DR Congo mining comes under scrutiny

Published by MAC on 2013-02-25
Source: Guardian, Bloomberg

Corporates aren't the only solution to conflict gold

Organisation for Economic Co-operation and Development rules governing the export of conflict minerals, fail to engage small-scale miners and the root of the problem

Greg Valerio

Guardian (Professional)

18 February 2013

Anyone who travels in Africa knows it is not always an easy continent; my transit from Entebbe airport in Uganda to Bunia, a north-eastern city in the Democratic Republic of Congo, was fraught with frustrating travel officials and bureaucracy, attempts to solicit a bribe and a stolen camera. But looking down from my small plane, I thought how the popular media narrative of militia and smugglers of conflict gold in isolation from the desires and consumption of developing and developed nations did not ring true.

Based in Bunia for a week, my journey took me through the small towns of Iga Barrieré and Kobu, north of Bunia, and past the new Chinese gold mining concession and eventually to the highly controversial AngloGold Ashanti mine near Mongbwalu.

I wanted to review and understand peace building in the war torn DRC and its relationship with artisanal and small-scale mining (ASM) and my guide was Henri Ladyi, co-ordinator of the Centre for Resolution Conflicts (CRC), a partner of Peace Direct. An inspirational man, Ladyi lost his father in a rebel attack before joining a militia to protect his family before finally becoming a peacemaker.

The situation is "calm but volatile", I was told. Gold fever only adds to the madness.

Inadequate OECD efforts

CRC has chosen to take a pro-active stance on the issue of conflict minerals and has identified employment of former combatants across towns and villages in eastern DRC as key to reducing or de-escalating the conflict.

It's a markedly different approach to the OECD's top-down process for governing the export of conflict minerals - or "due diligences in supply chain management" - which doesn't address the root causes of an ethnic conflict in which gold can easily be used to fund the violence.

The OECD conflict minerals process deals with the fruit, not the root of the problem. It has created a set of recommended procedures that only corporate mining companies can afford to follow, rather than address the majority employed by the gold trade, namely the small-scale miners.

In Ituri, small-scale gold miners and former combatants have never heard of the OECD, or transparency or supply chain management. Nevermind have the ability to read a complex UN-style report. All they know is that they currently sell their gold to traders and its final destination is Bunia.

Exercising our moral outrage at the appalling conflict that has to date claimed 5.5 million lives by boycott isn't the answer; we risk removing the population's ability to earn a living in an honest fashion, and which forces the same people to militia activity or illegal smuggling to earn a living. Or as one mining leader in North Kivu wrote in response to the Enough Project's call to boycott eastern DRC minerals: "We will die by the bullet or die of starvation".

It remains to be seen if the OECD due diligences on conflict minerals will work, but its clear that currently, it's just another CSR badge that the World Gold Council, the London Bullion Market Association and the Responsible Jewellery Council corporate members, can add to their collection.

Small-scale and artisanal miners

CRC asks whether responsible and well-organised small-scale mining by former combatants can lead to genuine peaceful and sustainable transformation? My work securing traceable gold in Columbia showed me the benefits in certified Fairtrade gold programmes. But Peru is not the DRC and it's a fledgling process that has harder goals than the blowing up and crushing that their large-scale mining cousins do to satisfy the greed of stock markets and bank vaults.

To describe the artisanal gold fields of Africa as chaotic is to understate a reality more akin to one of Dante's circles of hell. Small-scale mining is the second biggest employer on the planet, with a global workforce of 100m.

There are sad stories of fraud and lost opportunities. In Iga Barrieré, local miners lost 40kg of gold after a Korean called 'Mr Dave' dazzled them with a mechanised processing unit, which they used to mine for a month, before he disappeared.

The first thing you notice about any small-scale mine site is a constant humming of mechanised water pumps and generators followed by the noise of countless workers, digging and hauling up pans of soil to be panned and washed. All this is backbreaking, dirty, noisy, insecure and dangerous work carried out on the promise of payment plus a daily meal until the gold is delivered.

It is mind-boggling how the sheer muscle of humanity, driven on by the primeval urge to survive can move tonnes of earth every hour and in doing so carve vast ravines out hillsides, re-direct river courses, and sculpt entirely new landscapes as they pursue gold veins. But to truly understand the ASM sector you need to look beneath the obvious of environmental mismanagement, systemic mercury usage and child labour issues to understand the hidden driver of money and survival.

Day-to-day work as a small-scale miner

I talked to lots of miners and traders in the towns I visited. They all told the same basic story, best illustrated by one miner I spoke to in Kobu. He borrows money from a local trader which allows him to open up a small pit and employ a group of local diggers, maybe as many as forty a pit. The diggers move the soil until they hit the gold bearing rock or start to wash the gold from the river sands. If he digs rock he will also be loaned some mercury to amalgam the gold from the rock dust. Once this gold is extracted, he pays the trader back in gold, plus interest, which can be as much as 30% to 50%.

He is then obliged to then sell the remaining gold to the same trader at discounted rates on the international fix, determined by weight and purity. The trader determines purity through a process called 'acid burning' where the gold is heated and melted to liquid and burned with acid to remove any material that is not gold. After selling the remaining gold he then pays 30% of his income to Kilomoto, the government mining group, as license for working on their concession, before paying his workers.

From pit to closing the deal, he manages a myriad of different quasi-official interests; payments to the police, the Congolese security service, soldiers, the local government office, local chiefs, the environmental office as well as the hydro carbon tax (he actually offsets his carbon omissions) and anyone else who may have the power to stop him from mining - if he is left with as much as $3,000 from a $50,000 transaction for 1kg of gold he will feel himself fortunate. When you ask him why he does it he simply replies: "It is all I know how to do, and I earn just enough per month to feed my family".

It is little wonder then people in the DRC don't benefit. Since OECD measures to stem the flow of conflict metals, the UN Security Council has concluded that official export figures for eastern DRC were falling rather than increasing. However well intentioned the OECD's due diligences, smuggling is clearly on the increase, which will only lead to more insecurity and violence.

Everyone wants conflict-free gold, none more so than the exploited miners. But influenced by the corporates, the OECD's top-down guidelines have framed a solution that seems to be adding to the already highly complex problem rather than making it better. The UN report estimated that three tonnes of gold was illicity sold to the international market in 2010. Uganda is the principle destination, which ends up in the Dubai refineries and eventually in India and China.

China is the world's biggest jewellery manufacturer with several of the UK's leading high street jewellery brands manufacturing their collections there. There is no doubt in my mind, given the lack of enforceable traceability in the gold supply chain, that smuggled gold that funds conflicts is making its way into jewellery in the UK high street. The National Association of Goldsmiths and the British Jewellers Association are due to report on the state of the UK gold industry, but more needs to be done to assure consumers they are not funding conflicts, war and violence.

Greg Valerio is founder of Fair Jewellery Action

---

DRC and IMF to discuss disputed mine deal

Michael J. Kavanagh

Bloomberg

15 February 2013

Officials from Democratic Republic of Congo and the International Monetary Fund will meet to discuss a mining deal that led the IMF to cancel loans to the country last year, Congo's prime minister said.

The Washington-based lender terminated its $532 million loan agreement on Nov. 30 after Congo failed to publish sufficient detail of a 2011 asset sale by state-owned copper miner Gecamines to a company associated with Israeli billionaire Dan Gertler.

Congo wants to settle the dispute and begin a new program with the fund, Prime Minister Matata Ponyo told reporters today in the capital, Kinshasa.

"We agree that the question of the contract that brought down our relationship needs to be resolved," he said. "There will be bilateral discussions between experts of the International Monetary Fund and the DRC so we can end this and propose a basis for a new beginning."

Congo had the lowest per capita gross domestic product in the world last year, according to IMF data adjusted for purchasing power. The premature end to the three-year loan program, which was meant to promote growth and reduce poverty, cost Congo about $225 million, according to the IMF.

The Central African country produces about half the world's cobalt and about 3 percent of its copper and has large deposits of gold, coltan, tin and diamonds.

Under the terms of its accord with the IMF, the government agreed to publish all contracts related to oil, mining and forestry to improve transparency in its revenue collection from those industries.

Copper Project

The IMF canceled the program when the government did not provide enough detail of Gecamines' June 2011 sale of its 25 percent in the Comide Sprl copper project to Gertler's Straker International Corp.

The deal was one of five sales in 2011 by Congo's state-owned mining companies to Gertler that the IMF questioned amid concerns about how the country was managing its mining industry.

In December, Gertler sold Straker's stakes in Comide to London-listed Eurasian Natural Resources Corp. along with his shareholdings in several other properties for $550 million.

There will be a meeting in Kinshasa about the Comide contract "when the authorities are ready," Oscar Melhado, the IMF's resident representative in Congo, said in an e-mailed response to questions.

Ponyo said he met with IMF managing director Christine Lagarde twice in Washington last week to discuss mining governance and the possibility of a new loan agreement.

--Editors: Alan Crawford, Karl Maier, Emily Bowers