Swiss Referendum on "Dirty Gold" Sourcing

Author: Jon Clarke - Bullion & Economics Editor

Published: 18 Nov 2020

Last Updated: 18 Nov 2020

Synopsis

Recent reports of irresponsible gold mining have increased pressure on gold refiners to clean up their supply chain. An upcoming vote on the Swiss Responsible Business Initiative (RBI) looks to hold multinational corporations liable for abuses overseas. 

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Dirty Gold Mining

Much of the problem of “dirty gold” is in the supply chains of the large refineries which often involves artisanal and small-scale mining (ASM) which commonly employs poor miners who are unable to invest in cleaner methods and practices of mining.  70% of the world’s gold is refined in Switzerland which means much of the recent focus has been on firms such as Valcambi and Argor Heraeus who were mentioned in a 2020 report by campaign group Swissaid.

Gold sourced from ASM’s only makes up around 1% of the global supply, although countries such as Peru produce around 20-30% of their total production from smaller miners. 

Illegal Mining Spurred by Gold Price

Gold’s “safe haven” status has strengthened throughout 2020, making gold mining more profitable, particularly for illegal or unscrupulous firms. Recent deforestation in the Peruvian rainforests has been linked to mining with further activity occurring in neighbouring Brazil.

According to a governance expert and University of Basel professor, Mark Pieth, “gold is becoming so much more interesting than drugs. Forget cocaine in South America”.

Problems have also arisen in Papua New Guinea, as producer Golden Valley, who supplied the Perth Mint with approximately AU$200 million a year in gold, were questioned on the use of child labour and toxic mercury in their supply chain.

Conflict Gold

Dubai-based jeweller and gold sourcer, Kaloti, have been in a number of news reports in regard to the acquisition of large amounts of gold from conflict-stricken Sudanese mines. The mines are mostly controlled by violent militia groups who are responsible for a number of human rights abuses in the region, for which the revelations have become a black mark to Kaloti’s already problematic reputation.

Swiss Referendum on RBI

The Swiss Coalition for Corporate Justice (SCCJ) has been calling for the introduction of environmental due diligence and human rights obligations since 2016. A public vote in a referendum on the proposal is set to take place in Switzerland on 29th November despite some pushback from firms and their own national government. Ministers have instead asked voters to back the parliament-approved counterproposal which has since been criticised as being “too lax”.

CEO of Argor-Heraeus, Christoph Wild has argued that responsibility for the improvement of supply chains involves banks, governments, non-governmental organisations (NGOs), and even consumers themselves. Wild also suggested that the added cost of “responsible sourcing” would likely mean an increase in premiums.

Further Reading

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