For centuries, the artisanal and small-scale mining and trading of gold has been a good, and often the only, way for the world’s poorest to connect to global markets — markets that are otherwise almost completely out of reach.
With gold prices soaring well above US$3,000 per ounce, Artisanal and Small-scale Mining (ASM) has become more alluring than ever for the landless poor – from the Philippines and Ghana to the Democratic Republic of Congo, Tanzania, Mali, Mauritania, Peru, Ecuador, Colombia, Brazil, and every corner of the globe where gold is found. The sector’s promise draws countless individuals in search of opportunity and a better life.
ASM Challenges
The woes of Artisanal and Small-scale Mining – conflict financing, growing links to organised crime, environmental destruction, money laundering, inhuman working conditions and child labour – have all been well and repeatedly documented.
The premise of LBMA’s programme to bring more responsibly sourced Artisanal and Small-scale Mining gold into the Good Delivery List (GDL) is that there is much more to ASM than its problems. There are good volumes of legally and responsibly mined artisanal gold being produced around the globe. Wherever possible, Good Delivery List Refiners should refine that gold.
The Philippines: A Model for Responsible ASM Sourcing?
One country producing high volumes of legally and responsibly mined artisanal and small-scale gold is the Philippines. And one of LBMA’s Good Delivery List’s most successful responsible purchasers and refiners of artisanal and small-scale gold is the Bangko Sentral ng Pilipinas (BSP), the Philippines central bank and a GDL Refiner.
The BSP is legally mandated to buy all the country’s artisanally mined gold, and in the past used to do so dutifully, but without being required to pay heed to responsible sourcing. With the advent of LBMA’s responsible sourcing standards, the BSP introduced strict new buying criteria that have significantly reduced its artisanal and small-scale gold-buying volumes.
On the one hand, that is a win, since much of the gold that the BSP is no longer buying was illegally mined, so the bank has reduced its inadvertent financing of illegal mining. But on the other, in addition to all the illegal material, substantial volumes of ASM gold that are no longer being purchased by the BSP have, in fact, been legally and responsibly mined. And that gold, along with all the illegal material, is being smuggled out of the Philippines, disappearing uncounted and untaxed, mainly to China.
The BSP’s challenge is to use LBMA’s ASM Toolkit to enable it to source more of the country’s responsibly mined small-scale gold, while at the same time mitigating the risk of purchasing illegal, problematic material.
Together with Dr Tom Salter, in late May and early June, I travelled to the Philippines and worked for a week with a high-level team from the BSP to find answers.
We all quickly established that there is, as we had thought, a lot of responsibly sourced ASM gold that the BSP is not buying but should be. Among the reasons are that the BSP only sources from mines with Small-Scale Mining Contracts (SSMC).
The SSMC Bottleneck
Applying for an SSMC is a slow and expensive process that very few mines have managed to complete, though many are trying. We examined whether and how the BSP could legally source from mines in the process of securing their SSMC, rather than just the very few which have completed it.
Our discussions revealed that the BSP does not source gold from any of the small-scale processing plants that are in government-designated Minerals Processing Zones (MPZ). This seems an anomaly, and the BSP undertook during our training to revisit the issue.
The BSP has recently accredited a significant new supplier of ASM gold, PJLI. PJLI is one of the Philippines’ largest domestic conglomerates. The group includes a rural bank, a microfinance institution and a chain of pawnbrokers called Cebuana. It is Cebuana, which has 3,500 branches nationwide – compared to the BSP’s five gold-buying stations – which has been accredited by the BSP to buy legally and responsibly mined ASM gold on its behalf. For now, the PJLI will only buy from mines already accredited by the BSP. Looking ahead, the PJLI is well positioned through the Cebuana network to identify other suitable mines, conduct its own supply chain due diligence and assist mining associations in meeting LBMA’s ASM Toolkit requirements.
In addition, PJLI’s microfinance company has begun financing ASM operators, both for short-term liquidity and longer-term pre-finance. This is significant since, globally, the lack of access to legal financing for ASMs has consistently been found to be a major constraint on the development and growth of responsible ASM mining.
Looking Ahead: Opportunities for Responsible Growth
The ASM gold mining story in the Philippines is by no means always pretty. There is a great deal of illegal mining and environmental malpractice. But there are also plenty of examples of better practice and, consequently, there is also responsibly mined ASM gold. Working with LBMA, the BSP is showing what can be done when a GDL Refiner and its suppliers commit to finding and sourcing that gold.
