By Olga Petrova
LAKE BAIKAL, Russia (Reuters) - Green trees sway on thehilly Russian horizon, rainbows pierce Lake Baikal's greywaters and waves pound a pathless shore.
The stark beauty of the world's deepest and oldest lake isunder threat, ecologists say, because it lies downstream from arich source of zinc.
The proximity has opened up a debate in this resource-richnation, pitting industrialists and job-hungry officials inSiberia against ecologists and government agencies in Moscow.
Experts say the Kholodninskoye deposit, which sits in awatershed flowing straight into Baikal, is the planet's thirdlargest lead and zinc field.
Zinc is used in the production of galvanised steel, theautomobile industry, household batteries, vitamin supplements,fireworks and as a compound in some cosmetics.
MBC Resources, a subsidiary of Russia's privately ownedMetropol group, has a licence to develop Kholodninskoye, whichhas an estimated 13.3 million tonnes of zinc and 2 milliontonnes of lead. It has drafted a plan to develop the field andother metals in the region at an estimated cost of $4 billion(2.2 billion pounds).
But ecologists in Buryatia region in Siberia, where Baikallies, say development would despoil the biggest freshwater masson earth -- already threatened by tourism and other industries.
"For us right now, this is problem number one," said SergeyShapkhayev, director of the Buryat/Baikal Land Use Programme inUlan Ude.
"The geo-hydrological structure there is very complex, lotsof underground springs, subsoil water at different temperaturesthat would increase tailings volumes into the lake," he said.
Tailings are unrecoverable mining waste discharged asslurry.
In July, Russia's Natural Resources Ministry proposed a banon developing half of the Kholodninskoye deposit, saying miningwould damage the lake, considered a national ecologicalreserve.
The government of Buryatia, which borders some 60 percentof the lake, hopes development will bring investment and jobsto the region, and has strongly opposed the proposed ban.
RICH RESOURCE
At its deepest, Baikal is 1,637 metres and it is some 25million years old. It holds about one fifth of the world'sfreshwater and is around 9,200 km (5,717 miles) east of Moscow.
The shoreline runs along an ancient rift valley for about2,100 km (1,305 miles), roughly the distance from Moscow toDusseldorf, Germany.
Buryatia authorities are keen to promote Baikal, which ishome to some of the world's rarest types of fish and plants, asa tourist destination. But it also wants mining development.
Buryatia President Vyacheslav Nagovitsyn, appointed in 2007by then President Vladimir Putin, served as a crew member on ahighly publicised but ultimately unsuccessful submarine dive inJuly, aimed at reaching the bottom of Baikal.
The dive was financed by Mikhail Slipenchuk, Metropol'sgeneral director. He says not developing the zinc and leaddeposits would constitute a missed opportunity for Russia,already flush with cash from an energy and commodities boom.
"This is 20 percent of Russia's (zinc) reserves. If wecross it off the list, Russia will be the poorer for it," hesaid.
However, zinc prices have been sliding on weak demand andglobal oversupply, with some analysts predicting little reliefinto 2010.
The metal is one of the worst performers in the metalscomplex this year. In August, it dropped to its lowest levelsince November 2005 and is now trading around $1,745 a tonne,down almost 25 percent this year.
Zinc stocks at the London Metal Exchange have jumped 80percent this year to 160,000 tonnes, and a Reuters survey ofanalysts showed an expected surplus of about 281,250 tonnesthis year, growing to 328,758 tonnes in 2009.
The industry has seen mine closures and output cuts asenergy, labour and equipment costs rise -- raising questionsabout the ultimate profitability of the Kholodninskoye project.
Undeterred, MBC recently signed a memorandum withRusinvestpartner, a joint venture of state conglomerate RussianTechnologies and metals-to-oil firm Renova, under whichRusinvestpartner said it intended to buy stakes in projects todevelop Kholodninskoye and another lead and zinc depositnearby.
Even if the ban on development does not proceed, there isclean-up work to be done before any mining gets underway.
SOVIET LEGACY
Buryatia's Natural Resource Ministry said in July that MBCwould have to spend 2 billion roubles ($85 million) on cleanupof tailings plumes caused by Soviet-era prospecting.
Slipenchuk says the company will fund the clean-up butwants this to be written into the licensing agreement.
He said Soviet test shafts sent tailings-laced undergroundwater into the nearby Kholodnaya river which feeds Baikal.
"Either we spend several hundred million dollars settingthe Kholodninskoye deposit aside as a nature reserve, or wetighten regulations in the licensing agreement to make theholder responsible for these deficiencies," Slipenchuk said.
Baikal is such a powerful symbol of ecological purity forRussians that in 2006, Putin ordered a giant oil pipeline to berouted away from the lake, citing great risk to theenvironment.
But in spite of this, ecologist Shapkhayev said unregulatedlogging and careless tourism construction were already causingdamage, that would only be intensified by mining.
"Russian ministries think, mistakenly, that up to 2 milliontourists will come here, and that they need to build five-starhotels, mountain ski resorts ... and they dole out a largeshare of federal money for building the infrastructure," hesaid.
Shapkhayev said only around 20,000 tourists -- half fromabroad -- come to Baikal annually. Construction firms pop upseasonally to build poorly constructed lodgings with federalmoney, then disappear without paying their workers.
"Until we come to terms with corruption, those kinds ofproblems will happen more and more often," he said.
(Writing by Chris Baldwin, editing by Jon Boyle and Clar NiChonghaile)
