Patrick Schein

|

Fair trade gold blog

Gold Mining : at what price ?

08/05/2012

A recent article on the Swiss village of Medel, which voted against approving a exploration license to tap a gold deposit in the Grisons mountains estimated at 25 tonnes with a market value of some 1,3 billion dollars at current prices, led me to reflect on the real end value of mining for yellow metal and, more generally, on the contribution made by the gold industry to the development of our planet.

The choice between prosperity and quality of life split the population. On one side, there were those in favor of gold mining (one-third of voters), led by the village mayor – interestingly, the recently retired head of a major international audit firm -, who were convinced of the economic benefits for the aging population. On the other, there were those against the plan (two-thirds of voters), who placed the protection of their surrounding environment above all other considerations and who did not want to see an influx of workers from outside their region disturb the quiet idyll of their village of 435 Romansh-speaking inhabitants.

But the real issue at stake here is what actual value gold mining brings. Gold has one particularity that other metals do not: it is easy to get hold of because it is of little use for industry (12% of existing stocks), is locked away in central bank vaults (17% of stocks) and, above all, because it is owned by individuals in the form of jewelry (50% of global stocks) or as an investment (19%). All told, these stocks represent 60 times the volume of gold extracted from mines in 2011, i.e. more than enough to meet the small needs of industry for many years to come.
Whether held in jewelry or as an investment, gold is not a staple commodity. It is not indispensable for our development. While the world would continue to function without gold, you simply cannot transport electricity without copper, build cars without steel or manufacture aircraft without aluminum!
In short, even in those few instances where gold is required, there is no justification for gold mining if it does not contribute to the sustainable and equitable development of our society.

So what motivated the decision of the inhabitants of this small village in the Grisons mountains? Almost certainly, the fact that the negative side effects outweighed the benefits: not only do industrial mining operations cause significant environmental damage (the cost of which is always borne by the population of the producing country), but the value of their actual contribution to society is very limited. Unlike oft decried artisanal mining operations, the mining industry employs little in the way of local labor. Take the example of Newmont Mining which produced over 180 tonnes of gold in 2011 (6.5% of world production) with a market value of over US$10 billion, but only employed 43,000 people.

Moreover, the value created is not shared equitably. In its most recent annual survey, the GFMS gave details of the average cost of producing one ounce of gold in 2011, i.e. when the average annual sales price stood at US$1,572. According to the figures published, the cash cost amounted to US$854 (and even dropped as low as US$590 in South America) and, out of this total cost, mining taxes paid to the states accounted for US$46 and wage costs for US$227. In other words, for every kilo of gold produced worldwide, an average of 29 grams was paid to the producing state in the form of royalties and 144 grams to employees in the mining industry, with 457 grams representing the profit of the mining groups.

Even though certain mining giants have been built up by the financial sector as champions of sustainable development – Newmont is a component stock in the Dow Jones Sustainability World Index (click here) -, their impact on the environment is nothing short of devastating. For every kilo of gold extracted in 2011, the aforecited group emitted 935 kilograms of sulphur dioxide, 28 grams of mercury and 27 tonnes of greenhouse gases (GHG), as well as consuming 2.4 million liters of water and 75 kilograms of tires (click here).

Given this environmental footprint – which is not offset – and the way in which the value created is shared between stakeholders, why would anyone want to have their mountains dug up? In light of these numbers, it is easier to understand why the Swiss villagers vetoed the plan, since it is they and their children who would end up paying the price for mining a metal that is not needed for the development of our planet. As it is a non-renewable resource and since the gold deposit is not ready to disappear, it makes more sense to wait until it can be mined under better conditions …

In my view, there are two prerequisites for ensuring that gold mining is acceptable and promotes truly sustainable development:
1- Minimize and offset any the impact on the environment, i.e. assign a monetary value to the impact and pay this amount to the community, producing country or environmental fund. This compensation for the ecological impact must be over and above mining royalties already paid, which are abnormally low.
2- Share out the value created in a more equitable manner.

The day when we see gold mining have a significant net impact at a local, regional and national level, and when the costs incurred (environmental and production, including the amortization of investments) and value created are divided fairly between the different stakeholders (shareholders, employees, local population), then we will be able to call for a “yes” vote since gold will then be considered as having a genuine value for sustainable development.

Patrick SCHEIN
Gold trader & refiner

Fairtrade & Fairmined Gold: Peru’s SOTRAMI Gold mine

08/05/2012

An excerpt of an excellent documentary « Gold at a golden price » broadcasted on France 5 channel.
I bring up the principles of responsible artisanal Gold — fair trade Gold — and the documentary shows us SOTRAMI mining organization, the first peruvian’s mine to be Fairtrade & Fairmined labelled ( www.fairgold.org ).
(To get English subtitles, hit the red cc button underneath the video’s window).

The international treaty on mercury: a golden opportunity for artisanal miners !

31/01/2011

Originally published in French on the 13t January 2011

In February 2009, at the end of the meeting in Nairobi of the Governing Council of the United Nations Environment Programme (UNEP), environment ministers from around the world agreed on the need to develop a global legally binding instrument on mercury – a highly toxic pollutant. A total of 140 governments were unanimously in their decision to launch negotiations of an international treaty to address global emissions and discharges of a pollutant that threatens the health of the fetuses and babies of gold miners and their families.

The use of mercury in artisanal and small-scale gold mining is an important issue that will be examined in the context of the treaty negotiations.

Last month, the UNEP convened a global forum on artisanal and small scale gold mining in Manila. I was invited in my capacity as an expert in this field to explain to the government representatives and NGOs present the economics of artisanal gold mining and the importance of this sector – unlike the large-scale mining industry – to producer countries through its strong impact on the local economy and its propensity to generate a considerable number of jobs. I also had the opportunity to explain how artisanal miners use mercury as a financial instrument, allowing them to recover the gold contained in their concentrates easily, very quickly, and without requiring the use of any sophisticated technology.

At the forum, the miners present – who came from the Philippines, Peru, Mongolia and Tanzania – took the initiative to draft and read a declaration addressed to those governments participating in discussions on the treaty. This declaration and petition, to which I invite you to lend your support, is fundamental, as it expresses the desire of these miners to reduce or even eliminate their mercury emissions. Like other industrial players that release mercury into the environment – such as coal-fired power plants or the failure to recycle compact fluorescent lamps – artisanal miners, who are often among the poorest of the poor, are assuming responsibility and committing to reducing their mercury discharges. But to be able to do so, they are asking their governments to establish conditions that will enable them to make this transition to an environmentally responsible artisanal mining, as did the first mining communities to be certified fair trade. These conditions include legal and economic recognition of their activity, assistance with professionalization and transfers of technology, and the establishment of public services and basic infrastructure. This because the use of mercury is the direct result of the precarious conditions under which the industry operates. In order to eradicate this precariousness, only a formal legal recognition and economic visibility coupled with the transfer of existing and proven clean technologies will allow miners to make this transition and obtain the appropriate funding that is so greatly in need at present.

This declaration is proof that the negotiation of the treaty on mercury represents a unique opportunity for artisanal miners to stop employing techniques requiring the use of mercury as, for the first time, it allows them to expose the reality of their situation to all the governments of the world, while asking them to make it possible and to accompany them in their commitment to reducing their emissions of mercury.

This series of negotiations – taking place over five sessions between 2010 and 2013 – presents an unique opportunity for this sector to use the same weapons as those employed by the large-scale mining industry, including lobbying, to advance the economic importance of their industry which, unlike large-scale mining, is not predatory and provides true economic benefits to the countries in which the gold is mined.

In order to lobby – on behalf of the Alliance for Responsible Mining (ARM) – at the end of the month I will be traveling to Japan, which will be hosting the second session of the treaty negotiation. There, we will defend the responsible use of mercury in the industry, and ask the governments for their support by establishing appropriate public policies.

Best wishes for 2011 !

Patrick Schein

Gold: Man’s paradox

17/01/2011

Originally published in French in June 2011

Two weeks ago, an old friend contacted me because he wanted a general-interest article about gold to illustrate a movie he is producing that I am consulting on. In addition to narrating the history, economics and use of this precious metal, I wanted to provide a new approach to understanding an industry that many people consider only from a monetary and quantitative standpoint. I hope it will also help you to see this metal in a whole new way.

Have a pleasant day

Patrick Schein


Or artisanal - Pérou - © C. Famali - ARGOS

Responsible artisanal gold - Peru - © C. Famali - ARGOS

In 1862, British writer John Ruskin told the story of a man who sailed aboard a ship with no luggage save one carefully-guarded bag filled with all of his wealth in gold. The ship was caught in a storm and went down. Obeying the order to abandon ship, the man jumped from the bridge – his precious nest egg securely fastened to his belt – and sank straight to the bottom, dragged down by his bag of gold. The author then mused: « Now, as he was sinking, had he the gold? Or had the gold him ?”

Since it was first used more than 6,000 years ago in Thrace and Nubia, gold has crowned Mankind and threatened it, haunted us and made us dream.

Thracian gold - © REUTERS/Stoyan Nenov

Gold was the raison d’être of entire societies before ultimately annihilating them, it founded and destroyed economies, decided the fate of kings, illuminated the most beautiful works of art, and has been responsible for the most heinous crimes. Gold has driven men to endure the worst hardships in hopes of instant wealth and an end to worrying about tomorrow. This quest was immortalised by Charlie Chaplin in one of the first shots of The Gold Rush (1925), where we discover an impressive line of gold diggers trying to climb the Chilkoot Pass trail in the Canadian Klondike during the 1898 gold rush.

Ruskin’s paradox has characterised gold since time immemorial. Gold is a universe of contradictions. It is generally seen as a safe haven, but if we follow this principle too zealously, it becomes a curse. The inalterable beauty that makes it shine like a sun and its indestructibility have transformed it into a talisman used for protection against the darkness of the future. Christopher Columbus wrote the following to the Spanish royals: “Gold is the most precious of all possessions [...]; he who possesses it has got everything he needs in this world as well as the means to save souls in purgatory and send them one day to paradise”.

Nations have journeyed the world over seeking it as a means for control over other nations, only to discover that it was the gold that controlled their own destiny. At the top of the rainbow, gold is the ultimate contemplation, paradise, but at the bottom of the mine it is at its closest to hell. A symbol of eternity, it inspires the purest and most noble of ideas through religion or royalty, but can also lead the peoples of the Earth down the dark path to slavery or death.

Sao Francisco church - Bahia, Brazil

This golden paradox is reflected in the metal’s physical properties: the metal is extremely malleable – so much so that it must be combined with other metals to harden enough to be shaped into jewellery – while remaining unalterable. You can do anything to gold, except destroy it.

Invalides Paris - 10 kilograms of gold

Despite the complex obsessions it creates, gold is a beautifully simple and chemically inert element. It is extremely dense, as all the gold extracted since it was first discovered can fit into a cube that was 20 metres on each side. Isaac Newton had it adopted as a standard currency to replace silver, as thanks to its density and high price small volumes of gold could be used to make large payments. One of its distinctive characteristics lies in the fact that all the gold mined since the beginning of time is still in existence. In 2009, new mining accounted for less than 2% of total gold stocks, most of which — contrary to popular belief —are adorning people’s necks and wrists, although some do lie hidden at the bottoms of safes owned by central banks (20% of total stocks) and private individuals (20%). In fact, more than half the entire stock (84 million kilos) exists in the form of jewellery, more than 12 grams of gold for every person in the world (about €400 at current rates).

Gold reserves - 1 module = 4 tonnes of gold

Gold is a metal humanity could very well do without, since it is either worn as jewellery or locked away in safes. It was therefore Man who first assigned it a value, ever since towards 550 B.C., when Croesus, king of Lydia, struck the first gold coin extracted by his subjects from sand carried by the river Pactolus.

We have already extracted enough gold to satisfy demand for jewellery – the largest market – for nearly a century without having to melt the same gram twice.

Gold mine - Australia

These observations are crucial insofar as mining, and especially industrial mining (90% of all gold mined annually), is scarring our planet. One has only to browse the reports put out by the major gold mining concerns to realize that the extraction of 20 grams of gold generates 50 metric tonnes of mining waste and over 400 kg of CO2 and consumes more than 50,000 litres of water. This highly concentrated industry – where the 15 largest companies extract 50% of all annual production – is also not very labour-intensive. The tiny fraction of the wealth created that stays in the producing country is dwarfed by the amount of profits that goes primarily to feed the financial networks of industrialized countries. Mali presents a highly instructive case. In 2009, the country managed to become the third largest producer in Africa and 14th worldwide, while in the Human Development Index (HDI) published that same year by the United Nations Development Programme (UNDP), it placed 178th out of 182 countries (Niger came in last, despite being the world’s sixth largest producer of uranium !).

At a more modest level, France presents a particularly striking example. The department of French Guyana with its primary forest provides a priceless sanctuary for biodiversity. Several ancestral communities that coax their livelihood from the forest bear the brunt of the devastating effects of gold mining.

French Guyana Forest © P. Schein

In French Guyana, with its violent and highly-polluting technologies, gold mining — both legal and otherwise — represents a dramatic factor for environmental degradation that does not spare humans, due in part to the mercury used in illegal extraction, the only accessible means available to its miners to trap the gold in the auriferous sands.

This side of the business should undoubtedly lead to calls for the banning of gold mining in favour of simply recycling existing stocks, which are already more than sufficient to meet our needs. But this means casually forgetting Ruskin’s paradox, as gold mining can also drive development and offer a unique opportunity to generate income for a large number of people in need. Thus, gold can be a founding factor for communities, even countries, if a fair redistribution of income generated by its extraction is introduced, as has been the case in the western U.S., Canada and Australia for over 150 years.

Detail of the California state Seal showing a 49er ©Wikimedia

Mining is also justified in the case of artisanal gold mining, which supports more than 60 million people worldwide while providing only 10%-15% of global mining supplies. This type of extraction is also known to be responsible. Proof of this is the recent arrival of Fair Trade Gold, a gold with a high social value, a vector for development, extracted by artisanal mining communities in a responsible and environmentally-friendly manner.

Artisanal gold - Guinea ©P. Schein

Under these conditions, what future does gold have? Many had already declared its demise, but in the last four years it has trebled in value, and the global economic crisis has hoisted it to the forefront of the news as being the ultimate currency, as it is the only one that cannot be printed. One thing is certain: greed and fear and the desire for power and beauty are all still alive. Gold still symbolizes the desire for eternity, the ultimate insurance against risk; the value we assign it reflects our own insecurity, or rather our need for security. Like Ruskin’s traveller who jumped overboard, people take the symbolism of gold much too seriously. Blinded by its brilliance, they are misled by an illusion.

© REUTERS/Issei Kato

The jewellery industry no longer needs mined gold !

17/01/2011

In April 2010, I posted an entry on the french gold recycling blog that I run on the topic that the jewellery industry no longer needs mines to supply its gold.  In the United States, the use of recycled gold is quite fashionable and allows jewellers to break the hold of a mining industry that is increasingly tainted by awareness campaigns.

NoDirtyGold New-York - © Earthworks

But recycled gold has one major defect: it doesn’t drive any growth. While the artisanal gold industry provides a living for 60 million people, industrial gold – and recycled gold even less – does not provide work or consequently income to a large number of people. So, since artisanal mining can be responsible and environmentally-friendly, one should ALWAYS favour the use of the gold it produces. This gold is Fair Trade Gold.

Patrick Schein

Article published in French in April 2010

The figures speak for themselves. The World Gold Council, the union of the major gold mining groups, has just published its 2009 statistics, and they are quite eloquent as regards the recycling of that most popular of precious metals.

© Matthew Staver/Bloomberg

Globally, in 2009, the recycling of existing stocks of gold, mostly in the form of jewellery, was equal to the demand for gold of the entire jewellery industry!

© Acker/Bloomberg

In 2009, almost 1,700 metric tons of gold, mostly old jewellery, was melted and refined, while production of new jewellery absorbed just over 1,750 metric tons of gold. The worldwide jewellery industry therefore covered more than 95% of its needs through recycling !

More eloquent still, in Europe this coverage ratio has passed the 100% mark to reach 135% ! According to statistics, 270 metric tons of gold jewellery were recycled, while the continent consumed no more than 200 tons ! Europe therefore no longer needs mined gold to meet its jewellery needs.

© REUTERS/Parth Sanyal

The needs of the old continent can be met by recycling.

Stocks of old jewellery, representing more than 30 years’ worth of mine production, have become the new gold mine for the 21st century, whose use has become profitable thanks to the combined impact of historically high prices, an acute economic crisis and the emergence of new sales channels that are much more accessible and direct.

The self-sufficiency of the jewellery industry is no longer just a goal for environmentalists, it is an established fact!

So the question is: why continue the mining of gold if the industry has a very high environmental impact, since gold is not essential to our lives and as demand for jewellery may well be satisfied by existing gold stocks, which at the end of 2009 represented close to 65 years’ worth of mine production?

© REUTERS/Ajay Verma

For me, the answer is simple. Mining is justified only if it drives local development and results in an equitable redistribution of the income generated, as has been the case for over 150 years in the western U.S., Canada and Australia. A case can also be made for artisanal gold mining, which supports more than 60 million people worldwide while providing only 10%-15% of the global mining supply.

Have a nice week.

Artisanal miner in Peru © C. Famali/ARGOS

FLO and ARM create historic partnership for gold from artisanal and small scale miners by launching Fairtrade and Fairmined gold standards

17/01/2011

Originally published in March 2010

A historic partnership for the artisanal and small-scale miners

Fairtrade Labelling Organisations International (FLO) and the Alliance for Responsible Mining (ARM) have developed the first ever third party independent certification for gold to bring about social, environmental and economic development in artisanal and small-scale mining communities.

The partnership will enable both organisations to meet shared strategic objectives, creating a system to ensure that artisanal and small-scale miners (ASM) can earn a better price for their gold. The partnership will be communicated on product via a co-labelling hallmark using both the FAIRTRADE and FAIRMINED Marks.

The new Fairtrade and Fairmined gold standards mean that interested businesses can use the FAIRTRADE and FAIRMINED marks on certified gold products such as jewellery, commemorative coins, ingots, medals, trophies and religious artefacts. An industry market survey of 96 companies across 11 countries identified consumer products such as wedding rings, dress rings, necklaces, earrings and bracelets as potential products.

Globally, over 100 million people who depend directly or indirectly on artisanal and small-scale mining are trapped in unfair supply chains, and struggle to get a fair price for the gold they mine. The democratic organisation of miners, combined with added premium and increased access to markets, will allow miners’ organisations to improve the technology and working conditions at their mining sites, and also to develop community projects in education, health, environmental restoration and other forms of income. This would lead to more enduring and sustainable development in mining communities .

Artisanal and small scale miners produce just 15% of global annual gold supplies, but make up 90% of labour in gold extraction. Through Fairtrade and Fairmined certification, miners can improve theireconomic, social, labour and environmental conditions.

The Fairtrade and Fairmined standard means that:

1. Miners will get a better price for their gold, with increased security of the Fairtrade guaranteed minimum price. The Fairtrade minimum price for the pure gold content in unrefined gold is set at 95% of the London Bullion Market Association’s (LBMA) fixing at the FOB export point.

2. Miners will receive a Fairtrade social premium, calculated as 10% of the applicable LBMA fixing.

For Ecological Gold, gold that has been extracted without the use of chemicals and with strict ecological restoration requirements, an additional ecological premium, calculated as 5% of the applicable LBMA fixing on top of the Fairtrade premium must be paid.

3. Miners have the opportunity to empower themselves through their organisation. They form groups to give themselves better bargaining power with traders, to get a fairer return for their produce, and gain greater control over the jewellery supply chain. Though the price of gold is widely known in gold mining communities, miners often receive less owing to the number of middle-men between the miner and exporter. Once everyone takes their percentage, the miner may receive as little as 70% of the LBMA. Fairtrade and Fairmined certification will provide miners the chance to ask for pre-financing from prospective buyers, and provide miners with a minimum price for their product creating more competition in local markets and so improving trading relations to the benefit of the miner.

4. Certified miners must use safe and responsible practices for management of toxic chemicals in gold recovery, such as mercury and cyanide. Chemicals have to be reduced to a minimum, and where possible eliminated over the years. Miners earn an additional ecological premium when they recover gold through gravity only.

5. The Fairtrade and Fairmined gold will not contribute to conflict or violence. On the contrary, where certified organisations are located in conflict areas, increased economic stability, traceability and transparency from sale of their certified gold may help contribute to peace-building.

Harriet Lamb, Executive Director of the Fairtrade Foundation said:

‘Companies and consumers will embrace this golden opportunity to make a real difference to miners’ lives. The launch of Fairtrade and Fairmined standards for gold provides a lifeline for communities who find themselves at the mercy of unbalanced markets, when agriculture and other livelihoods are not viable. Many face exploitation from middle men who pay below market prices and cheat them on weight and purity of the gold content. Mining community members lack basic sanitation, clean and safe drinking water, poor housing, little or no access to education and healthcare and are financially unstable. The Fairtrade and Fairmined standards are an important development tool, and will complement other development interventions.

‘Our research shows that customers believe buying jewellery for a special occasion holds greater value and significance if it carried the Fairtrade and Fairmined hallmark. People said that the label reassures both the giver and receiver that the miners are getting a better deal.’

Cristina Echavarria, ARM´s Executive Director, said:

‘The Fairtrade and Fairmined Standards are the best standards in the market today for gold in terms of development impact on mining communities. They even set an example for the large-scale mining industry on issues such as traceability. Fairtrade and Fairmined is the premium among consumer labels, taken up by the most conscious consumers, a growing market segment that is setting future trends. Through them artisanal and small-scale miners all over the world will gain legitimacy and recognition by the mining sector and governments so that a historically disenfranchised group, often abused by illegal groups, can finally get recognition for its contribution to the livelihoods of millions, and access the hearts and minds of consumers who want to ensure that through their jewellery purchase, they can improve the lives and the environment of mining communities. Their decision is already impacting the whole of the mining and jewellery industries. This is a fundamental reason why we at ARM are so proud to have achieved this partnership with FLO and why the miners are so keen to deliver responsibly produced Fairtrade and Fairmined gold to ethical jewellers and consumers.’

The standard was piloted by ARM with nine legally established mining producer organisations in

Bolivia, Colombia, Ecuador and Peru and now applications are open to all small-scale and artisanal gold mining organizations in Latin America. More producer organisations from Latin America are expected to join the system in 2011 and beyond. As from 2010 ARM will establish a network of pilot projects in Africa, and later in Asia.

Manuel Reinoso Rivas, President of the Association of Artisanal Miner Producers of Central and Southern Peru, and ARM Board member says:

‘Fairtrade and Fairmined certification motivates all artisanal and small-scale miners, men and women alike, to press for better working conditions and above all improved health and safety. We need to learn how to use clean, non-polluting technologies that will not only preserve our environment but also help us recover increased quantities of metals. We are determined to cut the number of accidents and reduce the impact of occupational disease and help our workplaces and our communities to provide our fellow miners, our families, our wives and our children with a secure quality of life and an environment free from major risks and able to coexist with ours and others productive activities. In fulfilling this responsibility we are contributing to a better quality of life and setting an example to our own children and to future generations.’

Fairtrade and Fairmined gold will be initially launched in the UK and then rolled out to other countries with a long term vision of capturing 5% of the gold jewellery market over a 15-year period, totalling 15 tonnes of Fairtrade and Fairmined gold annually. Fairtrade and Fairmined gold will be co-labelled, bearing both the FAIRTRADE Mark and the FAIRMINED Mark in order to present to the consumer the strength of the partnership between the two organisations.

My background

17/01/2011
© Collanges/ARGOS

Having explained the reasons that led me to create this blog, a few words now about my background.

I am 44 years old, and have been working in precious metals for 20 years. I discovered this field in Spain. Armed with an MBA from the University of Paris IX Dauphine, I spent two years in the Spanish Basque country working for the second largest refiner on the Iberian peninsula, where I was responsible for the sourcing of raw precious metals and, once refined, their sale.

After an interlude in France, where I worked in a company that recovered the precious metals contained in electronic waste – which is ten times richer than any gold mine – in 1992 I founded S&P Trading, a company specialised in the trading of precious metals, and which sought to act as link between producers and collectors in producer countries and refiners, most of whom are located in Europe.

We were an immediate hit with collectors and medium-sized mines in Latin America, especially in Colombia, Peru and Ecuador. This success helped forge a network of competent partners across South America that provided us with a sustainable supply.

As most of the gold we bought in the Andean countries came directly or indirectly from artisanal and small-scale mining, I got to know this gold mining sub-sector, which both seduced and fascinated me. In 2004, I first raised the possibility of fair trade certification in this sector similar to that for cotton, which was introducing its fair trade-certified cotton in France. Thus, between 2004 and 2006, I worked to integrate the fair trade business model into the gold sector, notably by studying on behalf of the Global Mercury Project (managed by the UNIDO), how that model could increase artisanal miners’ incomes. This work allowed me to visit many countries and producers, and to observe that artisanal mining – which provided employment to over 15 million miners who were often despised, even demonized, by the mining industry – needed be represented and have its status recognised, by States, of course, but especially by consumers. The artisanal miner needed to be recognised as an individual, as well as an economic, social and political force.

In 2006 I joined the board of directors of the Alliance for Responsible Mining, which introduced the principles of fair trade as applied to gold and established the first Fair Trade Gold certified standards in partnership with the Fairtrade Labelling Organisation (FLO). I participated in this exciting venture by serving on the association’s executive board and on the technical committee that developed the standard.

Meanwhile, in 2006 S&P Trading acquired a precious metals refining unit in France, in order to have an indispensable tool for tracing the distribution of Fair Trade Gold. S&P Trading set out to become the leading distributor of traced metals, and above all in Fair Trade Gold.

The plant treats only precious metals sourced from either end-of-life products or manufacturing waste (recycling) and gold from responsible artisanal mining communities (Fair Trade Gold). This was the first unit in Europe to subscribe to the NoDirtyGold charter.

Between 2006 and 2008 I also worked with a gold mine in French Guyana. I served as finance and sales manager, and participated in the company’s initial public offer. This collaboration allowed me to familiarise myself with the medium scale mining from the inside, and especially to learn about mining in an exceptional environment, in terms of both its biodiversity and its regulatory environment, as French Guyana is a territory in South America where the laws of the French Republic and the European Community are applicable.

Finally, 2009 was an eventful year during which we introduced our gold merchant site www.GoldbyGold.com (reserved for private individuals) and launched our Fair Trade Gold distribution platform.

There, now you know almost everything about my career and our projects.

If you would like more information, please feel free to contact me directly.

Originally published in french in March 2010

Hello everyone! Why this blog?

18/10/2010

Miner "cleaning" his daily production - Guinea - © P. Schein

Welcome to the Fair Trade Gold Blog!

This blog is intended to keep you informed about recent events in the Fair Trade Gold world while serving as a forum for sharing with you my thoughts and comments about this precious metal with a high added social value.

Gold has been making headlines recently – it seems like a new rush is on! The price of the precious metal has indeed never been higher, not because gold is growing any scarcer but since, after more than twenty years of sluggishness, it has recovered its role as a safe haven, at a time when the world economy is going through a period rife with uncertainty and imbalances.

But while the planet gets carried away with an outbreak of gold fever, no one cares to know where our gold comes from. In 2009, a total of 2,500 metric tons of gold was mined, with an equivalent value of about 62 billion euros. At the end of the chain, 1,800 metric tons were transformed into jewellery and purchased by us, the consumers.

Upon more careful examination, one realizes that 90% of the gold produced worldwide is extracted by only 10% of the labour force involved in the industry. The rest occupies some 10 to 15 million miners, providing for around 60 million people in all, in 50 countries, mostly in the South. This is also a highly concentrated industry: the 15 largest producing companies account for nearly 50% of global extraction. The largest, Barrick Gold, alone accounts for one tenth of the world’s supply of mined gold.

The time has therefore come to change consumers’ and industry players’ (jewellers, manufacturers, traders, etc.) perception of gold mining, and place Man back at the centre of its economics.

During a study tour in 2006 conducted in West Africa or the Global Mercury Project, we were able to observe just how glaring this gap was. On one side was one of the mining industry giants employing nearly 3,000 people (directly) producing 8 metric tons of gold, and the other, an entire sector of the economy, with 200,000 miners extracting every year about 7 metric tons of gold. In addition, everything needed for the industrial mine is imported: the energy, the technology, most of the managerial staff, the chemicals, etc. If we include the dividends paid to foreign shareholders, this results in only a small fraction (I think around one third) of the value of the gold actually benefiting the domestic economy.  On the artisanal miners side however, almost everything is done by hand with very little mechanisation, which results, according to my estimates, in 90% of the total value of the gold extracted remaining inside the country.

This means that artisanal gold (a non-renewable resource) provides a lot of work to people who need it. As long as gold is extracted industrially, it will no longer root people in rural areas and thus favour the exile of these same people into already overcrowded cities.

This case, perhaps extreme but true nonetheless, demonstrates the value of artisanal gold mining in the world. Obviously, one must have regulations to keep its environmental impact to a minimum, not to mention the fact that the mining industry is frankly quite mediocre in this area. Thus, to produce 20 grams of gold (a ring for example), one of the industry giants consumes over 50,000 litres of water and produces nearly 50 metric tons of mining waste.

This example clearly shows the importance of gold’s origin. Given a choice between two identical wedding bands, a responsible consumer will surely prefer to wear the one that has provided employment to 80 times more people.

Artisanal gold is “handmade” gold. Gold that provides work for people who need it. As gold is a non-renewable resource, this concept becomes increasingly important with the continued expansion of the world’s population.

This blog is intended to place Man back at the centre of the gold mining economy. During a period in which some of the world’s most recognized voices are calling on political leaders to modify economic indicators to take into account criteria such as sustainability, quality of life and allocation of resources, and concluding that growth is not the sole component of development, it is time to apply the same principles to the gold mining sector, especially insofar as it involves a non-renewable, and therefore finite resource. So why continue to rank a gold mine by the number of ingots it produces? Why not evaluate it by the share of total value created that remains inside the producer country, the number of people it is employing locally and by the percentage of royalties it pays to the States? I call it: placing Man back at the centre of the gold mining sector.

I have, therefore, created this blog, in order to propagate these facts and these beliefs. It is intended to educate consumers, who have the greatest amount of leverage to change the situation because they are the ones who buy jewellery. It is also meant to raise awareness among industry players (jewellers, manufacturers, traders, etc.). This blog is open to the ideas and analysis expressed by other industry participants who champion this view of gold mining.

Let us place Man back at the centre of gold mining and support responsible artisanal gold mining!

Long life and prosperity to Fair Trade Gold!

Patrick Schein

Originally published in french on February 2010

Miners from the AURELSA mining community © P. Schein