Journey of Nyamaa and His Friends Towards Formalization

Chapter One: Nyamaa

Nyamaa is a 25-year-old artisanal miner from Mongolia. He has a beautiful wife, who is pregnant with their first child together. Nyamaa started by helping his parents with artisanal mining, also known as “ninja mining”, back when he was just 16 years old, by grinding the ore or carrying sacks of ore from one spot to the other.  This was the only way he knew of earning a decent income.  He tried herding livestock and applying for jobs in the soum (sub-province) where he lived, but found no luck. His family didn’t have enough livestock to make a living from, and he lacked higher or even vocational education to qualify for steady work. At the end of the day, mining was just what he was used to doing, since he is the second generation in his family pursuing this activity. One thing he knows for sure is that he doesn’t want the same future for his child, because he doesn’t want him or her to go through what he or his parents went through. Artisanal mining is not a way to make easy money. He grew up witnessing firsthand how his parents had to leave him with neighbors, family friends, or anyone available for long stretches of time while they traveled hundreds of kilometers away, digging the earth in every season and every kind of weather, just to earn a living and raise him and his siblings. Nyamaa carries those memories with him, and he is determined that his own child will not have to live the same way.

Today, Nyamaa stands as the leader of his own artisanal mining partnership, forging a new path forward. The members of his partnership are his friends and relatives, who live in the same province. He is eager to do everything right because even though his parents were away a lot when he was young, they raised him to be a righteous man who obeys the laws and regulations, loves and respects Mother Nature, and thinks of others. Until today, Nyamaa and his partnership have been mining illegally. Still, now that the new mining regulation has been approved, he wants to do everything right, just like his parents wanted him to. He no longer wanted to live with the feeling that he was constantly doing something wrong or on the run from the police. He wanted to stand proudly behind his work, knowing it was legitimate and secure. This is when everything got trickier, and his journey of passing through many hurdles to formalization starts.

Chapter Two: Steps and Approvals for ASM Land

The most important factor in formalization is securing official land where miners’ communities are allowed to work. This is the greatest challenge they face — and the point of deepest concern. Everyone understands that the process demands a long pursuit, tremendous effort, and patience. But there is a strong belief among them: perseverance will eventually pay off.

Chart: ASM land approval steps and approvals

As described in this chart, Nyamaa’s first important step is to find a viable land and determine its coordinates to start the application. He needs to find a mine site/land that was previously mined by others but abandoned. This is a new regulatory requirement from the Ministry of Environment, which Nyamaa and his friends can’t fully understand. Can it be economically viable to mine an abandoned mine site? He kept wondering, but as long as it’s the formal and law-abiding way, he wants to try to pursue to get the legal approval no matter what. His partnership found a viable land, where they plan to do hard-rock mining. There are at least 3 main government organizations, where the partnership will need to go through certain approval stages, namely the Ministry of Environment, the Minerals Agency, and the Citizens’ Representative Council (CRC). These stages and approvals all combined can take as long as over a year or even longer to acquire, not to mention the many trips to the capital city to request information on why it is taking this long to get a reply or provide an approval. If an ASM partnership could reach the CRC (local government) stage of approval, it is quite close to getting the final formal license to mine. However, the struggle to be formalized is not over yet. The CRC members will hear the proposal from the partnership and cast their vote on whether they would like to approve that certain land to be mined. Just when Nyamaa and his friends thought that they were getting very close to formal approval, the CRC members started hinting at some “helpful” financial assistance to push them to vote in their favour. They started a small campaign within the community to let the others understand why it is important for them to get this approval, because it will enable all the members to be employed, and it will eventually bring economic benefits for the whole sub-province. Eventually, they could secure the approval from the CRC and signed a tripartite agreement with the soum governor and the ASM NF (National Federation for Artisanal and Small-scale mining), according to the new regulations.

At long last, just as the miners finally secured approval for their mining land, his first child was born. It was a moment of pure joy — a dream coming true in more ways than one.

Yet, hard rock artisanal mining is anything but easy. To support his growing family, Nyamaa had to leave home for weeks at a time, spending long days and nights deep in the rugged mines. There was no other way. He carried the weight of responsibility on his shoulders, determined to carve out a better future for his newborn child, no matter how far he had to travel or how hard the road ahead might be.

Chapter Three: Turning Ore to Gold: A Journey Through Hardships

Nyamaa’s partnership doesn’t have a processing plant of its own to turn its mined ore into gold for real earnings. So Nyamaa has to travel 300 km every time he wants to process the ore. His friend Byambaa, an owner of a Mercury-free processing plant, tells him about his own struggles to obtain formal licences and approvals to operate formally.  

The Processing plant formalization requirements

Three years ago, when Byambaa decided to enter the ore processing business, he struggled to find enough starting capital for his business. Because it is not a classic and straightforward way of doing business, he struggled to find investors. Running a mercury-free processing plant is not an easy money-maker. The current regulations for a small processing plant are the same as for a big processing plant, which makes Byambaa’s life that much harder to work formally. This means the plant has to prove that the ore is supplied from a formal mine-site, and the plant also needs an approved Feasibility study and Environmental Impact Assessment, all of which take significant time and funding, not to mention the bureaucracy to be endured.

Some researchers estimate that building a plant and obtaining all the necessary permits can cost between 300,000 to 400,000 US dollars, and the entire process can stretch over five years. Adding to the challenge, supplies from formalized mining land were limited, and the regulations for processing plants—originally designed for large-scale operations—placed a heavy burden on small processors like Byambaa. Even after obtaining the permits, it is still very hard, unclear, and sometimes unrealistic for a processing plant to obey the laws. Although the legislation has only one clause saying that the ore coming to the plant should be from a traceable origin, it doesn’t mention any traceability or due diligence procedures.

Chapter four: Gold supply chain

After all the backbreaking work of carrying heavy stones down from the mountains, will we truly be able to sell it with satisfaction? What path will this shiny gold we have mined follow?

Chart: Gold supply chain

After processing the ore at Byambaa’s plant, Nyamaa sells his gold to his friend Baatar. Baatar has been selling gold for quite a few years now. Since 2021, he has been obliged to register and formalize his activity. Baatar was happy that the government acknowledged his business and enabled him to work as a formal gold trader. Before this new legislation, his line of work was in the grey zone. Compared to Nyamaa and Byambaa, for Baatar, it was very easy to formalize his activities as a gold trader and get his license to trade. However, Baatar tells Nyamaa that he is also facing many difficulties in maintaining his formal status, such as:

• There are only 3 Assay laboratories all over Mongolia. Because the closest assay office is in the Capital city, he must travel hundreds of kilometers to get his gold assayed. Depending on the wait times, sometimes he has to spend a few days in the city just to sell his gold.  

• The assay office drills a piece of the gold bar and keeps it for many months to confirm the assay results.

• The tax office imposes income tax on the full price of the gold sold to the Central Bank, when Baatar is only making income based on the daily exchange rates, in other words, his income comes from the difference. When Baatar tries to explain that it’s the miners who are making the majority of the income from selling the gold, the tax office asks Baatar to expose his sellers and demands traceability documents, while there are almost no formal ASGM partnerships selling gold with traceable documents.

The three friends—Nyamaa, the miner; Byambaa, who processes ore; and Baatar, the gold trader—are all striving to do what's right and earn a living through formal and legal ways. Even though the obstacles and difficulties they face in their own type of business are different, all three are questioning the current ways of formalizing the ASGM sector in Mongolia. Their line of work is closely interconnected, where every activity affects the next actor (miner, ore processor, trader), but it seems that the ministries and agencies that regulate the supply chain don’t see it as a whole chain of activities, and the formalization is not streamlined. The three friends agree on one thing: it seems they had an easier life when they did it all illegally. Why is it so much harder to be formal?

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