August 2011

Extracting gold without fuelling conflict

New World Gold Council standard aims to ensure “conflict-free” metal

By Paul Brent

It is malleable, indestructible, increasingly valuable and ultimately hard to trace back to its point of origin. These well-known attributes of the shiny yellow metal have prompted the World Gold Council (WGC) to initiate a new program to combat “conflict gold” and provide end-users – and regulators – with the assurance that their gold did not fuel military conflict in a foreign land.

The WGC and its gold-producing member companies and large refiners have created and are now “stress testing” a system to identify and show that newly mined gold was produced and refined without funding armed conflict, even if it is produced in countries experiencing some sort of warfare. “Even where that mine might be in a conflict area, you can produce gold in a way that doesn’t fuel conflicts,” said Terry Heymann, the London-based director of the WGC’s Strategic Development Group. “You can show that gold to have not contributed to conflict with chain of custody in place on the way to the refinery.”

Getting to the point where a system is in place to be stress tested has taken a year, a reflection of just how many factors go into getting the gold out of the ground and into consumers’ hands. “The gold supply chain is very complicated and somewhat fragmented,” Heymann explained. “Because of the value of gold and the value per small units of gold, sometimes it is hard to track every shipment, particularly coming out of conflict areas.”

The WGC’s system is designed to be applicable to armed conflicts globally and is a response to the requirements of section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Gold originating from the Democratic Republic of Congo gets special focus in the legislation. Heymann noted that there may be unintended consequences to the conflict-free initiatives. “Dodd-Frank and the OECD (conflict gold) process(es) would actually be very challenging for artisanal miners, and that is something we recognize and see as difficult,” he said. Because the conflict-free system builds on existing record keeping carried out by mining companies, it is not expected to add much in the way of complexity or cost to gold production, Heymann added.

Kinross Gold vice-president of corporate responsibility Ed Opitz, who worked on the development of the WGC’s conflict-free standards, said that while “conflict gold” is a tiny percentage of the gold produced annually (less than one per cent of global supply), and no WGC members operated in the Congo area, it needed to be addressed. “Although none of the WGC members currently produces gold in the DRC, some have plans to do so in the near future and others currently operate in adjacent countries. In that sense, the WGC is addressing the question of what operators must do to ensure their operations do not contribute to such conflicts,” he said.

Miners seem supportive of the measures and are poised to put them in place. “We’re certainly looking at helping with the development of these standards and how they can be applied to our operations,” said Dale Coffin, director of corporate communications with Agnico-Eagle Mines Limited.

The WGC is now consulting with various stakeholders on the latest draft and will accept comments on the standard until September.

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