibetans, they will not be silenced. There is no doubt that Tibetan communities consistently oppose mining.

By far the biggest new mine is at Gyama, Tibet’s “valley of the kings”, in an area even older than Lhasa as the home of the kings of Tibet who predate Buddhism. Gyama is upriver from Lhasa, on the Kyichu, the river that feeds into the great Yarlung Tsangpo after passing through Lhasa. That alone makes it an area of great historic significance, and environmentally, Lhasa’s water supply come from Gyama and is compromised by any leakage from the millions of tons mined, processed and dumped annually, in the quest for gold, copper, silver and other metals.

The Gyama mine, both open pits and now underground, is owned by a Canadian company which has ignored not only local objections, a shocking safety record, and the protests of Canadian Tibetans and their friends. Vancouver-based China Gold International (CGI) recently announced a dramatic upscaling of operations, an almost tenfold intensification of extraction, financed not by CGI’s shareholders who buy and sell its shares on the Toronto Stock Exchange, but by China’s big state-owned banks.

In April 2015, the Government of Canada National Contact Point for the OECD Guidelines on Multinational Enterprises issued a statement about environmental and human rights concerns related to the company’s operations in Gyama and it applied sanctions including the withdrawal of Canadian trade services to the company. [2]

CGI has taken its time to go beyond a modest scale of operations. But in November 2015 it announced it has obtained a loan of RMB four billion, with repayments to begin only in 2019, with full repayment by 2029. The mine life has been extended to 35 years, in line with CGI’s claim that the deposit is even richer than first estimates.

Even though the price of gold remains way below the long boom years of the decade to 2014, CGI is taking the gamble that by the time the greatly expanded mine is operational, the prices of gold, copper and the other metals to be smelted from Gyama ore will have risen again. That might seem a big gamble, but in reality the RMB4bn (US$672 million) is concessional finance, at low rates, from state owned policy banks that have no choice but to lend to such operators, whether they can expect profit or not. The grace period, or loan repayment holiday, from now to mid-2019, may not be attractive to the banks, but gives CGI time to gear up and start earning big bucks. 

Gyama (Jiama in Chinese) is to go from blasting, digging, crushing and concentrating 6000 tons of rock per day, up to 50,000 tons per day.  This is by far the biggest extraction project in Tibet, although the Shetongmon mine, near Shigatse is similar. To extract and pulverise and chemically cook that much rock each day, year-round, requires a large immigrant workforce, a huge and reliable electricity supply, a town, and access to a railway to get the concentrate out on rail wagons to a distant smelter. Only at the smelter will the copper, gold, silver, molybdenum, lead and zinc pour off separately, as pure metals.

You can track the stock price of CGI, on both the Toronto and Hong Kong Stock Exchanges, with a click. This looks, to the average investor, like just another commodity play.  CGI’s corporate PR estimates that over the life time of the mine, it will earn US$5.8 billion. CGI says its production costs are remarkably low, perhaps not surprising in a remote location where environmental regulations are seldom enforced and already dozens of Gyama workers have died in pit wall collapses.

One advantage of seeming like a normal mine is that CGI is obliged to file reports outlining its business model, in detail, and these are publicly available. CGI has an indepth report on its underground expansion plan is on its website, in compliance with regulatory requirements. This voluminous report lists cash flow, tonnages to be mined, royalties and profits for each year between now and 2050, the year the mine will be exhausted.

But Gyama is not a normal mine. It is literally the first enterprise in Tibet to make a profit for its Chinese owners, after decades of state-subsidised infrastructure construction that has only created an economy of dependence and disempowerment. Gyama will be the first profitable enterprise of central Tibet, capable of employing and sustaining a large immigrant workforce. That fulfils what China has always sought: a Tibet populated by politically reliable immigrants who will no longer need massive subsidies and official incentives to stay there. That is one reason the tax rate is so low: only 10%, a result of a special discount offered by the TAR government: “A company tax rate of 15% tax is payable on all after tax earnings, China Gold receive a 30% rebate on this tax from the Tibetan Government.”

In August 2015 CGI announced that: “The 2015 gold production from the Jiama Mine is expected to be approximately 16,000 ounces.” Much more is to come. CGI, at Gyama, in its Inner Mongolia mine and through acquisitions, has set itself a target of producing 500,000 ounces of gold a year.

[1] This is an excerpt of a longer article on conflict minerals in Tibet available at http://rukor.org/gold-from-tibet-an-update/

[2] More information on the Government of Canada review of China Gold, see http://tibet.ca/en/library/media_releases/370

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