Friday, July 8, 2011

Fifty thousand gold shops in the world's artisanal gold supply chain

There are approximately 50,000 small gold shops serving artisanal and small scale gold miners worldwide. They are a doorway to engaging artisanal gold mining communities and they are the first link of many in the artisanal gold supply chain to consumers.

by Kevin Telmer, Artisanal Gold Council

Gold shops and the supply chain 
Small informal gold shops are common in artisanal and small scale mining communities. After the miners, they are the next link downstream in the informal gold supply chain. They process raw gold or gold-mercury amalgam and then buy the raw gold product from miners at a price that is typically based on the London fix. This price is well known by both the miners and the shop owners due to mobile phones. Some shop owners will also refine the gold to close to 24 k purity (>99%) before selling it to the next level up in the supply chain. This is often done using the quartering technique which involves creating an alloy with silver and then digestion in nitric-acid to separate the gold from impurities such as copper. Others will assess the gold content (often by the difference of weight-in-water and weight-in-air) and then sell the raw product (gold dore) based on its percentage of gold. Gold from shops moves downstream in the supply chain to regional buyers and financiers and eventually to an international dealer and into the international marketplace as jewelry or bullion. Below is a model called the 70% model illustrating how 1000 miners interact with 5 gold shops and 1 financier and the international market.

Figure adapted from Telmer K. (2011, May 4) Lecture presented at the first meeting of the OECD hosted working group on gold. "OECD due diligence guidance for responsible supply chains of minerals from conflict affected and high-risk areas. Presentation at:

Gold shops as communication nodes
Because one gold shop communicates with many miners, shops can serve as focal points for establishing relationships and lines of communication with mining communities. They can be nodes through which to deliver education on issues like health, better mining and environmental practices, and formalization/legalisation approaches. How many gold shops there are worldwide is therefore an important question when considering how to distribute information or provide assistance.

Number of gold shops
A first estimate based on observations from field work by the many authors listed in Telmer and Veiga (2009) and kept up to date on the database, is as follows:

At 10 million ASGM miners with a gold production of 350 tonnes/year (Telmer and Veiga, 2009), if each gold shop serves 200 miners, as noted in reports to UNIDO's Global Mercury Project and in compliance with the 70% model described above, then there are roughly 50,000 gold shops that process about 7 kg of gold per year worldwide (total gold value of $338,000/a/shop at 2011 price of $1500/oz). There is of course variation in the number of miners served by each shop but nonetheless, it is clear that there are tens of thousands of gold shops.

Gold shops and mercury pollution
The number of shops is also helpful for assessing environmental impacts caused by artisanal mining and how to implement and prioritize solutions to reduce them. For example, gold shops can be large point sources of mercury emissions to the atmosphere because they evaporate mercury-gold amalgam to retrieve the gold. They can therefore be very good places to install emission controls as a first step to lower mercury pollution. A longer term goal can be mercury free processing of gold ores, but transitioning to zero mercury use can require substantial shifts in socio-economic systems, training, capital investment, legal procedures, etc., and therefore take a long time. While the transition to zero mercury is occurring, emission controls offer an immediate reduction in mercury pollution, and an opportunity to build a positive relationship with the community. Step 1 - lower mercury; Step 2 - zero mercury.

At 50,000 gold shops worldwide, emission controls could make a rapid and major contribution to reducing mercury pollution. Several groups are doing this. For example, the Artisanal Gold Council in collaboration with the European Environmental Bureau and AGENDA are running a mercury emissions reduction program in Tanzania, and the USEPA, Blacksmith Institute and Yayasan Tambuhak Sinta are beginning a program in Indoneisa; and UNIDO and the USEPA have run programs in south America. 

Wednesday, June 29, 2011

World Artisanal Gold Production

How much artisanal gold is produced per year is an interesting and important question. It defines the size of the artisanal and small scale gold mining (ASGM) economy. This is an informal economy that mainly serves the important role of supporting rural development in developing countries - just as it did in western North-America 100 years ago. Typically around 70% of the value of the gold remains with the miners and in-country. However, due to the informal nature of artisanal and small scale gold mining, a good estimate of annual gold production is not possible. The most recent robust estimate may be the one included in Telmer and Veiga (2009) World emissions of mercury from Artisanal and small scale gold mining. In N. Pirrone and R. Mason (eds.), Mercury Fate and Transport in the Global Atmosphere, Springer Science. This is available at Springer Link. The estimate is 330 tonnes of gold per year or 12% of official world production. The estimate considers a variety of types of data from 70 countries. Other higher numbers such as the 20-30% noted in The Global Atmospheric Mercury Assessment: Sources, Emissions and Transport by UNEP in 2008 rely on less data and less types of data. These higher numbers are also more difficult to align with other factors such as financial constraints and the magnitude of mercury consumption needed to produce the gold - a very large percentage of ASGM gold is produced using mercury.

Considering financial constraints, 330 tonnes of gold (12%) is worth roughly $15 billion USD in 2011 at a gold price of $1500/oz. If there are 10 million miners (also not a very well known number but seemingly reasonable and compliant with new numbers coming from some of the major ASGM countries), then each miner makes $1500/year or about $6/day - this also complies with average incomes reported from many field studies. On the other hand, 30% of global production (global production is around 2500 tonnes) would be almost 750 tonnes of gold. That is a primary economy of around 36 billion dollars in 2011 and equates to $3600/year or $14 per day per miner for 10 million miners. Of course the money is not evenly distributed but this level of income doesn't comply with many numbers that have been presented where miners are making $2 to $5/day on average.

An additional and important consideration when thinking about total ASGM gold production is the amount of mercury required to produce it. If on average ASGM miners use 3 units of mercury for every unit of gold produced - a ratio that incorporates a mix of practices including mercury intensive practices like whole-ore-amalgamation - then the production of 330 tonnes of gold requires 1000 tonnes of mercury. If ASGM gold production were 750 tonnes/year then about 2250 tonnes of mercury would be required - an amount close to total global trade in mercury and therefore unreasonable.

Because solid data is sparse in informal economies, and activities like ASGM are relatively elastic and so can grow and shrink more rapidly than the formal gold mining sector, there will be less confidence in estimates of their magnitude. Assumptions and triangulation using various types of data and a firm application of Occam's razor are necessary. Accordingly, currently there do not appear to be data that can support an ASGM economy as large as 750 tonnes of gold per year. However, the price of gold and the incentive for poor people to mine it has certainly grown since 2009. Perhaps due to this, the ASGM economy has grown since then and is now approaching 15% of global gold production? This would be good news for those communities that are capturing the potential development opportunity. Even better news if ASGM practices can be improved to lessen health and environmental impacts - perhaps through assistance from the gold industry or countries heavily involved in it. How much gold comes from this informal source? Worth thinking about... And also worth further solidifying.

Tuesday, March 29, 2011

Silver Causes Huge Increase in Mercury Use in Artisanal Gold Mining

Although gold is the primary target of most Artisanal and Small-scale Gold Miners (ASGM) that use mercury, the role of silver on mercury use can be astonishing. When mercury is applied to ores that contain both gold and native silver, in order to get all the gold, enough mercury must be used to amalgamate both the gold and the silver. Because silver is less rare than gold, some ores can contain ten times as much silver as gold or more - silver to gold ratios of 10:1 or 20:1. So more mercury must be added to these ores to capture all the gold. However, because silver forms a weaker amalgam than gold, the situation is even worse than these numbers imply. A typical mercury-gold amalgam formed by small scale miners contains roughly 50% mercury and 50% gold. Mercury-silver amalgam formed under similar conditions however is closer to 70% mercury and 30% silver. In the case of an ore that contains 10 times more silver than gold, about 20 times more mercury is added in order to capture the gold. The silver is also captured, and even though it is worth 40 times less than the gold, it is still profitable and sought after, but by using mercury much more intensely.

The effect silver on mercury use is profound. Processing ores that only contain gold may require 1 to 10 units of mercury per unit of gold with perhaps an average of 4. Processing ores that contain 1 unit gold and 10 units silver may require 20 to 30 units of mercury. When mercury is used so intensively, mercury pollution and contamination are also intense. Mercury emissions to air and releases to water and soils skyrocket around high silver operations.

MORE INFO: The Artisanal Gold Council and University of Victoria together with collaborators YTS and Blacksmith Institute have visited high silver, high intensity mercury use operations in Central Kalimantan on Indonesia's side of the island of Borneo -