Despite artisanal and small-scale gold mining (ASGM) increasing significantly across Africa, spurred on by rising gold prices, much of that activity remains informal, limiting its economic benefits, increasing environmental risks and making effective regulation difficult, reports gold market authority the World Gold Council (WGC) sustainability head John Mulligan.

Many artisanal miners follow traditional methods and contribute positively to local communities, while others operate outside of legal frameworks, leading to environmental degradation and lost government revenue. These latter factors strengthen the case for formalisation of the sector, and many stakeholders, including the WGC, are exploring how this can be encouraged.

A key issue in the ASGM sector is distinguishing between responsible and irresponsible operations.

Mulligan explains that artisanal mining operations vary greatly from location to location. Some are well-established and may contribute positively to local economies and communities, while others operate outside of the law and are therefore vulnerable to exploitation.

Mulligan adds that, as a result of ASGM’s informal nature, there is a lack of transparency in the industry’s financial flows, as most gold obtained through artisanal mining does not pass through formal markets and, therefore, artisanal miners often receive prices below market value.

“For the majority of ASGM, the frameworks aren’t in place. That impacts [on] its potential to contribute to economies because the money basically disappears, you can’t follow it.”

Without clear and formal regulations, ASGM miners are also vulnerable to exploitations by criminal networks and armed groups, and, in some areas, ASGM is linked to illegal gold smuggling and conflict financing.

In contrast, formalised, large-scale mining companies operate in well-defined legal frameworks that ensure economic contributions through taxation, job creation and infrastructure investment, Mulligan adds.

He says an alarming issue is ASGM’s approach to the environment in that it often has a negative impact, particularly through the widespread use of harmful materials, such as mercury.

ASGM miners use mercury to extract gold from ore; but, improper handling results in the contamination of near-mine water and food resources. Mercury not only harms ecosystems but also poses serious health risks to mineworkers and the surrounding communities.

This reliance on mercury can be attributed to its being effective, and familiar to the mineworkers, despite the dangers.

Mulligan adds that while there are mercury-free processing technologies, adoption has been slow as a result of cost accessibility and trust among ASGM miners.

Programmes such as planetGOLD – led by global authority on the environment the United Nations Environment Programme, have aimed to introduce alternatives, but changing longstanding mining practices is a complex challenge.

Mulligan says products used by ASGM miners need to be sustainable, and artisanal miners require financial and technical support to help them transition more easily to using safer methods of mining.

With Challenges Comes Opportunity

While African governments are starting to acknowledge ASGM as a challenge and an opportunity, Mulligan says many are seeing the potential economic benefits of integrating artisanal mining into formal supply chains; however, they struggle to enforce mining laws and the regulations for such operations.

Nonetheless, some governments still view ASGM as “purely a criminal activity and for good reason”, he adds.

Without incentives, such as fair pricing and legal protections, many ASGM miners are reluctant to enter formal markets.

A particular approach towards incentivising ASGM miners to formalise operations involves central bank gold-buying programmes, whereby central banks buy gold directly from artisanal miners at fair prices, thereby improving its traceability and reducing reliance on illicit markets.

Another major challenge with formalising ASGM-produced gold is ensuring responsible sourcing. Gold produced by illicit operators is easy to smuggle and reprocess, making traceability difficult.

It is this lack of traceability, Mulligan adds, that affects the global gold market, as buyers and refiners struggle to ensure that supply chains are free from illicit minerals.

“Gold from illegal sources damages trust in the market, and economies lose out because vast amounts of value disappear into opaque and often illegal [channels].”

In terms of strengthening due diligence at gold-buying points, technological solutions, such as blockchain-based tracking systems, could potentially improve transparency, although Mulligan says these need to be implemented at scale and close to the source of production.

“We are not short on potential solutions. What we are short on is ways of driving those solutions at scale and close to production.”

He also encourages governments to strengthen border controls to prevent minerals smuggling, which remains one of the biggest obstacles to transparency and trust.