National Endowments of Artisanal Gold - what can be done with them?

By -


As the price of gold rises, what opportunities are there for countries with artisanal gold mining sectors?

 Here I am not talking about the miners but rather the countries that are endowed with deposits of artisanal gold. This is an interesting topic in the new context of rising gold prices and the emerging Artisanal and Small Scale Gold Mining sector (ASGM). The potential role of ASGM gold in the monetary system and the geopolitics behind central bank reserves is worth a thought.

 Most of the major central banks have been accumulating gold over the last decade, with some like Russia and China doing so aggressively. So how does the artisanal gold sector fit in?

 It does somehow! 

 Artisanal gold represents US$20 billion per year of "reserve currency" (~500 tonnes) flowing out of 82 host countries. Its movements are not yet well tracked. If governments were able to collect a normal level of royalty (let alone corporate taxes) then they would have a "gold stream", which can help strengthen their national finances. Each could have a mini-Franco Nevada as part of government revenues. The beauty of professionalizing the artisanal gold sector is that it provides a government revenue that is currently absent, and this can be developed with little or negative cost to the governments (considering future profits). Can this be done easily? Well, the artisanal gold sector can easily double its productivity by mining better, and by increasing the level of gold recovery from the ore. In many cases currently, miners are recovering only 40 percent and always struggling with ore supply due to technical difficulties that are exacerbated by the on-again-off-again nature of cash-flow in the under-professionalized sector.

 What would it mean for countries to vault and dedicate 2 percent of their artisanal gold production to building national gold reserves? That is about 10 tonnes of gold per year that can be added to national reserves without actually paying for the gold. In this light, it is a government revenue windfall. If these countries wanted to buy the other 98 percent of the gold at market rates, they could likely accumulate close to all of it. Where this 2 percent of the artisanal gold production would be vaulted would depend on many arrangements and guarantees and who can be trusted in times of strife – an educational opportunity.

 Such a modality would certainly happen in conjunction with the elimination of mercury processing of gold ores, the world’s largest source of mercury pollution. A big part of the mechanism through which to bring the sector forward, is to use better, cleaner, and higher-recovery methods that provide greater incomes to miners. Governments globally have also come to learn and agree that eliminating this pollution source is the right thing to do.

 What if ASGM countries were able to retain a good portion of the gold that is mined from their territories? Let’s say at the level of other national reserves – the US has 8000 tonnes, then Germany, IMF, Italy, France, Russia, China, Switzerland, Japan… Will that help the ASGM countries? It may protect them somewhat, if not a lot, from currency devaluations. It may also contribute to making their financial systems more sophisticated and building government capacity in the context of managing national gold reserves and a professional artisanal gold mining sector.

 Kevin Telmer

Comments

Post a Comment

The Artisanal Gold Council is a registered non-profit organization that improves the environmental and economic sustainability of artisanal and small scale gold mining communities.

Popular posts from this blog

ASGM and Public Health

By Anonymous -
Image
The AGC helps miners improve their productivity and helps them to comply with minimal health, safety and environmental standards; this can facilitate the formalisation of their livelihoods, allowing them to increase their income in a safer way for both them and their communities. One of the ways in which the AGC does this is through educating health workers and miners on the risks of certain aspects of ASGM and providing ways to mitigate these risks, while at the same time as training miners on how to process their gold in a safer way, largely by using less or no mercury.   For the vast majority of the millions of people who work in ASGM worldwide, labor conditions are substandard. There are multiple health risk factors that affect these populations; for example, acute accidents and injuries are common and chronic conditions resulting from exposure to toxins are prevalent, although rarely quantified. Moreover, ASGM communities typically have little to no access to education, ...
Read more

The Media's demonization of the Artisanal Gold Mining sector isn't helping

By -
Image
The Miami Herald in 2018 and now Buzzfeed and the NYT in 2019 have published, once again, the typical easy story on alluvial gold mining in the Amazon: The very simplistic and oft repeated "mining is bad" story. They cast a pall over any and all that are involved in artisanal mining. What they report is not entirely untrue, but it is far from representative of the vast world of artisanal mining in the 82 countries where it occurs. Worse though, is that stories like this damage the fragile peace that has been obtained between governments and artisanal miners the world over during the last decade. The peace has been largely brokered by the UN and the OECD with their initiatives on mercury pollution (the Minamata Convention) and transparency (Due Diligence in the Gold Supply Chain). Mostly what the UN and OECD have championed though, is recognition of the huge development opportunity the artisanal gold mining sector represents. Helping the sector become a responsible one c...
Read more

Professionalization of the Artisanal Gold Mining Sector

By -
Image
Three professional mining engineers that have chosen to make careers in the artisanal gold mining sector and are busy helping to improve it onsite in Indonesia, 2019; left to right: Sixto Aguero, Abrar Ridhollah, and Yolanda Hantari. When asked what the Artisanal Gold Council’s mission is and about my own vision for the improvement of the artisanal gold mining sector, I explain that it is mainly two simple things. First, it is about the improvement of the artisanal gold mining sector writ large so that it can better perform its role in delivering development to the rural poor, essentially helping the sector to deliver the UN’s sustainable development goals (SDGs). And secondly, that the approach we use to do this, is professionalization, that we aim to professionalize the artisanal gold mining sector. In fact, professionalization of the artisanal and small-scale gold mining sector (ASGM) is largely what the Artisanal Gold Council does. To draw attention to this approach, I ...
Read more