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Big increase in illegal gold mining

Illegal mining of gold has rocketed in many poor countries as gold prices have risen. This has created difficulties for established gold mining companies, dangers for the illegal miners themselves, as well as environmental problems.

Poor men and women in Ghana, ex-militia fighters in steamy eastern Congo and farmers in Peru are among those joining the ranks of illegal miners and risking their lives as they seek to profit from soaring gold prices.

As a new gold rush spreads to the world’s remotest corners, the face-off between illegal, small-scale miners and multinational firms has cost millions of dollars and claimed lives.

Not all small-scale miners work illegally, but as international firms move into ever more remote and politically risky countries, they sometimes tread on the toes of artisanal miners who have worked that land for years.

Alternatively, the mining conglomerate’s trucks and cranes can act as magnets that draw small-scale miners to a previously unexplored area.

Whatever the dynamic, the result can be explosive.

“The higher prices of gold have made illegal mining become an issue in areas where there wasn’t any problem before,” said Olle Ostensson, chief of the natural resources section at the United Nations Conference on Trade and Development (UNCTAD).

Gold prices have trebled over the past five years. After coming off recent highs, spot gold rose to above $950 an ounce last week as tensions in the Middle East continued to encourage investors to seek safe haven in bullion.

There are between 13 and 20 million small-scale miners around the world, according to Communities and Small-Scale Mining (CASM), a group focusing on social and environmental problems facing artisanal mining communities.

They account for about 10 percent of the global production of metals and diamonds, and 75 percent of all gemstones. Around 100 million people are directly or indirectly dependent on small-scale mining.

“High commodity prices and declining resources around them (artisanal miners) in other areas are going to mean this is a growing phenomenon in many countries,” said Jon Hobbs of the UK’s Department for International Development (DFID).

Hobbs also chairs CASM, which is sponsored by DFID and the World Bank and is working with multinationals to draw up guidelines on how to tackle illegal mining.

As security costs and the threat of plant closures mount, international firms are trying to find a solution.

“Companies have realized this is their biggest social problem … and it is growing all the time … there are mines that are getting 6,000 people (illegal miners) on their sites a week,” said Kevin D’Souza, mining engineer and technical director at the consultancy Wardell Armstrong.

VIOLENT “COWBOYS”

In mineral-rich but often inaccessible parts of Africa, 6 to 8 million people work as small-scale miners.

CASM says there are between 800,000 and 1.5 million artisanal miners in Democratic Republic of Congo, between 350,000 and 650,000 in Sierra Leone and between 150,000 and 250,000 in Ghana, with thousands more across the continent.

As prices on world markets soar and reserves decline, areas that were once seen as too remote for mainstream operations are being opened up.

The intense battle for resources is sometimes causing violent clashes between multinationals and what some industry officials call “cowboys.”

In Ghana, Africa’s second largest gold miner after South Africa, illegal miners, known as galamseyers, have disrupted operations in several mines and are costing companies millions of dollars.

Some of the miners are local men and women, but mining firms say others come in from nearby countries.

“(The illegal miners) are all from Burkina (Faso), Togo and Benin and even Cote d’Ivoire (Ivory Coast) now too — they are not poor locals,” said Chris Anderson, mining giant Newmont’s Director of Corporate and External Affairs in Africa.

“They are mostly men (aged) between 15 and 40 and there is a real cowboy macho culture that exists around them,” he added. Newmont, the world’s second biggest gold producer, operates the Ahafo mine in Ghana.

Some industry officials say rich backers are financing informal operators in some parts of Africa. Thieves are also targeting mines to steal diesel or copper cables, causing power cuts that can trap mine workers underground.

“Illegal mining in Ghana is increasingly larger in scale, they are using bulldozers … they have big floodlights to work at night — all of which means there is capital up front,” said Anderson.

At least six illegal miners, aged between 14 and 20, died at AngloGold Ashanti’s Obuasi mine in Ghana in the last month, officials have said.

In Peru, the world’s leading silver producer and the fifth largest producer of gold, a growing number of small-scale farmers have turned to mining, UNCTAD’s Ostensson said.

“Instead of earning $1 a day by farming the land, people prefer to earn $2-3 by standing in a river mining gold.”

These miners often do not fully benefit from higher world prices because they usually live in remote areas where one buyer dominates the market, and they cannot afford to stockpile.

“The tragedy in all this is that the smaller miner is not being lifted out of poverty,” said Paul Hollesen, vice president of environment and community affairs at AngloGold Ashanti, the world’s third largest gold producer.

“It is the financier and the chain of middle people who are involved who are making more of the money,” he said. Industry officials say the middlemen can include tribal chiefs or anyone with capital to invest in equipment.

The miners, though, are the ones taking the risks.

DANGEROUS BUSINESS

Gold mining is particularly dangerous because mercury, a toxic heavy metal, is often used to wash ore in fresh water streams which also provide water for surrounding communities.

Mercury cannot be degraded and persists in soil, water and living organisms. Exposure to high doses of mercury can be fatal, and relatively low doses can damage the brain, nervous system and foetuses.

But particularly in parts of Africa, where decades of conflict have destroyed industry and infrastructure, people often have no choice but to seek their fortune in the ground.

“In the (Democratic Republic of) Congo, as the war finished in the northeast a lot of the youth were militia — they put down the gun … and it was easy to take up the spade and start digging,” said D’Souza of Wardell Armstrong.

Congo‘s eastern borderlands are a patchwork of militia-controlled zones and rebel fiefdoms where, despite government efforts and the official end to a 1998-2003 war, violence has persisted.

Up to 80 percent of all fighters demobilized in the eastern Ituri district since the war ended are believed to be illegal miners. Congo is rich in gold, copper, cobalt and diamonds.

“That is why the situation is particularly fragile … for those who want to get rid of artisanal mining … there is a high chance they will put down the spade and pick up the gun,” said D’Souza, who is also part of an advisory group for CASM.

“The problems are bonded labor, exploitation of the workers, safety, and the environment,” Richard Robinson, Congo representative for international non-governmental organization Pact, said.

Working conditions in most Ituri mines are atrocious and deadly cave-ins at underground mines are commonplace.

There is virtually no government presence and the miners live in hastily established communities.

Illegal miners and especially ex-militia can pose a serious security threat to established companies.

“In places like Ghana, we are not armed … but when our security encounter a group of 30 to 40 people with machetes and clubs, we have incidents,” said Hollesen at AngloGold Ashanti.

“The risk of this becoming a more common event is certainly there,” he added.

Gavin Hilson, a lecturer in environment and development at the University of Reading, said the solution was simple — mining firms should give up some land for artisanal mining to allow the poor to sustain their livelihoods.

Mining firms say the situation is more complex.

“Once they are formalized and operate under a regulatory umbrella then we can go in and provide them with equipment and provide them with loans and so on,” Hilson said.

“If we look at the issue pragmatically what needs to be done is that these companies have to free up areas they are not using — and that is not happening.”

(Additional reporting by Joe Bavier in Democratic Republic of Congo, Mica Rosenberg in Mexico, Kwasi Kpodo in Ghana, Gustavo Palencia in Honduras; Editing by Mike Roddy and David Evans)

© Thomson Reuters 2008. All rights reserved.

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