Australian Financial Review errs in calling PNG artisanal gold ‘conflict gold’
By Shawn Blore - June 16, 2020
A June 11 article by Angus Grigg in the Australian Financial Review is inaccurate when it claims that the Perth Mint is sourcing ‘conflict gold’ from artisanal miners in Papua New Guinea (PNG). The use of the term ‘conflict gold’ in connection with PNG is technically incorrect. The misuse of this term could well harm long-term efforts to eliminate conflict minerals and the wars and deaths that come with it.
The concept of conflict minerals – initially conflict diamonds – arose in conjunction with a series of bloody and destructive wars in Liberia, Sierra Leone, and Angola. Various armed groups in these conflicts seized control of artisanal diamond mines and then traded the proceeds from diamond sales for weaponry. Using diamonds to fund their operations allowed these armed groups to expand and extend these conflicts. Collectively, the wars in Liberia, Sierra Leone, and Angola resulted in the deaths of over a million people.
The UN Security Council passed resolutions banning diamond exports from these countries at various points in the 1990s and 2000s. The diamond industry recognized the problem of conflict diamonds and in 2003 put in place a mechanism – the Kimberley Process Certification Scheme – to ensure that diamonds sold in first-world markets did not originate with or otherwise fund rebel groups. The wars in these three countries eventually came to an end, but unfortunately, that wasn’t the end of the problem.
In the Democratic Republic of the Congo (DRC), a war began in 1996 and has continued with greater and lesser intensity ever since, fed not by diamonds but by other ‘conflict minerals’ in particular tin, tungsten, tantalum, and gold. Estimates of the deaths resulting from violence and excess mortality in the DRC over this period range as high as 5 million, and counting.
Recognizing the need to keep conflict minerals out of their supply chains, a number of institutions in the early 2010s developed guidelines or certification schemes for responsibly sourcing minerals from areas in conflict. The most important of these was the Organisation for Economic Cooperation and Development’s (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. First published in 2011, the OECD Due Diligence Guidance forms the basis of the London Bullion Market Association (LBMA) Responsible Gold Guidance.
Here is where Mr. Grigg and the Australian Financial Review commit a significant error. As its very name makes clear, the OECD Due Diligence Guidance is designed for minerals from conflict-affected and high-risk areas (CAHRAs). The OECD definition of a CAHRA indicates they are “areas identified by the presence of armed conflict [and], widespread violence”. The European Union Conflict Mineral Regulation, set to come into force on 1 January 2021, defines CAHRAs even more precisely as “Areas in a state of armed conflict, fragile post-conflict areas, as well as areas witnessing weak or non-existing governance and security, such as failed states, and widespread and systematic violations of international law, including human rights abuses.” Companies wishing to establish whether or not a country lies in a CAHRA often consult a number of open information resources such as the Heidelberg Conflict Barometer.
No matter what definition is used, PNG does not qualify as a conflict-affected or high-risk area. PNG is a functioning democracy with a Westminster-style Parliament. PNG’s only important post-independence conflict was with the island of Bougainville which ended in 1998 with a negotiated peace agreement allowing for the autonomy and eventual independence of the Bougainville region. Bougainville in 2019 voted to become an independent country, a result, the PNG government has peacefully accepted.
As PNG is not a conflict-affected high-risk country, the gold it produces should not be labeled conflict gold. Using the term here risks confusion and could weaken the fight against real conflict minerals in countries like the DRC. The Australian Financial Review should correct this inaccuracy.
The Australian Financial Review also makes a series of further assertions that either lack foundation or else are presented in a one-sided fashion. For example, there is no evidence – aside from a single quote from an unnamed source – that the artisanal gold exploitation is associated with expanded gun ownership or increased violence in the PNG interior.
Un-mentioned by the author are the huge financial benefits that accrue to individual artisanal miners in PNG and the stability that income brings. In 2018 PNG exported 3.11 tonnes of gold from artisanal sources, worth US$ 126 million at world prices. Though field prices vary from one location to another in the country, artisanal miners in PNG normally receive about 75% of the world price for the gold they sell. That means artisanal gold brought PNG’s artisanal miners more than US$ 95 million in 2018 alone.
The number of artisanal miners in PNG has never been counted systematically, but going with the estimate of 60,000 miners used in the Financial Review article, that means on average miners in 2018 earned about US$ 1585 per miner. Given that gold mining is often only a part-time activity for many of PNG’s artisanal miners, and that PNG’s GDP per capita in 2018 was only US$ 2438, it’s clear that artisanal gold mining is a vital income stream for a significant workforce.
With respect to mercury, the author notes that mercury is used in artisanal gold production in PNG, but leaves the impression that this somehow violates Australian law or international responsible sourcing guidelines including those of the London Bullion Market Association. This too leaves out a great deal of relevant information.
Certainly, the health and environmental risks associated with mercury use are real and well documented. For this reason, 128 governments worldwide negotiated and in 2017 ratified the Minamata Convention on Mercury, an international agreement designed to reduce and eventually phase out mercury use in all sectors of the economy, artisanal mining included.
The situation with mercury is much like that with CFCs after the signing of the Montreal Protocol in 1989, or that with greenhouse gases today: a factor in the productive economy that the world has agreed is a danger and is actively working to phase out. As with CFCs or greenhouse gases, immediate banning is not practical. No one – not least Australian car drivers – expects car manufacturers to switch from gasoline to electric cars overnight. Instead, there is a transition period during which substitute products and techniques are developed. This progressive approach is fully promoted and endorsed by the Minamata Convention on Mercury.
The LBMA recognizes this situation in the 2019 edition of its Responsible Gold Guidance. “LBMA recognizes that mercury is used mainly by artisanal miners and small-scale mines and does not, therefore, ban such supply chains. Instead, LBMA requires refiners who work with such artisanal supply chains to assist them in establishing processes to use mercury in a safe manner in order to limit negative impacts on environment and health and safety issues and to find alternative solutions to mercury.”
PNG has not yet signed on to the Minamata convention but has taken some of the initial steps the convention recommends and is on the pathway to becoming a signatory. These include a mercury initial assessment and an evaluation of the sources of mercury in the economy- carried out by the PNG Conservation and Protection Authority. In the mining sector, the PNG Mineral Resources Authority has begun a preliminary study of the extent of mercury use in the artisanal gold sector (The Artisanal Gold Council is involved as a partner in the MRA mercury inventory work).
In contrast to the impression given in the Australian Financial Review article, PNG’s efforts on mercury are in line with both the Minamata Convention on Mercury and the recommendations of the LBMA.
The UN and OECD have, over the last decade, championed the recognition of the huge development opportunity that the artisanal gold mining sector represents. Helping the sector become a responsible one contributes directly to 11 of the UN’s 17 sustainable development goals. This important information should be included in stories such as this one by the Australian Financial Review so that the public is properly informed that there are many good reasons to help the many people dependent on the artisanal mining sector.