Despite employing an estimated 15 million miners and producing between 15-20% of the world’s annual gold production, less than 1% of ASM material comes through LBMA refiners.
These figures suggest that most LBMA refiners have chosen a policy of avoidance over engagement or risk mitigation. This undermines the economic potential of the sector, poses a governance threat to refiners, and requires an urgent paradigm shift in how artisanal gold is perceived and refined.
Increasing Direct Sourcing of ASM Material
Just how ASM gold can be made more attractive to Good Delivery List (GDL) refiners was discussed at LBMA’s Sustainability and Responsible Sourcing Summit in March. Participants examined a range of factors and approaches that could change current thinking and ultimately increase direct sourcing of ASM material by our refiners.
What can be done to de-risk ASM material for LBMA refiners? Is this even possible? Are due diligence and audit frameworks such as the Responsible Gold Guidance too unrealistic, setting unobtainable expectations and demands? How can big miners and NGOs help ASM material gain legitimate market access to LBMA refiners? What are the levers required for NGOs, industry and development donors to incentivise governments in producing nations to fully appreciate the sector’s potential, and act accordingly?
The discussion hinted at some of the ways current thinking could change. For example, efforts to ban mercury – one of ASM’s biggest environmental risks – should shift from complete elimination toward its responsible use and disposal instead. Or ‘progressive due diligence’ – a scalable and more accessible process by which ASM material and suppliers are mentored and integrated into more formal supply chains – could make audit and due diligence frameworks more attainable to ASM participants.
LBMA Chairman Paul Fisher has often called on industry to see mitigation of environmental, social and governance challenges not as a cost but rather as an investment in the future. The same argument applies to ASM.
THE CONTINUED MARGINALISATION OF ASM MATERIAL HAS SEVERAL NEGATIVE IMPLICATIONS FOR THE GOLD SECTOR WRIT LARGE
Market exclusion reinforces the economic and political marginalisation of the sector and its communities, emboldening the indifference by producer countries to formalise miners or implement a supportive legal and regulatory framework within which miners can more safely work.
It also undermines peace and security in high-risk areas by potentially fuelling corruption or funding conflict, thus requiring heightened due diligence requirements for businesses. The loss of tax revenues through smuggling further undermines the economic sovereignty and the ability of governments to use those revenues for the public good, thereby perpetuating underdevelopment.
Most critically, it poses a legitimate governance issue for the gold industry and end users. ASM material still gets into legitimate global markets via trading centres with lax due diligence requirements. There, it gets relabelled as recycled material, masking its origins and bypassing any semblance of due diligence. None of this is in the interests of the gold industry.
With the sector accounting for as much as 20% of annual production, the first step is to reimagine the sector as a business opportunity, rather than a tokenistic stab at CSR.
Steps to Progress
Miners, refiners and end users all have a self-interested role to play. The first step is to reimagine the sector as a business opportunity, rather than as a tokenistic stab at CSR.
Secondly, industry actors must commit to long-term and sincere engagement with the sector by demonstrating an appetite for risk mitigation, rather than avoidance, and working through any sourcing issues an ASM partner may encounter. Doing so would help overcome the mistrust many ASM actors have toward the formal gold sector.
Thirdly, it requires a broad acceptance that, for durable change to come, the challenges facing the ASM sector are fundamentally ones of underdevelopment. And for this reason, foreign donors should provide sustained, multi-year funding to projects aimed at fixing the foundational challenges facing the sector.
As we move forward on this renewed engagement with the ASM sector, we are guided by the advice of one Summit participant: “Focus on making progress, not perfection.”
So stay tuned! We will share updates at the LBMA/LPPM Global Precious Metals Conference 2022, in Lisbon, in October.