Responsible Sourcing Newsletter: October 2022

Phew!

How else to describe the successful conclusion of the LBMA/LPPM Global Precious Metals Conference that recently wrapped up in Lisbon, Portugal.

For those following the discussion, sustainability and responsible sourcing were front and centre on the agenda. On the last day of the conference, representatives of the global gold industry signed the Declaration of Responsibility and Sustainability Principles, comprising ten key objectives that commit signatories to responsible sourcing standards, respect for human rights, the advancement of the UN Sustainable Development Goals (SDGs), and action and disclosures on climate change.

The other key announcement, of course, was the public release of a feasibility study LBMA commissioned to consider practical means by which GDL refiners can increase their direct sourcing of artisanal and small scale mined (ASM) production. Readers are encouraged to read LBMA Board’s response, which overwhelmingly supports the report’s recommendations and signals where LBMA intends to next take this initiative.

Of the recommendations, the most consequential is the call for LBMA to create a ‘good delivery list’ for processors and intermediate refiners. In drafting the terms of reference for this report, LBMA made clear to the report’s authors that we were not looking for performative CSR proposals, but tangible ways to open direct market access for ASM gold.

It is fair to say that there is a growing consensus and realisation that the collective response to ASM over the last decade—by industry groups, governments and multilateral organizations like the OECD—has got it wrong, and that there is a need for a recalibration in how we approach the sector.

Shunning ASM has not diminished production levels or market appetite. It is approximately 20 percent of global production, after all. Rather, what has happened is the material disappears into the illicit market, only to later resurface in trading hubs as ‘recycled’ gold.

So, while a direct embrace of ASM production by GDL refiners will undoubtedly contribute to improved market access and several SDG targets, there is a governance imperative as well.

What lies ahead is extremely ambitious, and with little precedent.

As the LBMA Board response noted, we are under no illusions that change will take time. Progress will be slow and will require LBMA to better understand imperfection and the efforts to mitigate shortcomings in sourcing practices. GDL refiners will be required to embrace risk mitigation, rather than avoidance, of the ASM sector. LBMA will support this effort by considering ways to infuse progressive improvement into our compliance requirements, and work with GDL refiners as they mentor and remediate sourcing challenges with intermediate refiners.

In the coming weeks, LBMA will move to implement the recommendations proposed in the report, including constituting an ASM Task Force (with membership comprising Good Delivery List refiners, representatives from Large Scale Mines (LSM), civil society groups and industry partners such as the World Gold Council (WGC) and Responsible Mineral Initiative (RMI).

The Taskforce will serve an advisory role, helping to craft the outreach and frameworks—legal, regulatory or compliance—needed to deliver the ultimate game changer: a GDL for intermediate refiners. The idea is influenced by similar models designed by the RMI and PX Precinox, a GDL refiner operating in Peru, that are delivering promising results.

The key advantage of such models is that they allow for greater volumes of material to meet due diligence requirements, remove mercury from the processing of dore, and offer as much as double the yields to miners. Each of these wins improves the ESG indicators of the sector, while simultaneously diminishing the vulnerabilities and stigma that currently thwart its full potential.

If you have any comments to share on the ASM report—or think your expertise may assist the Taskforce—please reach out to me at alan.martin@lbma.org.uk.

In the meantime, we look forward to sharing our progress as we roll up our sleeves to begin the hard work.