Responsible Gold Sourcing from Artisanal and Small-Scale Mining Scoping Study on Developing Pilot Supply Chains Imprint
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Responsible Gold Sourcing from Artisanal and Small-Scale Mining Scoping Study on Developing Pilot Supply Chains Imprint Editor: Bundesanstalt für Geowissenschaften und Rohstoffe (Federal Institute for Geosciences and Natural Resources, BGR) Stilleweg 2 30655 Hannover Germany Authors: Fabian Stähr, Philip Schütte Contact: Bundesanstalt für Geowissenschaften und Rohstoffe Stilleweg 2 30655 Hannover [email protected] Date: September 2016 ISBN: 978-3-943566-93-2 (PDF) Cover photos: © Gold washing (Burundi), Photo: D. Braun (left) © Entrance of SOTRAMI ASM-Cooperative (Peru), Photo: BGR (middle) © Underground gold mining (Columbia), Photo: BGR (right) Copyright: © 2016 Bundesanstalt für Geowissenschaften und Rohstoffe Responsible Gold Sourcing from Artisanal and Small-Scale Mining Scoping Study on Developing Pilot Supply Chains Fabian Stähr, Philip Schütte Hannover, September 2016 Responsible Gold Sourcing from Artisanal and Small-Scale Mining Scoping Study on Developing Pilot Supply Chains Executive Summary Public and political discussions increasingly acknowledge the role of responsible supply chains in order to support decent working conditions, protect the environment and apply adequate due diligence. In recent years, companies have demonstrated that through apply- ing supply chain due diligence they may act as partners contributing to improved conditions of production of certain raw materials. Establishing certification schemes and institutionaliz- ing supply chain management in line with the OECD Guidance serves to strengthen cooper- ation between producers and buyers; compliance with international minimum standards may be demonstrated in a credible way. Gold forms one of the most important products of the global mining sector. About 10% of global gold mine production originates from artisanal and small-scale mining. Artisanal and small-scale mining represents an important livelihood base for the local population: 10-20 million small-scale miners, and their families, directly depend on gold mining. However, this type of mining is frequently associated with difficult working conditions, child labor, and envi- ronmental risks. In addition, gold supply chains associated with artisanal and small-scale mining are characterized by higher risks of conflict financing or smuggling. Formalizing the artisanal mining sector and the associated supply chains, therefore, represents an important responsibility in the context of global gold supply chains and value creation. Gold refiners represent a central leverage point in terms of supporting due diligence and responsible practice in gold supply chains. Gold refiners based in Germany are associated with complex upstream supply chains within the EU and, partly, globally. Currently, these refiners are not purchasing significant quantities of gold from artisanal and small-scale min- ing sources. The present technical report provides a basic overview on the general sourcing options for German gold refiners with regards to artisanal and small-scale mining gold. To this end, the report explores different criteria such as the current gold production through artisanal and small-scale mining, logistical supply chain requirements as well as relevant international due diligence and sustainability standards. Responsible sourcing of gold from artisanal and small-scale mining would appear to be a feasible step for some German refiners. A sourcing scenario in compliance with international and industry standards and certification schemes would seem feasible to develop, provided that adequate risk management is implemented. In order to establish a long-term successful gold sourcing relationship, appropriate partners needed to be selected and adequately in- centivized. The report illustrates criteria and challenges for this process. The report further includes an analysis of 12 countries where artisanal and small-scale gold mining is common. The national framework for responsible gold sourcing is evaluated for each country. Overall, according to this analysis, it would seem feasible to establish a re- sponsible supply chain in several of the investigated countries. As a next step, the report suggests evaluating the situation on the ground in more detail, with the aim of outlining more concrete gold supply chain sourcing scenarios. ii Responsible Gold Sourcing from Artisanal and Small-Scale Mining Scoping Study on Developing Pilot Supply Chains Abbreviations and Acronyms AGC Artisanal Gold Council ARM Alliance for Responsible Mining AS(G)M Artisanal and Small-Scale (Gold) Mining BGR Bundesanstalt für Geowissenschaften und Rohstoffe CFSP Conflict Free Smelter Program CSR Corporate Social Responsibility CTC Certified Trading Chains DMCC Dubai Multi Commodities Centre EITI Extractive Industries Transparency Initiative FLO Fairtrade Labelling Organizations International FOB „Free on Board“ (Incoterms) ILO International Labour Organization KYC Know Your Customer LBMA London Bullion Market Association LSM Large-Scale Mining NGO Non-governmental Organization RJC Responsible Jewellery Council RJC CoC – Chain of Custody RJC CoP – Code of Practices OECD Organisation for Economic Co-operation and Development SDG Sustainable Development Goals XRF X-ray fluorescence analysis iii Responsible Gold Sourcing from Artisanal and Small-Scale Mining Scoping Study on Developing Pilot Supply Chains Table of Contents Executive Summary ..................................................................................... ii Abbreviations and Acronyms .................................................................... iii Table of Contents ........................................................................................ iv 1. Artisanal and Small-scale Mining and the Concept of Responsible Supply Chains ............................................................. 1 1.1. Introduction .................................................................................................................. 1 1.2. The Concept of a Responsible Supply Chain ............................................................. 2 1.3. The Structure of Artisanal Gold Supply Chains .......................................................... 3 1.4. Refineries and Downstream Closed Pipe Gold Supply Chain .................................... 4 1.5. Development Relevance ............................................................................................. 5 2. Prospects of German Refineries for Gold Sourcing from Artisanal and Small-Scale Mining .................................................................... 7 2.1. Gold Refineries ............................................................................................................ 7 2.2. Requirements for Establishing a Responsible Artisanal Gold Supply Chain .............. 7 2.3. Consumer Perspectives on Artisanal Gold Supply Chains ......................................... 9 3. Requirements and Standards for Artisanal Gold Sourcing ......... 12 3.1. General Reference Standards .................................................................................. 12 3.2. International Standards and Regulations .................................................................. 13 3.3. Industry Standards .................................................................................................... 15 3.4. Sustainability Standards for Artisanal Gold Mining ................................................... 18 3.5. Operating Requirements for Supply Chain Management ......................................... 21 4. Incentivizing Artisanal Gold Miners to Participate in a Responsible Supply Chain ............................................................. 27 4.1. The Function of Gold Trading in Artisanal Supply Chains ........................................ 27 4.2. Financial and Non-Financial Incentives .................................................................... 28 4.3. Initiatives to Support and Certify Artisanal Gold Mining ............................................ 30 5. The National Framework in Producing Countries for Establishing a Responsible Artisanal Gold Supply Chain ................................. 33 5.1. Parameters and their Contraints ............................................................................... 33 5.2. Methodology of the Country Assessment ................................................................. 33 iv Responsible Gold Sourcing from Artisanal and Small-Scale Mining Scoping Study on Developing Pilot Supply Chains 5.3. Results oft he Country Assessment .......................................................................... 35 5.4. Countries Recommended for Assessing Opportunities for Responsible Artisanal Gold Sourcing ............................................................................................................ 41 6. Conclusion and Outlook .................................................................. 43 Appendix I – OECD-Requirements for ASM ............................................. 45 Responsibilities for Gold Refineries According to the OECD Guidelines for the Source of ASM Gold from Conflict-Affected and High-Risk Areas ............................................ 45 Appendix II – Certification Initiatives ........................................................ 47 Profile: Fairmined ................................................................................................................... 47 Profile: Fairtrade Gold ...........................................................................................................