Gold (17 page)

The first two companies to examine the site decided against it.
Then it caught the eye of Robert Friedland, the billionaire American minerals magnate known as Toxic Bob for a 1991 cyanide-and-heavy-metals leak at his company's mine in Summitville, Colorado. The cyanide techniques at Summitville had delivered profitable gold yields from low-grade ore.
Chang Shan Hao presented a similar opportunity, and in May 2002, using a Toronto-listed junior called Jinshan Gold Mines, Friedland bought the property.

“Frankly, the property was not properly explored when Robert came in,” said X. D. Jiang, the mine's general manager, a diminutive geologist, and the real genius of Chang Shan Hao. “There were about a hundred artisanal miners still working on the site. It was a mess.”

Friedland took it over anyway and hired Jiang in 2002. Jiang built a pair of fifty-ton test heaps. He experimented with crushing
the ore more finely than China Nuclear had crushed it, produced a feasibility study, and in February 2007 completed a recovery plant that could process 20,000 tons of ore a day. They piled the ore into heaps, leached out the gold with cyanide, fed the pregnant solution into tanks containing carbon in solution, and stripped out the gold. In July they poured their first 500-ounce bar. Other mines were pouring too, and one year later, in 2008, China overtook South Africa as the world's biggest gold producer.

The year that China moved into first place, Beijing whisked away the old minerals policy and replaced it with another.
Gold became a restricted commodity, one that the Chinese preferred to mine themselves.
Friedland was looking for money anyway, to cover the “cash burn” at his Oyu Tolgoi gold-and-copper strike across the border in Mongolia. In May 2008 he sold his stake in Chang Shan Hao to the state-owned China National Gold Group for $200 million. Friedland called his relationship with China National Gold “strategic.” It certainly was for the Chinese. They kept a connection to the man who was developing the richest mineral play in the world, Oyu Tolgoi.
Eventually Friedland's joint venture partner in Mongolia, the giant Rio Tinto PLC, muscled him from the board, but that would not have mattered to the Chinese. They owned almost 10 percent of Rio too.

On the face of it, Chang Shan Hao was a doubtful prize—a scruffy, low-grade pit. In most parts of the world, it would struggle to be profitable. But if ore is a product of math, in Inner Mongolia the math was right. The province had the world's biggest coal deposits. With the coal, they made cheap power. With cheap power, they made cheap steel. Cheap power and cheap steel and cheap labor put the sparkle into Chang Shan Hao.

I
NNER
M
ONGOLIA
'
S FOUNTAIN OF COAL
has showered the province with millionaires. In a 2012 table of China's million millionaires (people with net assets of more than 10 million renminbi, or $1.6 million), Australia's
Business Review Weekly
put the Inner Mongolia total at 13,500. Many of them seemed to be staying at my hotel in the industrial city of Baotou. The ground-floor bar blazed with gold Rolexes. Women in stilletos tottered through the marble lobby with shopping bags from the high-end-label stores next door. Outside, a red Maserati glowed among the ranks of jet-black SUVs. A corps of stony-faced drivers with mirrored glasses waited for their bosses. A dusty white Toyota Land Cruiser came roaring up the drive and pulled to a stop beside me. I climbed in, and we sped away to Chang Shan Hao.

The road north of Baotou climbs into orange mountains. From the heights you can see the green haze of fields along the Yellow River. First we drove on a four-lane highway that wound through foothills. Every few miles the driver slowed to a crawl, crept past a parked police car, then shot back to his normal speed. In a series of sprints we made our way through the mountains and onto the plain until, clear of police, the driver accelerated to breakneck speed.

For half an hour we sailed along the motorway. I could see the green glow of agriculture far off to the left. Suddenly, without warning, the driver wrenched the wheel and shot off the freeway onto an unmarked dirt track that plunged into a dry creek bed. We bucked along through gravel and fine sand, throwing up red plumes that broke across the hood. It must have been a well-known shortcut. A line of large blue trucks with loads that swelled out at the top like loaves of bread came toward us. We tossed cinnamon-colored clouds of silt onto each other's windshields as we bounced by.

We reached pavement, and struck off along a highway lined with
poplars. Sad-looking, crumbling hamlets appeared and receded in the distance. A Chinese village clustered at a crossroads around some engine shops and a truck café. We came to a railroad construction site. A ridge of gravel ran like a ruler across the plain from one horizon to the other, with a notch left for the highway.

The humps of Mongol burial mounds appeared on the steppe, and sometimes a more elaborate painted-concrete tomb with a shallow dome and a forecourt surrounded by a low, white wall. I thought of the Mongols riding out of this plain in the thirteenth century—the most devastating cavalry the world had ever seen. Now native Mongolians fear that mining, and the migration of ethnic Chinese, will annihilate what remains of their nomadic life.
A month before I visited in June of 2011, Mongol protests brought riot police into the streets of the provincial capital, Hohhot, after a Chinese truck driver ran down and killed a Mongol herder who was trying to block a coal truck convoy from crossing grasslands.
China executed the truck driver, but the convoys have not stopped.

Twice in two hours I saw distant herders driving animals beneath the dark sky. Black clouds had been building for an hour, and then a squall dashed out and drummed on the roof. At a highway tollgate a young Mongol couple, their bicycle loaded with luggage, sheltered from the rain. Beyond, the highway dipped down to a river swollen by the rain. Chunks of mud sailed across the road in a frothy slick. The ditches dissolved into rushing streams. We crept along with the wipers flailing, and came to a pirate mine.

The site was abandoned in the rain. A front-end loader and a truck were parked beside a hovel. Smoke oozed from a stovepipe and dribbled down the wall. Sluices and a sifting screen stood by the river, with ramps for the trucks to bring ore. The miners had diverted the river, dredged the bed, and had been washing gravels down the
sluices to collect grains of gold. They had messed up the river for miles, and would certainly have bribed local officials. In China I often saw miners foraging in rivers. Once in Shandong I watched a highway crew with a backhoe scooping out a stream to patch the road, and while they were at it, running gravel down a sluice.

Near Chang Shan Hao illegal miners had been dynamiting hills, crushing ore, and piling the gold-rich soils into leaching heaps. Paper sacks that looked like cement bags were stacked beside the ore. The bags contained sodium cyanide briquets. The miners watered the cyanide from local streams and let the solution seep through the heap to liberate the gold. Cheap plastic sheets beneath the heaps caught the gold-bearing cyanide precipitate. The pirates collected the concentrate and trucked it to small refineries in Baotou that process the material and cast it into bars.

We came to an expanse of grassland bordered by distant hills. A ruined fort stood near the road. Crumbling towers flanked the gate. The ramparts ran about a thousand feet in the long dimension. Evidence of China's ancient contest with the Mongols is printed on the surface of the province. Old walls appear and disappear in the desert. On my Chinese map they were all called “Wall of Genghis Khan.”

The fort was another residue of that old contest. A cluster of Mongol houses and some goat pens stood beside it. I watched a Mongol girl lash a stubborn goat with a knotted cord. Her skirt flew out and her arm flashed and the goat tried uselessly to dodge the blow. A mile down the road we drove through the gold mine gate.

A
ROW OF SAPLINGS STRUGGLED
in the wind. On a hillside, a painter balanced on a ladder diligently brushed a design of boatmen
onto the dome of a pagoda. China Gold had a policy of improving the appearance of its mines. On the slope above the pagoda stood a yurt, the traditional leather Mongol tent, ostensibly a nod to the country's past. But they were short of housing at the mine, and the yurt was full of Chinese workers.

A path led up the hill to an observation point. From Chang Shan Hao the plain stretched west into Central Asia. I thought of all the travelers who had set off through those deserts. In 1935 Peter Fleming (brother of Ian Fleming) made a seven-month trek from China to Kashmir. In
News from Tartary
he described his encounters with isolated Chinese governors, Tibetan pilgrims, a Mongol prince, and the small parties of gold washers, itinerant placer miners scouring the streams of Inner Asia. Such bands had picked for centuries at the surface expressions of huge deposits now coming to light.

Chang Shan Hao had nineteen drill rigs going on a narrow strike three miles long and 200 yards wide. The miners had already followed the ore down to 500 feet, and the deposit was “open to depth,” meaning that the deepest drill hole had not found the end of the ore. The drill plan called for a further 175,000 feet of exploration holes. The mine expected to double its reserves from 168 million tons of ore to more than 300 million tons, or about 5 million ounces of gold, and a mill expansion is now forecast to increase output to 260,000 ounces a year by 2015.

We drove up to the pit on a road that circled the mine, and at a platform that surveyed the scene we got out to take a look. Red and yellow ore trucks swarmed the pit. Lines of vehicles loaded with ash-black ore crawled up the ramp while empty ones went down. Even at a glance, something seemed not right. After a moment of watching the activity, I realized what it was. Compared to a Western mine, pit traffic was inordinately dense. The open pits I was familiar with were
austere, even solemn in appearance, not like the teeming crater at Chang Shan Hao.

A
T A MINE LIKE
G
OLDSTRIKE,
where a truck hauls 370 tons, pit managers keep traffic at a stately pace. They never crowd the mine. At Chang Shan Hao the pit floor writhed with trucks. This activity was a function of truck size. Compared to such behemoths as those at Western mines, the Chinese trucks carried only fifty tons. To keep the plant in ore, they jammed more trucks into the mine. When we drove off to tour the mill we met a line of brand-new yellow mine trucks trundling to the pit, and I commented to Jiang that they looked like mine trucks anywhere. “Oh yes,” he said, “they look the same. But they break in a month.”

The same was true of Chinese pumps. Jiang had American pumps at Chang Shan Hao that had run continuously for two years. The Chinese pumps were much less durable. Using such equipment was not a flaw in the business plan, but part of it. In a cheap-steel environment the cost-effective choice was to buy the local products, and when they broke, buy more.

Labor was also plentiful and cheap. At Chang Shan Hao a workforce of a thousand produced, when I was there, 110,000 ounces of gold a year. Typically a miner earned $650 a month.
The mining contractor was China Railway, the biggest company in China.
Notoriously corrupt, it consumed one percent of China's entire GDP. It had more than 2 million employees, its own police force, court system, schools, hospitals, and telecommunications. It has a culture of military discipline from its origins as a department of the army. At the mine, China Railway workers slept eight to a four-bunk room,
swapping bunks at the shift change. They kept their quarters in immaculate order. They worked long hours in hard conditions far from home. As a mine executive observed when I remarked on this, “there are always others waiting at the gate to take the place of anyone who does not like the work.”

X. D. Jiang, the master of Chang Shan Hao, lived in relative splendor. He had a suite at the end of the hall in the managers' wing of the motel-like living quarters. His bedroom was about four times the size of any of the identical rooms that filled the rest of the wing. The legate of a powerful state company, China Gold, and the mine's top manager, Jiang received marks of respect that no Western mine boss would expect. Mine staff sprang to their feet when he entered a room.

Jiang seemed never to stop working. I went to see him one night at his office on the second floor of the administration building. At the end of a dark corridor, light spilled into the hall from the corner office. Three brown-leather sofas formed a U that faced Jiang's opulent lacquered desk. A golden dragon about three feet tall snarled from its plinth. In a map on the wall, China occupied the center of the world. The diminutive Jiang sat swallowed in his huge black leather chair, wreathed in cigarette smoke—as isolated by his position as once the governor of the nearby fort had been, separated from those around him by authority, education, and background.

The eldest child of a Chinese literature professor, Jiang was born in 1958 in Weihai, a city in Shandong on the Yellow Sea. He was nineteen in 1977 when Deng Xiaoping restored the system of university entrance exams. Jiang won a university admission, and in the practice of the time, was told where and what to study. He took the four-year course at the Changchun Geological Institute, and graduated in 1982.

For the next twenty years Jiang put his drills into targets from China to the Arctic. He worked at mines in Ontario and East Africa. In 2002 he returned to Vancouver, where he'd settled his family, arriving just as Toxic Bob was buying Chang Shan Hao. Friedland hired Jiang, and Jiang set off to see if he could make a gold mine out of the heaps of low-grade rubble piled on the lonely hill.

Jiang arrived at a ragged site that had a few test heaps and a pit. Pirate miners rooted through the property. The resource that Jiang wanted to assess was one that demanded meticulousness and patience, and certainly resolve. The business culture of the province was rapacious, even for China. Coal millionaires sneered at the concept of a low-grade deposit, particularly one that needed so much careful assessment. They preferred a commodity that could be gouged out of the ground in bulk and converted into cash almost on the spot. Gold took too much time.