Responsible Gold Plan Promoted in Peru by Major Swiss Refiners

By Paula Dupraz-Dobias —Special to Peruvian Times —

Henschel, Tomas-Better Gold InitiativeLIMA, PERU –A Swiss public-private alliance, aimed at assisting artisanal and small miners in their efforts to respect environmental and social standards, was launched here Nov.19, with the commitment of several Swiss jewelers and major refiners.

According to Peruvian deputy miniter of the Environment, Mariano Castro Sanchez, the Better Gold Initiative integrates three forces, namely the Peruvian government’s policies and the law, market forces and the “weight of conscience” in the face of the devastating impact of uncontrolled illegal mining.

The program, based on an alliance between the Swiss Economics Secretariat (SECO) and the Swiss Better Gold Association, a group of Swiss businesses, is limited to formalized miners, in five provinces: Ayacucho, Ica, Arequipa, Piura and Apurimac. Its intent is to bring miners closer to the market’s demandin Switzerland by skipping intermediaries, and guaranteeing more favorable prices.

The initiative also promises to offer access to funds from the SBGA for miners’ sustainable development projects and to other financing following the legalization and formalization of mining operations.

Better Gold Initiative- panelCastro Sanchez said that his ministry was very interested in the joint SECO- SBGA project, when the Swiss embassy first approached his administration about it, as the government was developing policies to combat illegal mining.

Excluded from the program is the Madre de Dios region, where approximately 50,000 hectares of virgin forest have been eradicated and high levels of mercury have been reported in human populations and fish, due to illegal mining.

It is estimated that that some 20 percent of gold mined in the country is extracted illegally.   Ernesto Raez Luna, an advisor to the Environment Ministry, claimed that some $ 1.79 billion worth of illegally mined gold was exported in 2011, amounting to more than the income generated by drug trafficking.

Gold represents 99 percent of Peruvian exports to Switzerland. Altogether some 70 percent of all gold worldwide transits though Switzerland.  Swiss ambassador Hans RuediBortis explained, “Not only doSwiss businesses and multinational firms know that they have a social responsibility, but they are also co-responsible in the supply chain.”

Only one mining enterprise, the Soltrami cooperative in Arequipa, is currently part of the new initiative. Thomas Henschel, the director of the Better Gold Initiative, explained that for now, only 20-30 kilos a month are processed through the program.  “We are not only looking at quantity, but quality,” he said.

Henschel and SBGA members expressed hope that the initiative will grow with time. The initiative’s director said that “Within the next four to five years, the expectation would be to produce two to three tonnes per year,” once more miners are legalized.

The gold refiners participating in the initiative through the SBGA include PAMP, Metalor and Argor-Heraeus.  The three firms process a total combined quantity of approximately 1500 tonnes of gold per year, from global sources, according to industry sources.

Jay Schnyder of PAMP, whose company has been present in Peru for some twenty years, said that they had been “confronted with the question of a growing awareness in the public, who wanted to know where things were coming from.” He added, “Refiners have a heavy responsibility and are an interface between producers and the consumer market.”

Henschel emphasized that the BGI will assure transparency and traceability, “from mines to buyers.”

According to Schnyder and the other refiners, the current quantities of gold produced are admittedly very small compared to the total amounts they import, principally from large formal miners such as Yanacocha, owned mainly by the Denver-based Newmont Mining and the Peruvian firm Buenaventura. Schnyder said “it would take a long time to see change” and it was important that they “take a small step attitude (in developing the initiative), which will take a few years.”

Ernesto Raez Luna, an advisor to the Environment Ministry, demonstrated, in the form of an inverted triangle, how the formalization of informal miners represents a “filtering process.”  He said that from an estimated 100,000 illegal miners in 2011, numbers dropped to 70,000 in 2012, when the government’s formalization process was first launched. He said approximately 30,000 miners presented land titles or hoped to receive formalization titles by September this year, while only a few thousand are expected to comply with environmental requirements by the process’ official closing date in April 2014.

In July 2012, El Comercio reported PAMP and its parent company MKS, had purchased gold from some thirty individuals involved in “illegal mining activities” and “money laundering.” Metalor, also faced accusations reported by Swiss broadcaster, RTS, in 2011, and Swiss weekly Le Matin Dimanche, for purchasing the metal from traders of illegally mined gold.

Metalor recently responded in an email to the Peruvian Times about suspected illegal gold purchases, saying  “As per Metalor’spolicy, sourcing of materials to maintain and assure our high level of standards is monitored constantly.”

Earlier this month, Switzerland opened a probe into Argor-Heraeus, accused of refining three tons of gold originating from an armed group in the Democratic Republic of Congo, between 2004 and 2005. The war in the DRC has cost the lives of an estimated six million. United Nations investigators say Argor purchased the metal ore, which was shipped to Uganda and then Switzerland.

Responding to the sticky issues refiners have faced, BGI’s director said, “We are looking ahead now, not to the past.” He said the growing demand for responsible gold has attracted a new community of investors, including private equity, to the sector.

Miguel Santanilla, chief researcher at think-tank Instituto del Peru, was more categorical. He told the Peruvian Times that Swiss refineries were eager to “wash their faces” from the tarnished image the press accusations have left. He also expressed concern about the continuation of illegal mining, in more removed areas, forgery of documents and licenses, and smuggling of illegal gold across Amazonian borders into Brazil and Bolivia.

Other partners in the Swiss Better Gold Association include Cartier, which is part of the luxury brand Richemont group, Vieri, another jeweler, and Max Havelaar, a fair trade organization.

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