Kilos of gold and no place to sell: Gabon and the impassible barrier of OECD Due Diligence
By Shawn Blore - June 10, 2020
Gabon’s government gold buying agency, the CGCO, is currently faced with the comfortable challenge of exporting its stockpile of ASM gold, now more than 200kg and growing as gold from its ASGM sector continues to pour in. The flight restrictions and border closures implemented by Gabon authorities to fight the Covid-19 pandemic have inadvertently proved a boon to Gabon’s legal gold buying network, now purchasing gold at a rate 10-20 times its pre-pandemic levels.
But though now blessed with gold to sell and strong world gold prices, Gabon’s CGCO is finding that getting that gold to market comes with its own set of difficulties to be overcome.
Given Gabon’s strong air links to Europe and preference for doing business in French, a refinery in Switzerland or France would make the most natural business partner. Unfortunately, the unforeseen side-effects of the worldwide effort to eliminate conflict minerals and perform meaningful due diligence on mineral supply chains had made selling into Europe a virtual impossibility for artisanal gold producing nations such as Gabon.
The OECD Due Diligence Guidance on Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, first published in 2011, is the worldwide standard for due diligence on artisanal gold mineral supply chains. At peace since independence in 1960, Gabon should in principle be exempt from all but the most basic of the OECD provisions, which in theory apply only to conflict afflicted and high-risk areas, so-called CAHRAs. In practise, however, European refiners tend to take a ‘maximal’ approach lumping all African countries together as high risk and demanding the full suite of OECD provisions regardless of local circumstances.
This maximal approach also extends to the refineries’ interpretation of the OECD guidelines. As written, the OECD guidance provides for ‘progressive engagement’, a process by which refiners could – and should – begin or continue to purchase minerals from a country or source even if that source does not meet the full suite of OECD standards, so long as that source is making good faith efforts to bring its supply chains into full conformity.
Progressive engagement would be the perfect strategy for Gabon, a country with no history of conflict which has only just begun the process of formalising its artisanal gold sector. As its stands, Gabon has a credible system for registering gold producing areas and gold traders, and can track its artisanal gold from the field trader up to the level of the comptoir or exporter. As it moves forward on formalisation, Gabon plans to extend mining concessions to ASM producers and begin tracking gold to its producer and point of origin.
Unfortunately for Gabon, and for African ASGM producers generally, European refineries do not in practise work via ‘progressive engagement’. Instead, these refiners typically demand full and perfect compliance from African artisanal gold sources before the very first gold purchase.
To take but one example, as interpreted by these refiners, the OECD Guidance demands full traceability of all gold down to each individual artisanal miner. In Gabon, as in many African countries, miners live far from any city or town and produce volumes as low as a tenth of a gram a day. Literally thousands of people may have contributed to the 200kg Gabon now has for sale. Tracking and naming all of them is beyond Gabon’s current capabilities, yet if they want to sell their gold into Europe it is exactly that which the European refiners demand.
As a result, Gabon has begun to look elsewhere to sell its gold. The Artisanal Gold Council has been assisting Gabon in its search for a viable commercial partner, and with the logistics of moving gold with normal air traffic suspended. For better or worse, the most likely candidates are to be found in Dubai, a location which also has strong air links to Africa, though traditionally very little French and only lukewarm interest at best in OECD-style Due Diligence.
In the short term, the formation of a commercial partnership between Gabon and Dubai will be a win for both. In the longer term, it will be due diligence that loses out. A Gabon that could partner with a refiner willing to progressively apply due diligence standards would have an incentive to continue formalizing and developing its artisanal sector. Without that pressure, reforms may – indeed likely will – stall.
The situation is similar across much of Africa. Numerous initiatives in different parts of Africa designed to bring ASGM production up to OECD standards and so establish direct commercial links between ASGM producers and European refiners have to date come to nought.
A refiner that was willing to engage with African producers to gradually improve their standards of production and formalisation would find many willing partners. The LBMA, in a recent post, has called on the refiners to reconsider their current lack of engagement with the ASGM sector. What this engagement might look like will be explored in subsequent post. What is clear is that absent some flexibility on the part of LBMA refiners, African gold will likely continue to adhere to no due diligence whatever, and to flow almost exclusively to Dubai.