VZCZCXRO1380
PP RUEHCHI RUEHDT RUEHHM RUEHLN RUEHMA RUEHNH RUEHPB RUEHPOD
DE RUEHPF #0398/01 1330641
ZNR UUUUU ZZH
P 120641Z MAY 08
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHINGTON DC PRIORITY
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY 0772

UNCLAS SECTION 01 OF 04 PHNOM PENH 000398 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, OES--COVINGTON, EEB/ESC/IEC/ENR 
BANGKOK FOR REO--WALLER, FCS--BACHER, USAID/RDMA--PASCH AND 
BOWMAN 
 
E.O. 12958: N/A 
TAGS: EMIN PGOV SENV SOCI PHUM CB AS
SUBJECT: CAMBODIA'S EMERGING MINING SECTOR:  FOREIGN 
INVESTMENT AND ANCIENT CULTURE CLASH 
 
REF: A. PHNOM PENH 113 
 
     ¶B. 07 PHNOM PENH 1189 
     ¶C. 07 PHNOM PENH 1193 
 
¶1.  (SBU) Summary:  International interest in northeastern 
Cambodia's mining potential has increased sharply in recent 
years with a number of large, well-respected international 
firms joining smaller domestic and international companies in 
the search for gold and bauxite.  While no major discoveries 
have yet been reported and some companies are downplaying 
expectations, both government officials and some other 
companies have predicted that discoveries are just around the 
corner and that the sector could potentially spawn "billions 
of dollars" in investment.  Unregulated mining is opposed by 
some environmental groups, who worry about the effects of 
toxic chemicals and potential exploitation in some of 
Cambodia's extensive protected areas.  Many representatives 
of the region's ethnic minority communities, which make up a 
majority of the population in the region, are fervently 
opposed, citing both conventional fears such as land disputes 
and environmental worries alongside culturally rooted 
concerns such as angering ancestors and inducing lightning 
strikes, fissures in the earth, or volcanic activity.  In one 
case, residents seized drilling equipment and threatened to 
use violence if necessary to prevent further drilling.  End 
Summary. 
 
Mondulkiri Province:  Isolated and Pre-Modern 
--------------------------------------------- 
 
¶2.  (U) Mondulkiri--the epicenter of Cambodia's nascent 
mining industry--is the country's largest but most sparsely 
populated province, with just 40,000 people in 14,000 square 
kilometers.  Eighty percent of residents are ethnic 
minorities, with the majority being members of the Phnong 
ethnic group.  With poor road networks, limited 
communication, and abundant natural resources, these 
communities lived largely independent of the rest of 
Cambodian society for decades.  Ethnic minority members often 
have little formal education, many are illiterate and 
unfamiliar with a market economy, a scientific worldview, or 
political processes.  Many do not speak Khmer, although 
increasing numbers of young people are learning the national 
language.  Protection and veneration of spirit forests, 
burial grounds, and ancestors figures prominently in their 
animist beliefs. 
 
Mining Interest Surges 
---------------------- 
 
¶3.  (U) Small-scale mining began to take off in Mondulkiri 
and other parts of northeastern Cambodia in the early 1980s 
as local families attempted to supplement their incomes with 
minerals (mostly gold) recovered using hand tools and basic 
methods such as panning.  According to a provincial Ministry 
of Industry, Mines, and Energy (MIME) official in Mondulkiri, 
mining firms--particularly domestic companies and foreign 
firms from China, South Korea, and Vietnam--began small 
commercial operations in the area in 1989. 
 
¶4.  (SBU) Major international mining companies have begun 
exploring in Cambodia in the last two years.  Oxiana, an 
Australian mining firm which runs the huge Sepon copper and 
gold mine in Laos, began exploring for gold in Mondulkiri in 
¶2006.  BHP Billiton, another Australian company, began 
explorations nearly a year ago on a 100,000 hectare 
concession in Mondulkiri.  Representatives from both firms 
dismissed rumors and Cambodian government suggestions that 
they have found major, easily extractable deposits, instead 
insisting that they are seeing interesting results which 
warrant continued exploration, but no major discoveries yet. 
Two other Australian firms--Southern Gold and Indochine--are 
also exploring for mineral reserves in northeastern Cambodia, 
though these firms are much less well known and are perceived 
as secretive by many civil society observers.  Southern Gold 
has made repeated predictions of a major discovery. 
 
Is Mining A Big Environmental Worry? 
------------------------------------ 
 
¶5.  (SBU) Environmentalists are split over the relative 
danger of Cambodia's nascent mining sector.  A 2004 study 
from Oxfam America and MIME warns that, if not properly 
conducted, gold mining can cause cyanide and mercury to leach 
 
PHNOM PENH 00000398  002 OF 004 
 
 
into the environment, severely damaging human and 
environmental health.  In addition, the creation of mining 
settlements in remote and forested areas contributes to 
deforestation and reduced wildlife as miners harvest trees to 
build shelters and support mine shafts, clear land for 
settlements, and hunt animals.  Both Oxiana and BHP Billiton 
have taken pains to emphasize their social responsibility and 
commitment to environmental protection, but many 
environmental groups say that these companies' records in 
Cambodia are still unproven, and that other mining firms have 
not acted in environmentally responsible ways.  In contrast, 
some environmental leaders argue that environmental activism 
in Cambodia is better spent on economic land concessions and 
other pressing issues, given that no major deposits have yet 
been found and mere exploration has little environmental 
impact. 
 
¶6.  (SBU) Environmental groups have also raised questions 
about mineral exploration and exploitation in some zones of 
protected areas.  (Note:  The Ministry of Environment 
reversed a 12-year-old ban in August 2006, and the December 
2007 Protected Areas Law permits mining and other commercial 
activities in two of the four classification zones to be used 
in protected areas.  See ref A.  End Note.)  Oxiana's 
concession includes a large swath of Phnom Prich Wildlife 
Sanctuary and BHP Billiton's territory includes Seima 
Biodiversity Conservation Area.  Indochine's Memorandum of 
Understanding gives them the right to explore more than half 
of Virachey National Park, the site of a USD 5 million World 
Bank environmental project, as well as extensive additional 
area outside the park. 
 
¶7.  (SBU) However, prohibiting development in all of 
Cambodia's protected lands may not be realistic or desirable. 
 A 1992 review by the UN's World Conservation Monitoring 
Center, found that Cambodia had a very high percentage of its 
territory designated as protected--26% of Cambodian territory 
compared to 16% in Thailand, 11% in the U.S., 10% in 
Indonesia, and 5% in Australia.  And, much of Cambodia's 
"protected" land is severely degraded and not worth 
preserving. Seima Biodiversity Conservation Area in 
Mondulkiri is an example.  According to Wildlife Conservation 
Society staffer Tom Evans, the government created the 
boundaries of the conservation area by simply following the 
boundaries of a failed logging concession.  As a result, the 
concession includes large areas of little environmental 
value. 
 
Land Disputes, Lightning, Earthquakes and Angry Spirits are 
Top Community Concerns 
--------------------------------------------- ------------- 
 
¶8.  (SBU) The sharp increase in mining interest and 
exploration has raised significant concerns among Mondulkiri 
residents.  Affected communities and civil society members 
are concerned by the non-transparent manner in which mining 
concessions are awarded and their potential environmental and 
social effects.  Far from being included in the licensing 
process, communities often don't know that concessions have 
been awarded until exploration or actual mining starts. 
 
¶9.  (SBU) The main interest of many minority residents of 
Mondulkiri is preserving their traditional way of life.  A 
traditionally nomadic people practicing swidden (slash and 
burn) agriculture in the province's poor soils, they are 
ignorant of or frustrated by laws that limit their ability to 
farm where they choose.  As a result, ethnic minority 
communities are experiencing increasing conflicts with local 
authorities over farming on state-owned, protected, or 
privately held land.  Many ethnic minorities feel that 
government policy is unfair, restricting their rights to farm 
where they wish while offering insufficient protections 
against economic development by outsiders.  As one ethnic 
Phnong NGO leader poignantly stated, "If local people do 
farming (on protected land), it's illegal.  But when 
companies come to do mining (on protected land), it's 
development."  To other observers, it seems as if the ethnic 
minorities want to have their cake and eat it, too--flouting 
the laws when it suits them, but asking for enforcement when 
the mining companies begin operations. 
 
¶10.  (SBU) In a visit by Econoff to Dak Dam village within 
the BHP Billiton exploration area, residents described their 
fear, distrust, and powerlessness in the face of mining. 
 
PHNOM PENH 00000398  003 OF 004 
 
 
Already traumatized by past dealings with the notorious 
Wuzhishan logging concession, villagers told Econoff that 
they are completely opposed to mining--even exploratory 
drilling in non-sacred areas of their community.  They fear 
being forced off their land if bauxite is discovered and that 
the mining could damage the environment or the health of 
villagers.  They also believe that drilling will anger their 
ancestors whose spirits reside in the area, and may lead to 
earthquakes, lightning strikes, fissures in the earth, and 
volcanoes.  In fact, the villagers blame one death on BHP 
Billiton--a local man who was killed by a lightning strike, 
which the community believes was caused by angry spirits. 
 
¶11.  (U) In a separate, well publicized example, in May 2007 
residents of Bou Sra village in Mondulkiri hauled two heavy 
drilling machines away from a new granite mine.  These Phnong 
villagers were angry about the unannounced mining of a sacred 
mountain they consider to be the birthplace of the Phnong 
people.  They warned that if the miners came back, they would 
use violence to protect the area.  Civil society leaders 
report that mining operations have not resumed since the 
drilling machines were seized one year ago.  The government 
has not yet responded to their requests to cancel the mining 
concession. 
 
Local Government Has Little Role 
-------------------------------- 
 
¶12.  (SBU) Sadly, the natural arbiter between the interests 
of the mining companies and the interests of the 
communities--local and provincial government--appears to be 
completely absent from mining regulation.  National 
government officials issue mining licenses without consulting 
at the provincial or local level.  BHP Billiton 
representative Dave McCracken reports that his company deals 
only with national authorities, often the Prime Minister 
himself.  A team of four officials from the national MIME 
office--but no one at the provincial level--have been 
assigned to work full-time with BHP. 
 
¶13.  (SBU) Provincial and local leaders we met in Mondulkiri 
had little input into or information about the mining 
occurring in their province.  Local NGO and government 
officials could not tell us how to contact area mines to 
secure permission for a visit.  When we brought a commune 
councilor with us on an unannounced visit to a Vietnamese 
gold mine, we were turned away by a self-described Royal 
Cambodian Armed Forces soldier armed with an AK-47.  (Note: 
The 2004 Oxfam/MIME study reports that military personnel 
frequently guard mining locations.  End Note.)  The commune 
councilor said that, although the mine was in his commune, he 
had never visited it, and did not know the name or 
nationality of the company running the mine, what they were 
mining for, or whether the mine was active.  The provincial 
director of MIME said that environmental impact assessments 
(EIA) were conducted by an interministerial delegation from 
Phnom Penh, with provincial officials rarely invited along. 
The director was unclear about when an EIA was required and 
whether or not it was available to the public, and said that 
he had never seen one. 
 
Comment 
------- 
 
¶14.  (SBU) At this point, increasing interest in Cambodia's 
mining potential is more an indicator of underlying problems 
in society and government than an issue in itself.  As is the 
case in hydropower development (ref B) and economic land 
concessions (ref C), the procedures and effective government 
representation that should allow communities to have a 
meaningful voice in development decisions that affect them 
directly are simply not present.  Moreover, safeguards like 
environmental and social impact statements that should serve 
as a bulwark against inappropriate development are also 
missing.  With a history of isolation, little understanding 
of political processes or a modern economy, and concerns 
ranging from those likely to generate some sympathy from 
mining companies and the government (i.e. the potential for 
land disputes and environmental damage) to those alien to a 
scientific worldview (i.e. increased lightning strikes and 
volcanic development), it is hard to imagine a community less 
equipped to be active participants in decisions about mining 
than Mondulkiri's ethnic minorities.  If significant and 
extractable mineral deposits are discovered, and absent 
 
PHNOM PENH 00000398  004 OF 004 
 
 
significant good governance reform, some Mondulkiri 
communities may become embroiled in localized and 
occasionally violent conflicts similar to land disputes 
taking place elsewhere in Cambodia. 
MUSSOMELI