Gold has been known as a valued material from ancient times, mined for centuries already. But today this industry has to go through massive changes due to several reasons.
Firstly, though gold has been mined for so many years, developing a mine and extracting gold from it is still a very resource-demanding task. It takes approximately 10 to 20 years from discovering a large gold deposit to full mining operation. At the same time, the lifespan of a gold mine could be comparably short, from several years to several decades.
Secondly, a significant share - about 20% - of newly mined gold is mined by Artisanal and Small Scale (ASM) workers. And ASM is widely known for certain risks such as, for example, child labor.
Thirdly, experts expect that the production of gold will soon reach its peak (if that hasn’t happened already), and by 2050 gold mining will no longer be economically sustainable. There aren’t many large undiscovered mines, and the remaining gold deposits are deep in the earth which makes production difficult and expensive.
Still, annual gold demand requires more gold than is newly mined. This presents a set of challenges such as a growing need for new technologies, wider gold recycling practices, increased demand for sustainable and conflict-free ASM-mined gold, and supply chain traceability.
A Surge for New Technologies
As mentioned above, remaining gold deposits are limited and hard to explore. The recent report by the World Gold Council says that the industry struggles to maintain high production levels, as many potential areas have already been explored. Besides that, not every discovered deposit is suitable for production. According to the data, only about 10% of global gold discoveries contain enough metal to justify mining. Some of the remaining deposits require building new infrastructure such as roads, access to water and power. These make such mines economically inefficient.
The industry is pushing for technologies that enable faster exploration, production and development of complex and remote deposits.
Gold Recycling: Sustainable or Not?
The World Gold Council’s data says that there has been a 12% increase in gold recycling during the last three years.This shift could be explained by the lack of gold deposits. Besides, recycled gold usage presents an opportunity to avoid significant greenhouse gas emissions, as mining requires more energy and resources than recycling. Recycling of gold emits less than 1% of the carbon emissions from mining new gold.
Some brands claimed they would only use recycled gold: in 2020 Pandora was the first to announce such a move and said the company would produce jewelry from recycled gold and silver from 2024. Experts’ opinions were controversial. On the one hand, production from recycled material will help reduce carbon emissions. On the other hand, using recycled gold doesn’t indicate where it came from. The rising share of recycled gold poses another set of challenges for the industry.
Bringing Sustainable Practices to Gold Mining
The gold supply chain is complex and it includes several participants based in different countries around the globe. We explored this topic in more detail in this article and found out that before being used in a smartphone or jewelry, gold first has to be explored, mined, and transported to smelting facilities and trading houses, then to metal traders and component manufacturers.
Only after those several stops did gold reach the production facility. This complexity and gold’s high value (which makes it susceptible to smuggling, processing, and selling it illegally) create many risks within the supply chain.
The Gold Supply Chain starts with exploration and mining. ASM has a notable share in gold mining operations. Gold Artisanal and Small-Scale mining use minimal technologies and machinery. And, according to AGF Mining, 70-80% of small-scale miners are informal and considered as illegal activity, often located in remote, sometimes violent or conflict areas.
This unformalized nature of ASM brings several risks to the gold supply chain such as child labor, health and environmental risks, money laundering and financial criminal activities.
International Standards and Regulation
To address some of these supply chain risks and prevent usage of illegally mined gold, many formal frameworks and tools were created. Some of the most important measures and standards include:
- The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas: this guidance outlines a five-step framework for companies to identify and address risks in their mineral supply chains, including for gold.
- The Responsible Gold Guidance (RGG) from the London Bullion Market Association (LBMA).
- The Responsible Gold Mining Principles (RGMPs) developed by the World Gold Council.
The set of standards and international regulations aim to prevent illegal gold from entering global supply chains.
Formalizing ASM: Creating Mining Cooperatives
The problem, however, could also be addressed from another perspective. Cooperatives – associations created by miners to support mining activities, from extraction to commercialization of mining products – are gaining traction in several African and Latin American countries, including the DRC, Rwanda, Ghana, Brazil and other gold-producing countries. Cooperatives are a cost-effective way to regulate illegal operations and mitigate their associated negative social and environmental impacts. Such formations help minimize risks associated with ASM and bring about more responsible practices.
Recently Minespider partnered with Society Artisanal to track responsible ASM gold from the DRC. Society Artisanal’s strategy is to work with artisanal mining cooperatives in the Democratic Republic of Congo (DRC) to export conflict-free artisanal gold and track it from the mine to its smelting facility, with further plans to scale traceability beyond the refinery. This example shows that ASM presents a great opportunity for new business models to appear, at the same time ensuring all international standards are met and the mineral is conflict-free, responsibly produced and tracked across the supply chain. Having several mechanisms in place, such as sourcing only from proven cooperatives and using blockchain technology to track gold across the supply chain, ensures greater gold traceability and transparency.
Gold Traceability Projects
We already mentioned initiatives by global policy makers, local governments and communities, however, responsible and legally produced gold is even more important for brands, especially jewelry producers, traders and electronics manufacturers. No one wants a gold ring produced by a child or a laptop with minerals that came from a conflict area.
But do commercial companies track gold throughout their supply chains?
Such luxury brands as Cartier and Bulgari stated that they started tracking gold across the supply chain - from a mine to refining facility - in accordance with international standards. Bulgari says 99% of its gold comes from refiners certified according to the RJC Code of Practices and Chain of Custody standards. According to the press, Cartier has a chain of custody for some, but not all, of its gold. Their parent company Richemont sees traceability as a long-term goal.
Commercial companies can’t ignore international standards and regulations, and have started tracking their supply chains. At the same time, these efforts remain limited.
The Risks are Still There
Despite international standards and regulations being in place, along with cooperatives and some pilot traceability initiatives, irresponsible gold operations are not rare and haven’t disappeared. Africa and Latin America remain regions where gold supply is frequently associated with criminal activities.
In one of our previous articles, we dived into Brazil's mining and mentioned illegal mining activities which are unfortunately not uncommon in the Amazon rainforest and other regions of Brazil.
According to the Swissaid report, over $30 billion worth of gold, or more than 435 metric tons, was smuggled out of Africa in 2022, and the biggest share of it went to the United Arab Emirates, Turkey and Switzerland, where it was refined and sold to the customers. Experts say that when it comes to the gold supply chain, sustainable and traceable gold could be frequently mixed with gold of unknown origin to be presented as responsibly-mined.
Last year, Valcambi SA, a gold refiner accredited by the London Bullion Market Association, left the Swiss Association of Precious Metal Manufacturers and Traders after a disagreement over where it sources its gold from. The refinery sourced gold from the United Arab Emirates, where opaque supply chains can make it difficult to determine whether the metal has been responsibly sourced. In their statement for Bloomberg, Valcambi said that excluding direct supplies from specific countries is not the correct approach.
The industry made great progress towards sustainable practices, but there is still a lot to be done, in particular, larger-scale traceability projects combining novel technologies such as AI and blockchain with physical identifiers, and unified international standards.
Minespider’s advanced traceability technology helps to track gold from mine to consumer, ensuring that all necessary standards are met. The Digital Product Passport for gold contains information about country of origin and other critical data so consumers can be confident that gold is conflict-free and responsibly mined.
Contact us here to learn more about the Product Passport for gold and how we can help you comply with regulations.
