IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.
PS1: Assessment and Management of Environmental and Social Risks and Impacts
OT implements robust Environmental and Social practices which meet or exceed Good International Industry Practices. Detailed review of the Project’s E&S risks and impacts has been provided in the disclosed Environmental and Social Review Summary (ESRS) for the original Project #29007 (https://disclosures.ifc.org/project-detail/ESRS/29007/oyu-tolgoi-llc). OT has demonstrated high standards for day-to-day operational management especially with respect to occupational health and safety. OT maintains a well-staffed and competent Environment Team and Community Social Performance Team. The Project is subject to a number of domestic and international audits/inspections and generally performs well when evaluated against good practice environmental and social guidance. Any minor occasional non-compliances have been addressed through systems and procedures that have been put in place.
All actions in the ESAP of the existing investment are either completed or are being implemented and monitored as planned, other than the following which are no longer applicable (i) the ESIA of the coal power plant at Tavan Tolgoi which is no longer being developed, and OT has instead signed an Electricity Supply Agreement with the relevant entities of the Government of Mongolia, and (ii) the development of an Industrial Estate outside the site, which is no longer being planned.
OT continues to implement effective stakeholder engagement activities, including continuous engagement with the Tri-Partite Council (TPC) which was set up as a part of the Herder Complaint Resolution Agreement (CRA) and implementation of action items agreed through the CAO process.
Any changes in management systems and procedures are routed through a notice of change (NOC) process and reported to the Management and lenders in a timely manner. With regards to risk management, OT employs a robust risk management system to define, assess, mitigate, and track risks (including E&S risks) that could potentially affect performance across all aspects of the business. These risks are discussed, categorized, and reviewed with management, and logged into the on-line platform.
An Independent Environmental and Social Consultant (IESC) audits OT’s performance on a six-monthly basis and presents the report to the lenders. The report is also translated into Mongolian and shared with stakeholders through OT’s website and other channels.
As part of its sustainability agenda, OT intends on adding renewable energy to its energy mix. Per ESAP #1, OT will update and implement a supply chain management system to screen for potentially significant environmental and social (e.g. forced and child labour, deforestation) supply chain risks. Where significant risks are identified, OT will put measures in place to either avoid or manage these risks. This may include considering alternative suppliers, legal covenants, audits, and reporting requirements.
Identification of Risks and Impacts and Management Programs
OT is conducting its operations as scoped in the 2012 Mine ESIA. Underground production began in March 2023 following many years of development. OT is currently implementing a concentrator conversion project with commissioning planned for the remainder of 2024 through the first quarter of 2025. There will be no change in the approved throughput levels.
Based on the most current underground mining plan and modelling of the subsidence zone, OT has anticipated a larger subsidence zone and an expansion of the current Mine License Area (MLA) by 266 ha to accommodate expected subsidence associated with the development of underground works. This plan also includes the proposed diversion of the Dugat river, which includes redevelopment of the existing Dugat Surface Water Diversion beyond the MLA boundary, and to discharge to a location further downgradient of the existing discharge point. The planned surface water diversion extension is to a drainage channel that then feeds into the Budaa River ephemeral system. For this, OT commissioned a “Supplementary ESIA” through a third party in November 2022 to supplement with the existing 2012 OT Mine ESIA and has been engaging with the affected communities and other stakeholders in this process. The supplemental ESIA report will be disclosed soon, meanwhile the publicly disclosed IESC’s reports have been documenting regular updates about this.
The current Environmental and Social Management Plan (ESMP) reflects the identification and assessment of impacts and risks detailed in the integrated OT ESIA, along with the Operational ESMPs (OESMPs) and supporting procedures/other implementation documents. The ESMP has been generally functioning effectively and goes through a formal review cycle every two years. In 2021 the ESMP was updated to include changes such as the updating of management plans and procedures, revised organizational structure as well as operational and business updates.
Emergency Response
The general Project strategy to face and manage emergency situations during Project operations is defined in the Operations Phase Emergency Preparedness and Response Plan (EPRP) which provides a high-level overview of the procedures and commitments to emergency response and preparedness. This ESRP has been designed and implemented as envisaged during the original investment.
PS2: Labor and Working Conditions
The total OT workforce was 19,687 as of 31 July 2024, of whom 4,623 are employed by Oyu Tolgoi LLC and 15,064 are contractors from 190 companies. A total of 95.62% of the total workforce, and 97.27% of the Oyu Tolgoi LLC workforce, are Mongolian nationals, and these have been consistently above the targets set for the Project. Measures for employment, working conditions, non-discrimination, inclusions, retrenchment and demobilisation, as well as contractor and influx management are being implemented satisfactorily and as planned.
Working Conditions and Terms of Employment.
Mongolia enacted a Revised Labor Code in 2021, which became effective from 2022 with an objective to better align Mongolian labor laws to international standards. This revised Code has required OT to shift its 3 week on/1 week off roster system to 2 weeks on/2 weeks off system. This has significantly disrupted operations and has necessitated hiring of additional workforce for the 4th shift. A change in the average salary calculation regulation in 2022 allowed employers to exclude certain allowances from calculation of the average salary rate (ASR).
OT has been engaging with the employees on this issue by providing briefings, written clarifications as well as tools to calculate their revised salaries. A joint working group was established on March 6, 2024 and held around 20 meetings to determine a way forward in implementing the ASR. The revised roster and working arrangements as well as the ASR have impacted the salary packages of OT employees across the board with employees reporting a sharp decline in take-home salaries. A breakaway Trade Union called the “Local Trade Union” has been formed raising concerns around salary impacts with OT, including organising strikes of workers on at least two occasions. OT has now initiated a new Collective Bargaining Agreement (CBA) negotiation with both the Trade Unions which was kickstarted in August 2024 and is expected to be concluded soon. Both sides are optimistic about reaching a mutually beneficial agreement.
As per ESAP #2, and post conclusion of the CBA, OT will commission an international labor consultant to conduct a labor assessment at OT to IFC and EBRD PS2 and PR2 requirements. The Terms of Reference and the selected consultant will be agreed with IFC and EBRD.
Workers’ Accommodation
Impacts of a large workforce on the local community has been limited as most of the workforce is being accommodated at site. However, OT is planning to house more staff in residential units in Khanbogd Soum as onsite accommodation is significantly under-capacity. As per ESAP #3, OT needs to develop a workers’ accommodation roadmap toward a long-term worker housing strategy informed by comprehensive E&S risk and impact assessment and mitigation. The roadmap will set out a high-level plan, timeline, required E&S studies and milestones.
Grievance Mechanism
OT has a mature employee grievance mechanism called ‘myVoice’ and a number of channels, including anonymous channels, to register grievances. Between August 2023 to July 2024, there were 207 grievances reported through the myVoice. Of these grievances 209 are reportedly closed (which included cases from earlier periods). The introduction of the CareHub (Mongolian grievance management support for Mongolian workers) and increased advertising of myVoice has resulted in increased reporting of issues. The Business Conduct Office (BCO) monitors these grievances.
Occupational Health & Safety
Occupational Health and Safety (OHS) is governed by Rio Tinto’s Health, Safety, Environment and Community Management System (HSEC MS) framework, which is a mature system aligned with ISO 9001, ISO 14001, and ISO 450001 requirements. The system encompasses all the activities carried out by employees, contractors and subcontractors and is heavily centered on risk identification and assessment process to define, access, mitigate, and track risks that could potentially affect OHS performance. The most significant risks are communicated upward through the organization to senior management where appropriate resources to address the risks are allocated. OT conducts critical control verifications to ensure that appropriate measures to reduce or eliminate the identified safety risks are completed. Additionally high quality OHS training and maintaining competency of the workforce, particularly those involved in high risks activities is a priority. The Project follows country specific OHS and implements a series of OHS corporate actions, technical regulatory standards, preventive safety programs and activities that foster a strong safety culture and continuous improvement. As a result, the OHS performance of the Project has been strong since inception. The recorded Injury Frequency Rate (IFR) has declined since 2016 and reached 0.20 in 2023, whereas OT’s target is 0.23.
PS3: Resource Efficiency and Pollution Prevention
Resource Efficiency and Greenhouse Gas (GHG)
OT is aiming to achieve net zero carbon emissions by 2050 and aims to reduce its current carbon emissions by 50% by 2030. To achieve this goal, OT has defined several initiatives to improve efficiencies, reduce emissions and impacts on climate, which will be implemented in the coming years. These include a small-scale solar project, underground and surface operations electrification, and a carbon credit market development. In 2023, the accounted GHG emissions totaled 640,219 tCO2eq after abatement through Renewable Energy Certificates.
Water Resources
The South Gobi region experiences low annual precipitation (less than 100mm/year) and has limited fresh water supplies, primarily found in sediments within ephemeral stream beds. Herders rely on these water sources through springs and wells, many of which are located downstream of the Oyu Tolgoi (OT) mining site. During the development of the open pit, OT had to relocate the Undai River and replace the Bor Ovoo spring. The Undai River Diversion is a mature system with an 11-year operating history, with water monitoring results showing a trend of increased downstream water transfer to the New Bor Ovoo Spring compared to natural conditions.
OT is permitted to withdraw groundwater from 28 production wells installed in the regional Gunii Hooloi (GH) aquifer, which contains brackish and non-potable water also not suitable for livestock watering, at a rate of 918 L/s. In Year 2023 the total annual consumption rate of 530.7 L/s. The mine’s concentrator circuit is the biggest use of water at the site and is the focus of water recycling efforts. Over the last several years, water recycling efficiencies have been above the 80% threshold minimum criteria recycling rate included in the ESIA.
Seepage from the tailing storage facility (TSF) was detected in the alluvial aquifers beyond the site’s boundary, High Total Dissolved Solids (TDS) is present in monitoring bores up to possibly 60 m east of Mine License Area. There has been no impact on local communities or livestock. The nearest receptor is a herder well located 8 km downstream. OT developed a Remedial Action Plan and has since then implemented several actions to address the seepage and expanded its already comprehensive monitoring to verify the effectiveness of the remedial measures and assess the need for additional actions. Progress updates on the Remedial Action Plan are disclosed regularly (please refer to: https://admin.ot.mn/wp-content/uploads/Progress-Report-Q3-EN.pdf). The Remedial Action Plan includes: i) the remediation of any potential environmental impact from escaped seepage to values that reflect natural alluvial conditions; ii) increased monitoring frequency and proactive response to any new identified seepage escaping into the environment; iii) reconfiguration of the current seepage containment system for combined TSF cells to adequately capture seepage; iv) pumping any collected seepage back to the TSF; and v) implementation of a dedicated stakeholder engagement plan developed for this incident. Design changes have been implemented to prevent similar seepage in new cell of the TSF which was commissioned in December 2023. OT maintains a comprehensive groundwater and surface water monitoring network to ensure that operations do not negatively impact water resources.
Pollution Prevention
Pollution prevention is integrated into the Company’s environmental management system. OT has developed and implemented different management and monitoring plans to ensure their activities are conducted so as to minimize adverse impacts on human health and the environment, including for areas under the direct control of the Company, and areas managed by contractors and subcontractors. These controls are aligned with lender E&S standards, which include IFC Performance Standards and commensurate to the nature of the activity and the corresponding risks and impacts. The E&S audits and reviews conducted by the Independent E&S Consultant and lenders (including E&S representatives from IFC), observed that pollution prevention measures remain consistent, such as ongoing monitoring of air and water quality, environmental noise, stack emissions monitoring, as well as the management of mineral waste. Overall, environmental monitoring results have been consistently meeting the applicable standards.
Waste and Effluent Management
OT’s strategy for the management and disposal of non-mineral waste is outlined in the Non-Mineral Waste Management Plan and in the Non-Mineral Waste Collection and Transfer Procedure aligned with the principles of waste management and mitigation hierarchy, good international industry practices and regulations at the national and provincial levels. Waste is segregated at source, collected and classified in hazardous, non-hazardous, recyclable and non-recyclable waste streams, temporarily stored in dedicated storage facilities, and disposed-of following local regulations and procedures. The Project continues to be self-sufficient in the management of non-hazardous waste produced during operations. Waste is reused and recycled to the extent possible and managed in the permanent Waste Management Center (WMC) located on the northeast side of the MLA. OT has established a composting facility for organic kitchen food waste with resultant compost used for vegetative rehabilitation efforts. Hazardous waste is also handled in line with OT’s waste management hierarchy system, classified and temporarily stored at site following good industry practices. In 2023, approximately 67 tons of hazardous waste were shipped for incineration from the site to a licensed contractor. All handling and processing of approved hazardous waste streams has been authorized by the relevant Mongolian domestic regulatory approval agencies. Liquid domestic effluents from the camp, workshops and processing facilities are collected and treated in wastewater treatment plant with effluents monitored against Project standards. Treated effluents are routed by pipe to the TSF.
PS4: Community Health, Safety and Security
The community health and safety impacts are addressed by a number of management plans and procedures that are being actively implemented, with the three main ones being the Emergency Response Plan, the Transportation Plan and the Community Health and Safety and Security Management Plan. These are being implemented satisfactorily with active involvement of the Communities and the Environment team where needed.
Grievances around dust and noise have been received from neighboring communities, which have been routed through the Communities team, local government as well as and the TPC. There is a Participatory Environmental Monitoring mechanisms in place led by an NGO and includes herder participation. Four types of monitoring are conducted across 176 monitoring points, including roads, water points and now the TSF impacted areas. Results are discussed with the TPC and OT for mitigation measures. Alternative transportation options are also being considered.
PS5: Land Acquisition and Involuntary Resettlement
The Project physically displaced 10 herder households in 2004 within 10 km of its Mine License Area. Subsequently, in 2011 with the commencement of construction activities, another 89 herder households were identified as economically displaced. The Resettlement Action Plan (“RAP”) that was prepared provided the entitlement framework to address the physical and economic displacement. The implementation of the RAP is now nearing completion, and a Resettlement Completion Audit for the economic displacement and livelihood restoration has been undertaken. The final audit report confirms that the RAP commitments have broadly been met though OT will continue to engage with herders on various livelihood and community programmes.
The ESIA for Subsidence that is underway (refer to PS 1 section) also indicates potential economic impacts on a few commercial entities which may need to be addressed through the updated entitlement framework provided in the RAP, subject to a final court decision.
PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
OT has a comprehensive Biodiversity Action Plan (“BAP”) in place that manages operational risks and residual impacts from construction which was a required ESAP action from the existing investment. The BAP focusses on habitat and species related offsets for impacts to natural and critical habitats that occur within the rangelands associated with the Project. The BAP includes key actions related to reducing threats on biodiversity, including reduced illegal hunting and collecting; improved rangeland management; reduced impacts of non-project powerlines; and strengthened protected areas management. Specific species management occurs for Khulan (Equus hemionus hemionus) IUCN NT and Goitered Gazelle (Gazella subgutturosa) IUCN VU, bird including Steppe Eagle Circaetus Gallicus IUCN EN and Houbara Bustard Chlamydotis MacQueenii IUCN VU as well as endemic plants.
To date, the implementation of the BAP and subsequent management of these species and their habitats has generally been successful. Illegal hunting and collecting has been controlled using community outreach and surveillance activities. Bird Flight Diverters have been installed along all major transmission lines reducing soaring bird flight mortality. Recent trials on removing fencing along the Trans-Mongolian Railway negotiated by OT with the Government of Mongolia has resulted in an increase in habitat available for rangeland species, including Khulan. Rangeland offsets have been more difficult to achieve, due to difficulties with ensuring nomadic grazing activities are appropriately controlled. Monitoring of impacts of Biodiversity Management Offset Plan measures has also been successful, however the monitoring regime may be better focused on key ongoing risks.
In response to these issues, a working group was formed in January 2024 to review the BAP, make recommendations on improved management of rangelands and update the biodiversity monitoring program. This review is currently ongoing, and it is expected that alternative measures to attain improved rangeland management will be adopted as well as changes made to the monitoring regime The original commitments to achieve no-net-loss and net gain for critical habitats remain for the Project and will be reflected in an updated BAP. These actions are currently being supervised by the Independent Environmental and Social Consultant and the lenders.
PS8: Cultural Heritage
Cultural heritage management is set out in the OT Cultural Heritage Management Plan (CHMP) and complementary Cultural Heritage Management System (CHMS) procedures. No recent incidents around cultural heritage have been reported.
