Extending the Ladder: Linking Investment to Improved ESG Performance for Small-Scale Mines

The Backstory

Artisanal and Small-Scale Mining

The Artisanal and Small-Scale Gold Mining (ASGM) sector provides an income for 16 million miners and workers globally, contributing around 15% (600 tonnes) to the annual supply of gold.

Miners and workers often labour in precarious and informal contexts, as part of family-run businesses or loose co-operative structures. However, over the last decade in particular, there has been growing momentum in support of ‘responsibly mined gold’ from ASGM sites. In parallel, it has become increasingly clear that if the ASGM sector is to improve its environmental, social and governance (ESG) performance and deliver gold at economically viable volumes, miners will require access to finance that incentivises ESG and productivity improvements in parallel.

Fairtrade Gold – Connecting Mines and Markets

Fairtrade has worked with ASGM operators and communities since 2012, developing and deploying the ‘Fairtrade Standard for Gold and Associated Precious Metals’, a recognised marker for good practice. ASGM sites that comply with the criteria articulated within this standard can become Fairtrade-certified and sell their gold on ‘Fairtrade terms’ into international markets. These terms include a secure minimum price and an additional $2,000/kg premium payment for investment in mine and community projects, such as sanitation and school facilities or income diversification activities. Fairtrade-certified mine sites are based entirely in South America, recovering anywhere between 50kg and 300kg of gold per year, depending on the size of their system of production and sophistication of recovery techniques used.

Downstream, increased consumer scrutiny is driving demand for Fairtrade-certified gold, with more than 400 jewellers, fashion houses, manufacturers, banks and technology companies either sourcing Fairtrade gold or using it in their finished products. Today, the demand for responsibly mined gold through Fairtrade and other responsible mining schemes radically outstrips supply, calling for new approaches and strategies to grow the base of responsibly mined gold.

The Birth of The Impact Facility for Sustainable Mining Communities

In 2015, Fairtrade transported the same certification-based model to ASGM sites in East Africa. Since then, however, it has become clear that deploying a comprehensive compliance framework as a point of entry is not a realistic starting point for the majority of mine sites in this context. These sites tend to have much lower production rates of gold (as low as 4kg to 5kg per year) due to rudimentary equipment and an abundance of pressing day-to-day needs (including unstable and collapsing mine shafts, poor chemical management, inefficient processing techniques), which limit their efficiency and safety.

Taking an Inclusive Approach to Drive ESG Improvements

In this context, the case for an alternative way of working became clear. The Impact Facility was created in response to this reality, providing services that help to fill in the ‘missing middle’ between the starting position of most ASGM sites and the often out-of-reach expectations of international compliance frameworks.

In partnership with donors, investors and local capacity building organisations, The Impact Facility opens up access to technical training, asset finance and markets, guiding partner mine sites to improve their ESG performance levels step by step at a pace appropriate to their needs and in line with recognised performance standards, as captured in the Impact Escalator.

A Miner’s Perspective

For miners, the most prominent and visible challenges are often related to productivity, targeting the high-grade ore and doing so efficiency and safety. Many request pumps to dewater shafts or generators and compressors to improve productivity by drilling using compressed air to more easily blast and disintegrate the rocks to access high-grade ore zones.

Miners may also face challenges in securing or maintaining rights to mine on the land. Without security of land tenure, there is little incentive or ability for these enterprises to plan for a longer-term future. Consequently, they typically exploit high-grade ore zones for as long as it is economically viable to do so and then move on.

A lack of geological understanding may also inhibit the ability of ASGM miners to effectively target high-grade ore zones; however, it should not be assumed this is always the case.

Many ASGM miners have a good intuition or understanding of how high-grade gold zones may be best targeted, based on what they observe both at surface and underground.

The Productivity versus Processing Dilemma

Traditionally, the donor community has often had a different focus, for example, on social and environmental issues such as mercury reduction in processing methods. While these are important pieces of the puzzle, they may fail to address the underlying economic and technical limitations of a small-scale mining enterprise. What is required is an aligning of these two differing visions to make sure future interventions have sustainable impacts in the long run and generate economically viable enterprises.

If mines are not increasing productivity or exploring for the next high-grade ore zone, they will struggle to produce sustainable volumes of ore to make on-site mercury-free processing viable. The same goes for building routes to market. Without first establishing a baseline of sufficient production, it is hard to do so at an economically viable scale.

By considering productivity (gold production) and processing (mercury reduction) hand in hand, The Impact Facility hopes to promote more sustainable outcomes and incentivise improved ESG performance.