When one thinks of Brazil, Copacabana Beach, football greats, and of course the Amazon usually come to mind.
But Brazil has been catching our attention lately for different reasons.
Last May, we wrote about the how legislation championed by the Bolsonaro government aimed at watering down environmental protections in the Amazon was intensifying illegal mining and conflict in Indigenous lands.
This week another media report raised serious concerns about how lax policies governing how illegal domestic production mined by garimpeiros (wildcat miners) in the Amazon is being laundered through official channels.
Consider these quotes from Brazilian officials quoted in the article:
Gustavo Kenner Alcântara, a State prosecutor: “We can’t identify precisely where the gold came from, where it went, who is buying it and who is selling it…it doesn’t make sense that such a valuable commodity as gold is until today sold with handwritten invoices. Any international buyer of Brazilian gold is running the risk of buying illegal gold, even if it is from a regularized company.” He added that there is no electronic invoicing system for gold in Brazil.
Gustavo Caminoto Geiser, a Federal Police crime expert: “It’s so easy. I have illegal gold and I have someone who has a legal mine. I don’t even need authorization from that person, I simply declare that the gold came from there and that it is legal…The current system doesn’t have any kind of check or block. It is self-declaratory. The law expressly provides that the buyer has the duty to believe the seller’s declaration and what is on his papers.”
A bill yet to become law, unveiled by Brazil's President Jair Bolsonaro to regulate mining including oil and gas projects, is being met with concern by many observers, who are warning it may empower illegal miners to exploit protected areas at will. In the Yanomami Indigenous Territory, the country’s largest indigenous reserve, in the state of Roraima, there are nearly as many garimpeiros as there are Indigenous residents, according to recent estimates.
“They are coming by the river, the roads, and the air. There are more than 100 planes and helicopters flying over our territory every day,” said Hekurari Yanomami, who heads the community council responsible for supervising Indigenous health care in a Yanomami reserve.
Articles like this highlight the sourcing minefield LBMA refiners can sometimes find themselves in when they rely on official documentation or processes that can either be easily forged or manipulated by suppliers or government officials. Having witnessed this first-hand in Eastern Africa, UAE and India, I can attest that it is not a risk isolated to Brazil.
It also underscores the necessity of knowing the peculiarities and nuances of local mining landscapes and the need for refiners to undertake regular site visits to understand their supply chains and any vulnerability—something hindered by travel restrictions brought on by the COVID 19 pandemic.
Within LBMA circles, articles such as this have already sparked conversations with refiners about how they plan to mitigate any potential sourcing issues and also ensure the true origin of their material. Already one refiner has suspended a relationship with a supplier alleged to have sourced from garimpeiros operating in an unlicensed concession in protected Indigenous lands.
In the interests of continuous improvement, in LBMA’s Version 9 of the Responsible Gold Guidance, which came into effect from Saturday, 1 January 2022, refiners will also be obligated to have better line of sight of recycled material—one conduit through which illegal material is laundered.
Stories such as this highlight the ever-changing sourcing landscape, and why as new information comes to light, refiners will need to reconsider their supply chains and sometimes long-standing sourcing relationships.
2022: A Breakthrough Year for ASM
In previous newsletters, we have intimated our intention to crack a puzzle that has long befuddled us: how to increase direct sourcing of Artisanal and Small-Scale Mining (ASM) material by Good Delivery List (GDL) refiners.
While many of the challenges and obstacles are well known, the solutions that could help to de-risk artisanal material (most of it with a close proximity to a host of problematic issues) has remained more elusive.
It is estimated that there as many as 10-15 million ASM gold miners worldwide, accounting for approximately 15-20% of annual gold production. Despite this, ASM production amounts to less than 1% of GDL refiners throughput, with the rest being absorbed through illicit markets. Long stigmatised by national governments who criminalise the sector and overlook their economic contributions, artisanal miners face incredible barriers gaining access to legal markets. For these miners, the outcome is a defeating and self-fulling prophecy—why bother trying to be legal when the door is firmly shut? But for the gold industry writ large, the status quo presents a governance issue it cannot ignore: the longer ASM material is shut out of legal markets the longer the industry (including GDL refiners) will struggle to deal with the sourcing vulnerabilities - and potentially damaging news headlines—the sector poses to their responsible sourcing efforts.
Explorative Process Begins
Next month we hope to begin the work of consulting the best minds that work in this sphere—development practitioners, academics, researchers and our refiners who have already shown a commitment to ASM sourcing. We will also work closely with industry partners such as the World Gold Council, many of whose members face challenges regulating unlicensed artisanal miners close to their industrial concessions. What lessons can be learned? What approaches or programmes—many of them designed by credible NGOs working with ASM communities—could be scaled up or replicated elsewhere?
We invite all interested parties to engage with LBMA as we begin this explorative process. In addition to targeted interviews with experts, we plan to host several workshops on the margins of our Responsible Sourcing and Sustainability conference in March, as well as the annual OECD Conflict Minerals Forum in May, to solicit further public feedback.
We hope these events will inform a draft policy to be completed this year, with LBMA announcing a new ASM framework that can guide and support ASM communities and GDL refiners to make new market linkages, and remedy the perennial governance threats to responsible sourcing.
Please get in touch with Alan Martin, Head of Responsible Sourcing, at firstname.lastname@example.org if you have ideas to share.
Responsible Sourcing News
- Kenya: How gold worth billions of dollars is smuggled out of Africa. The East African
- Nigeria: NSCDC Arrests 2 For Illegal Mining in Osun. Daily Trust
- Nigeria: Wike needs caution in war against illegal refineries – Ex-IYC Boss. Daily Post
- Zimbabwe: Undocumented Zimbabweans cleared of illegal mining. Mmegi online
- Ghana: In search of galamsey gold, money: Apiate woman returns to destroyed home. Ghana Web
- Burkina Faso: Australia Miner Plunges Most Since 2014 After Burkina Faso Coup. Bloomberg
- South Africa: Orkney illegal mining case goes to the regional court. IOL
- Ecuador: Illicit Gold Mining in Ecuador – Challenges and Considerations. Global Americans
- Brazil: Brazil's clearwater Tapajos River polluted by illegal gold mining. Reuters
- Brazil: Tarnished Gold: Aircraft, fuel key to illegal Amazon mining. Independent
- U.S: Mining cos, feds agree to $90 mln settlement over Gold King Mine spill site. Reuters
- India: Illegal mining case: Whose money is it, BJP asks Punjab CM Charanjit Singh Channi. The Times of India
- India: Illegal mining hollows Punjab govt claims. Tribune India
- Kyrgyzstan: For the first time since May, the results of production at Kumtor were announced in Kyrgyzstan. Radio Free
- UAE: UAE steps up anti-dirty money measures to avoid global watchlist. FT
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