On 26th Sept 2023, a very interesting article on small-scale mining, large-scale mining and recycling of gold and various initiatives in this area appeared in the leading German business newspaper Handelsblatt under the headline "As long as they know there is gold in the ground, they will dig for it". Since the article is in German and behind a paywall, we provide a summary here.
Small-scale gold mining is rife with problems, from hazardous working conditions to human rights abuses, often associated with child labor. It is estimated that 20 to 25 % of gold comes from small-scale mines. This gold often finds its way to Europe via the gray market, raising ethical questions for investors. Investors cannot be sure that their investment is not inadvertently funding child labor, environmental destruction or terrorism.
The London Bullion Market Association (LBMA) has now set up a task force of industry representatives to develop new guidelines for small-scale mining. Initial results are expected to be available in 2024.
Role of Fairever & Fairtrade
Florian Harkort, founder of Fairever, stresses the urgent need to act. Around 150 million people live from small-scale mining, sometimes under shocking conditions, as he himself has seen as a development aid worker. Fairever is Germany's first Fairtrade-certified precious metals trading company and specializes in the responsible sourcing of gold from small-scale mining.
Organizations like Fairtrade are working in South America - for example in Peru - to improve working conditions and practices in small-scale mines. However, the number of certified mines still needs to grow so that more local workers can benefit.
Importance of small-scale mining
Environmental organisations like the WWF advocate stopping gold mining completely and instead only recycling it.
An opinion that gold trader Florian Harkort does not share. "The local people have no alternatives. As long as they know there is gold in the ground, they will dig for it, sell it and use it to pay for their food. Turning a blind eye is not helpful," he says. Moreover, there is also an investment demand for gold - and recycling only covers about a quarter of the total demand.
Responsible small-scale mining, as promoted by Fairever and Fairtrade, has the potential to lift millions of people out of poverty. Unlike recycled gold, which ignores the problems of small-scale miners, responsible mining aims to integrate these miners into the global market. This provides them with a sustainable income while maintaining environmental and ethical standards.
Drawbacks of recycled gold
The article acknowledges that the carbon footprint of recycled gold is significantly lower, but also points out the pitfalls. Using only recycled gold could cause the price of gold to skyrocket, creating even more incentives for irresponsible small-scale mining.
Moreover, recycled gold does nothing to improve the conditions of those engaged in small-scale mining or mitigate the environmental degradation caused by exploitative practices. It only meets about a quarter of the total global demand for gold, demonstrating its limitations to replace newly mined gold.
The article also details efforts by the LBMA and the World Gold Council (WGC) to digitize the gold trade to improve supply chain transparency from mine to bar. Local middlemen would need to be more tightly controlled. It clearly points out that small-scale mining must be included in these improvements to make it easier for traders and investors to source responsibly.
In summary, the article highlights the urgent need for responsible practices in small-scale gold mining. Companies like Fairever and organizations like Fairtrade are leading the way in efforts to make the industry more ethical and sustainable, offering a much-needed alternative to recycled gold that does not address the core problems of millions of people who rely on small-scale mining.