Posted Monday, July 31, 2006; 20:00 HKT

Irishman John Macken is stranded. A powerful sandstorm is ripping across the Gobi Desert and the Cessna scheduled to fetch him from this remote spot in Mongolia's south, called Oyu Tolgoi, can't risk a landing. The sand rampages in intimidating sheets, propelled by fierce, gusting winds, crashing into cars with enough force to strip off paint and crack windshields. The entire Gobi appears on the move, bounding across the barren terrain in giant, leaping clouds of stinging yellow grit, pausing for a moment when the wind suddenly dies off, then surging with renewed energy as the gales return. But Macken, 55, isn't bothered. As the rest of us run for cover, he slips on a pair of black sunglasses and strides through the storm in a white polo shirt. "Sand in the Gobi is like rain in Ireland," he shrugs.

Macken puts up with the sand because of what lies beneath. Under this stretch of desert is one of the largest copper and gold deposits ever discovered, and Macken, CEO of Vancouver-based Ivanhoe Mines, possesses the rights to mine it. Ivanhoe estimates the deposit is worth $38 billion. In contrast, the entire GDP of Mongolia is just $1.9 billion. Macken calls the deposit "hitting the jackpot; you only find one of these a decade." When the project reaches full production, miners will excavate up to 200,000 tonnes of ore a day and burrow nearly 2 km under the earth's crust. Water for processing will come from subterranean cisterns of salty goo, which, Macken says, date "from the dinosaur age." Today, Oyu Tolgoi is a ragtag outpost of makeshift offices and humble gers—the traditional white tents Mongolians have inhabited for millennia—with the rest of the site still home to scorpions and the occasional camel-toting nomad. "It's Wild West stuff, the frontier," Macken says. But Ivanhoe is talking up a grandiose scheme. During the mine's life-span—at least 35 years, probably more—the company envisions the area as a thriving industrial center, with high-rise apartments, five-star hotels, broadband Internet and an international airport. In fact, the project has the potential to completely transform this poor nation of 2.5 million people, bringing Mongolians more money than they have seen since Marco Polo was captivated by the opulence of the Great Khan back in the 13th century. "It's the most important thing that has happened in Mongolia for a long time," says Macken.

Mongolia may well be the world's new El Dorado. It's not just Oyu Tolgoi, and it's not just copper and gold. Mongolia could be harboring a host of other valuable metals, as well as coal. How much, nobody knows, but last year mining companies spent $100 million just on exploration. Instead of elation, however, the buried treasure has generated controversy. A national debate is raging from the halls of parliament to the gers of the countryside over how mining should—and shouldn't—change Mongolia at a critical moment in its history. Emerging from isolation after decades of communist rule, Mongolia today is experimenting with democracy, enjoying an explosion of civil society and tapping into the world economy to a greater degree than it ever did in the past. Mining can impact all of this: it can strengthen Mongolia's nascent pluralism, or contort the government into a corrupt kleptocracy; develop the entire country, or enrich only a handful; give Mongolia control over its own destiny, or make it a victim of erratic, insensitive global markets.

Unfortunately, there is little to guide Mongolia through this complex transition. Most developing countries with economies dependent on natural resources have miserable economic and political histories. Some, like Congo, deteriorate into criminality and chaos; others, such as Saudi Arabia, never cure their addiction to just one commodity. "No one has a model to show Mongolia," says Mandar Jayawant, deputy country director for Mongolia at the Asian Development Bank. The Mongolians realize that the decisions made over the next few months could determine the future of their society for generations, and many worry their inexperienced leadership will spoil this golden opportunity. "This isn't Mongolia, it is Mine-golia," says Ganbaatar, the popular founder of civic movement Resolute Reform. "The whole globalization process is focused on digging things up. This is too dangerous for us. We could follow Africa."

Mongolia has little else to offer the global economy beyond its mineral wealth. Much of this boundless country—three times the size of France—is completely undeveloped, with no industry, towns, even paved roads. About 40% of the population still leads the nomadic lives of their distant ancestors, roving among the pastures with their herds of cattle, yaks, camels, sheep and horses. Though mining has been an important part of the economy for decades—it already accounts for 20% of GDP and 70% of exports—the scale has been too small to do much to alleviate the country's poverty. Three-fourths of the population lives on $2 a day or less. The capital, Ulan Bator, is notorious for its nearly 4,000 "street children," some of whom survive subzero winters inside the city's sewers. Surrounding the city are unusual slums called "ger districts," where unemployed from the countryside set up their tents hoping—but often failing—to find jobs.

Yet centuries ago the Mongolians might well have been the richest people on the planet. Marco Polo was the most vivid chronicler of the fabulous treasures of the Great Khan, at that time Genghis Khan's grandson Kublai. His opulent palace in Beijing, Polo wrote, was "the most extensive that has ever yet been known," with storehouses of gold, silver, jewels and pearls, gilded and painted ceilings and great staircases of marble. Kublai's wealth has become legendary. Schoolchildren today are still dazzled by the 19th century romantic poem "Kubla Khan" by Briton Samuel Taylor Coleridge, and its most famous verse: "In Xanadu did Kubla Khan, a stately pleasure-dome decree ..."

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