Meeting the Challenge of Leadership

The Responsible Gold Guidance (RGG), first issued in 2012, placed LBMA among the first industry schemes to base its Responsible Sourcing Programme on the Five Step due diligence process, outlined in the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-affected and High Risk Areas.

LBMA has always sought to ensure that the RGG – the 10th iteration of which will be launched in 2025 – remains at the forefront of all emerging challenges and debates related to the governance of the precious metals market.

From the first version of RGG, LBMA has been focused on building more modern responsible business practices, reflecting on many issues of concern known to impact the precious metals market - traceability of material, money laundering, child labour, systemic human rights abuses and the use of mercury. Leading financial markets, jewellery companies, investors and consumers understand that LBMA’s Responsible Sourcing Programme sets out high standards in ethical sourcing.

In a sign of how far we have come on this journey, it is now unimaginable to consider a world without such a programme to provide confidence to the market, consumers and the broader public.

This said, LBMA can never be complacent to an evolving landscape and new threats. We have to maintain our vigilance and continually strive toward better. In our efforts to do so, we often recall two foundational principles upon which both the RGG and OECD Guidance are premised: continuous improvement and progressive improvement.

The former speaks to the need for industry schemes to never rest on their laurels. Maintaining the status quo is not an option. And so, with the conclusion of each new iteration of the RGG, we begin the process of identifying further areas of improvement. This commitment to continuous improvement is what keeps LBMA’s Responsible Sourcing Programme fit for purpose.

Key Themes over the Last 12 Months

Over the last year, the responsible sourcing agenda at LBMA has focussed on four key areas:

The first is to invest significant energies and resources to address the governance challenges and market exclusion associated with Artisanal and Small-scale Mined (ASM) gold, while also responding to concerns that current definitions of recycled gold support unsubstantiated product claims. At first glance, these issues may seem unconnected, but LBMA considers them two sides of the same coin.

The second focus has been reinforcing the integrity and credibility of LBMA’s Assurance Programme. This primarily consists of the development of a suite of guidance documents that support Assurance Providers before, during and after their annual engagements with GDL Refiners. With 2023 being the deadline by which to implement all new requirements introduced in RGG v9, LBMA has ensured that both GDL Refiners and Assurance Providers understand and meet these requirements, especially with respect to the transparency and disclosure of information.

A third priority seeks to strengthen in-person engagement with civil society partners. These exchanges of views are critical to fostering mutual trust and understanding of each other’s perspectives and play an integral role in informing LBMA’s improvement to the Responsible Sourcing Programme (RSP). This year, we introduced round-table discussions with a group of NGOs to strengthen communications and transparency.

The previous priorities necessitate a fourth - an increase in communication with the full spectrum of LBMA stakeholders. In addition to publications such as this report and the monthly Responsible Sourcing Newsletter, which inform the market and general public about the day-to-day activities of the RSP, LBMA launched the inaugural edition of the Sourcing Advisory to raise awareness of Good Delivery List (GDL) Refiners and Assurance Providers (APs) to ad hoc sourcing threats and vulnerabilities brought to our attention.

As part of efforts to improve the Assurance Programme, the Responsible Sourcing team also increased its dialogue with both entities, proactively providing constructive feedback on the quality and LBMA expectations of assurance reports received during the 2024 assessment period. The result has been the most thorough assurance period since the beginning of the RSP in 2012.

ASM Initiative: Agreeing a Pathway for Legal ASM

LBMA’s ASM Initiative is first and foremost an effort to address the governance challenges to the global legal gold sector posed by the unsupervised, marginalised and criminalised environment within which the ASM sector is often forced to operate.

By responding to the governance imperative, LBMA is moving toward an amelioration of the reputational damage the status quo poses to legal gold supply chains. A lot of progress has been made over the last two years. While there is much more to be done, we are confident that the first concrete steps have been taken to promote engagement by GDL Refiners and reverse the avoidance that has hobbled the full potential the sector represents for millions of miners and the economic development of producer countries around the globe.

INTERMEDIATE REFINERS

Supported by our ASM consultant, Gregory Mthembu-Salter, LBMA also engaged with several intermediate refiners and aggregators in Ghana, Peru and Tanzania, encouraging them to undergo an assessment process led by the Responsible Mineral Initiative (RMI). The cost of an initial assessment is free for participants supported by the RMI member companies’ contributions, facilitating the process of undergoing an OECD aligned assurance by which intermediate refiners can demonstrate their due diligence policies and practices. Securing RMI’s conformance builds the credibility of prospective intermediate refiners while providing GDL Refiners with additional comfort that they are dealing with an established and credible supplier.

Another key focus of the Initiative in 2024 was to expand our engagement with producer governments. During the March 2024 Sustainability and Responsible Sourcing Summit in London, LBMA welcomed a delegation from Ghana representing most of the agencies working on the permitting and oversight of the ASM sector.

A few months later, Mthembu-Salter undertook a ground visit to Ghana accompanied by representatives of MKS-PAMP and Rand Refinery. A similar trip is planned for Peru in October with PX Precinox and the Swiss Better Gold Association.

During the OECD Forum on Responsible Mineral Supply Chains in May, LBMA also held discussions with Geita Gold Refinery (GGR), a Tanzanian intermediate refiner which successfully completed the RMI assessment and is seeking to supply GDL refiners with ASM material. GGR has also partnered with LBMA member StoneX to implement the Geoforensic Passport, co-developed by Dr. Barbara Beck and Metalor Technologies, to address concerns conflict-affected material from neighbouring Congo might impact its supply chain. The open-source tool allows users to build a geological profile for all ore received, providing assurance on the origin of material, detecting foreign amalgam material and thwarting potential illicit streams. Gold by Gold, Colombia-based intermediate refinery which was the first to gain RMI conformance, has successfully undergone its RMI re-assessment this year and is also seeking to supply GDL refiners. A number of other intermediate refiners are in the process of their RMI assessment.

The ASM Initiative also complements the current work of the World Gold Council (WGC) and its efforts to promote an Artisanal and Small-Scale Gold Mining Domestic Purchase Programme (ASGM DPP) with Central Banks.

LONDON PRINCIPLES

In June 2024, a vanguard group of four Central Banks from the Global South committed to the ‘London Principles’, a set of operating values to help structure and formalise domestic purchasing by Central Banks. The Principles mirror the key requirements of LBMA’s ASM Toolkit, including the recognition of progressive improvement and a requirement that all material be refined by a GDL Refiner. These Central Banks are part of a wider group of seven, who are working with the WGC and supporting institutions to share best practices in interacting with ASGM.

ASM TOOLKIT

Guided by a taskforce comprising of some of the most knowledgeable practitioners in due diligence, ASM mining and responsible supply chains, the most significant development was the release during LBMA’s Sustainability and Responsible Sourcing Summit in March 2024 of an ASM Toolkit to guide GDL Refiners in their onboarding of potential ASM suppliers.

Composed of a list of necessary yet achievable due diligence requirements, the Toolkit introduces for the first time the concept of progressive improvement into a LBMA guidance document. This approach - aligned with the OECD Due Diligence Guidance - allows ASM suppliers to meet certain requirements over time, rather than at the point of onboarding by Refiners. While basic regulatory and know-your-customer (KYC) information is mandatory before a commercial relationship can commence, other requirements - such as developing a mine closure plan, improved mining practices or removing mercury entirely from their operations - can be progressively implemented and strengthened over time.

Progressive improvement is a core tenet of the sourcing models championed by the Swiss Better Gold (SBG) Association and the CRAFT Code developed by the Alliance for Responsible Mining. Both are members of the ASM Taskforce. LBMA is currently working with both organisations to define the acceptable timeframes by which such requirements should be met.

Following the Toolkit’s release, several Refiners and the SBG began to test its use with their current and potential ASM suppliers in Peru and Ghana. As the Toolkit is a living document, LBMA will consider their feedback and make any necessary tweaks to the criteria over the course of the year.

Recycled Under the Spotlight: Towards a Definitional Refresh

The recycled market is a diverse sector, with some unique risks and legitimate trade characteristics. Because of the intrinsic value of gold, no material goes to waste, creating a circular market where previously refined material - particularly from the jewellery and manufacturing sectors - comes back to GDL Refiners for further processing.

Over the course of the year, LBMA engaged in several discussions related to the recycled market, particularly around the need to revisit material definitions to address public concerns of ‘greenwashing’ in relation to certain product claims.

Product claim definitions for recycled gold are being used and discussed by many groups as there is a premium associated with recycled gold products; however, LBMA has prioritised participation in the process being carried out by the ISO 21261 Working Group.

By supporting the ISO Working Group, LBMA accepts the necessity of collectively agreeing one workable product claim definition that can be applied across the precious metals market. This is currently not the case, leading to confusion among industry participants and opening the door to potential abuse and false claims. The ISO process also complements research led by the Roundtable on the Responsible Recycling of Metals (RRRM).

One of the main conclusions of a report the RRRM issued in May 2024 was for industry groups to rethink the current ‘halo’ around recycled material and elevate its risk profile to the same as mined material. The report also highlighted the need for more stringent requirements by industry groups both to prove the origin of material and validate the chain of custody surrounding the material. LBMA agrees with this approach. Our current definition already defines recycled gold with regard to due diligence requirements, not for product claims, and is consistent with the OECD Due Diligence Guidance.

RECYCLED GOLD AND DUE DILIGENCE

We believe the best way to increase the integrity and transparency of recycled material is through enhanced sourcing requirements. During the drafting of RGG v10 in 2025, we will revisit our recycled gold definition in light of the ISO process.

Any changes to this definition will consider the difference between secondary material for due diligence purposes and ‘recycled’ material for product claims.

In our view, there are several related interventions - not just the definition itself - that could improve the oversight of the sector. Strengthening the due diligence infrastructure surrounding the recycled
market and addressing the governance challenges in the unsupervised, and largely illegal, artisanal and small-scale gold sector (ASGM) are equally as important.

LBMA has already moved to implement additional due diligence requirements. Version 9 of the Responsible Gold Guidance (RGG v9 - in force since January 2022 - introduced measures designed for GDL Refiners to ensure their intermediate refiners (i.e. non-GDL Refiners) operating in high-risk jurisdictions undertake an OECD-aligned assurance of their supply chains. This is significant as it extends, for the first time, due diligence practices to the secondary market, which was previously outside any due diligence framework, and impedes criminal elements seeking to mask the true origin of material and evade necessary due diligence. We remain committed to tightening such requirements in future iterations of the RGG.

The definition of recycled gold is not the end game for LBMA; the focus has to be on how the controls are managed on non-recycled gold getting into refineries. Due diligence on recycled gold (or secondary material) is just as critical as on ASM supplies, as the governance concerns are often linked. If we are to put an end to gold laundering, due diligence must be strong for both primary and secondary material.

In this regard, we view the key objectives of the ASM Initiative to be a tangible and good faith effort by LBMA to apply appropriate due diligence and attract more legitimate ASM feedstock to the GDL system, rather than the secondary markets where it gets mixed into recycled supply chains.

Responsible Sourcing Programme Development

SPOTLIGHT ON IMPLEMENTATION

It is no exaggeration to say that maintaining public trust in the Assurance Programme is critical to the credibility of LBMA’s Responsible Sourcing Programme.

Our commitment to the continuous improvement of our policies and practices is measured by our responsiveness and adaptability to emerging trends and challenges, as well as public feedback on our performance.

Launching a new version of the RGG requires broad consultation and agreement across a range of actors to ensure both the credibility and effectiveness of implementation. LBMA expects Refiners to understand the expectations of the new requirements and meet the evolving public expectations of responsible business conduct. RGG v9 - issued in January 2022 - was one of the most consequential updates ever undertaken by LBMA. It introduced a raft of new obligations spanning greater transparency and disclosure of information, to broadening the due diligence burden to second tier suppliers.

With the release of any new Guidance document, Refiners are given one-year to implement the necessary changes to policies, operations and commercial contracts. The 2024 review period marked the second year of implementation for RGG v9 but the first time Refiners were assessed against all the new requirements introduced under version 2 of the Disclosure Guidance (DG), the document that supports Refiners in meeting their reporting and disclosure requirements. The Third Party Assurance Guidance (TPAG), which provides similar direction to accredited LBMA Assurance Providers (APs), was introduced at the same time in January 2023 - marking the first revision to both documents since the launch of the Responsible Sourcing Programme in 2012.

Adding to this was the launch of version two of the Responsible Silver Guidance (RSG2), effective as of 1 January 2024. (See below - Responsible Silver Guidance Revision: Key Changes) Since the launch of RGG v9, LBMA has worked with Refiners and Assurance Providers to encourage more fulsome and detailed transparency and disclosure in both their confidential management reports and their public-facing
compliance reports.

RESPONSIBLE SILVER GUIDANCE REVISION: KEY CHANGES

The changes to the RSG v2 align it with the RGG v9, while also addressing the differences between the two markets. What are the key changes?

• Removal of the de minimis threshold

• Clarity on due diligence expectations regarding the responsible sourcing of recycled silver

• The elimination of cash transactions except for Artisanal and Small-scale Mining (ASM), where transactions will require approvals

• Clarity on the origin of material, such as an integrated approach to risk assessment and strengthening the due diligence processes

• Further detail on ESG risk assessments

• Risk mitigation requirements clarified and aligned with OECD Due Diligence Guidance

• Rotation of Assurance Providers every 10 years and annual assurance checks to promote AP independence and assurance quality

• Mandatory conformance with Disclosure Guidance to promote better reporting practices

Refiners will have 12 months to meet this new guidance.

Supporting the Integrity of LBMA’s Assurance Programme

In recognition of the critical role the Assurance Programme plays in assessing and validating Refiners’ conformance with the RGG, significant time and resources have been invested in improving the training and oversight of Accredited Assurance Providers.

In early 2024, LBMA released a suite of guidance documents to support Assurance Providers before, during and after their annual engagements with GDL Refiners. These include:

An Assurance Providers Toolkit that delivers additional support in instances when there is a disagreement or need to push for greater clarity and comfort about a Refiner’s policies and practices.

A Pre-Assurance Assessment form that Assurance Providers should submit to LBMA outlining such things as their findings from opensource research conducted on the auditee Refiner prior to their site visit, their proposed sample size of records they plan to test and a list of documents they will review during the assurance.

A Guide to Completing Refiner Data and an amended Refiner Data Collection Form, designed to enhance the analysis of Country of Origin (CoO) data submitted by Refiners to LBMA as part of their annual assurance reporting.

A Non-Conformances Template to ensure consistency by Refiners in their submission of Corrective Action Plan (CAP) if a high-risk or medium-risk non-conformance has been identified during the assurance and/or if the Refiner fails to satisfy one or more of the requirements set out in Steps 1-5 of the Responsible Gold Guidance or Responsible Silver Guidance.

These documents are intended to complement - not replace - the TPAG and DG, with a view to strengthening the overall implementation of the RGG, RSG and assurance requirements.

The introduction of these additional tools all speaks to a wider effort to strengthen the consistency of implementation of the Responsible Sourcing Programme and the knowledge base of Assurance Providers.

The introduction of the non-conformance and CoO templates has reduced classification errors and led to greater efficiencies in how such data is screened and analysed. Prior to this, the tallying of non-conformances (for purposes such as this report) was done manually, and the granularity of information such as sub-step or reasons for the non-conformances was confined to the management assurance report.

The CoO template has resulted in less human error in the submission stage and provides for a more efficient way to import the data into an internal database created by the Compliance team in
2023. CoO templates undergo several layers of review during the assessment stage.

Within 24 hours of receipt of a Refiner’s assurance reports, the Responsible Sourcing team conducts a preliminary scan of the source countries to gain comfort that there are no breaches of international sanctions regimes. Any concerns are immediately flagged and escalated to senior leadership for action. During the formal review, the data is compared to the previous year, with a close focus on any anomalies, high-risk supplying countries, or jurisdictions with no known or plausible gold deposits.

Any concerns are raised with both the AP and Refiner during the assessment phase, including a verification of origin and classification of material, the reasons behind any noticeable spikes and the details
of enhanced due diligence applied to high-risk sources.

Toward Greater Transparency and Disclosure by Refiners

One of the most significant developments in 2024 was providing the identity and location of high-risk suppliers in their Country of Origin filings.

The disclosure of high-risk suppliers is an important step towards meeting elements of Footnote 59 in the OECD Due Diligence Guidance, and responds to calls for greater transparency by civil society groups. The Footnote speaks of disclosing such information - subject to certain commercial sensitivities - to an “institutionalised mechanism” that is either regional or global in scope.

While LBMA remains committed to greater transparency and disclosure of information, in discussions with various stakeholders (including the OECD and civil society groups), it became apparent that greater clarity was needed as to what constitutes a universally accepted “institutionalised mechanism”.

In an effort to advance discussion and forge consensus on such questions, LBMA approached the OECD in May to ask them to moderate a discussion with affected industry audit schemes and civil society organisations. A meeting is tentatively scheduled for the latter part of the year.

LBMA-EU Alignment Update

During the first half of 2024, LBMA completed a second alignment assessment in order to become a recognised industry scheme under the EU Conflict Minerals Regulation (CMR).

This recognition is important for GDL Refiners importing gold bearing material into the EU as it would allow them to rely upon their annual assurance reports to demonstrate conformity with the CMR, rather than commission a second assurance to satisfy the law.

A previous assessment by Kumi Consulting, the independent assessors hired by the European Commission, faced delays and significant logistical challenges due to the Covid-19 pandemic. Assessed against version 8 of the RGG, Kumi Consulting’s 2023 report concluded that while that iteration of the RGG was largely aligned to the OECD Due Diligence Guidance, LBMA’s Programme was scored “partially aligned” due to uneven implementation of the RGG by some Refiners and Assurance Providers.

Because partial alignment had been achieved, LBMA was invited to make a second application, requiring the shadowing of only two GDL Refiners during their annual assurances, rather than the five required during initial assessment.

As part of the second evaluation, LBMA submitted extensive documentation outlining the material changes introduced in RGG v9, as well as improvements developed to support Assurance Providers in the course of their work. Both efforts closed off shortcomings identified in the first assessment. As part of the assessment, LBMA leadership was also interviewed by Kumi in March, providing additional context and explanation to our processes. Once Kumi’s second assessment report is submitted to the European Commission an internal review process will begin.

LBMA will then be provided with an opportunity to respond to Kumi’s report. If the second assessment is successful and LBMA’s Programme is scored as “fully aligned”, the application would then proceed to the approval stage with individual member states of the EU.

While the approval timelines are beyond LBMA’s control, we expect to receive a provisional response from the European Commission by the end of the year.