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With the World Bank’s annual symposium on ASM starting in Nairobi today, we make the case for a greater focus on investment finance and technical support as the primary tools for raising the profitability and ESG performance of artisanal and small-scale gold mines, in stark contrast to historic efforts which have prioritized higher pricing.
There is a preconceived notion that gold miners are universally exploited by low prices and that price-led mechanisms are therefore the most important point of entry for income-improvement and ESG uplift.
By purchasing gold at premium prices – and using this gold in finished consumer products – global businesses can drive the most rapid changes for artisanal and small-scale mining communities – or so the narrative goes.
However, many miners, even in remote mining communities, derive 90%+ of the global price for their gold, with prices reaching as high as 97% in major urban gold-buying hubs..
For businesses purchasing responsibly mined gold, there are a range of ‘invisible’ additional costs to manage. These include the costs of physically segregating gold through complex global supply chains; a process which can sometimes be even more costly than the ‘premium’ payments made to miners for their responsibly mined gold.
These two dynamics – high prices for gold at the mine level and high transaction costs for segregation – debunk the focus on price as a point of entry for driving income and ESG improvements for the majority of artisanal and small-scale mines.
We need a fresh approach.
At this year’s World Bank symposium, we will call for an urgent focus , instead, to go towards access to finance, quality equipment and technical support as drivers for rapid economic and ESG gains.
With high quality equipment, the efficacy of mineral processing can be radically enhanced, contributing to significantly greater financial gains than price-increases in isolation, and laying the foundations for long term improvements to mine safety and ESG performance.
To date, there have been few , if any, formal financing schemes designed specifically to cater for the needs of the ASM sector and mining communities. Formal banking and other financial institutions have lacked the sector knowledge and risk-appetite to support ASM, despite the rapid legalization of the sector over the last decade.
As a result of this, the vast majority of finance and equipment for the sector is supplied through informal traders and middlemen. In order to access their needs, miners often enter into lopsided ore-sharing arrangements, where informal investors receive a large percentage of recovered gold while the mine is in production.
Within such arrangements, there is limited scope for mine sites to make long term investments which support the growth of their businesses, let alone to prioritize safety and wider ESG improvements.
In response to these dynamics, The Impact Facility, this year, launched an industry-first approach which simultaneously tackles poor access to finance and low ESG performance.
Our approach supports artisanal and small-scale mines to identify priority equipment needs and opens up access to quality equipment on a lease-to-purchase basis, in exchange for a monthly fee.
In parallel to this, we support mine sites to raise their safety and ESG performance, with the assurance that the higher their results in these areas, the higher the value of equipment they can go on to access through our scheme.
Our equipment investment focus for this first year has targeted mineral extraction and processing, with our portfolio for next year set to expand to also cover solar-mining investments as well as investments to eliminate harmful chemicals from gold processing, including mercury.
Our modern approach opens new ways of working at the mine-level, and presents new opportunities for downstream financiers – including impact investors, private investors and companies – to drive ESG impact in new ways.
We look forward to joining the conversation on access to finance at this year’s World Bank ASM symposium in Nairobi, both to profile our approach and to learn from others in this rapidly changing space.
To find out more about our work, visit www.theimpactfacility.com