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Explainer - What is artisanal gold and why is it booming?

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01/15/2020 | 05:43am EST
FILE PHOTO: Artisanal miners sluice for gold by pouring water through gravel at an unlicensed mine near the city of Doropo, Ivory Coast

A rapid rise in the price of gold since 2000 has driven millions of people to deposits in Africa, South America and elsewhere where they dig for gold using basic technology.

Such informal digging – known as artisanal or small-scale mining (ASM) - has been around for centuries, and gold offers cash to communities that may lack alternatives. There are now around 15-20 million artisanal miners, and millions more depend on them, Delve, a global platform for ASM data, estimates.

More and more people are trying to bring this fast-growing trade into the formal economy. But it has generated toxic waste and fed labour abuses, organised crime and prostitution, according to groups including the United Nations and the OECD.

WHAT IS ARTISANAL MINING?

Artisanal and small-scale miners often operate "freelance," sometimes paying landowners to access a site, or handing bosses a share of their ore.

Many work with little more than pickaxes and shovels and carry what they dig on their backs. Others use diggers and crushers.

Often, miners use mercury to extract the gold, then turn it into semi-pure nuggets of dore (pronounced door-ray) to sell to traders.

WHY HAS IT INCREASED?

Consumption of gold has risen, as rapid economic growth in China created millions of new gold buyers and the economic crisis of 2008 drove investors into assets - like bullion - expected to hold their value.

That pushed prices from less than $300 an ounce in 2000 to around $1,500 now, making mining more attractive than farming for many in countries with often rapidly growing populations.

It is hard to measure the output of artisanal and small-scale miners but Metals Focus, a consultancy, estimates they now produce about 560 tonnes of gold a year worth some $27 billion. Mechanised mines produce around 2,900 tonnes a year, it says.

WHAT PROBLEMS DOES THIS CREATE?

It can leak toxins and pollute water systems.

Informal mines often collapse. Children often work on sites, sometimes forced by unscrupulous bosses to squeeze into narrow pits.

Such mining feeds a shadow economy that deprives states of taxes: Gold worth billions of dollars is smuggled from Africa every year.

Narcotics dealers and warlords use the gold to launder profits or buy arms.

WHO BUYS ASM GOLD?

Consumers in the West increasingly want products that are ethically sourced, so many large banks, jewellers and gold refineries are wary of artisanal gold. Typically they only buy from carefully monitored schemes that ensure miners are treated fairly and the source of gold is traceable.

But the amounts produced this way are small.

Much of the rest goes to buyers under less scrutiny, in places such as the Middle East and India, according to trade data and people in the industry. The gold can enter the global system from there.

(Reporting by Peter Hobson; Edited by Sara Ledwith)

Stocks mentioned in the article
ChangeLast1st jan.
DOW JONES AFRICA TITANS 50 INDEX -1.55% 529.29 Delayed Quote.0.07%
GOLD -0.06% 1580.277 Delayed Quote.4.31%
NEW GOLD INC. -0.81% 1.22 Delayed Quote.6.96%
S&P AFRICA 40 INDEX 0.02% 164.52 Delayed Quote.-2.98%
SILVER -0.11% 18.061 Delayed Quote.2.16%
SILVER - CAPE VERDE ESCUDO 0.00%End-of-day quote.0.00%
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