Responsible Sourcing Newsletter: November 2021

Too often, when challenges in the Artisanal and Small-Scale Mining (ASM) and recycled gold markets are discussed within responsible sourcing circles, they are approached through separate lenses, as though the risks and vulnerabilities are distinct from one another.

Luckily, this is changing as the evidence of their interconnectivity grows.

Earlier this month, LBMA's Responsible Sourcing team made its maiden re-entry into the world of in-person meetings to attend Swiss Gold Day (9 November), hosted by the Swiss Ministry of Foreign Affairs. Attended by leading Swiss refiners, NGOs and government agencies, the informal exchange offered a robust discussion on topics ranging from transparency and traceability of gold to the opportunities and challenges facing recycled and ASM gold.

As our recently published 2021 Responsible Sourcing Report notes, 54% of throughput by Good Delivery List (GDL) refiners in 2020 was recycled material—a minimal drop from 2019. ASM is approximately 20% of total mined production yet less than 1% of GDL throughput is ASM.

Both recycled and ASM materials are complicated beasts. In the former case, we know the figures we are seeing are not entirely accurate representations of the market. Part of the problem may lie in how recycled material is classified under HS Codes designed by the World Customs Organisation—something the Swiss government is working to improve. In this instance refiners may not have any nefarious intent or reasons to doubt suppliers’ claims regarding the origin of the material—which under the Responsible Gold Guidance (RGG) is defined as “the point in the gold supply chain where the gold is returned to the refiner or other downstream intermediate processor or recycler.”

However, we are also well aware of the sourcing risks associated with ASM material. With most of the material being mined in the absence of any domestic legal framework or under high-risk conditions that can violate Annex II of the OECD Due Diligence Guidance, we understand why GDL refiners avoid direct sourcing to mitigate possible reputational damage. We are also equally aware that criminal networks send illicit material to secondary markets with the express purpose of obscuring its true origin. How else does 20% of mined production evaporate to 1% of throughput of the world’s largest refiners? If you missed our review of the Responsible Sourcing Report in the LBMA webinar today, please watch here.

Increasing direct sourcing from ASM producers and getting better line of sight of the recycled market are among the strategic goals of LBMA. Both are highlighted in our International Bullion Centres initiative as key action points. Later this month we will launch Version 9 of the RGG. Among the key changes are new requirements that refiners disaggregate their recycled supplies according to different materials (i.e. jewellery, industrial by-products or investment bars). We will also require refiners to undertake more stringent due diligence on recycled material by going as far down the supply chain as possible. Over time this level of detail will give us a more accurate picture of the market, and our ability to spot trade anomalies.

During Swiss Gold Day, we also announced our intention to explore how LBMA can support refiners in their efforts to increase direct sourcing of ASM material. A first step in this direction will be to commission a feasibility study that examines different models and approaches that could de-risk artisanal production for LBMA refiners. We are also looking to build linkages between refiners and NGOs that have presences in artisanal mining communities and understand the context and nuances of responsible sourcing from high-risk mining areas.

Taken together, these efforts aim to approach the vulnerabilities in the recycled and artisanal sector as two sides of the same coin. We very much look forward to beginning this work with stakeholders across the value chain.

Responsible Gold Guidance (RGG) Version 9

As mentioned above, LBMA launched its second annual Responsible Sourcing Report on Tuesday, 9 November 2021.

The 2021 report provides an overview of LBMA’s work as well as more detail on the performance of the annual audit process, our Incident Review Process, including case studies from individual Good Delivery List (GDL) refiners. It also includes the Country of Origin (CoO) of all gold and silver refined by each GDL refiner during the past year, as well as the Country of Destination. Read more here.