Fair Trade Gold

The Processes Behind Fair Trade Gold

(Patrick Schein)

Third party Fair Trade gold was recently formally introduced into the EU market. This is the first time that a mined commodity has been third party certified as fair trade by Fair Labeling International (FLO). In this interview, Marc Choyt, publisher of Fairjewelry.org, interviews Patrick Schein, a precious metal refiner based in Paris fully committed to ethical gold sourcing. Schein is a board member of the Alliance for Responsible Mining (ARM), which pioneered the initiative.

Marc: First, for those who are familiar with your long work as a pioneer in artisanal mining sector, tell us about what exactly the objective of the Association of Responsible Mining (ARM) is.

Patrick: The Alliance for Responsible Mining (ARM) is a global independent pioneer initiative whose objective is to enhance the quality of life of the Artisanal and Small-Scale (ASM) miner. It's mission is to contribute to the transformation and recognition of ASM as a responsible activity facilitating a just and transparent supply chain.

Marc: Among the myriad objects that are mined by small scale miners, why did you choose gold?

Patrick: Gold mining affects an estimated 60 million people. Fifty countries in the Southern hemisphere are involved in gold mining. Also, gold has a direct link to the consumer through jewelry with its symbolic emotions and emblematic brands.

Marc: So in your model, you focused first on the supply chain?

Patrick: Right. For the last 5 years, ARM has focused on the supply side through producer support, miner's capacity building, empowerment and elaboration of the Gold Standard Zero.

Standard Zero defines the criteria of fair trade gold. It represents the foundation allowing the link between the consumer and the miner.

Being a miner based initiative, ARM decided to liaise with a consumer facing Fair Trade organization, and a strategic partnership was sealed 2 years ago. We work with the leading fair trade organization, the Fairtrade Labelling Organization (FLO) out of Germany.

(Peruvian miners at work)

Marc: Why not just develop your own initiative instead of working with FLO?

Patrick: Working with FLO allows us to reach the market. FLO is an international non-profit organization with 24 national initiatives working to secure a better deal for producers. In the US, they are known through their national initiative TRANSFAIR USA. They already have an established label.

Marc: ARM and FLO are formally allied?

Patrick: Yes, with the objective to create the Fairtrade & Fairmined label for Gold and to hit the market within a year with jewelry made of Fairtrade & Fairmined Gold in the UK first, and then in all other countries where FLO is active and their national initiative interested to launch the product.

Marc: Where is this gold coming from?

Patrick: The standards have been tested on the ground since 2007 in 9 pilot mining communities in South America. The first labeled Fairtrade & Fairmined Gold will come from them.

Marc: Why South America as opposed to Africa, which also has so much ASM gold?

Patrick: The choice of South America is due to 2 reasons: first ARM is born in South America and managed from there and thus has its broadest networks of stakeholders and potential producer support organizations in that continent.

Second, Latin American miners have reached significant levels of organization, so that they are empowered and have a fairly good chance of being certified.

Once the Fairtrade & Fairmined Gold will be launched in the market and the demand is growing, we will reach out toward Africa where we have already made scoping studies to identify potential partners and mining producers. After Africa, we will then approach countries in Asia.

(A Bolivian Miner with Retort)

Marc: Which countries are you working with?

Patrick: The first countries hosting pilot projects are Bolivia, Colombia, Peru and Ecuador. The pilot communities are diverse and represent a wide range of characteristics such as:

• - Different national contexts and legislation governing ASM.

• - Different types, sizes and levels of organization,

• - Different types of gold mining, i.e. both alluvial and hard rock.

• - Different ecosystems: tropical rainforest, Andean mountain, Atacama Desert.

• - Different processing techniques, i.e. amalgamation, cyanidation, mercury-free

Marc: How were you able to organize these communities so that they would engage in this fair trade gold process? It must have been very difficult.

Patrick: The key factor was that in each of the countries, we had supporting organizations. These groups empowered communities of miners. They did a great work assisting the mining organizations in understanding the concept of fair trade, understanding and adopting the standards and getting all the administrative work done.

Nevertheless, the driving force in adopting the Fairtrade & Fairmined gold was the miners' willingness and desire to work within a fair trade model as economic, social and political stakeholder. They wanted to gain dignity, respect and legitimacy. They knew that fair trade was a good tool to achieve that goal. They also understood that they are the own actors of their future, and organized themselves in federations with strong leaders, such as Manuel Reinoso in Peru.

Marc: How much of a premium do the miners get from selling this gold through your certification process?

Patrick: The Fairtrade & Fairmined premium will represent 10% of the London Market Fixing for gold (the world reference market) with an extra 5% premium for ecological gold produced under stringent environmental practices.

(Miners in Peru ready to head down)

Marc: What do the practices look like on the ground for eco gold?

Patrick: The ecological gold is produced exclusively under gravimetric methods, with no mercury or cyanide. It also involves restoration. Forest restoration is key, as forests are areas of high biodiversity.

Marc: How would the fair trade gold process significantly improve the communities that are involved, besides the slightly higher price?

Patrick: The Premium is a tool for development and empowerment. It is an opportunity for miners to invest in the economic, social or environmental development of their organization, its members and their families, and the surrounding community.

The Premium is not the only benefit the miners will get for adopting the fair trade model. By having shorter commercialization routes and greater transparency with their transactions, the miners are getting a better price for their gold. We have seen that during the pilot period. Miners got better commercial conditions for their gold and, in some cases, by formalizing their operations, they got also fiscal benefits like VAT reimbursement because of their new exporter status, for example, in Peru.

Marc: Are there additional benefits for these communities by engaging with FLO and ARM?

Patrick: It is common knowledge that ASM miners have a bad reputation among governments for their illegal activities. Fairtrade & Fairmined certification gives the miners a recognition as an economic, social and political stakeholder. Through its responsible practices, Fairtrade & Fairmined mining helps to change the ASM image. Governments are realizing that ASM is an important opportunity to reduce poverty if well managed, and crucial for national economies. It works like a lobbying tool for them. Economically and socially, ASM gives work to a lot of people and cannot be ignored, marginalized or sometimes demonized.

Fairtrade & Fairmined certification will also allow pre-finance for the miners at current market prices. This is also an economical benefit for the miners because they will not be obliged to sell their gold everyday to get the necessary cash to live. They will be able to stockpile bigger lots and thus get better prices. It will also work towards mercury abatement by favoring cyanidation which is a longer process but offering a much better productivity.

Marc: Cyanide is a better agent than mercury?

Patrick: ARM favors cyanide leaching over mercury amalgamation as the environmentally superior technology, but actively promotes cyanide-free gold processing. Amalgamation is a speedy process that can be carried out by individuals, while cyanide leaching is a slow process that usually requires substantial investment in the construction of a processing plant.

The large scale mining sector replaced amalgamation by leaching some decades ago, eliminating mercury use from its gold processing operations. Artisanal miners in many countries have proved that amalgamation can be replaced by leaching at their level of production if they organize, obtain the necessary finance to invest and start using small processing plants for processing mineral ore. As cyanide can be detoxified and is even biodegradable with exposure to UV light and oxygen, leaching is considered much more environmentally friendly than mercury amalgamation using an element that is toxic and persistent. If your readers want to know more about this position , I invite them to see:

(A cyanide vat with gold )

Marc: How can you assure that the miners are not buying gold from somewhere else and merely selling it to you at a better price?

Patrick: All the mines will be audited by an independent certification body, FLO-Cert using mining professionals. The first audit is the certification which involves regular audits. So the grade of the ore and the plant capacities are known. In addition, the number of miners and their productivity is known.

So as the organizations must declare all those variables to the system, any discrepancy or important variation can be detected and verification action initiated on the ground to understand those variations. If you see that the volume of ore treated is going down and the gold production not declining, then the grade of the ore must obligatory be higher and you can specifically check this point with the organization.

In mining, everything is logic and as all processes are traced and reported, it is quite easy to identify discrepancies.

Marc: What takes place in the mines, in terms of environmental safeguards, verses, perhaps, a typical gold refining operation by small scale miners?

Patrick: Responsible ASM actively encourages better preventive and restorative environmental practices and the application of responsible methods of production. Responsible miners abide by the environmental laws in their countries, contribute to environmental protection, human health and ecological restoration in its operations and communities, and mitigate negative impacts.

Respecting protected areas, avoiding damaging important biodiversity, minimizing the ecological footprint of mining, and, where possible restoring or replacing biodiversity, and where this is not possible, compensating for that residual loss, are principles for environmental protection.

(Patrick, helping to amalgamate some ore)

Marc: Why would someone choose fair trade gold over recycled gold, which is so much easier to understand and still is a good choice?

Patrick: The values conveyed by those two golds are quite different. Recycled gold is easy to get. In 2008, US generated more than 3 million ounces of gold from fabricated old gold scrap (this number does not include the private and official sector eventual sales of gold holdings). It is easily understandable by the consumer, at least simpler than mining, and it is better than dirty gold. All US jewelry manufacturers could use 100% recycled gold with almost no effort.

Recycled gold is a FACT not an OBJECTIVE. The planet's above the ground stocks end of 2008 (gold that have been mined since the origin), the recycling gold reserves, were estimated at 5.2 billion ounces of gold or 75 years of 2008 jewelry fabrication or 67 years of mine production. It will not prevent mining to occur for a simple reason: you do not need a customer to sell gold, you go to the market. It is a commodity.

Recycled gold does not aggregate value and it has no development impact. Mining has allowed countries or states to become regional or world powers. Look at California, South Africa or Australia. The only way to stop mining is to not give gold, a metal used only to put in a safe or around a neck, its value.

Recycled gold does not bear any social value and does not prevent mining to occur. I defend recycled gold, the refinery I manage in Europe is the first one who signed the No Dirty Gold campaign, but before promoting it, I am campaigning for Fairtrade & Fairmined gold.

It is a good complement of responsible artisanal gold, but it could eventually end up competing with it in the market once it is accepted by consumers.