opportunities, challenges and agenda for the future
TRANSCRIPT
Opportunities, Challenges and Agenda for
the Future
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Dr. Kevin Telmer, Ph.D.
Executive Director, Artisanal Gold Council
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Dedicated to improving the opportunities, environment, and health of millions of
people involved in Artisanal Gold Mining
• Based in Canada with projects and linkages in more than 25 countries on 3
continents
• Deep field knowledge with Artisanal Gold Mining communities from decades
working with miners, governments, and industry
• Many collaborations
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Introduction
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Africa
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Ghana
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Burkina Faso
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Mali
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Senegal
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DR Congo
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Nigeria
• An important development opportunity which can contribute directly to poverty alleviation and regional development.
• Although social and environmental problems are common in this sector, there is also great opportunity to transform mineral wealth into lasting local development
Kenya
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Mozambique
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1. How can we get that 8kg ingot produced responsibly
and delivered to the international market so that it can
be sold as socially responsible produced gold?
2. Is it more or less responsible than Industrial Gold?
3. Perhaps both sectors can be socially responsible?
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FDI
Exports
Gov Revenue
GDP & GNI
Employment
ASM LSM
Tanzania-ASGM 500,000 vs 10,000 LSM
LSM triangle from: The Golden
Building Block, World Gold
Council, 2009
ASM Triangle: Telmer, K. (2011) First meeting of the
OECD-hosted working group on gold, 4 May 2011,
Paris.
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Global Artisanal Gold Sector
• 400 tonnes of gold from 70+ countries
• 15% of annual gold production (Sept 2012)
• Value: USD$20 billion
• 15 million miners; 90% of gold mining workforce
• Secondary economy - 100 million people
• Building block for rural development
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ASGM compared to LSM ASGM is Better...◦ More energy efficient (joules/unit gold)
◦ Releases less greenhouse gasses (CO2/unit gold)
◦ Produces less waste rock and tailings per unit gold
ASGM is Worse...◦ Releases significantly more mercury
◦ Those who use cyanide use about twice as much per unit of gold produced
◦ Do not practice waste or land management
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Coal burning24%
Primary production of non-ferrous metals, 10%
Large Scale Gold Production, 5%
Cement production 9%
Artisanal Gold
Mining37%
Consumer Product Waste,
5%
17Mercury Emissions
UNEP 2013
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Does not call for a prohibition of mercury use
within the ASGM sector
Proposes a gradual reduction by way of
measures that promote the adoption of
mercury-free practices
Requires the creation of a National Action Plan
(NAP)
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Minamata Convention: Annex C
National Action Plan (NAP) guidelines
NAPs must include:◦ Actions to eliminate worst
practices
◦ Steps to formalize the sector
◦ Conduct ASGM inventories
◦ A public health strategy
◦ More…
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ASGM compared to LSM ASGM is Better...◦ Employs more people
◦ Employs local people
◦ Immediate income for the ‘rural poor’
◦ Easily integrated into the informal structure of the community
ASGM is Worse...◦ Associated with loss of traditional occupations
◦ Significant heath and environmental concerns
◦ Unorganised can cause social instability/conflict
◦ Associated with child labour, lack of safety
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FDI
Exports
Gov Revenue
GDP & GNI
Employment
Gold Mining
LSM
ASM
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Which is more complicated for due diligence?
Which pays more into the local economy?
Domestic ASM
Domestic LSM
On Site
Buyer
Region Buyer
ExporterIntern. Trader
Refiner
RefinerMine Smelter
L
B
M
A
70% 80% 90% 95% 98% 99%L
B
M
A10g 100g 10kg 50kg 100kg
1000kg
10Miners
30Miners
5Miners
International
International
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Site boss
gets 70% of
LME
Loan
$175,000
5 Field Gold Shop 1 kg Gold/week
(profit = $7000-costs/week ea.)
Costs: Food,
Shelter, Transport,
Equipment, Fuel,
Purification,
Security, Staff
100 Site Bosses 50g Gold/week
(profit $700-costs/week)
1000 Miners 5 g Gold/week
(profit $70-costs/week)
$200,000
5 kg Gold
$140,000 5 kg Gold
$70,000 5 kg Gold
1 Financier 5 kg Gold/week
(profit = 25,000-costs/week)
5 kg Gold
Inte
rnatio
nal
Go
ld B
uyer
LME price:
$40,000/kg
50:50 Split
Refin
er
Export
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ASM miners37M (70.4%)
Illegal Security forces
4.5M (8.3%)
Merchants2.8M (5.7%)
Gold shops3.6M (6.8%)
Financiers3.7M (7.1%)
Claim holders1M (1.8%)
Division of profits(USD per year)
ASM miners5300
(88.0%); 7000 USD
Illegal Security forces
200 (3.3%); 22000
Merchants250 (4.1%);
11000
Gold shops50 (0.8%);
71000
Financiers25 (0.4%);
149000
Claim holders
200 (3.3%); 5000
Labour Force& income
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Can we make a Business Plan?
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Easy if the idea simply and clearly written
Discipline required to articulate the business in writing
ensures rigor
If the business cannot be clearly described on paper, its
chances are slim
Applicable to attendees of this conference
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Little is written
Therefore, to integrate it into the formal sector, more
must be written
By who and how much will it cost?
◦ The Gold Industry must do most of the writing
◦ E.g. OECD ASM Sourcing Tool (led by AGC)
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Coherent, consistent customer focused story
Define the market, its prospects, the customers, suppliers and competitors
Credible assumptions and forecasts
How to achieve sustainable competitive advantage
Identifies the potential risks and mitigating actions
Supported by those who must implement it
Contains a description of the individuals involved
Identifies the funding requirement and investor’s expected returns
NOTE: Most business plans are prepared to secure funding.
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Buy ASM Gold for Social and Green Reasons:
Reduce Mercury Use, Improve Environmental
Performance, Reduce Poverty, Create Jobs and
Economic Diversity
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Market: All Gold Markets, Bullion to Jewellery
Prospects: a consistent and resilient source – modern phase 40 years
and continuing; the last gold mine will be an Artisanal Gold Mine
Customers: (a) Gold buyers when undifferentiated; (b) socially
responsible investors/consumers; (c) the black market if not improved
Suppliers: 70+ countries, 400 tonnes Au/year
Competitors: Market players who want to offer socially responsible
gold;
Competition: Who can buy responsibly most easily
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Assumption: Supply of Artisanal Gold is less susceptible
to gold price fluctuations
Forecast: Supply of Responsible Artisanal Gold will
continue to grow
Forecast: Demand for Responsible Artisanal Gold will
continue to grow
Forecast: Companies first to engage in enabling
delivery of Artisanal Gold to international markets will
prosper
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Businesses that align with the improvement of Artisanal
Gold will have a marketing advantage over competitors
Businesses that are successful in forging relationships
with Artisanal Gold producers will have improved
access to gold from Artisanal and Industrial Producers
who themselves benefit from good relations
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There are risks involved with engaging and risks involved in non-engagement
Engagement risks are mainly social – models of collaboration are young or absent
Non-engagement risks can be social, environmental, and strategic
◦ mercury contaminated concessions
◦ Loss of access to a competitor
There is little risk of competition for the resource as the two groups target different sizes and types of deposits
The IFC has some interesting tools to evaluate risk and the net present value of social investments
TBC
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The business plan to work with Artisanal Miners must be
supported by
◦ more than the CSR department of companies
◦ more than the international donors
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Executive board members
Advisory board members
Key Staff
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Pilot projects now allow costs and timing to be well understood
AGC has an operational mercury free processing system and training centre in Burkina Faso that respects local socio-economic systems and intends to roll out more by attracting investors
A social investment fund for 20 million USD with ROI of 30% over five years to improve artisanal gold mining businesses
Initial investment for the pilot system comes from the US Department of State and UNIDO and GEF (Public Donors)
Their focus is Minimata Convention compliance but they understand this is most likely to happen through sector improvement
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Video: http://www.youtube.com/user/ArtisanalGoldCouncil
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Global SRI market an estimated USD$13.6 trillion as of December 31, 2011 (South
America not included)
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Global Sustainable Investment Alliance 2012 Report
Global SRI
Market
17%
Global
Non-SRI
Market
83%
2011 Global AUM - USD$79.8 trillion
Europe,
USA
and
Canada,
96%
Rest of
the
World,
4%
Global SRI Market
Current SRI Market – and its growing
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• The world’s FIRST socially responsible gold bullion ETF – The Artisanal Gold Fund
• SRI performance is comparable to non-SRI
• A competitive investment vehicle
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Socially Responsible Investment (SRI) ETF
TM
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Socially Responsible Investment Physically-Backed Gold ETFs
SPDR Gold Trust
iShares Gold Trust
ETFS Physical Gold
ZKB Gold ETF
Sprott Physical Gold Trust
iShares MSCI USA ESG Select Index
Calvert Equity A
Parnassus Fund
iShares KLD 400 Social Index
Product Differentiation
TM
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TM
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Funding is required to transform the current Artisanal Gold supply chain into a responsible one that international markets and companies can engage with
It can perhaps be compared to investing in an industrial mine and its products: prospecting, exploring, marketing, permitting, site development, production, sales, closure.
The business advantages for the gold sector are large
Those industrial miners who are earliest to engage with artisanal miners will be most attractive to socially responsible investors
The same is true for the downstream industry including bullion traders, refiners, bullion banks, exchanges, financial firms, mints, the jewellery industry, and service providers
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