Creating incentives that allow artisanal and small-scale miners of gold to earn more from their work while improving environmental and social practices is central to efforts to formalise the sector, says market development organisation World Gold Council (WGC) sustainability strategy head John Mulligan.

Artisanal and small scale mining- (ASM-) linked gold mining has expanded significantly as rising gold prices have increased the value of the activity, especially in regions where alternative livelihoods are limited, he explains.

ASM often takes place in areas characterised by extreme poverty, weak legal frameworks and limited infrastructure, creating vulnerabilities for miners and exposing them to organised crime, armed groups and other illicit ongoings, adds Mulligan.

Because the ASM sector supports more people than legitimate mining does, Mulligan says the associated challenges have also grown.

“There have to be efforts to improve conditions in the sector and this begins with identifying what responsible artisanal and small-scale mining looks like in environments where regulation and enforcement capacity may be limited,” he explains.

As such, Mulligan says a key priority of these efforts is creating incentives that encourage ASM miners to adopt better practices while ensuring they receive fair value for their gold.

Here, one of the approaches being explored involves centralised processing facilities, where miners can bring ore for treatment rather than using mercury to extract gold in the field themselves, and in so doing reducing health and safety risks for both the miners and the environment around them.

Mercury-based minerals extraction is also inefficient, recovering only about 40% to 50% of the gold contained in ore, while modern industrial processing facilities can recover about 95%.

“The higher recovery rates provide miners with a direct financial incentive to use centralised facilities, while also reducing mercury pollution – a significant contributor to global mercury contamination,” he says.

Moreover, linking the ASM sector to formal markets and processing facilities helps ASM miners secure fairer prices for their gold and also provides a mechanism to encourage improved environmental and safety practices, says Mulligan.

In establishing the ASM and formal sector linkage, he says central banks can and need to play a bigger role, purchasing domestically produced ASM gold through formal buying programmes that could be used to exert positive influence at the point of collection by requiring miners to meet certain standards before their gold can be purchased.

However, Mulligan says achieving meaningful progress in these approaches requires solutions that can be implemented at scale.

Formalisation Initiatives

While ASM formalisation such as Fairtrade Gold, Fairmined Gold and Swiss Better Gold have sought to improve conditions in ASM, Mulligan says that they have generally remained limited in scope and have not yet succeeded in bringing significant volumes of artisanal gold into mainstream global trading systems.

To address this, the WGC has helped establish the Global Coalition for Action on Artisanal and Small-scale Gold Mining, alongside the World Bank and the Intergovernmental Forum on Mining.

This coalition aims to develop scalable good practices that can be applied across different jurisdictions despite the wide variation in how ASM is conducted.

However, because some artisanal operations consist of individuals working with basic tools, while others are highly mechanised and resemble industrial mining operations, standardisation of operations becomes difficult.

The challenges associated with ASM also contribute to illicit gold flows, which Mulligan says pose reputational risks for the broader gold market, as gold functions both as a mined commodity and a monetary asset, meaning maintaining trusted chains of custody and market confidence are essential.

This factor complicates matters, as illicit gold flows can lead policymakers and governments to view the gold market differently if ASM product enters formal channels, despite the existence of formal, regulated supply chains that operate under transparent responsible mining standards.

Because of historic and stubborn remaining linkages between ASM and criminal groups, any long-term investment and sustainability initiatives can be undermined as a result of the associated creation of instability and uncertainty in such sectors, he says. In turn, this instability can affect the ability of responsible mining companies to invest in ASM infrastructure, renewable-energy projects and other initiatives intended to support local economic development and community resilience.

Therefore, addressing ASM challenges requires a combination of local solutions, formal purchasing mechanisms and international collaboration to encourage responsible practices while creating viable economic opportunities for miners, concludes Mulligan.