Winners and losers in Mongolia's mining gold rush

Even if there were an old-type thermometer in place, it would be unable to correctly reflect how cold it is in Zaamar, a central Mongolian town of unpaved roads and wooden houses. At 40 degrees Celsius below zero, the mercury would freeze. But that doesn't really matter, because, regardless of the temperature, the "ninjas" don't rest.

Armed with rudimentary tools, they hollow out the steppe in search of its most precious mineral resource: gold. And there are many of them; various studies claim that up to 300,000 people, 10 per cent of the population living in a country four times the size of Japan, have at some point in their lives been involved in the search for gold. Currently, the government estimates, about 100,000 Mongolians illegally mine up to five tonnes of gold each year.

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Ganzorig, who prefers not to give his full name, is one of them. As he digs, with a pick and shovel, in the frozen ground outside Zaamar, he responds in monosyllables. He looks up from about five metres below the surface, sweat frozen in his eyelashes. Despite the conditions, he laughs heartily and often. When the partner he's working with hauls a bucket of soil to the surface, Ganzorig takes the opportunity to climb out of his hole and smoke a cigarette.

"It's not been a good day so far," he acknowledges. "But this job is better than trading cattle." And he should know; until a couple of years ago, Ganzorig was one of the nomads who inhabit Mongolia's northeast. He lost most of his herd during the winter of 2010, remembered as the terrible " dzud", then decided to sell the rest and follow the advice of a friend who worked as a ninja.

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"The main goal is to feed my family," he says. "One gram is trading for 55,000 tugrik [HK$210], so even though the price varies according to the market, every day we work we generally earn about 100,000 tugrik."

A few yards from Ganzorig, Demidee is also looking for gold. Having just turned 19, he is using his 10 days of holiday from vocational training college to help his mother search for riches, but neither of them dares dig a hole. Instead, they use a crude metal detector. Given that most nuggets weigh only a few milligrams, their returns are poor.

"We spend too much time digging up useless bits of scrap metal," says the young man. "Sometimes, however, we get lucky. Once we even came up with a piece of gold weighing 2.3 grams." Today, however, they have found nothing. "We prefer that to digging holes, which is very dangerous," he says.

The ninjas in Zaamar must be alert to another danger: Khurlee and his metallic grey Land Cruiser, which can appear out of nowhere.

"They are on private land and they aren't allowed to dig here," says Khurlee, a heavy hired to scare off the gold diggers by a Mongolian mining company he'd prefer not to name. He is wearing a camouflage uniform and warned of his arrival by turning on a red light on the roof of his car and blasting a siren. He is aware of the presence of a journalist so he politely urges the ninjas to leave the area. But Amgelan Damdinragehaa claims that that isn't always the case.

"They often end up fighting, and there have even been people killed in the clashes," says the former ninja. "Besides private security personnel employed by the mines, the police have been known to use firearms to expel those seeking gold."

Damdinragehaa is the president of a small association of artisanal miners, a type of organisation the government legalised at the end of 2013 to reduce the number of ninjas and allow people to legally benefit from the exploitation of a national resource. Having been one, Damdinragehaa understands the ninjas' plight, but he is now determined to see the back of them.

"In this area, there used to be 10,000 illegal miners, but now there are only 3,000. The rest of us are associated, and that allows us to have more resources, to have more power when negotiating prices and to sell gold directly to the Bank of Mongolia regardless of quantity."

Damdinragehaa argues that ninjas present two problems: environmental degradation, "because they don't repair the damage done to the land by digging hundreds of holes"; and an economic loss for the country, "because they don't pay taxes and sell the gold to Chinese middlemen".

Ganbold, who also prefers to give just his first name, admits this is true. But only partially. He works with his wife, Tungalatamir, in the nearby village of Khailaast, beside a small lake, where he sifts through soil discarded by an open-cast mine to find gold. They do not dig, they simply pay others to deliver the soil in a truck to them and "clean it" using a hopper and pressurised water. As it is the heaviest material, at the end of the process, any metal to be found in the soil is deposited at the bottom of the hopper. Several tonnes of raw material are necessary to yield, if they are lucky, a couple of nuggets.

Although the soil no longer has any value for the Uuls Zaamar gold mine, the company considers ninjas like them thieves. So the couple know that at any time, someone might appear to send them packing, and there is a chance they'll have their truck and tools seized.

Unlike the workers in Zaamar, Ganbold and Tungalatamir work only between April and October, when the ground is not frozen - "We are already over 60, so we are not spring chickens any more" - but they find about six or seven grams of gold every day they're on the job, they say.

Once in the privacy of their charming ger (the traditional Mongolian tent) the couple have erected in Khailaast, Ganbold displays the notebook in which he keeps track of the treasure they've extracted.

They sell at night, in a small shop in the middle of the dusty town, which appears to have been transported directly from the American Wild West. The process is straightforward: the clerk reaches for a little scale from under the counter, certifies how many grams a seller has brought in and pays in cash immediately. As a European specialist will later confirm, after examining a small sample, the gold Ganbold and Tungalatamir dig up is 24 carats, the highest purity. They are aiming to save enough to buy an apartment in the capital, Ulan Bator, in which to move with their two adult children.

"Then we will retire, but we still have some way to go," Tungalatamir says, counting a wad of bills.

From Khailaast, a trusted courier will take the gold bought in the shop to Ulan Bator, to sell to brokers, who will introduce it to the international market once it's been combined with other metals and its quality has been lowered to the standard 18 carats.

"But, sometimes, Chinese buyers come here to buy directly and save the commission of intermediaries," says the manager of the shop. "Then the gold will be bought in China and Hong Kong by investors and jewellers who will eventually channel it to the legal market."

The problem with this system, Tuya Damdinjats points out, is that it encourages the looting of Mongolia's raw materials. Damdinjats heads the Duush Mandal Khairkhan (DMK) union, an association of traditional miners created by 300 former ninjas in the village of Zuunkharaa, about 200km from Khailaast.

"We avoid letting the gold out of the country. And, unlike what multinational mining companies and the ninjas themselves do, we actually care for the environment. We try to pollute as little as possible and we have a programme with the Asia Foundation NGO to recycle the soil in new facilities we have built especially for the purpose," she says, during a visit to the small factory in which the union's rocks are broken up and processed under the supervision of three or four employees. Unlike Ganbold, the union uses chemicals to extract its gold, and the purity is lower and more variable.

The organisation has acquired more advanced digging equipment, some of it funded through development grants given by the governments of the Czech Republic and Switzerland, and has been improving the working conditions of its members: "Everyone pays 53,000 tugrik in taxes per month and they are guaranteed a minimum salary of half a million tugrik," says Damdinjats. "Of course, they do not pay for any of the tools and they have health insurance … and 10 days of holidays after each month working."

This approach, she emphasises, professionalises the ninjas, contributes to the national economy and helps reduce accidents at work.

Accidents must surely happen, though, judging by what we see in the Noyod mountain, one of several areas in which union members are permitted to dig. Here, three DMK men, helped by two children, aged 14 and 11, on their school holidays, prepare by hand the cartridges of dynamite they'll use to blast open the bowels of the earth. Some of them work with a cigarette dangling from their mouths, apparently oblivious to the danger that poses.

"Here we are as a family," laughs Uuganbayar. Everyone says they are satisfied with the functioning of the DMK.

"Working as a ninja can return more money, but it is dangerous and illegal," says the short but strong 40-something miner, who is also responsible for surveying, to determine where they dig.

"We are guided by the terrain, we dig a metre deep and, depending on what we find, we either stay or seek another location," he explains.

They dig out 20 bags of stone a day, which are sent to Zuunkharaa for processing. The adults wait for the midday sun to reach its zenith so its light penetrates as far as possible the narrow hole into which they crawl. Even so, the sunlight disappears a few feet in, leaving the tiny flashlights attached to their helmets as their only illumination. Security measures are non-existent, and usually they don't even wear protective masks, because, they say, oxygen is scarce below ground and masks hinder their breathing.

An hour is enough time to place their explosives and flee the shaft before a thudding sound shakes the ground. A few seconds later, a jet of powder shoots out of the ventilation shaft they'll use to extract the stone.

"That is the most exhausting job because you can barely breathe and [the loads] are heavy," says Nyambaatar, 20, as he tries to wipe fine white powder from his face. "But I wouldn't do anything else, because I do not know anything else - but also because I believe that we are contributing to the development of the region. Many families who were once poor now live well with this type of mining."

That is not the kind of talk that pleases D. Enkhbold. As president of the National Mining Association of Mongolia, which represents large multinationals operating in the country, he is at loggerheads with both the ninjas and traditional mining associations.

"As for the former, it is clear they are not subject to any kind of regulation and they are especially harmful. The problem with the latter, however, is the opacity with which they work, the lack of means to control their operation and the fact that they have some unfair tax advantages." In addition, Enkhbold states, "The bigger the mining companies are, the more they contribute to society through jobs and taxes or royalties. And they also care more than small businesses for the conservation of the environment."

In Zaamar, Damdinragehaa contests that last assertion. And he does so by pointing at the lunar landscape sculpted around a large Russian mine.

"Can you see all these little hills? They weren't there before. They are the result of a botched process to cover the gigantic holes the miners made. The Russians took the gold, they paid corrupt politicians who turned a blind eye on taxation, and conducted a ceremony with the media to show how they would recover the environment. When the cameras left, they did, too," says Damdinragehaa. "Now no one can bring cattle here because they fall in the holes and get killed."

Enkhbold concedes only that, "Corruption and bureaucracy are major problems, also for multinationals."

The struggle for gold in what some dub "Minegolia" is expected to be long and bloody, in part because the prize is a sweet one. The importance of the mining sector has exploded since Mongolia abandoned communism in 1990. Today, mining represents about 20 per cent of the country's gross domestic product and provides 70 per cent of its economic growth.

However, the falling prices of most raw materials have slowed the increase in GDP from a rate of 17.5 per cent in 2011, a speed that made the land of Genghis Khan one of the fastest growing economies in the world. Nevertheless, the World Bank states that the poverty rate in Mongolia fell from 27.4 per cent to 21.6 per cent between 2012 and 2014.

"The problem is that growth remains in the hands of a few, and social differences soar," says Damdinjats, who is also the mayor of Zuunkharaa. "There are fewer and fewer people in poverty, largely thanks to mining, but the divide with the rich is growing.

"Gold, like other valuable minerals, is a state resource that should be reinvested in the country. More job opportunities for the youth must be created through education, so that dependence on mining is lessened. And we must try to prevent foreigners from taking our raw materials. What prevents this from being achieved is, of course, corruption in the government.

"Everyone wants their envelopes and, in the end, the deputies are elite people drafting legislation to make even more money."

Meanwhile, the steppe is steadily being stripped.

"In Mongolia you either have to be a herder or get a good degree to work in an office. There are very few alternatives," says Tungalatamir. "There are almost no factories like in China, but the land has many resources and we don't think it's fair to let the corporations take everything. We should all benefit."

Says Ganzorig, "As far as I have the strength, I will dig for gold. Nothing else I can do now will support my family. If they want me to stop they will have to put me in jail."