A commodity boom coupled with the ongoing struggle to earn a living in remote areas has led to an explosive growth in artisanal and small-scale mining (ASM) activity globally over the last decade. With its low barriers to entry, ASM is one of the fastest-growing rural livelihoods in many developing countries and has undeniably gained significance within the global minerals supply chain.
According to a 2020 study by the OECD, ASM is a significant contributor to the world’s annual supply of minerals, accounting for 25% of diamonds, 20% of gold, and between 18% and 30% of cobalt.
It is estimated that more than 40 million people globally are directly involved in ASM and that at least a further 130 million others work in related industries that support the sector. In this context, ASM has many positive socioeconomic impacts as it provides jobs for people with limited income earning opportunities in remote areas.
Unfortunately, in many jurisdictions, there is typically little formal oversight or governance of the ASM sector, resulting in an array of issues.
Among the most notable are unsafe working conditions, occupational disease hazards, environmental deterioration, human rights violations, money laundering and conflict with state security forces.
On top of these challenges, the lack of controls over ASM commerce can mean a significant loss in tax and royalty revenue for national treasuries.
MORE THAN 40 MILLION PEOPLE GLOBALLY ARE DIRECTLY INVOLVED IN ASM AND AT LEAST A FURTHER 130 MILLION OTHERS WORK IN RELATED INDUSTRIES
Working Together to Formalise the Industry
Given the growing importance of the ASM sector to the global mineral supply, governments, large-scale miners (LSMs) and international organisations are beginning to work together to formalise the industry.
While there is no one solution, a pioneering example of how this can be achieved is being played out in South America, in one of its poorest countries, Bolivia, which is rich in mineral resources.
A geological phenomenon that needs little introduction, the Cerro Rico (Spanish for rich mountain) is the largest silver deposit the world has ever known, yielding an estimated 60,000 tons of silver since its discovery in 1545.
After 400 years of active mining, in 1952, all of Bolivia’s largest and most important mines, including Cerro Rico de Potosi, were nationalised.
Since that watershed moment in Bolivia’s history, the Cerro Rico de Potosi, along with all the other mineral resources of the country, has been owned by the citizens of Bolivia, with the government acting as custodian. While mining on the mountain was initially undertaken by the state mining company, the Corporación Minera de Bolivia (Comibol), the tin crisis of 1985 forced Comibol into bankruptcy and effectively set the stage for artisanal mining to flourish.
IT IS APPROXIMATED THAT MORE THAN 150,000 PEOPLE ARE INVOLVED IN ARTISANAL MINING ON THE CERRO RICO
It is estimated that there are between 6,000 and 20,000 artisanal miners in the Cerro Rico today, most of whom are descendants
of miners, artisan tradespeople and indigenous labourers. They operate collaboratively in self-managed groups known as cooperativas, working more than 140 different mines on the mountain.
Taking into account affiliates and downstream services to the cooperativas, it is approximated that more than 150,000 people are involved in artisanal mining on the Cerro Rico.
Mining rights and the activities of these artisanal miners are regulated by a robust legal framework. Bolivia’s Mining and Metallurgy Law No 535 (2014 Mining Law) was passed in 2014, and covers three categories of mining operators including cooperativas, state-owned mining companies and the private mining sector.
During the multi-year discussion period leading up to the passage of the 2014 Mining Law, the cooperativas actively participated in the
process, holding steadfast to their criteria and conditions. As a result of their efforts and significant influence, the cooperativas received the strongest legislative support of the three categories of miners.
This group of operators is as strong now as it was back in 2014. Today, there are a total of 2,388 cooperativas, incorporating more
than 135,000 individual miners, operating across nine mineral-rich departments in Bolivia.
IT IS APPROXIMATED THAT MORE THAN 150,000 PEOPLE ARE INVOLVED IN ARTISANAL MINING ON THE CERRO RICO
Bringing ASM Ore into Mineral Output Mainstream
Since the passing of the mining code, progress has been made to make ASM activities safer and more environmentally responsible, and to bring ASM ore into the mainstream of Bolivia’s mineral output.
Facilitating this endeavour is Empresa Minera Manquiri S.A. (Manquiri), a wholly owned subsidiary of Canadian public company, Andean Precious Metals.
Manquiri owns and operates San Bartolomé, a 5,500 tonne-perday mineral processing plant situated at the southern base of the Cerro Rico de Potosi. Since the commissioning of this plant in 2008, Manquiri has worked as an oxide
mineral processing partner for many of the Cerro Rico cooperativas for the last 15 years.
Efficiently and responsibly extracting precious metals from ore is an expensive and complex process, something the cooperativas have historically known all too well. Lacking either the capital or the technology to recover precious metals, they have a long and established tradition of selling their raw ore to thirdparty processing plants.
Up until 2008, the bulk of the ore mined from the Cerro Rico was processed by more than 60 small processing plants situated in and around the city of Potosi. Prior to the commissioning of Manquiri’s San Bartolomé plant, the fairness of prices paid for the ore supplied by the cooperativas could be questioned. Moreover, there is no doubt that the low efficiency rates and heavy environmental impact from the smaller operations were detrimental to the workers and the region.
It was in this context that, when the San Bartolomé project was first proposed, the ability to source and process material from cooperativas was factored into the business case. Setting up the project made financial sense from the perspective of optimising Manquiri’s mining costs and offered an opportunity to build a holistic and productive partnership with the artisanal miners with whom the Company coexists to this day.
Upon first commissioning, San Bartolomé was structured in association with Comibol and seven cooperativas. Today, Manquiri maintains a business relationship with 17 cooperativas working on the Cerro Rico. Collectively, these cooperativas are comprised of 301 small-scale partnerships, each of which consists of about 10 miners per group.
SINCE THE PASSING OF THE MINING CODE PROGRESS HAS BEEN MADE TO MAKE ASM ACTIVITIES SAFER AND MORE ENVIRONMENTALLY RESPONSIBLE
The San Bartolomé plant
Manquiri also actively sources silver-rich oxides from other ASMs who mine silver-rich oxides from the valleys beneath the Cerro Rico. To date, the Company has formed partnerships with 15 of these cooperativas together with several individual small-scale miners, who collectively represent roughly 47% of Andean’s annual production, roughly 2.4 million ounces of silver.
While many of these resources are 300 to 500 miles from the San Bartolomé plant, much of this ore can be highgrade and therefore is economical to transport and process. This strategy provides a business opportunity for the remote ASMs, which do not have easy access to processors, and also helps to protect the Cerro de Potosi after centuries of heavy industrial mining.
The last 15 years of operation have proven the feasibility of the business case, providing one of the best examples in the world of an effective working relationship between an ASM and an LSM. As the largest commercial silver oxide processing plant in Bolivia, San Bartolomé is playing an important role in formalising Potosi’s ASM sector.
Through its purchase of third-party ore, Manquiri has a working relationship with approximately 4,800 individual artisanal miners, although not all of them supply on a continuous or permanent basis It is always the cooperativas who choose with whom they will do business, with their selection being based on factors such as price, prompt payment, speed of unloading and sampling systems.
While the cooperativas are effectively free agents with the ability to sell their ore to any plant in Potosi, basic health, safety and environmental standards are enforced, with which all suppliers must adhere if they are to partner with the San Bartolomé plant.
How Does It Work?
Under the current arrangement, the cooperativas are responsible for transporting their ore to the plant. Trucks with a 20-30 tonne capacity arrive at the entrance to the plant, where a scale determines the weight of the ore. Sampling is performed to define the metal content and moisture, factors used to compute a shipment’s value.
Once the ore is processed at the metallurgical facility, the waste is deposited in San Bartolome’s state-of-the-art dry-stack tailings dam, ensuring the proper encapsulation of the tailings. Responsible mining initiatives are applied equally to each of its artisanal mining suppliers.
As a result of these partnerships, the availability of mining jobs has increased in San Bartolomé and a transparent and stable market for the purchase of silver oxide ore now exists. It also has shown how modern mining, together with
solid environmental, social and governance programmes, can allow for the reactivation of a regional mining industry and the meaningful contribution to the economic development of those regions.
THIS STRATEGY PROVIDES A BUSINESS OPPORTUNITY FOR THE REMOTE ASMS, WHICH DO NOT HAVE EASY ACCESS TO PROCESSORS, AND ALSO HELPS TO PROTECT THE CERRO DE POTOSI AFTER CENTURIES OF HEAVY INDUSTRIAL MINING.
This was illustrated through an independent socio-economic impact study undertaken by Oxford Economics in late 2021. This study found that, in terms of its economic contribution, Manquiri’s direct contribution of US$71.1 million to Bolivian GDP stimulated a further indirect boost to the GDP of US$147 million. Of this, US$96 million indirectly benefited the wider mining industry.
Given the importance of job creation in this sector, there is a need to work within a framework of strategic objectives that can both achieve increased production for the cooperativas and adhere to clean technologies that allow sustainable mining.
The work outlined in this article demonstrates the possibility and potential for other large-scale miners to work in association with small local businesses, creating a functional symbiosis that can be regulated and managed.
The building and maintenance of these partnerships takes time and trust, but Bolivia is showing how its way of working with ASMs is a win-win. The purchase of third-party ore augments the mineral processing plant operator’s mineral resources and helps to keep the San Bartolomé mill running at near capacity. In return, the ASMs have a stable and reliable partner and income stream.
The government is also starting to benefit from the arrangement. In October 2022, Bolivia’s government struck a deal with gold mining cooperativas, agreeing to a 4.8% tax levy on the gross value of gold sales. While this tax will apply only to gold and not to other metals, it represents progress.
In the meantime, the impact of artisanal mining on the global economy will continue to expand and gain importance. Ways of legitimising the ASM sector can continue to be developed and adapted, with the potential for companies both large and small to improve local and international business.
THE IMPACT OF ARTISANAL MINING ON THE GLOBAL ECONOMY WILL CONTINUE TO EXPAND AND GAIN IMPORTANCE
|Year||State Mining||Private||Silver & Base Metals Cooperative||Alluvial Gold Cooperatives & Other Investors||TOTAL|
Bolivian Mining Exports (US$ millions)
Source: Bolivian Mining Industry