Artisanal gold mining, a blessing in disguise

The planet’s mineral resources become the coveted symbols of luxury, which is why the words “dirty gold” are anathema to our ears. The possibility that we are wearing gold from mines that exploit workers and pollute the environment takes the shine off our watches and jewellery. While consumer demand for ethically sourced gold is increasing, numerous problems are still to be resolved upstream, at the mines themselves. In March this year, police raids across Peru revealed that a criminal organisation, Los Topos, was operating illegal mine shafts and using the identities of registered miners to launder the gold. Some of the individuals providing a front for this criminal operation had dealings with Minera Veta Dorada, an ore processing plant belonging to the Canadian mining company Dynacor which supplies Swiss refiner PX Precinox. Once again, Switzerland’s refiners appeared as accomplices to unregulated mining.

20 million miners

The amalgamation is nothing new and, as NGOs become increasingly vociferous in their accusations that not enough is done to guarantee the traceability of gold, last year another Swiss refiner, Metalor, announced it would no longer process gold from artisanal mines in Latin America. This prompted a huge backlash from non-profits that defend the role of small-scale mining in sustainable development, with the result that Metalor reviewed its decision and now works with a small mining group in Peru and with the Swiss Better Gold Association (SBGA) to support artisanal gold production. Representatives of Metalor and the SBGA were on the panel at the recent Basel Gold Day, organised by Mark Pieth, a professor of criminal law at Basel University, to debate issues surrounding artisanal and small-scale mining (ASM). These are important questions in an informal sector that employs 20 million miners, provides a livelihood for 100 million people and accounts for 20% of global gold production, which consultancy Metals Focus estimates at 3,368 metric tons in 2020. At current prices, these roughly 700 metric tons of gold produced each year by artisanal and small-scale mines are worth US$ 43 billion: enough to help lift local communities out of poverty but also enough to attract illicit interest.

Speaking at Basel Gold Day, Diana Culillas, who is secretary general of the Swiss Better Gold Association, was adamant that “it is possible to work with artisanal mines and this is what we are doing in Latin America. The problems we’ve discussed only concern a small number of mines. The objective is to give artisanal mines access to regulated markets as well as ensure that their customers at the other end of the supply chain are prepared to pay an incentive for sustainably mined gold.” As group general counsel for Metalor, José Ramon Camino insisted that “we can’t do this alone. The efforts refiners are making should not be underestimated but the traceability of ASM gold is a complex matter. These are questions that all stakeholders need to address.” According to Edward Bickham, senior advisor for the World Gold Council, “this begins at government level. It is governments’ role to introduce regulations that will boost investor confidence and enable artisanal mines to enter into relations with financial partners. As for civil society, it needs to demand greater transparency in what is still very much an informal supply chain.”

Gold miners seek snowball effect

Has Edward Bickham’s message been heard? Mid-October, the South African investment firm Pearl Grey Equity Partners announced the creation of a venture capital incubation fund that seeks to give South Africa’s small-scale mines access to capital and, through this, enable them to expand their business in compliance with international regulations. Swiss refiner PX Precinox is taking a similar approach, as its CEO Philippe Chave explained to Swissinfo in the wake of “Perugate”. It works with a processing plant in Peru that sources gold ore from between 400 and 600 miners who must be registered with the government, have a tax ID number and an operating license. They can choose to recover the gold themselves using mercury, in which case they can expect to recover around half of the metal, or they can choose to supply Dynacor which recovers 95% of the gold using non-mercury chemicals in a controlled installation.

“We charge our customers [jewellers and watchmakers] a premium to support sustainable projects,” Mr Chave continued. “This is based on the amount they commit to purchasing over one year at a rate that is financially acceptable to the market. All these funds are invested in sustainable projects which creates a snowball effect. The more we invest in the mining communities, the more obvious it becomes to the miners that they have everything to gain from formalising their activity. The more miners there are who are legally authorised to sell gold, the more gold we can bring to market and the more we can reinvest in the community. This is the momentum we’re aiming for.” Also speaking at Basel Gold Day, Felix Hruschka from the Alliance for Responsible Mining delivered a few home truths: “These small-scale mines are located in countries that lack an adequate regulatory framework, with weak administrations that are prone to corruption and where salaries are low. Artisanal and small-scale mining remains largely informal because investments are considered high-risk, not to mention questions of image and reputation. But for the miners, they are a way out of poverty. Remember that these are miners, not criminals. All they want is to earn a living and for that reason alone they deserve all the help we can give them to legalise their activity and fully integrate them into the supply chain.”