Responsible Sourcing Report 2021
Section 12: Sourcing Gold and Silver
Where do refiners source gold and silver? This is extremely important as refiners have an obligation to perform tailored due diligence for every source of gold and silver that they accept for recovery and refining.
Mined gold is gold that originates from mines (Large-Scale, Medium-Scale or Artisanal and Small-Scale Mines) and has never been previously refined. This term means that any gold or gold-bearing material produced by or at a mine, in any form, shape and concentration, until it is fully refined (995 or greater), fabricated into a gold refiner product (e.g. bar, grain) and sold.
Large-Scale Mining (LSM)
LBMA relies on the OECD for the definition of LSM. Annex II of the OECD Guidance describes LSM as “…gold mining operations that are not considered to be artisanal or small-scale…”.
In reality, most LSM involves huge, long-term investment in infrastructure by experienced, multinational operations in multiple global locations. Operational responsibilities to all stakeholders is fundamental to ethical operators. These companies tend to be listed entities with legal reporting obligations and rigorous governance frameworks. For the purpose of due diligence, mined material emanating from LSM has well established logistics and supply chains. Some Large-Scale Mines can produce more than a million ounces of gold in a single year.
LBMA has developed toolkits to enable refiners to deal efficiently with Large-Scale Mines. It works closely with organisations such as the World Gold Council (WGC), the International Council on Mining and Metals (ICMM), and the Initiative for Responsible Mining Assurance (IRMA) to ensure that the various industry initiatives are aligned. In recent times, there has been an increasing focus on the Economic, Social and Governance (ESG) agenda, highlighting how the mining companies can work together with the refiners to address these issues.
Artisanal and Small-Scale Mining (ASM)
LBMA recognises the importance of engaging and maintaining relationships with Artisanal and Small-Scale Miners. This sector provides a livelihood for more than 40 million people across the world.
LBMA supports all initiatives that endeavour to bring responsibly produced Artisanal and Small-Scale Mined gold into legitimate supply chains. Where and when possible, LBMA will actively become involved to benefit the industry.
While ASM material currently comprises less than 1% of the throughput of GDL refiners, LBMA works with refiners and several respected NGOs to increase direct sourcing from ASM suppliers.
Recycled gold and silver
Recycled gold and silver refers to metal that has been previously refined. This term traditionally encompasses anything that is gold-bearing and has not come directly from a mine (the first stage of the gold life cycle). In practical terms, recyclable material includes end-user, post-consumer products, scrap and waste metals, and materials arising during refining and product manufacturing, and investment gold and gold-bearing products.
This category may also include fully refined gold that has been fabricated into grain, Good Delivery bars, medallions and coins that have previously been sold by a refiner to a manufacturer, bank or consumer market, and that may thereafter need to be returned to a refiner to reclaim their financial value, or for transformation into other products (e.g. 1 kilo bars).
Recycled material can be strategically important for the industry. This is due to the increasing trend of downstream companies announcing decisions to only accept recycled material in an effort to address their environmental commitments.
Recycled gold due diligence may vary significantly over the wide range of suppliers and materials that are commonly received and processed. This is because the risk of illegality or wrongdoing will be very different supplier by supplier, material by material, and by type and form, value and area of origin. For example, the risk of possible wrongdoing associated with scrap electronic circuit boards is less than the risk associated with scrap bullion jewellery, because the circuit boards have much greater bulk, have more traceability, require much more extensive processing and have a significantly limited market. Also, the purity of electronic scrap is very much lower than that of jewellery. Therefore, an attempt to mix contraband or conflict gold into the process would not only be detected but it would also greatly disrupt the processing of this material. Geography also plays a part: for example, the risk of conflict bullion being mixed with scrap bullion jewellery collected in Kansas City is different to the risk if that scrap bullion jewellery was collected in Kinshasa. Each source of material must be assessed for its local risk characteristics.