September 9, 2008

Zinc Mine Threatens Russia’s Lake Baikal

Ecologists say the stark beauty of the world's deepest and oldest lake is under threat because it lies downstream from a rich source of zinc.

Debate has ensued over the resource-rich nation, pitting industrialists and job-hungry officials in Siberia against ecologists and government agencies in Moscow.

The Kholodninskoye deposit, which sits in a watershed flowing straight into Baikal, is the planet's third largest lead and zinc field, experts say.

Zinc is used in the production of galvanized steel, the automobile industry, household batteries, vitamin supplements, fireworks and as a compound in some cosmetics.

A subsidiary of Russia's privately owned Metropol group MBC Resources, has a license to develop Kholodninskoye, which has an estimated 13.3 million tons of zinc and 2 million tons of lead. It has drafted a plan to develop the field and other metals in the region at an estimated cost of $4 billion.

However, ecologists in Buryatia region in Siberia, where Baikal lies, say development would despoil the biggest freshwater mass on earth -- already threatened by tourism and other industries.

"For us right now, this is problem number one," said Sergey Shapkhayev, director of the Buryat/Baikal Land Use Program in Ulan Ude.

"The geo-hydrological structure there is very complex, lots of underground springs, subsoil water at different temperatures that would increase tailings volumes into the lake," he said.

Tailings are unrecoverable mining waste discharged as slurry.

Russia's Natural Resources Ministry proposed a ban on developing half of the Kholodninskoye deposit in July, saying mining would damage the lake, considered a national ecological reserve.

Buryatia, which borders some 60 percent of the lake, hopes development will bring investment and jobs to the region, and has strongly opposed the proposed ban.

Baikal is 1,637 meters at its deepest and it is some 25 million years old. It holds about one fifth of the world's freshwater and is around 9,200 km (5,717 miles) east of Moscow.

The shoreline runs along an ancient rift valley for about 2,100 km (1,305 miles), roughly the distance from Moscow to Duesseldorf, Germany.

Home to some of the world's rarest types of fish and plants, Buryatia authorities are keen to promote Baikal as a tourist destination. But it also wants mining development.

Buryatia President Vyacheslav Nagovitsyn served as a crewmember on a highly publicized but ultimately unsuccessful submarine dive in July, aimed at reaching the bottom of Baikal.

Mikhail Slipenchuk, Metropol's general director, financed the dive. He says not developing the zinc and lead deposits would constitute a missed opportunity for Russia, already flush with cash from an energy and commodities boom.

"This is 20 percent of Russia's (zinc) reserves. If we cross it off the list, Russia will be the poorer for it," he said.

But zinc prices have been sliding on weak demand and global oversupply, with some analysts predicting little relief into 2010.

Zinc is one of the worst performers in the metals complex this year. In August, it dropped to its lowest level since November 2005 and is now trading around $1,745 a ton, down almost 25 percent this year.

Zinc stocks at the London Metal Exchange have jumped 80 percent this year to 160,000 tons, and a survey of analysts showed an expected surplus of about 281,250 tons this year, growing to 328,758 tons in 2009.

Output cuts and mine closures have effected the industry as energy, labor and equipment costs rise -- raising questions about the ultimate profitability of the Kholodninskoye project.

MBC recently signed a memorandum with Rusinvestpartner, a joint venture of state conglomerate Russian Technologies and metals-to-oil firm Renova, under which Rusinvestpartner said it intended to buy stakes in projects to develop Kholodninskoye and another lead and zinc deposit nearby.

There is clean-up work to be done before any mining gets underway, even if the ban on development does not proceed.

In July, Buryatia's Natural Resource Ministry said that MBC would have to spend 2 billion roubles ($85 million) on cleanup of tailings plumes caused by Soviet-era prospecting.

The company will fund the clean-up but wants this to be written into the licensing agreement, said Slipenchuk.

Soviet test shafts sent tailings-laced underground water into the nearby Kholodnaya river which feeds Baikal.

Slipenchuk said: "Either we spend several hundred million dollars setting the Kholodninskoye deposit aside as a nature reserve, or we tighten regulations in the licensing agreement to make the holder responsible for these deficiencies."

Because Baikal is such a powerful symbol of ecological purity for Russians, in 2006 Putin ordered a giant oil pipeline to be routed away from the lake, citing great risk to the environment.

But ecologist Shapkhayev said unregulated logging and careless tourism construction were already causing damage, that would only be intensified by mining.

"Russian ministries think, mistakenly, that up to 2 million tourists will come here, and that they need to build five-star hotels, mountain ski resorts ... and they dole out a large share of federal money for building the infrastructure," he said.

Only about 20,000 tourists -- half from abroad -- come to Baikal annually, he added. Construction firms pop up seasonally to build poorly constructed lodgings with federal money, and then disappear without paying their workers.

"Until we come to terms with corruption, those kinds of problems will happen more and more often," he said.


Image Caption: Lake Baikal from satellite (NASA)