Russia's Lake Baikal being threatened by zinc mine

Green trees sway on the hilly Russian horizon, rainbows pierce Lake Baikal's grey waters and waves pound a pathless shore.

The stark beauty of the world's deepest and oldest lake is under threat, ecologists say, because it lies downstream from a rich source of zinc.

The proximity has opened up a debate in this resource-rich nation, pitting industrialists and job-hungry officials in Siberia against ecologists and government agencies in Moscow.

Experts say the Kholodninskoye deposit, which sits in a watershed flowing straight into Baikal, is the planet's third largest lead and zinc field. Zinc is used in the production of galvanised steel, the automobile industry, household batteries, vitamin supplements, fireworks and as a compound in some cosmetics.

MBC Resources, a subsidiary of Russia's privately owned Metropol group, has a licence to develop Kholodninskoye, which has an estimated 13.3 million tonnes of zinc and two million tonnes of lead. It has drafted a plan to develop the field and other metals in the region at an estimated cost of €2.8 billion.

But ecologists in Buryatia region in Siberia, where Baikal lies, say development would despoil the biggest freshwater mass on earth - already threatened by tourism and other industries.

"For us right now, this is problem number one," said Sergey Shapkhayev, director of the Buryat/Baikal Land Use Programme in Ulan Ude.

"The geo-hydrological structure there is very complex, lots of underground springs, subsoil water at different temperatures that would increase tailings volumes into the lake," he said.

Tailings are unrecoverable mining waste discharged as slurry.

In July, Russia's Natural Resources Ministry proposed a ban on developing half of the Kholodninskoye deposit, saying mining would damage the lake, considered a national ecological reserve.

The government of Buryatia, which borders some 60 per cent of the lake, hopes development will bring investment and jobs to the region, and has strongly opposed the proposed ban.

At its deepest, Baikal is 1,637 metres and it is some 25 million years old. It holds about one fifth of the world's freshwater and is around 9,200 kilometres east of Moscow.

The shoreline runs along an ancient rift valley for about 2,100 kilometres, roughly the distance from Moscow to Duesseldorf, Germany.

Buryatia authorities are keen to promote Baikal, which is home to some of the world's rarest types of fish and plants, as a tourist destination. But it also wants mining development.

Buryatia President Vyacheslav Nagovitsyn, appointed last year by then President Vladimir Putin, served as a crew member on a highly publicised but ultimately unsuccessful submarine dive in July, aimed at reaching the bottom of Baikal.

The dive was financed by Mikhail Slipenchuk, Metropol's general director. He says not developing the zinc and lead deposits would constitute a missed opportunity for Russia, already flush with cash from an energy and commodities boom.

"This is 20 per cent of Russia's (zinc) reserves. If we cross it off the list, Russia will be the poorer for it," he said.

However, zinc prices have been sliding on weak demand and global oversupply, with some analysts predicting little relief into 2010.

The metal is one of the worst performers in the metals complex this year. In August, it dropped to its lowest level since November 2005 and is now trading around €1,200 a tonne, down almost 25 per cent this year.

Zinc stocks at the London Metal Exchange have jumped 80 percent this year to 160,000 tonnes, and a Reuters survey of analysts showed an expected surplus of about 281,250 tonnes this year, growing to 328,758 tonnes next year.

The industry has seen mine closures and output cuts as energy, labour and equipment costs rise, raising questions about the ultimate profitability of the Kholodninskoye project.

Buryatia's Natural Resource Ministry said in July that MBC would have to spend €60 million on cleanup of tailings plumes caused by Soviet-era prospecting.

He said Soviet test shafts sent tailings-laced underground water into the nearby Kholodnaya river which feeds Baikal. "Either we spend several hundred million dollars setting the Kholodninskoye deposit aside as a nature reserve, or we tighten regulations in the licensing agreement to make the holder responsible for these deficiencies," Mr Slipenchuk said.