“The best defence is a strong offence.”
The infamous line - allegedly attributed to America’s first president George Washington - came to mind while reading a recent Reuters report announcing the imminent imposition of an import ban on Russian diamonds entering G7 consumer markets.
The proposed move comes as G7 nations continue to ratchet up the pressure on Russia and plug holes that allow Moscow to continue to financially prosecute its illegal invasion of Ukraine.
With Russia being the largest diamond producing country by volume, with an export market valued at an estimated $4 billion a year, it’s fair to say the move is going to cause a massive market disruption, most notably in India where over 90% of the world’s diamonds are cut and polished.
All that doesn’t count for much when the United States, as my old friend Edahn Golan points out, is the single largest consumer market in the world. If every importer has to demonstrate the proof-positive lineage of every diamond over one carat entering G7 markets (no matter where it comes from), you can bet diamantaires the world over have either found religion on full supply chain traceability, or are about to, fast.
But here’s the rub: this headache was entirely predictable and avoidable. Last year, member states of the Kimberley Process, the certification scheme set up as a response to a series of diamond fuelled civil wars, shrugged off action against Russia.
Before entering the gold business, I spent many years researching conflict diamonds. That work included coordinating the civil society coalition, one of the three multistakeholder pillars of the KP. For a little while things went well, until complacency and paralysis set in, and producer governments replaced rebel movements as the main perpetrators of human rights abuses.
Rather than amend the “conflict diamond” definition to acknowledge this reality or commit to the principle of continuous improvement and adapt to new threats, democratically challenged governments chose to stick their heads in the sand instead. Because the KP operates on a consensus voting system, all it takes is one country to object and everything hits a brick wall.
These same countries - and, as a consequence, the global diamond industry - are now paying the full price of that inaction. This kind of story serves as a cautionary tale for other industries: either proactively respond and adapt to existing and emerging threats, with credible responses and interventions, or others will legislate it for you.
A timely reminder of this came with the recent briefing note by the OECD entitled Responsible is Reliable: How Responsible Sourcing Can Address Disruption Factors and Geopolitical Risks in the Supply of Transition Minerals.
Citing a 27% rise in political violence in 2022 alone and growing resource nationalism and opposition to mining operations, the note sets out how supply chain due diligence (aligned to the OECD Guidance) can help unlock responsible, reliable and diversified global supplies of transition minerals. It also encourages companies operating in such environments to engage in “a way that mitigates, [but does] not overlook, these risks.”
“Any perceived benefit in deprioritising short-term or localised risks is likely to diminish over time as the increased costs of ad hoc deal-making and corruption manifest into larger conflicts, impede investment, adversely impact communities and lead to unpredictable supply disruptions,” the paper warned.
The gold industry is far from perfect, and our journey toward better is a constant work in progress. But there was another story I read last week that showed some quarters of our industry - a very important one at that - have taken closer heed of George Washington’s sage advice.
All 33 World Gold Council (WGC) members, who collectively produce over 1,300 tonnes of gold per year, committed themselves to annually publishing the names and locations of their refining partners.
The WGC also committed to joining LBMA’s Gold Bar Integrity (GBI) initiative. This will ensure gold enters the GBI platform “at source” and is a major step in the digitalisation of gold across the supply chain. It will provide industry partners, investors and the public at large with a robust and verifiable ledger of responsibly mined gold, support transparency, and increase gold’s attractiveness as a trusted asset class.
Sustainability and LBMA: Things to Watch
LBMA is pleased to announce the imminent publication of two documents that will be of interest to readers.
Following an extensive public consultation, LBMA’s Sustainability and Responsible Sourcing Strategy will be launched on 3 October. This document defines what we mean by sustainability but also the five areas of focus we plan to prioritize over the next three years.
A few days later, on 6 October, LBMA plans to launch our fourth annual Sustainability and Responsible Sourcing Report. This report highlights the activities and programme development over the last year, as well as the annual performance of GDL refiners and approved assurance providers. It also includes case studies and aggregated country of origin data for all refiners.
LBMA/LPPM Global Precious Metals Conference 2023
With only a few weeks to go, spaces are filling up. So don't miss out on your chance to attend this year’s LBMA/LPPM Global Precious Metals Conference, taking place from Sunday, 15 to Tuesday, 17 October 2023 at the beautiful W Barcelona. Join us for our 23rd Conference in the cosmopolitan capital of Spain’s Catalonia region for three days of high-profile speakers, insightful panel sessions, and unrivalled networking opportunities with over 800 industry professionals from across the globe.
Register via our website.
Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development
The IGF’s 19th Annual General Meeting is scheduled for November 7–9, 2023, at the Palais des Nations in Geneva, hosted by the United Nations Conference on Trade and Development. The theme for 2023 is Sharing Mining Benefits in the Energy Transition. Registration is open through the United Nations Office in Geneva.
Register via the IGF website.
Head of Responsible Sourcing, LBMA
Responsible Sourcing News
- Research group established to investigate gold trade violence in Africa. Mining Technology
- Tanzania has started domestic gold purchase to boost forex reserves. Reuters
- Gold mining giant AngloGold Ashanti moves primary listing, headquarters to US from South Africa. Intellinews
- How to establish local refineries: Africa's struggle to profit from raw materials. Elpais
- Gold rising in popularity as bitcoin fades, says Royal Mint. Proactive
- How to make Russia really pay for invading Ukraine. The New York Times
- Countries repatriating gold wake sanctions against Russia study. Reuters
- Arubis trims annual forecast further after metal theft. Reuters
Asia and Middle East
- China's gold imports via Hong Kong bounce back in August. CNA
- Chinese gold buying is driving a paradigm shift in bullion. Yahoo! Finance
- The Chinese gold premium: has the dust settled on the record surge? GoldHub
- Barrick says big miners show interest in Pakistan Copper Project. Bloomberg
- London-listed Rockfire to buy suspended Dubai gold refinery. Bloomberg