A hot topic today in the world’s gold mining sector is artisanal gold mining. In our southern neighbor China, more than 9 million artisanal miners work in thecoal mining sector alone, producing 11 percent of the total coal mined, competing with the major coal giants - Australia and Canada. Artisanal miners' participation in gold production is projected to reach 1,000 tons a year, which is directly affecting gold prices. As a result of the globalization of artisanal mining year-on-year, by the end of last year more than 40 million artisanal miners were living on this planet including nearly 5 million women and over one million children. According to some scientists the number of artisanal miners is likely to grow in the coming years due to climate change, economic crisis and political conflict.
The movement to artisanal mining from rural and urban households is the largest area of growth. The main reason is that the income from artisanal miners can be comparably higher than in traditional farming. For example, the survey found that someone working in the artisanal mining sector in Uganda can earn at least twenty times more income than in farms, forests and fisheries. In Liberia, it can be 17-50 times more profitable than in traditional farming even though it is risky, thousands of artisanal miners rush into this sector. The "lucky" stories telling of someone who suddenly found precious metals, such as gold and diamonds, calls thousands of people with lower-income to artisan mining. In our country there are over 60-100 thousand artisanal and small-scale miners (unofficial data). This comes second to the livestock sector, which is about 300,000 people. In addition, as livestock herders with small herds face seasonal problems with their livelhoods when prices of livestock fall, and factors such as dzud, drought and desertification, add to the reduction of herd size.
As the number of artisanal miners grows, more countries are more committed to coordination, transparency, and cooperation. International experience shows that there are many countries that directly prohibit artisanal mining. However, artisanal miners directly banished won’t disappear but they can be formed into more hidden and more criminalized organizations. In some countries where there is religious conflict or civil war, the "illegal army" of the illegal extraction industry is formed, and it starts conflict with the legitimate government in the form of confrontation. Some Latin American and African countries try to make arrangements to regulate the use of state or military monopoly controls on minerals. Unfortunately, this final "regulatory" point does not help the artisanal miners or the country's citizens who are more likely to be exploited and oppressed. The biggest winners of state monopoly control are the politicians, military officials, black market intermediaries, and so on.
As the proportion of minerals extracted from artisanal mining increased in the world market, the amount of money in circulation was estimated at billions of dollars. As of 2011, about 15 percent of the world's annual gold exports have been delivered by artisanal miners, which exceeds the total gold exports of some African countries. Such a high proportion will not only affect the price of gold, but also a substantial part of the revenues that would have been controlled end up in the black market. As a result, human rights violations continue and get worse, at least in terms of regional conflicts, arms trafficking, and terrorism financing, therefore international organizations try to legalize the supply chain of artisanal mining, and support it and seek to develop standardization.
The initiative to make the global supply chain or the origin more transparent was a voluntary action, but it is now becoming more mandatory. The international best practice of regulating the market, which is most suited to this requirement, is the public-private partnership that is termed Private Public Partnership (PPP). The advantages of this arrangement are the coordination of public-private partnerships to open the gold supply chain. It is helpful to mention the example of Tanzania, where the gold supply chain has been expanded and gold trade is improving. Tanzania has implemented a public-private partnership program with the assistance of the World Bank, with two goals being set.
The first goal was to set standards for artisanal miners by coordinating the activities of public institutions. First of all, to limit the number of different approaches to artisanal mining, particularly they defined 4 different approaches and conducted different policies for each approach. By establishing a special fund for technical assistance out of their mined gold tax and World Bank financing they become more diversified and more active. The number of registered artisanal miners have increased and gold supply has become increasingly transparent.
The next policy is to inform the miners about the "fair value" of the world gold market, by doing this, miners start to ignore the unregistered traders who lower their gold prices and stimulate economic leverage or interest to sell their gold to those who have official licenses. In turn, the government of Tanzania has made it clear that the supply of gold will be transparent, as well as the origin of the gold, and most importantly, it will have the opportunity to fully take tax.
Given the fact that gold supply is a fair trade rather than an unregistered market and this fair trade is the main advantage of the PPP partnership. The main problem facing gold supply in Mongolia is that the gold purchase service infrastructure is very weak and complicated. Examples of other countries show that their central banks have approved gold procurement programs and these create fast-service gold buy-out mines in artisanal mining.
For example, the Philippine Central Bank approved a gold trading program in 1991 and established a five-point gold trading platform near the ASM.
At specific locations on the street, they’ve set the weight-measuring standards, issue gold originating certificates and submit artisanal miners, partnerships and gold traders into the registry software. Most importantly, the quality of gold is determined by using an X-ray apparatus or a quick-analysis device and 70-80% of the payment is made in cash and the remaining of gold price is transferred to the miner’s account after the official gold test results.
Since the late 1980s, in Cote d’Ivoire gold mined by artisanal miners was purchased directly from the artisanal miners by government agencies and local (village) leaders. As a result, 80 percent of the payment was paid to the artisanal miner, 8 percent was taken as a royalty payment, and 12 percent was allocated to the village budget and used public-private partnerships. Illegal gold trade in Ghana has also been reduced by Ghana's liberalization of the gold trade and the establishment of a gold mining company.
By conducting a gold trading program at Bolivia's Central Bank the government gave massive strike to the illegal gold trade at the Bolivia-Brazilian border, and the country's legal gold production increased by 25 percent. The quick-to-buy gold buying points in Bolivia are not concentrated in large cities, but they are located at easy access places close to actual artisanal mine sites. Similar programs have been successfully implemented in Ethiopia.
The above examples illustrate the wisdom of the basic policies of the gold trading programs of the Bank of Mongolia towards six major targets; to improve the register of artisanal miners, stabilize gold prices, improve standards, reduce the number of gold trading networks, support local budgets, and to receive full tax.
According to statistics, the Bank of Mongolia has purchased 63 percent of 20 tons of gold in 2017 from individuals. Also, by January 11, 2018 it purchased 682 kg gold, which is an increase of 130 percent over the same period of last year. Of course, Mongolian artisanal miners do not have the capacity to supply that gold to the Bank of Mongolia, but it is not a secret that firms are going to sell their product through individuals as tax evaders. It can be seen from the amount of unpaid tax, since the non-sustainable gold supply can be measured by tens of billions of MNT. Therefore, it is imperative to establish a joint venture with the private sector and commercial banks in order to gain access to gold and trade networks. The discussions relating to the establishment of a gold supply chain should include a wide range of stakeholders, including ministries, agencies, the Bank of Mongolia, the Precious Metal Assay office, the Ministry of Finance, local authorities, gold traders, and artisanal miners. It is time to introduce this kind of knowledge and good international experiences to the artisanal miners as well as to larger mining companies and to create a unified database of gold supply information.
Otgochuluu.Ch
Source: www.sam.mn
