Executive Summary

Several GDL refiners told us that they would take more ASM gold if it came from artisanal miners present on LSM permits working in some form of co-operation with the LSM permitholder. This is because of the improved chances in this scenario of greater transparency and due diligence on ASM practices, and better visibility on what improvements are taking place in practice. The few sites where this does happen generate much of the ASM gold currently being refined by LBMA GDL refiners. But few countries encourage or incentivise cooperation or even cohabitation, and in some, such as the Democratic Republic of Congo (DRC), the law actively discourages and penalises LSM working with artisanal miners on industrial mining permits.

We think it would be pro-poor for governments of countries with artisanal mining sectors to adopt a more ASM-friendly legislative and regulatory stance, which they then carried through into practice. Some governments have already started to do this, and it is from these countries that there is the best prospect of LBMA GDL refiners sourcing more responsibly mined ASM gold.

The experience of Swiss Better Gold (SBG) and of USAID’s Oro Legal Project in Colombia shows that donor engagement can encourage governments to make their ASM legislation and the implementation of the resulting rules and regulations more ASM-friendly. This can in turn boost the volumes of responsibly mined ASM gold that are eligible to be refined by LBMA GDL refiners.

ASM formalisation is often difficult and expensive, discouraging miners from attempting it. Another disincentive to formalisation are the multiple compliance requirements and tax liabilities to which legal ASM is exposed. One answer is for governments to reduce this burden. Another is for the formalisation of ASM miners to be linked to increases in recovery rates from the gold ore they mine, for example by the provision of access to semi-industrial crushers to formalised miners. The improved recovery rates, as well as helping to mitigate negative environmental impacts associated with artisanal gold processing, would provide the miners with extra revenues that enable them to pay the taxes that come with formalisation and legal mining. Artisanal processing has been estimated typically to recover under half of the gold contained in ore, so there is scope to increase recovery rates with semi-industrial or industrial mineral processors, while also being sensitive to the trade-offs implied by the gendered impact of a move from artisanal to more industrial processing.

We asked GDL refiners what the key features of regulatory environments are that they need
to consider sourcing ASM gold. They told us they are looking for:

1. ASM miners to be operating legally, on permits where they are allowed to be, and with everyone paying all the taxes and levies they need to be paying.
2. An accessible database of authorised, registered miners, particularly for those supplying either them directly or intermediaries such as processors, to make it more possible to conduct the necessary due diligence.
3. An accessible database of all legal ASM concessions, for the same reasons.
4. Adequate legislation concerning ASM and the environment, a permit system to drive
   compliance, with an inspectorate to make sure that the rules are being followed.

We recommend that the LBMA engage further with its GDL members on what they are or should be looking for from regulatory regimes for ASGM, and with governments, civil society and other stakeholders in ASGM producing countries to seek to secure the reforms required to achieve these regimes. This task may be more effective if conducted in conjunction with donor governments and/or appropriate multilateral organisations, including the World Bank.

We also recommend that the LBMA explores collaborating with the WGC and other stakeholders to clarify the necessary and desirable regulatory conditions to encourage ASM/LSM cooperation including in the production of responsibly mined ASM gold. This would in turn encourage GDL sourcing of ASM gold.

The emergence of processors and intermediate refiners committed to conducting due diligence on their ASM supply chains, and to refining only responsibly mined ASM gold, should be encouraged by the LBMA. The LBMA should:

Encourage GDL refiners to develop long-term relationships with these processors
and intermediate refiners, which would ideally include joint efforts to raise the
standards among ASM suppliers. This could also include encouraging and facilitating
appropriate intermediate refiners to be audited by the Responsible Minerals
Initiative (RMI) to determine their conformance with the requirements for the
Responsible Minerals Assurance Process (RMAP);

• In conjunction, where appropriate with other stakeholders, define the criteria and requirements that would enable GDL refiners to source from these processors and intermediate refiners. These criteria should be consistent with the auditing criteria for the RMI’s RMAP;
• Encourage GDL refiners to explore sourcing ASM gold from intermediate refiners that are on the RMI’s RMAP conformance list;
• Establish a new GDL of processors and intermediate refiners.

The development by the LBMA of a new GDL of artisanal mining operations, as has been proposed by the LBMA, would require the Association to conduct a measure of due diligence on candidate ASM producers, which should mean that less onerous and less expensive due diligence would be required from LBMA GDL refiners looking to source from them. This would need to be spelled out clearly in the LBMA’s Responsible Gold Guidance (RGG). This should encourage an improved commitment to source this gold from GDL refiners, which in turn would help the sustainability of what are often short-term, donor funded projects to encourage responsible ASM mining.

The establishment of an LBMA GDL for processors and intermediate refiners, whose members would as a condition of membership conduct due diligence on their supply chains, would contribute significantly to addressing refiner reputational concerns in sourcing from ASM. Additionally, the likely volumes of gold in question would be likely to be larger, running into tonnes rather than kilos, and thus materially impacting the overall volume of ASM gold refined by LBMA GDL refiners.

Obstacle nine was the additional cost and burden to refiners of the enhanced due diligence (EDD) required to meet RGG standards relating to sourcing ASM gold. RMI funds are already available in some circumstances for EDD. Furthermore, the establishment of an LBMA GDL for ASM and/or for processors and intermediate refiners would distribute the burden and cost of this due diligence. First, the processors and intermediate refiners would be conducting their own due diligence on their ASGM suppliers, and demonstrating this, via their own documentation and a third-party assurance process. They might also demonstrate this by passing a RMAP audit and being placed on the RMI’s conformance list. Secondly, the LBMA’s oversight of these GDL members’ fulfilment of their membership criteria would also constitute a measure of due diligence, which would also lessen the extent and cost of the due diligence required of GDL refiners. Again, this would need to be made explicit in the RGG.

We readily admit that the proposed measure would not eliminate the need for GDL refiners to conduct and pay for their own due diligence. This is likely still to be more complex, and potentially more costly than the due diligence GDL refiners conduct on LSM suppliers. Since due diligence will always be more expensive than no due diligence, non-GDL refiners that have few or no due diligence requirements are able and will doubtless continue to source ASM gold in large volumes. It may be that for some GDL refiners, this extra cost will not be possible to justify, no matter what reforms are implemented along the lines that we have proposed. Even so, we maintain that integrating a GDL of intermediate refiners in the RGG could facilitate the distribution of the cost and burden of due diligence along the supply chain, rebalancing its current concentration at the existing GDL refiner level alone across more of the supply chain. That would alter the cost-benefit calculations of GDL refiners in deciding whether to source from ASM, and would, we believe, result in more of them sourcing more ASM gold.

It remains likely, even if our proposals are implemented and have the effect that we think they will have, that most ASM gold will enter international markets via the paths of least resistance, which is to say via traders, aggregators, processors and intermediate refiners who impose no significant due diligence requirements on producers. From there, some of this gold will continue to make it through the GDL system as recycled gold.

Some, particularly in civil society, may perhaps be disappointed in this report’s limited scope. They may be reassured, perhaps, that some among its primary audience might by contrast consider its analysis to have gone too far already. Our intention has been to explore ways within existing parameters in which the LBMA and its members can increase the flow of responsibly mined ASM gold into GDL refiners. These parameters include the current state of relations globally between LSM and ASM and the largely compliance focused approach taken by the LBMA and its members with regards ASM. The report’s final section looks beyond these parameters, to where the possibilities might be for new approaches and new partnerships. It recommends that the LBMA and its membership concentrate their attentions on ASGM-producing countries that have governments with (relatively) benign regulatory environments, and to seek out and develop relationships there with crude refiners and processors interested in eligibility for membership of a processors’ GDL. This process would be encouraged by the LBMA taking a lead in exploring how it and its members could in practice begin to move beyond the current largely compliance-focused approach to ASGM engagement, towards a shared commitment to progressive improvement via mentoring and other partnerships, such as are envisaged in the OECD Responsible Minerals guidance.