Environment for Development
Perspectives: Mercury Use in ASGM
August 2011
United Nations Environment Programme
Division of Industry, Trade and Environment
Chemicals Branch
11-13, chemin des Anémones
CH-1219 Châtelaine, Geneva
Switzerland
Preface
UNEP DTIE Chemicals Branch work on artisanal and small-scale gold mining (ASGM) is based on the fact
that this is the largest demand sector for mercury globally. A number of targeted actions to promote the
reduction of mercury use and releases in this sector are on going within the UNEP Global Mercury
Partnership while negotiations on the forthcoming Global Mercury instrument are underway. In this context,
this study explores potential environment, social and development co-benefits from reduction and
elimination of mercury use in ASGM through an economic lens; and the policy options and financing aspects
for making this transition.
Without consideration of externalities, the real economic impacts of ASGM cannot be judged accurately.
ASGM may provide an employment opportunity but cannot reach its full potential to contribute to
sustainable economic development, in part due to associated externalities including from mercury use in
artisanal gold production. Understanding the challenges and opportunities for moving towards
reduction/elimination of mercury in ASGM practices is key in developing effective policy options to reduce
these negative impacts. Given the complexity, it is worthwhile to focus on how these elements can work
together in integrated enabling policy strategies. Moreover, adequately financing the transition to reduced or
no mercury use in ASGM is critical; but the real challenge may be in creating policy conditions for ASGM
so that stable, predictable financing is both publically and privately sourced and used effectively for better
mercury management to improve the lot of artisanal miners and the communities in which they work and
live.
Assessing genuine development impacts of ASGM. Options for integrated policy strategies for ASGM.
Investment in policy and technology to achieve reduction or elimination of mercury in ASGM. This report
does not provide all answers for these three important strands of work on ASGM. Rather, it aims to enrich
discussions in each and provide a framework from which future work can benefit.
The report synthesises existing knowledge to frame the economic argument for investing in mercury
reduction/elimination in artisanal and small-scale gold mining as part of development strategies for this
sector. The objective is to provide an analytical foundation including often omitted negative external
consequences for concurrent and future studies conducted under the UNEP Global Mercury Partnership.
This report was produced at UNEP DTIE Chemicals Branch from January – July 2011. A draft was posted
on the UNEP Global Mercury Partnership website on 15 August 2011 to solicit review from a broad range of
stakeholders over a 30 day period. This current version was finalized on the basis of comments received.
Any comments, corrections or suggestions for improvement are most welcome. Please direct feedback to
Ms. Brenda Koekkoek (e-mail: brenda.koekkoek@unep,org).
Disclaimer
The designation employed and the presentation of material in this report do not imply any expression of any
opinion whatsoever on the part of the United Nations or UNEP concerning the legal status of any country,
territory, city or area or any of its authorities, or concerning any delimitation of its frontiers or boundaries.
Any views expressed in the document do not necessarily reflect the views of UNEP.
The mention of specific companies or of certain manufacturers’ products does not imply that they are
endorsed or recommended by UNEP, nor preferred compared to others of a similar nature that are not
mentioned. The use of information from this publication concerning proprietary products for publicity or
advertising is not permitted.
Material in this publication may be freely quoted or reprinted, but acknowledgement is requested together
with a reference to the document. A copy of the publication containing the quotation or reprint should be
sent to UNEP Chemicals Branch. The electronic version of this document is available from:
http://www.unep.org/hazardoussubstances/EnvironmentforDevelopment/tabid/56182/Default.aspx,
or is available from:
UNEP DTIE Chemicals Branch
11-13, chemin des Anémones
CH-1219 Châtelaine, Geneva
Switzerland
Phone: +41 22 917 1234
E-mail: mercury@unep.org
ii
Acknowledgments
UNEP expresses its appreciation to all those who contributed to this study, particularly the reviewers who
gave their time at various stages of this process (in alphabetical order):
Jan Šamánek, HMWG coordinator, IPEN
Joseph DiGangi, International Pops Elimination Network (IPEN)
Kevin Telmer, Founding Director, Artisanal Gold Council
Ludovic Bernaudat, Programme Development and Technical Cooperation Division, United Nations
Industrial Development Organization (UNIDO)
Marcello M. Veiga, Associate Professor, University of British Columbia
Patrick Schein, Alliance for Responsible Mining (ARM)
Peter W.U. Appel, Senior Research Scientist, Geological Survey of Denmark and Greenland
Susan Keane, Senior Environmental Analyst, Natural Resources Defense Council (NRDC)
William M.B. Jirabi, Senior Environmental Management Officer, Division of Environment, Tanzania
Yuyun Iswamati, ASGM Partnership Lead, International Pops Elimination Network (IPEN)
Special thanks the principal author, Ms. Louise Gallagher for her dedication and commitment. Usman Tariq
and Rebecca Fisher also gave research and editing support.
iii
TABLE OF CONTENTS
Table of Contents .................................................................................................................................................. iv
Economic Concepts Glossery .................................................................................................................................v
Key Messages ........................................................................................................................................................ vi
Introduction ............................................................................................................................................................1
I. Welfare Impacts of Artisanal and small-scale gold mining .........................................................................2
A. Artisanal and Small-scale Gold Mining and Global Gold Production Trends ...................................................2
B. National Economic Impacts of Large and Small-scale Gold Production...........................................................5
C. Impacts on Local Economies ...........................................................................................................................12
II. The Costs of Inaction on Mercury Use in Artisanal and Small-scale Gold production ..........................17
A. Mercury Use in artisanal and small-scale gold mining ....................................................................................17
B. Techniques for Significant Reduction and Elimination of Mercury ................................................................20
C. Financial and External Costs of Inaction on Mercury Use in ASGM ..............................................................22
III. Challenges and Opportunities.......................................................................................................................33
IV. Enabling the Transition: Policy and FinaNcing Options ...........................................................................35
A. A Note on Institutional Arrangements .............................................................................................................35
B. An Overview of Integrated Policy Strategies on Mercury-Use in ASGM .......................................................35
C. Financing the Transition ..................................................................................................................................37
D. The Need for a Long Term Strategy ................................................................................................................44
Conclusion and Recommendations .....................................................................................................................47
REFERENCES ....................................................................................................................................................... I
Appendix A........................................................................................................................................................... IV
iv
ECONOMIC CONCEPTS GLOSSERY
Economic
Development
The main indicator of economic development is increasing gross domestic product GDP per capita,
reflecting an increase in the economic productivity and average material wellbeing of a country's
population. Economic development is closely linked with economic growth - changes or expansion in a
country's economy. Economic growth is conventionally measured as the percentage increase in GDP
during one year.
Externalities
With pure private goods, the costs carried by the individuals involved are the only economically
meaningful costs. Externalities, both positive and negative, however are defined by two conditions: (1)
unintentional impacts on the welfare of another, without attention being paid to the effects and (2)
compensation is neither paid nor received which is equal (or greater) than the value of the resulting costs
and benefits to others. Environmental pollution is an example of a social cost that is seldom borne
completely by the polluter, thereby creating a negative externality. So, costs of pollution from production
and consumption not “paid for” are negative externalities – typically termed ‘nonmarket’ costs. Benefits,
on the other hand, are positive externalities for which the person generating them has not been paid.
Market
Failure
Diverging private and social costs and benefits arising from the existence of externalities pave the way for
‘market failure’ whereby the natural consequence of artificially cheap production and consumption is
overproduction and excess consumption.
(Policy)
Action
Environmental policy actions typically aim to re-align private interests with public policy targets through
regulations and costs – or market signals – which include legal liability, prices and information, and
ownership rights to highlight true impact of consumption and production choices. The OECD defines
policy action as "no new policies beyond those which currently exist".
Costs of
Action
The cost of implementing policies. Attention should be paid to both financial and nonmarket impacts on
all stakeholders, positive and negative, and how these are shared across society (including government
budgets and private costs). The emphasis tends to be on the financial costs of policy administration,
training, new technology and so on however.
Costs of
Inaction
The cost of not implementing policies, specifically including both financial and nonmarket impacts on all
stakeholders, positive and negative, and how these are shared across society (including government
budgets and private costs).
Net Social
Benefit (Cost)
Social benefits and costs are, in opposition to private costs, the positive and negative impacts for society
as a whole of a particular economic activity or policy measure. If there is a positive externality, then
higher social benefits than private benefits. If a negative externality exists, then the opposite is true.
Economic assessment frameworks weigh costs of policy implementation against financial and monetized
nonmarket impacts, positive and negative, of that policy change, in theory reflecting economic values of
all stakeholders over distance and time. The overall impact on society is assessed against a ‘social welfare
criterion’ – the measure by which policies can be accepted or rejected based on whether there is a net
social benefit or cost. Typically, Pareto Efficiency are used as the benchmarks, where no one can be made
better-off through a reallocation of existing resources without making someone else in society worse-off
(note that a weakness in that this definition of efficiency does not take distribution considerations into
account). Since observable market prices do not generally exist for an environmental good or common
(in this sense it is a value of the actual common or value of the environmental good such clean air, clean
water, clean soil, etc.), the marginal social cost of damage to the environmental good or common is not
usually readily available in monetary terms. However, while challenging, it is possible to value and
integrate these costs and benefits into analysis frameworks using nonmarket valuation techniques.
v
KEY MESSAGES

Artisanal and small-scale gold mining (ASGM) is perceived as a positive development opportunity in
some countries on the basis of historic experience on North America’s West Coast, Australia and South
Africa. The economic impacts from mining do indeed generate positive financial gains – especially for
miners and the local communities – but also negative externalities in the form of environmental damage
and health impacts with local to global dimensions. There is no telling if the activity generates a net
social benefit or cost until all externalities are accounted for. As such, development strategies including
ASGM must consider both aspects.

ASGM is estimated to supply 13 percent of the world’s gold production per annum, or about 330 tonnes
of average annual mining production in recent years. From this, the current sales value of annual
artisanal and small-scale gold production in 2010/11 is worth around US$10.5 billion. Working on the
highly conservative basis that ASGM makes up 8 percent of national production in countries engaged in
gold mining, and setting aside the costs of associated externalities, the economic value of this sector in
‘low’ development status countries can be estimated at US$486.9 million. For ‘medium’ development
countries, the value of production from this sector could be as high as US$1.7 billion.

On the externalities side, mercury is one of the largest negative impacts from this sector. Many artisanal
miners use mercury because it is available, cheap, effective and quick. However, its use in ASGM
appears profitable only if certain financial, health and environmental impacts are not accounted for.
These hidden costs for miners, their families and the communities they live in and support reduces net
benefits from ASGM immeasurably. There is also an important global dimension for health impacts
through atmospheric and oceanic transport of mercury, as well as globally traded contaminated food
products. Available analyses strongly suggest that prevention of mercury pollution from ASGM (and
other sources, it must be said) can produce vast health and economic benefits at the local, national and
global levels.

Where countries have chosen to adopt a strategy of making ASGM a formal part of the mining sector,
challenges exist for mercury reduction and elimination efforts. The fact is that costs of ‘action’ on
mercury are typically better understood than the benefits of reducing and eliminating its use in ASGM.
Asymmetrical analyses like this means interventions to reduce or eliminate mercury in artisanal and
small-scale gold production are often not supported.

Solutions that are purely political will not solve what is essentially an economic problem. Mercury
functions as a financial ‘tool’ for impoverished miners in producing income from gold mining quickly
and cheaply. The question is how to reconfigure public policy, businesses and infrastructure to ensure
better returns from development choices in terms of natural, human and financial capital. This
necessitates law and markets working together at national, regional and international levels to coherently
align economic, environmental and human health goals.

Mobilizing financial resources is a critical aspect of encouraging adoption of cleaner technologies in
ASGM where this sector has been marked for development in a country. Main sources of finance
currently identified include multilateral and bilateral funding, national budgets in gold producing
countries and private investment enabling miner’s access to capital at the local level. Addressing the
challenge of scaling-up successful transitions to non-mercury production techniques is likely to depend
on miners being able to access financial resources. However, without recognized and defendable mining
rights and integration to some extent of artisanal mining in the formal economy, local-based financing
will need to overcome significant challenges to be effective.

Countries considering developing their ASGM sector as part of poverty reduction and economic
development strategies must weigh up all implications of this course of action.
vi
INTRODUCTION
Recent price trends for gold suggest that mercury-related health and environment impacts, as well as other
environmental problems related to artisanal and small-scale gold mining ASGM are set to increase unless action
is taken.
In addition to its decorative and industrial uses, gold is, and has been for centuries, considered a ‘safe haven’ for
investment. This is reflected in how total gold demand in 2010 rose sharply in reaction to the financial and
economic crises.1 The related increase in gold prices2 is already driving new exploration activities in the formal
gold sector.3 Even more rapid growth is predicted for informal gold production however. Combined output in
mature mining operations4 fell in 2009 and mining operations are seen to be shifting to Africa and central Asia
where artisanal and small-scale practices are most prevalent. When the gold prices have risen from 272US$/oz
in 2000 to more than 1,6500US$/ to date, increased artisanal and small-scale gold mining– with all the
associated benefits and costs– looks inevitable.
Is this good news for development in gold producing countries in these regions? The answer is not clear.
Artisanal and small-scale gold mining are two livelihood activities which may have poverty reduction potential
in developing countries and countries with economies in transition. Yet this potential is challenged by many
factors – the most relevant for the UNEP Chemicals Branch being the human health and environmental
consequences of mercury and other chemicals often used for gold processing in ASGM. As such, ASGM
embodies a tension between economic and sustainable development goals, due to excessive associated human
and environmental costs which extend around globe with mercury released from this activity contaminates food
chains far from the place of use.
ASGM has been on the radar of the international community for over 30 years and the sector has more political
and funding attention than ever due to the process on the forthcoming Mercury Treaty. 5 Yet the process of
finding solutions to the significant health, environmental and social problems that all too often accompany these
forms of gold mining has been sluggish and uncoordinated.
The empirical evidence for the negative (external) impacts of mercury use has not been articulated in the
economic language of key financial decision-makers in countries where ASGM occurs. As such, UNEP argues
that the costs of investing in mercury reduction/elimination in ASGM are typically better understood than the
benefits of doing so. Asymmetrical analyses like this means interventions to reduce or eliminate mercury in
artisanal and small-scale gold production are often not realized. What is more, as ASGM continues to be
excluded from national, regional and global economic perspectives in any meaningful way, it can not be
assessed fairly for its true development potential.
This report synthesises existing knowledge to frame the economic argument for investing in mercury
reduction/elimination in artisanal and small-scale gold mining as part of development strategies for this sector.
The objective is to provide an analytical foundation including often omitted negative external consequences for
concurrent and future studies conducted under the Global Mercury Partnership. The aim is to identify the
economic challenges and opportunities for reducing mercury in artisanal and small-scale practices, with the goal
of eliminating its use when possible. This approach ultimately seeks to motivate greater political, private sector
and civil society support for significant reduction or elimination of mercury in artisanal and small-scale gold
production. The objectives for each section of this discussion are:
 To marshal an understanding of the economic benefits and associated externalities from ASGM (Section I).
 To demonstrate how mercury-related externalities affect the miners and surrounding communities and reduce
the overall positive economic impacts from ASGM (Section II).
 To summarize succinctly the challenges and opportunities for moving towards reduction/elimination of
mercury in ASGM practices (Section III); and
To map the integrated enabling policy strategy at the global, regional, national, corporate and community levels
–and importantly, the potential means for financing their implementation (Section IV).
1
World Gold Council (2010) Supply and Demand Statistics, accessed 1 December 2010
World Gold Council (2011) Gold Investment Digest Q4 2010, last accessed 15 March 2011
World Gold Council Supply and Demand Statistics, accessed 1 December 2010
4
In South Africa, the US, Canada and Australia from 1,260 tonnes in 2000 to 756 tonnes
5
See the Targets for mercury reduction, safer use and elimination in ASGM included in the draft text negotiated at INC2
2
3
1
I. WELFARE IMPACTS OF ARTISANAL AND SMALL-SCALE
GOLD MINING
Artisanal and small-scale gold mining are two separate forms of mining that are brought together under one
single categorization of mostly informal and illegal (in many countries, but not all) gold production by
individuals, groups, families or cooperatives with minimal (or no) mechanization.6
Conservative estimates suggest that there are 10 million miners 7 operating in the artisanal and small-scale
sector; but the Global Mercury Project8 estimates at least 50 million people in over 55 countries9 depend on
ASGM for their livelihood, mainly in Africa, Asia and South America.10 People engage in ASGM because there
is a sustained market for gold, capital investment and operational costs are low, it can be flexibly combined with
other economic activities and they have few other options for employment. In all, gold mining has the folkloric
quality of ‘get rich quick’ schemes that attracts many men and women without the skills, education, business
knowledge or support to seek employment elsewhere.
Questions on this complex issue are manifold in the development context: How do these forms of mining impact
people living in rural, marginalized communities in developing countries or ‘in transition’ countries? How do
mining activities fit into broader sustainable development choices? And to what extent do mercury pollution and
other externalities stemming from such mining activities reduce available choices through reducing quality of
human health, natural resources or through a contamination legacy?
Historically, exploitation of natural resources, including minerals mining, has yielded both economic benefits
and environmental destruction. Gold mining heralded a new stage in national economic development in Western
Coast of North America, Australia and South Africa. This experience is offered as the empirical proof for the
potential of ASGM to contribute to economic growth, but the legacy of mercury contamination must not be
overlooked.11 Currently, with the trends in gold mining production showing a distinct shift towards increased
production in developing countries, gold mining presents an important dilemma for decisions surrounding
sustainable development strategies in Sub-Saharan Africa, Latin America and Central Asia.
A. ARTISANAL AND SMALL-SCALE GOLD MINING AND GLOBAL GOLD PRODUCTION
TRENDS
Conservative estimates suggest that ASGM supplies 13 percent of the world’s gold production per annum12, or
about 330 tonnes of average annual mining production in recent years13. From this, the current market value of
annual artisanal and small-scale gold production, at 70 percent14 of the average price for gold in 2010/11, can be
estimated at around US$10.5 billion.15 ASGM provides an important source of income for miners, particularly
in regions where economic alternatives are extremely limited.
Since 2006, official global gold mine production has increased 4 percent from 2,360 to 2,460 tones in 2009.16
Comparing gold mine production in 2006 and 2009 (based on the across countries categorized by UN Human
Development classifications and Least Developed Country status, ‘low’, ‘medium’, and ‘high’ human
development status countries are producing more gold while output of ‘very high’ development status countries
The term ‘artisanal’ is used to encompass all small, medium, large, informal, legal and illegal miners who use rudimentary processes to extract gold from secondary and
primary ore bodies. The term ‘small-scale’ suggests a degree more of organization and mechanization; and in many cases, more severe health and environment consequences as
artisanal production scaling-up.
7
Telmer and Veiga (2009)
8
UNIDO GMP (2006a)
9
Telmer and Veiga (2009) updated this estimate to 70 countries, It is now likely to be higher according to the list on www.mercurywatch.org which has confirmed artisanal
mining presence for 74 countries and suspects its presence in an additional 6 countries (total: 80). Many additional countries have been identified through monitoring and
mining exploration magazines which report the presence of artisanal production.
10
A second estimate from the ILO (1999) gives figures of 80-100million people directly and indirectly dependent on ASGM for their livelihoods.
11
See Fetherling (1997)
12
UNEP (2010)
13
Telmer and Veiga (2009) estimate annual production from ASGM at approximately 330 tonnes. Supply has averaged approximately 2,497 tonnes per year over the last several
years according to World Gold Council Demand and Supply Statistics, accessed 13 January 2011. These figures form the basis of related calculations.
14
Averaging monthly gold prices from February 2010 to March 2011 gives a figure US$1,416.341/oz(troy) based on data available from the World Gold Council Investment
Statistics, accessed 31 May 2011. 70 percent of this value is used to represent the difference between the spot price for gold and returns to industry based on estimates for the
formal mining sector based on expert opinion elicited from the Global Mercury Partnership and data from Mongolia and Indonesia.
15
For comparison, this is equivalent to approximately 10 percent of the total net official development assistance (ODA) from members of the OECD’s Development Assistance
Committee (DAC) in 2009. US$119.6 billion total overseas development assistance was contributed by DAC members in 2009, representing 0.31 percent of the DAC members’
combined gross national incomes. OECD Development Co-operation Directorate, accessed 16 April 2011. Note. Development aid disbursement in 2009 for our identified gold
mine producing countries low, medium and high human development) was calculated using AidData Research Release 1.9.2
http://data.irtheoryandpractice.org/plaid19/download/, accessed 13 April 2011. The figure generated was 3US$bn but data output does not to include all countries selected.
16
This variation is not particularly large and should be viewed as an indication of stability of production and not an increase per se. In large scale operations, to get from a
‘greenfield’ site to first gold bar production, it takes 8-10 years. And this delay is getting longer due to increased environment and social considerations. This means that the
mines entering production in 2009 were discovered in 1999-2001, when prices were very low (275$/oz) in comparison to current prices.
6
2
–Australia, United States, Canada and others– is decreasing (See Table 1.). Comparing across the UN Regions,
Europe and Asia experienced the greatest surges in gold production between 2006 and 2009 (See Table 2.).
Gold is both a commodity and a monetary asset used as a reserve asset by governments and individual investors
alike as a hedge against inflation. It currently accounts for around 11 percent of reserves held by central banks
worldwide.17 2010 saw a reversal of four decades where the official banking sector became modest net buyers of
gold.18 By volume, jewelry accounts for 2017 tons or 50 percent of total gold demand (US$61 billion in 2008)
driven largely by consumers in China and India. Working with gold is also increasingly a source of innovation
in technology development.19 Demand, for industrial uses in 2010 was 326.8 tones, 17 percent higher than in
2009 fuelled by recovery in the electronics sector.20
A 29 percent increase in gold prices from 2009-201021 is already driving new exploration activities in the formal
gold sector – even in locations previously abandoned as not viable.22 New exploration will not lead to new
production before 2020 however. Currently, the World Gold Council reports a 41 percent year on year increase
in gold recycling but only a 3 percent increase in mine production.23 More than 25 percent of gold’s annual
supply flows originate in the recycling of scrap.24 In 2009, almost 1,700 metric tons of gold, mostly old jewelry,
was melted and refined, while production of new jewelry absorbed just over 1,750 metric tons of gold. The
worldwide jewelry industry therefore covered more than 95 percent of its needs through recycling.25
Despite the increasing importance of gold recycling, new investment in mine production is occurring largely in
developing countries. Combined output in mature mining operations26 fell in 2009 and mining operations are
shifting to Africa and central Asia where artisanal and small-scale practices are most prevalent. These regions
are the least explored or exploited not only due to poor capacity and investment climate in the past.27 Moreover,
known gold deposits are relatively depeleted. Most of the gold left to mine now exists as traces buried in remote
corners of the globe, and leads to shallow mining activities compared to underground mining at a greater depth
or in larger alluvial areas.28 Large scale mining operations are seen to be shifting to regions least explored or
exploited due to poor capacity and investment climate in the past, where it is cheaper to mine (i.e. lower labor
costs) and environment and social costs not always taken into account – and places where artisanal and smallscale activities are most prevalent (See Table 3.).29
Table 1. 2010 Gold Mine Production by UN Human Development Status
2006 Gold Production
(tones p.a.)
2009 Gold Production
(tones p.a.)
Low
301
324
Medium
822
849
High
606
702
Very High
624
573
168
149
2,360
2,460
Human Development Status†
UN Least Developed Countries
World Total30
Source: †UNDP (2010); British Geological Survey (2011); Word Gold Council (2011; World Factbook 2011; UN-OHRLLS Least Developed Countries Programme.
17
World Gold Council (2011) Demand and Supply Statistics, accessed 29 November 2010
World Gold Council (2011) Global Demand Trends: Full Year 2010
The most important use of gold in the technology industry is that of gold bonding wire to complete electrical circuits in microchips. Other examples exist for medical
technology development. Researchers at Mount Sinai have pioneered the use of gold nanoparticles in medical technology to visualize coronary artery plaques vulnerable to
rupture to obtain better and earlier diagnosis of cardiovascular disease (Coromode et al., 2010). This technology is also applicable to detecting tumour growth (Wang et al.,
2010).
20
World Gold Council (2011) Global Demand Trends: Full Year 2010, accessed 8 March 2011
21
World Gold Council (2011) Gold Investment Digest Q4 2010, accessed 15 March 2011
22
The Economist, Precious but Precarious: The high price of gold is encouraging miners to dream, 29 December 2010
23
World Gold Council (2010). Working with the British Geological Survey (2011) data, the increase is calculated at 4 percent
24
http://seekingalpha.com/article/113149-gold-recycling-threatens-demand-supply-equation, accessed 10 July 2011
25
http://www.fairjewelry.org/archives/3700, accessed 10 July 2011
26
In South Africa, the US, Canada and Australia.
27
Financial Times, 12 November 2010 ‘World Economy: In Gold they Rush’, accessed 16 November 2010.
28
See Avila (2003) and Larmer (2010)
29
Financial Times, 12 November 2010 ‘World Economy: In Gold they Rush’, accessed 16 November 2010.
30
Includes Cuba, Greenland and French Guiana gold output which are not included in the development categorizations.
18
19
3
Table 2. 2010 Value of Gold Mine Production by UN Region
UN Region
2006 Gold Production
(tones p.a.)
522
606
446
2009 Gold Production
(tones p.a.)
460
713
486
% Change
Oceania
Europe‡
North America
259
177
349
237
219
321
-9
24
-8
World Total
2,360
2,460
3
Africa†
Asia
Latin America and the
Caribbean
-12
18
9
†Includes
South Africa, ‡Includes Russian Federation and Eastern European States. Sources: UNDP (2010); British Geological Survey (2011); Word Gold Council (2011);
World Factbook (2011); UN-OHRLLS Least Developed Countries Programme
Table 3. Production Ranking of the Top-20 Gold Producing Countries (by Volume)
Gold Mine Production
Ranking (2006)
Gold Mine Production
Tonnesa (2006)
Gold Mine Production
Ranking (2009)
Gold Mine Production
Tonnesa (2009)
Rankb
1
South Africa
272.1
China
320.0
2
China
247.2
United States
223.3
3
Australia
247.0
Australia
222.0
4
United States
242.0
Russian Federation
205.2
5
Peru
203.3
South Africa
197.6
6
Russian Federation
159.3
Peru
182.4
7
Canada
104.2
Indonesia
127.7
8
Indonesia
85.4
Canada
97.4
9
Mali*
85.4
Ghana
97.2
10
Uzbekistan
84.0
Uzbekistan
73.0
11
Ghana
66.2
Papua New Guinea
67.8
12
Papua New Guinea
58.3
Brazil
57.0
13
Argentina
44.1
Mexico
51.4
14
Chile
42.1
Colombia
47.8
15
Brazil
40.1
Argentina
46.6
16
Tanzania*
39.8
Mali*
42.4
17
Philippines
36.1
Chile
40.8
18
Mexico
35.9
Tanzania*
39.1
19
20
Kazakhstan
Mongolia
22.6
21.3
Philippines
Kazakhstan
37.0
22.5
Legend
Sources: Source: British Geological Survey (2011)
UN Human Development Categories
Very High
High
Medium
Low
*
Also categorized as a Least Developed Country
Notes. a Metric tonnes;b Consulting the British Geological Survey (2011)
World Mineral Production 2005-2009, London:UK originally produced 87
countries, but excluded Benin, Cabo Verde (Republic of), Cambodia,
Madagascar, Togo, Guinea Bissau (Republic of). These countries are
included to complement ongoing UNEP Chemicals Branch work. These
additional countries, marked in red in the above table, are missing data to be
found in the second drafting of this report. As such, the ranking of
production volumes is still based on the original 87 countries provided by
the British Geological Survey data
http://unctadstat.unctad.org/TableViewer/tableView.aspx?ReportId=110
4
B. NATIONAL ECONOMIC IMPACTS OF LARGE AND SMALL-SCALE GOLD PRODUCTION
Large-scale gold mining is an important sector for many developing countries but often comes with severe
environmental damage, the economic impact of which is rarely if ever factored into calculations of social
benefit.
Some economic benefits for countries of opening up formal gold resource exploitation can include the
following31:










Higher fiscal revenues in the form of mining royalties and taxes;
Net foreign exchange earnings from exports, imports and dividends;
Provision of physical infrastructure by mining companies;
Increased employment/livelihood development in rural locations where natural resource mining takes
place. Value-added transformation/production can increase employment effects even further both in
rural and urban communities;
Returns for domestic investors in mining exploration companies32;
Building up of national central bank gold reserves;
Domestic availability of gold for jewelry and technology industries (if cheaper);
Increased demand through multiplier effects;
Transfer of technical goods and services with implications for development of other economic sectors;
and
Positive knock-on effects in the development of finance and legal infrastructure.
Large-scale gold mining also takes a toll on the health of the environment and communities. Massive open-pit
mines, some measuring as much as two miles (3.2 kilometers) across, generate staggering quantities of waste—
an average of 76 tons for every ounce of gold.33 There is some concern as to whether or not a resource curse or
‘Dutch Disease’ is the natural outcome of resource exploitation in lesser-developed countries.34 Dependence on
natural resource export revenues from a narrow group of commodities, weak rent capturing, world price
volatility, excessive borrowing on forecasted production and exchange rate fluctuations can leave national
economies vulnerable. It does not follow that because a locality or nation is rich in natural resources that it must
have a low level of economic diversification; yet this has often been the case. 35
Though it is important to differentiate between large and formal/informal artisanal and small-scale gold mining,
in reality the two are intertwined to some extent. Smaller scale mining tends to coincide with larger scale
operations with artisanal miners leading the exploitation of deposits and carrying out secondary mining of
industrial tailings during and after large-scale operations. ASM miners also act as exploration agents for largescale operations in some cases. When a junior exploration company comes to a country it often looks at old
closed mines and artisanal and small-scale activities to get an indication of where their investments might be
best directed. In early 2011, perhaps twenty such cases have been reported in the international media pertaining
to African nations: Burkina Faso, Burundi, Eritrea, Ghana, Kenya, Liberia, Mali, Nigeria, Senegal, Sierra
Leone, Sudan, and Tanzania. Yet artisanal or small-scale miners rarely get ‘finder fees’ or royalties for this
service.
Both LSM and ASGM brings its own form of challenge and opportunity for local communities and ecosystems.
Some externalities associated with gold resource exploitation can include the following:


Increase of environmental degradation and associated risks for biodiversity and ecosystem services in
fragile ecosystems, protected areas or other areas of high conservation or ecological value from land
clearing, river diversion and leaching of polluted mining tailings;
Untreated tailing dumping practices leading to serious illnesses and general decline of local
community’s health;
31
List sourced and adapted from WGC (2005)
Since January 2011 to April 2011, companies involved in gold mining have outperformed the metal itself by nearly five percentage points. Due to the miners' production cost
structure, often with considerable fixed expenses, these companies can act as a leveraged plays on gold prices. A 1percent increase in the price of gold will often equal a greater
than 1percent increase in operating income. These nuances give the gold miners a unique risk/return profile relative to physical gold prices. Levitt, A. Gains in Gold Miners, 14
April 2011, posted at http://stocks.investopedia.com/stock-analysis/2011/Gains-In-Gold-Miners-GDX-GLDX-BVN0414.aspx, accessed 15 April 2011
33
EARTHWORKS & Oxfam America (2007). Golden Rules – Making the case of responsible mining.
34
Lahiri-Dutti (2006); World Gold Council (2009)
35
ICCM (2006); World Gold Council (2009)
32
5

Human rights violations in the forms of abusive treatment of communities/activists who oppose the
mining operations, including forced eviction or displacement of local communities or indigenous
people;
 Increase of horizontal and vertical conflicts between the company and the community or local
government; and
 Decrease of the quality and quantity of the environmental services supporting agriculture, forestry and
fisheries specifically, leading to increased risks for livelihoods dependent on the trade of related
products.
Major exporters of gold in lower development status categories (in 2009) include: Mali, Sudan, Tanzania, Papua
New Guinea, Thailand, Indonesia and Suriname. Of these, Mali, Tanzania and Sudan are classified as Least
Developed Countries (See Table 4. for rankings of gold exporters). Important to note is that reported export
values are affected by both dollar values and changing gold prices for gold rather than significant increases in
production in many cases. Absolute volumes of gold mine production have decreased while export revenues
have remained steady or increased for many countries (See Tables 5. and 6. below). To control for this, export
values for 2006 and 2009 presented here have been presented at a 2010 dollar value base for comparison.
Table 4. Gold Export Earnings Ranking of the Top-20 Gold Producing Countries for 2006 and
2009 (2010US$ millions)
Gold Export b Value 2006
(2010US$millions)
Gold Export Value b 2009
(2010US$millions)
Ranking
(out of 87 Countries) a
1
2
3
United States
Australia
Canada
8,784
6,902
5,142
United States
Australia
Canada
13,977
11,809
7,653
4
5
6
7
8
9
10
11
12
13
14
15
Peru
Japan
Mali*
Mexico
Korea (Republic of)
Colombia
Papua New Guinea
Brazil
Turkey
Tanzania*
Malaysia
Thailand
4,002
3,008
1,131
1,082
832
828
814
658
639
610
607
549
Peru
Thailand
Turkey
Japan
Mexico
Korea (Republic of)
Colombia
Brazil
Mali*
Sudan*
Argentina
Papua New Guinea
6,752
5,681
4,641
4,484
4,061
2,833
1,559
1,400
1,362
1,278
1,039
998
16
17
18
19
20
Argentina
Russian Federation
Indonesia
Chile
Saudi Arabia
548
547
547
522
492
Indonesia
Chile
Tanzania*
Suriname
Kazakhstan
930
879
818.
693
659
Legend
UN Human Development Categories
Very High
High
Medium
Low
*
Sources: UNDP (2010); British Geological Survey (2011); Word Gold Council (2011); World
Factbook 2011; UN-OHRLLS Least Developed Countries Programme.
Notes. aConsulting the British Geological Survey (2011) Mining Production 2005-2009,
London:UK originally produced 87 countries, but excluded Benin, Cabo Verde (Republic of),
Cambodia, Madagascar, Togo, Guinea Bissau (Republic of). These countries are included to
complement ongoing UNEP Chemicals Branch work. However, as data for these countries are
missing, only the original 87 countries are ranked.b Gold exports (non monetary, excluding ores and
concentrates) data extracted from UNCTADStat Merchandise trade index, exports, annual 1995 2009 http://unctadstat.unctad.org/TableViewer/tableView.aspx?ReportId=110
Also categorized as a Least Developed Country
6
Table 5. Gold Mine Production in Countries with Low Human Development or Classified as Least Developed Country
Country
HDI
Valuea
Gold
Production
(tones
p.a.)2006
Estimated
Gold
Production
Valuec 2006
Gold Exportsd
Value 2006
(2010US$m)
Gold Exportsd
as percentage
of Total
Exports2006
Gold
Production
(tonnesb p.a.)
2009
(US$2011m)
Estimated
Gold
Productionc
Value 2009
Gold Exportd
Value 2009
(2010$m)
Gold Exportsd
as percent
Total
Exports2009
(US$2011m)
Benin
0.435
-
-
-
-
-
-
-
-
Burkina Faso
0.305
1.6
73
0.9
0.2
13.2
601
3.5
0.7
Burundi
0.282
4.3
196
53.1
23.3
1.0
46
2.3
1.3
Cambodia e
0.494
0.0
0
21.3
0.6
0.0
0
97.8
2.6
Congo (DRC)
0.239
0.1
5
0.0
0.0
2.0
91
1.5
0.0
Ethiopia
0.328
3.8
173
64.4
6.2
4.0
182
92.5
5.7
Guinea
0.340
16.3
742
2.1
0.3
21.4
974
97.8
9.7
Guinea Bissau
0.289
-
-
-
-
-
-
-
-
Rep.e
0.497
6.1
278
14.4
1.6
5.0
228
0.0
0.0
Liberia
0.300
0.0
0
0.0
0.0
0.5
23
3.0
2.0
Mali
0.309
85.4
3'889
1,131.8
74.2
42.4
1'931
1,362.7
75.3
Mauritania
0.433
0.3
14
0.1
0.0
6.8
310
11.8
0.9
Mozambique
0.284
0.1
5
2.4
0.1
0.5
23
6.5
0.3
Myanmar
0.451
0.1
5
0.0
0.0
0.1
5
0.0
0.0
Niger
0.261
2.6
118
37.3
9.5
2.1
96
38.1
7.5
Senegal
0.411
0.6
27
12.5
0.8
5.7
260
181.2
9.0
Sudan
0.379
4.5
205
148.2
2.7
1.9
87
1,278.5
14.1
Tanzania
0.398
39.8
1'812
610.7
32.8
39.1
1'780
818.6
27.4
Togo
0.428
-
-
-
-
-
-
-
-
Uganda
0.422
1.5
68
122.6
12.7
0.9
41
78.2
4.5
Zambia
0.395
1.0
46
0.3
0.0
2.8
128
19.0
0.4
168.1
7'655
2,222.1
149.3
6,803
4,093.1
Lao People's Dem.
Total
Notes. UNDP’s Human Development
Metric
The value of gold production is included in case of underestimation of export figures. Averaging monthly gold prices from February 2010 to March 2011 gives a figure US$1,267.641/oz(troy)
based on data available from the World Gold Council. The values shown here are produced using the average price and mine production data from the British Geological Survey (2011) Mining Production 2005-2009, London:UK; d Gold exports (non
monetary, excluding ores and concentrates) data extracted from UNCTADStat Merchandise trade index, exports, annual 1995 - 2009 http://unctadstat.unctad.org/TableViewer/tableView.aspx?ReportId=110;eClassified as medium human development, but
are included on the Least Developed Country listing of UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries, and Small Island Developing States (UN OHRLLS).
a
Index; b
tonnes; c
7
Table 6. Gold Mine Production and Exports in Countries with Medium Human Development
Country
HDI
Valuea
Gold
Production
(tones
p.a.)2006
Estimated
Gold
Production
Valuec 2006
Gold Exportsd
Value 2006
(2010US$m)
Gold Exportsd
as percent
Total
Exports2006
Gold
Production
(tones p.a.)
2009
Gold
Productionc
Value 2009
Gold Exportd
Value 2009
(2010$m)
(US$2011m)
Gold Exportsd
as percent
Total
Exports2009
(US$2011m)
Algeria
0.677
0.4
18
3.7
0.0
1.0
46
26.4
0.1
Bolivia
0.643
9.6
437
127.0
3.0
7.2
328
116.2
2.2
Botswana
0.633
3.0
137
36.1
0.8
1.6
73
50.0
1.5
Cabo Verde
0.534
-
-
-
-
-
-
-
-
China
0.663
247.2
11'257
0.5
0.0
320.0
14'572
0.2
0.0
Dominican Republic
0.663
0.0
0
0.0
-
0.4
18
142.6
2.5
Equatorial Guinea
0.538
0.2
9
-
-
0.2
9
0.7
0.0
Fiji
0.669
1.4
64
28.6
4.2
1.1
50
25.9
4.1
Gabon
0.648
0.3
14
0.1
0.0
0.3
14
0.5
0.0
Guatemala
0.560
5.0
228
0.5
0.0
8.5
387
3.7
0.1
Guyana
0.611
6.4
291
79.6
14.0
9.3
423
212.5
29.1
Honduras
0.604
4.1
187
106.9
2.0
2.1
96
141.1
3.5
India
0.519
2.5
114
1.9
0.0
2.1
96
197.7
0.1
Indonesia
0.600
85.4
3'889
547.2
0.5
127.7
5'815
930.6
0.8
Kyrgyzstan
0.598
10.3
469
206.0
25.9
17.2
783
529.8
45.0
Mongolia
0.622
21.3
970
270.1
17.5
9.8
446
258.4
13.6
Morocco
0.567
1.3
59
20.6
0.2
0.4
18
40.2
0.3
Namibia
0.606
2.8
128
46.2
1.4
2.0
91
8.6
0.2
Nicaragua
0.565
3.4
155
58.3
7.7
2.6
118
93.6
6.7
Philippines
0.638
36.1
1'644
300.4
0.6
37.0
1'685
218.6
0.6
South Africa
0.597
272.1
12'390
166.3
0.3
197.6
8'998
200.3
0.4
Suriname
0.646
10.4
474
287.3
24.5
12.8
583
693.1
47.8
Tajikistan
0.580
1.9
87
16.1
1.2
1.4
64
16.8
1.7
Thailand
0.654
3.5
159
549.2
0.4
5.4
246
5'681.1
3.7
Uzbekistan
0.617
84.0
3'825
178.5
3.2
73.0
3'324
337.7
3.1
Vietnam
0.572
0.0
0.4
Total
3.0
137
7.4
555.4
25'291
2'871.3
3.0
137
204.4
514.0
23'406
9'937.7
Notes. a UNDP’s Human Development Index; b metric tones; c Consulting the British Geological Survey (2011) Mining Production 2005-2009, London:UK originally produced 87 countries, but excluded Benin, Cabo Verde (Republic of), Cambodia,
Madagascar, Togo, Guinea Bissau (Republic of). These countries are included for a number of UNEP Chemicals Branch projects.; d The value of gold production is included in case of underestimation of export figures. Averaging monthly gold prices from
February 2010 to March 2011 gives a figure US$1,267.641/oz(troy) based on data available from the World Gold Council. The values shown here are produced using the average price and mine production data from the British Geological Survey (2011)
Mining Production 2005-2009, London\; e Gold exports (non monetary, excluding ores and concentrates) data extracted from UNCTADStat Merchandise trade index, exports, annual 1995 – 2009.
8
In many countries, mineral exports are predominantly exploited by large-scale mining operations which are
in turn believed to contribute more to national domestic product (through taxes and mining royalties) than
artisanal and small-scale gold production in many countries. This is in part due to the informality of ASGM
operations which has lead to misrepresentation in the industry data. ASGM production is not recorded in
official export statistics (its output is often exported illegally). Or, because gold is not traceable once
processed, it becomes indistinguishable from gold sourced from larger-scale, formal mines.
Working on the highly conservative basis that ASGM makes up 8 percent of national gold production36 the
total value of potential contributions from this sector in ‘low’ development status countries can be estimated
at US$2011544 million. For ‘medium’ development countries, the value of production from this sector could
be as high as US$20111.9 billion (See Table 7.). Small-scale mining activities can generate revenues for States
that at times rival the amounts currently being collected through levies on large-scale mining.
Furthermore, Small-scale mining is generally a low-technology undertaking and labor is the key production
factor. In this, there is a striking inversion between large-scale mining operations and artisanal efforts (See
Box 1. and Figure 1.). Significantly, this employment is generated in marginal rural communities with few
other available livelihood opportunities.
However, the vast externalities of ASGM lead to serious concerns about its true impact for social welfare at
the national level. ASGM can make a contribution to economic development but given that the activity
causes damage to local societies, its net impact on national wellbeing is less clear (See Box 2.).
Box 1. Estimated Numbers of
Artisanal and Small-scale
Miners in14 Countries

Ghana, 500,000

Tanzania, 500,000

Congo (DRC), 300,000

Philippines, 300,000

Brazil, 300,000

Indonesia, 300,000

Mali, 200,000

Mozambique, 100,000

Peru, 85,000

Mongolia, 68,000

Bolivia, 50,000

Guyana, 13,000

Ecuador, 10,000

Cambodia, 5,000
Figure 1. Illustrating the Employment Inversion between
Large Scale and Artisanal, Small-scale Gold Mining
Source: Telmer, K. (2011, May 4). Lecture presented at the First meeting of the OECD-hosted working
group on gold. “OECD due diligence guidance for responsible supply chains of minerals from conflictaffected and high-risk areas.” OECD Conference Centre, Paris. LSM triangle sourced from WGC (2009).
Employment figures generated from a review and synthesis of available literature found at
www.artisanalgold.org
36
This figure was chosen on the basis that Mali has documented the likely contribution of the artisanal and small-scale sector at approximately 8 percent. This figure is too
low for many countries: Congo, Guinea, Liberia, Mali, Mozambique, Senegal, Tanzania, Sudan, and the Philippines. For example, gold production in the Philippines is 70
percent supplied by artisanal and small-scale operations. Furthermore, recent news in Sudan points to huge artisanal production: See
http://af.reuters.com/article/investingNews/idAFJOE73A0AQ20110411. However, in the interest of producing conservative estimates, the lower percentage was used to
estimate national contributions of ASGM activities in Tables 5 and 6.
9
Table 7. Potential Contribution of ASGM to Gold Production in Developing Economies
Country
Gold Production
Rank 2009
Gold Produced
2009 (tones p.a.)
(87countriesb)
Estimated Gold
Productionc 2009
(US$2011m)
Estimated Productionc
2009 Attributable to
ASGM (8%, US$2011m)
Countries with Low Human Development or Classified as Least Developed Country
Benin
Burkina Faso
25
13.2
601
48
Burundi
Cambodia
Congo (DRC)
Ethiopia
Guinea
64
54
42
21
1.0
2.0
4.0
21.4
46
0
91
182
974
4
0
7
15
78
Guinea Bissau
Lao PDR
38
5.0
228
18
Liberia
Mali
Mauritania
Mozambique
Myanmar
Niger
Senegal
Sudan
Tanzania
Togo
Uganda
Zambia
Total
72
16
34
70
83
51
35
55
18
65
46
0.5
42.4
6.8
0.5
0.1
2.1
5.7
1.9
39.1
0.9
2.8
149.4
23
1,931
310
23
5
96
260
87
1,780
41
128
6,803
2
154
25
2
8
21
7
142
3
10
544
1.0
7.2
1.6
320.0
0.4
0.2
1.1
0.3
8.5
9.3
2.1
2.1
127.7
17.2
9.8
0.4
2.0
2.6
37.0
197.6
12.8
1.4
5.4
73.0
3.0
514.0
46
328
73
14,572
18
9
50
14
387
423
96
96
5,815
783
446
18
91
118
1,685
8,998
583
64
246
3,324
137
23,406
4
26
6
1,166
1
1
4
1
31
34
8
8
465
63
36
1
7
9
135
720
47
5
20
266
11
1,872
Countries with Medium Human Development
Algeria
Bolivia
Botswana
Cabo Verde
China
Dominican Rep.
Equatorial Guinea
Fiji
Gabon
Guatemala
Guyana
Honduras
India
Indonesia
Kyrgyzstan
Mongolia
Morocco
Namibia
Nicaragua
Philippines
South Africa
Suriname
Tajikistan
Thailand
Uzbekistan
Vietnam
Total
63
32
57
1
74
81
61
78
30
29
49
50
7
22
28
73
52
48
19
5
26
58
37
10
45
Notes. a Metric tones; b Consulting the British Geological Survey (2011) Mining Production 2005-2009, London:UK originally produced 87 countries, but excluded Benin,
Cabo Verde (Republic of), Cambodia, Madagascar, Togo, Guinea Bissau (Republic of). These countries are included for a number of UNEP Chemicals Branch projects.;
cAveraging monthly gold prices from April 2010 to April 2011 gives a figure US$1,416.34/oz(troy) based on data available from the World Gold Council. The values
shown here are produced using the average price and mine production data from the British Geological Survey (2011) Mining Production 2005-2009, London:UK; d Gold
exports (non monetary, excluding ores and concentrates) data extracted from UNCTADStat Merchandise trade index, exports, annual 1995 – 2009.
10
Box 2. The Paradox of Gold: Examples of National Impacts of Artisanal Gold Production
in Tanzania, Mongolia, Philippines and Mali
Tanzania has had a long and productive mining community dating back to the late 1800s. In the 1980s, a series of
regulations caused the mining sector to develop rapidly, leading to a mining boom in both large and small-scale
gold mining. Currently, most of the revenues from large-scale mining operations are used for tax purposes,
collected by governments through royalties, corporate income tax, and various withholding taxes. A World Bank
study estimated that mineral exports for 2002/03 were roughly US$623 million, the bulk of which come from
large-scale mining. The volume of revenue produced by ASGM is essentially unknown due to the sector’s informal
nature and therefore many believed its economic contribution was minimal. In fact, this sector is actually quite
sizeable; the World Bank estimated in 1995 that 90 percent of some 550,000 miners were unlicensed and
essentially impossible to track. Tanzania’s large-scale mining operations employ some 30,000 miners, a stark
contrast to the hundreds of thousands engaged in small-scale mining. In terms of the external costs for this sector
in Tanzania, in 2003 UNIDO conducted a health and environmental assessment in several mining areas in Tanzania
and found out that the urine, blood and hair samples analyzed detect the level of mercury body burden. Mercury
concentrations in the bio-monitors urine, blood and hair were statistically significantly higher in the exposed
population from Rwamagasa compared to the control group from Katoro. The chemistry and ecotoxicity results
from another study done by Chibunda et al (2009) suggest that sediments collected downstream of the River
Mabubi the mine adversely affect the catfish and probably other fauna and as such present a considerable local
environmental risk.
In Mongolia, a relatively new small-scale sector has been controlled by well developed regulations and programs,
allowing for industry growth. In the early 2000s, after the termination of Soviet assistance, Mongolia experienced a
decline in traditional livelihood alternatives which compounded with extreme weather conditions caused a rapid
expansion of the sector. The economic and environmental shifts during that period meant that the almost
nonexistent artisanal and scale-scale gold mining sector expanded to over 100,000 miners in 2003. In February
2003 the government of Mongolia passed a regulation making artisanal mining a legal, formal activity. The industry
is thought to represent roughly 20 percent of the rural workforce and indirectly supports roughly 400,000 people
in related working capacities or communities. Furthermore, it is estimated that artisanal gold contributes
US4million to the Mongolian economy.
The artisanal and small-scale sector is a large contributor to the gold sales in the Philippine economy. This activity
occurs in more than 30 provinces in the Philippines and provides subsistence revenue to between 200,000 300,000 miners and their families. For the last five years, the sector has been producing an average of 30 tones or
about 80 percent of the country’s annual gold supply. At the same time, ILO has documented extensive use of
child labor in the sector in the Philippines and use of mercury has caused extensive damage to rivers, small
communities, and the health of miners and their families (See Box 8.).
Mali, is one of the world’s poorest countries. On the UNDP’s Human Development Index it ranks fourth from the
bottom on a 177-county listing (UNDP 2004). GDP per head is still very low and Mali remains as one of the most
aid-dependent countries in the world (EIU 2004). Mali is Africa's third-largest gold producer, has estimated
artisanal output at 4 tonnes per annum, or 8 percent of total domestic production of nearly 50 tonnes. Mali relies
on gold for 70 percent of its exports and 15 percent of its gross domestic product. Its gold output has been hit in
recent years by slowdowns at some of its biggest and oldest mines, but new mines, including Randgold's Gounkoto
discovery, is forecasted to help boost output. While great income is generated, most staffs employed in the mining
industry are coming from outside Mali and residents who live within the intensive mining areas are complaining
due to little trickle down benefit from the industry. To accommodate Sadiola Gold Mine, about 43 villages have to
be displaced, while in Fouru near the large Syama goldmine, about 121 villages were also displaced. Gold
production involves child labor, poor working conditions, low wages, and involvement of middle-men with no
regulation or oversight. Ecological problems especially from the tailings is a major concern in Mali.
Sources: World Gold Council (2009); World Bank (2008); Pomfret (2011); Ongoing work at UNEP Chemicals Branch on formalization of ASGM sector provided some
information for Mongolia. Reuters 29 March 2011, ‘Mali cuts 2011 gold production forecast 1 5percent ’ accessed 2 June 2011
11
C. IMPACTS ON LOCAL ECONOMIES
Causes of rural poverty are complex and multidimensional. The rural poor are quite diverse both in the problems
they face and the possible solutions to these problems. In almost all countries, the conditions—in terms of
personal consumption and access to education, health care, potable water and sanitation, housing, transport, and
communications—faced by the rural poor are far worse than those faced by the urban poor.37 This makes them
especially vulnerable to health impacts from exposures to toxic substances. ASGM can have a strong economic
impact in the communities where it occurs compared to large-scale mining. However, both activities include
large economic impacts due to externalities that are usually ignored in economic calculations.
1. Local Income Impacts
The supply chain for artisanal and small-scale gold is incredibly complex and diverse. It usually involves an
ASM miner, ASM processor, transporter, small local trader, larger national trader or exporter, and an importer.
A somewhat simplified model supply chain is shown in Figure 2. displaying the relationships between miners,
site bosses, gold shops, financer, and international gold buyers, as well as detailing the financial and human
capital figures at each stage. Figure 2. applies only to ASGM sites that have a direct link with foreign financiers.
It is quite common for individual miners to have an established relationship with their most immediate trader,
usually the site boss, but in some circumstances this role is termed the financer, supporter, or negotiator. There is
an understanding between the miners and their trader or financer in that so long as the miner supplies gold, the
trader provides the miner with various services and goods including mercury, equipment, site access fees,
transport costs, health costs and subsistence during periods of mining when there is no income. While such
relationships may seem mutually beneficial, it often results in significant debts on the part of the miner.
Unfortunately, this exploitative arrangement is often the only option available to miners. 38 The boss-miners
relationship could be even worse for miners that work as forced laborers and under armed supervision, such as
what is happening in some countries in Africa.
Figures for ASGM by and large do not feature in official statistics39, but using the supply chain model (See
Figure 2.) and official gold production data, an approximate figure can be estimated. From Mongolian and
Indonesian experience underpinning the simplified supply chain model, site bosses in artisanal operations
receive 70 percent of the value of gold traded on the London Metal Exchange (LME) for pure gold (100 percent
gold grade).
Assuming fair distribution of gains from trade between miners40, dividing the conservative estimate of US$10
billion for annual gold production from artisanal mining over the 10 million miners thought to be directly
earning or supplementing their livelihood from this practice gives us a conservative range of US$3-4 per day in
potential earnings per miner.41
Commonly, a group of miners consists of 5 people that will share the yield with the mining boss, which ranges
from 10 to 30 percent. This means that each miner could get only 2 to 6 percent, excluding the processing cost,
which is borne by the miners themselves.
37
See Khan (2001)
Hayes (2008)
British Geological Survey (2011):43
40
This is a big assumption. See discussion on the 70 percent supply chain model above.
41
Calculated using average annual production values for recent years and the average price for April 2010-2011 (US$1,416.34) on the basis of 260 weekdays per year giving
US$1,000 (rounding down from US$1051.89) per year, or US$3.85 per day.
38
39
12
Figure 2. Supply Chain Model for Gold Mined through Artisanal and Small-Scale Methods
Adapted from Telmer, K. (2011, May 4). Lecture presented at the First meeting of the OECD-hosted working group on gold. “OECD due
diligence guidance for responsible supply chains of minerals from conflict-affected and high-risk areas.” OECD Conference Centre, Paris.
A comparison of miners’ and national per capita incomes by the Global Mercury Project (GMP) shows that
miners can earn more than national average income levels in some cases (See Table 8.). At best, with rights to
land claims and access to social and financial capital, some miners can become successful. Auxiliary valueadded products –often technology development or jewelry– or growth in the secondary service sector can be
additional boosts to local economies. Working in ASGM for a fixed period of time can also generate start-up
capital for other businesses.42 In more dire cases, income earned from small-scale mining can keep households in
extreme poverty (often those with high dependency ratios, or female-headed households) stay above food
insecurity thresholds though perhaps not to escape ‘basic needs’ poverty.43
While production in ASGM is by no means uniform, these operations generate as much as 2-3grams44 of gold in
per miner and per day, representing an income well above the international poverty line and higher than what
many alternative livelihoods, if available, could offer. As ASGM is often an illegal economic activity, it is not
clear how to measure the economic benefits of ASGM at the rural or local level however. An important factor in
considering the higher income provided by ASGM is the actual impact the activity has on the cost of living in
communities. As commonly found in many countries, the price of goods and the cost of living in mining areas
are quite high compared to the traditional rural economy. In addition, incomes and revenues from ASGM can
accrue to a handful of the village’s elite and are not shared fairly across the mining and local community.
42
It is important to note that artisanal miners are not necessarily going to be the beneficiaries of returns from investment in mining operations. See discussion above on their use
as exploration tools by large scale operations.
43
See Fisher et al. (2009)
44
Donadyne et al. (2009):49
13
Table 8. Summary of Income Profiles for Miners, their Communities and Countries
Mining Community
National
Monthly Income
(US$2011)
Annual Income
(US$2011)
Annual Income
(US$2011)
Sao Chico
Crepurizinho
$148.83
$213.12
$1,785.91
$2,557.43
$3,393.24
Talawaan
Galangan
$48.81
$104.77
$585.78
$1,257.28
$845.33
Various villages
$45.24
$542.92
$380.99
Ingessana District
$95.25
$1,142.98
$416.71
Twamagasa
$52.39
$633.40
$333.37
Kadoma-Chakari Region
$58.34
$700.08
$571.49
Region or Community
Brazil
Indonesia
Lao PDR
Sudan
Tanzania
Zimbabwe
Source: Adapted from Hinton and Veiga (2004); information presented to Canadian Institute of Mining Annual Meeting, May 2006, Vancouver.
Figures adjusted for inflation.
2. Employment Impacts
Some rural people without mining skills and knowledge find it challenging to shift from agriculture, harvesting
forest-based products or fisheries to become a full-time miner in the formal.45 Yet many engage in ASGM
because there are almost immediate returns and entry costs are low. It can also be flexibly combined with other
economic activities. Members of ASGM communities are often involved in other economic activities besides
mining, including drivers, hotel service providers, mercury and cyanide sellers, small business activities, brothel
or entertainment house workers, prostitutes, drug sellers and informal security guards –as jobs which income
from mining supports. ASGM provides an important source of primary income for non-agricultural workers in
rural communities and regions where economic alternatives are extremely limited.46 Mining income can also
supplement agricultural income when crops fail, commodity prices drop or as a natural complement to the
seasonal cycle of agricultural activity.
Mining may provide somewhat better daily wages (up to US$3-4 per day), but miners will work for 12 to 24
hours in a harsh environment, not an 8-hour day, and far from a decent working condition. In general, skilled
jobs and better positions in the mining sites will be taken by outsiders who have more experience, not by local
community residents or villagers. There is also an important consideration vis-a-vis the sustainability of this
livelihood in particular localities. Although the figure of employment indicates livelihood opportunities at a
macro level, there is little data showing that the same miners remain working in the same areas for extensive
periods of time.
The mining lifecycle covers five sequential stages, beginning with project or business planning and exploration,
then followed by development, production and closure.47 Regardless of the status or scale of the persons or the
organization engaged in the mining activity, all of these phases have to be carried out for mineral extraction to be
conducted on an economic basis. Due to the nature of the sector – the depletion of the resources, changing
policy, and tight competition, for example – miners frequently move from one site to more promising sites,
hoping to be lucky as pioneers of a new mining area.
Drawn from the general pattern of ASGM practices all over the world, Figure 3. shows a simplified empirical
cycle of ASGM practices which is divided into three stages as follows:
45
Interview with local villagers in Poboya gold mining site, Palu, Central Sulawesi by Iswamati, Y. In July 2011.
See Tschakert (2009); Bush (2009) for evidence from Ghana; Fisher et. al. (2009) for evidence from Tanzania.
See Avila (2003)
46
47
14
a. Early Stage or “Conventional Exploration” Stage
 Dissemination of research paper or leak of government surveying results on gold potential in particular
regions;
 Rumour–stage in local community or indigenous peoples groupings;
 Individual-driven, localized mining actitity using little or no mechanisation in tandem with established
subsistence livelihoods;
 Auxillary subsistence economic activity;
 Experienced or skilled miners from other areas are drawn to the region.
b. Later Stage or “Supply Push” – Exploitation Stage
 Mining activities expanded through financing by family resources, individual private financiers, formal loans
or government subsidy;
 Using simple technology, with new miners and prospectors ‘learning by doing’;
 Period for risk takers or people with entrepreneurial skills;
 Pre-existing socio-economic dynamics, i.e. poverty, inflation, available alternative livelihoods, influence the
expansion of ASGM practices;
 Some areas developed into a semi-industrial mining areas and practices;
 Profit sharing with bosses or financiers is common, with ‘boss-miner’ relationship having the potential to
create a life-time debt system;
 Environmental problems increase along with gold production and number of miners.
c. Declining Stage “Supply Pull” Scavenging Stage
 Production starts to decline due to several factors, possibly including: peaking of ‘easy’ exploitation, new
regulations enacted by government to control, increasing conflict with local communities, casualties;
 New ASGM site is identified elsewhere.
Figure 3. Empirical cycle of ASGM practices
An empirical cycle of ASGM practices
Rate of
production
• Govt. survey
• Research
paper
• Traditional/
local
knowledge
• Subsistence
economy
activity
• Individual
• Subsidized
• Loans
• Experienced/
skilled miners
Declining Stage “Supply Pull”
Scavenging Stage
Later Stage “Supply Push”
Exploitation Stage
Early Stage
“Conventional Exploration”
• Financier
• Loan
• Simple
technology
• Risk taker/
entrepreneurial
mentality
• Exchange
information
• Learning by
doing
• Socialeconomy
dynamic
• Semiindustrial
T
R
A
N
S
I
T
I
O
N
• Profit sharing
• Boss-miners
relationship
• Environmental
problems
• Too many miners, too little gold
• Too many environment, health and
socio-economic issues
• Regulation enacted by government
• More promisimg new ASGM sites
• Controversy
• Alternative livelihood available
T
R
A
N
S
I
T
I
O
N
Accelerated
production
Low quality
A
ASGM
Site
A
B
“R&D”
B
Trial / exercise
Deployment
Time
Business push
“R&D”
Enjoyment period
Trial / exercise
Declining
Deployment
Degradation/scavenging
Business push Enjoyment period
Source: Ismawati, Y. (2011). Presented at the Jabodetabek Regional Consultation workshop on Development National and Regional Approach on Environmentally Sound
Management of Mercury in Southeast Asia focusing on ASGMand Health Care Sector. US Department of State Grant No. SLMAQM-11-GR-027.
15
3. Negative External Social and Environmental Impacts
The damage to environmental services and human health, at the local and broader levels, from ASGM remains
underrepresented in estimates economic impact from this activity. Unintentional costs to local economies can
arise from human health impacts on miners and the wider community, most particularly children. Opportunity
costs also result from ASGM-degraded biodiversity and ecosystem services that support production and export
from other sectors such as forestry, fisheries and agriculture. Furthermore, some of the auxillary livelihood
activities generated following gold rushes severely damage social fabric, including the introduction of underaged prostitution, criminals, alcoholism and child labour48.
Generally speaking, absolute poverty cannot be reduced without economic growth.49 ASGM may contribute to
local economic growth and by extension national economic growth; however, the magnitude of the contribution
is uncertain due to the lack of including the extensive externalities associated with the activity. At the most
essential level, this sector has the potential to both reduce vulnerability to income shocks as a result of living
close to or below the poverty line (below US$1 a day) and also increase the poor’s vulnerability through
destruction of environmental services and human health impacts, in addition to the social costs that affect small
mining communities.
Through mercury pollution, ASGM contributes to economic vulnerability with increased financial, health and
environmental risks. For the most part however, externalities associated with ASGM have not been estimated
and as such, there is a lack of available information to draw from to assess their combined magnitude. Of all
sources of external costs in this activity however, mercury use is considered amongst the most damaging for
human and ecosystem health. What is more, with the mercury treaty currently under negotiation, mercury is seen
as an ‘entry point’ through which the international community can act on other health, environment and social
ills associated with this activity. Section II demonstrates how mercury-related externalities affect the miners and
surrounding communities and reduce the overall positive economic impacts from ASGM.
Section I. Key Conclusion
Though economic data on ASGM is poor, going on official gold production reporting, it is clear that this sector can
generate significant earnings in developing country economies. This activity has the potential to become even more
important as new investments in exploration driven by high gold prices seek out relatively untapped resources in Asia,
Sub-Saharan Africa and Latin America. It is worth stating that going on official gold production is a conservative
approach and likely underestimates the importance of the sector. However, the large externalities associated with the
activity are also part of the economic picture. A full assessment of these externalities will help countries and
communities assess the impact of ASGM correctly and foster deeper analyses as to its true importance for
development. While nurturing ASGM where it is considered as a viable livelihood, alternative potential livelihoods and
opportunities will need to be developed to support rural poverty reduction efforts.
ILO recently (2011) released a report called “Children in hazardous work: What we know, what we need to do,” that stated that more than one-fifth of child miners reported
increased health problems since starting work; over 40 percent suffered from musculoskeletal pain and 30 percent from exhaustion, while one-third of the child miners
complained of respiratory and genito-urinary diseases. Of children who fell ill or were injured, 43 percent were not able to access medical services. One-third continued working
despite his or her illness. Individuals who become entrapped in child labour are typically the poorest and most vulnerable members of society. The US Department of Labor
identified that children employed in gold mining exists in 17 countries, while child forced labor is found in 3 countries. Children are being employed in ASGM for several
reasons: family economic hardship, because they are physically flexible and fit to work inside the shaft and they are a source of cheap labour. ILO Convention No. 182 defines
the worst forms of child labour requiring immediate action, and does not allow exceptions and prohibits children from being engaged in several types of work including (point d)
“work which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of ILO - International Programme on the Elimination of
Child Labour (IPEC). June 2011. Children in hazardous work. What we know. What we need to do. Accessed 21 June 2011. children” up to 18 years old.See U.S. Department of
Labor’s List of Goods Produced by Child Labor or Forced Labor 2010, accessed 14 December 2010.
49
See Khan (2001)
48
16
II. THE COSTS OF INACTION ON MERCURY USE IN
ARTISANAL AND SMALL-SCALE GOLD PRODUCTION
As seen in Section I, a number of complex factors determine the true magnitude and direction of the economic
contribution of artisanal and small-scale gold mining. Of these, mercury use and its external cost impacts on
human health and environment has significant implications for societal welfare at local, national and global
levels.
While reducing income-vulnerability of miners and their families, part of the difficulty with ASGM is that it can
also increase health-vulnerability for miners, their families or the broader community. Artisanal and small-scale
miners all over the world use mercury to extract gold from ore. The sector is a major source of global mercury
demand and pollution, with most mercury used by artisanal miners illegally diverted or imported from end uses
in electronic and chemical industries or in dentistry, for example.50 Moreover, where environmental damage is
significant from river diversion, deforestation or release of toxic substances, including mercury and cyanide or
when ecosystem services are monopolized by miners e.g. water, risks for other community members dependent
on ecosystem goods and services for their livelihoods can increase. Conflict over land –particularly over
environmental degradation– as well as local political and development priority issues are common points of
contention between miners and local indigenous populations. This is one significant obstacle to sustainable
development faced by gold producing communities and broader society in countries connected to this industry.
Economic analysis takes the perspective of the wider society, as well as costs and benefits to individuals,
communities, individuals or groups of industries or government entities into consideration. 51 Financial and
monetized nonmarket costs52 can be weighed against benefits, with the economic consequences of environment
and health impacts understood to result from mercury use in ASGM activities –though currently ‘unpriced’ or
external– being included alongside financial costs. In considering the full range of economic implications of
mercury use in artisanal and small-scale gold mining, ‘hidden’ and ‘visible’ benefits from investment in
significant reduction/elimination of mercury use are brought to the fore.
Conducting an economic analysis incorporating many environmental and health endpoints is complex, and is not
the purpose of this study. Given time and resource constraints, this report relies on existing sources of primary
and secondary data, and as such the analysis is restricted by what information is available. An important ‘valueadded’ however is the synthesis of existing socio-economic research on the ‘costs of inaction’ on mercury,
informing future work for UNEP and other stakeholders in the Global Mercury Partnership.
A. MERCURY USE IN ARTISANAL AND SMALL-SCALE GOLD MINING
Mercury amalgamation is the most commonly used method to extract gold in ASGM due to its ease of use, low
cost and abundant legal and illegal supply. Gold miners use mercury for its chemical properties because it is a
‘tried and tested’ technology, with rapid results. In this sense, mercury is a financial ‘tool’ for many miners,
generating much needed currency quickly.53 The sector is the largest source of global mercury demand, with
most mercury used by artisanal miners illegally diverted from other end uses.54 With this mercury largely being
released into the environment, ASGM is the single largest source of intentional- release mercury in the world.
50
Veiga et al. (2006):54. Also, since mercury-containing waste can be expensive to treat, a profitable way to handle this mercury by-product can be to sell it to the black market.
See INC2 technical briefing documentation for further information from Indonesia.
51
Cost Benefit Analysis (CBA) is an economic assessment framework that weighs costs of policy implementation against financial and monetized nonmarket impacts, positive
and negative, of that policy change, in theory reflecting economic values of all stakeholders over distance and time. The overall impact on society is assessed against a ‘social
welfare criterion’ – the measure by which policies can be accepted or rejected. This is usually the point where the policy change in question makes people better off while
leaving nobody else worse off, known as Pareto Optimality. For a project or policy to pass this test, compensation must be paid by the “winners” to the “losers” so that they are
indifferent to the policy change. A second social criterion is based on a principle of potential compensation, where once the potential exists for compensation to be transferred,
the action is considered efficient regardless if the compensation is actually paid. Though there are limitations to this approach, CBA remains the sole framework that can
reasonably help frame answers to questions like ‘what are the economic benefits of reducing/eliminating mercury use in artisanal and small-scale gold mining, within and beyond
mining communities?’.
52
Since observable market prices do not generally exist for an environmental good or common (in this sense it is a value of the actual common or value of the environmental
good such clean air, clean water, clean soil, etc.), the marginal social cost of damage to the environmental good or common is not usually readily available in monetary terms.
However, while challenging, it is possible to value and integrate these costs and benefits into CBA frameworks using nonmarket valuation Stated Preference and Revealed
Preferences techniques. Contingent Valuation (CV) is the best-known and most widely employed of the former approach, while hedonic pricing is an example of the latter.
53
There is evidence of gold being traded for bread in the case of Zimbabwean hyperinflation in 2009 http://www.youtube.com/watch?v=7ubJp6rmUYM, accessed 26 July 2011
54
Veiga et al. (2006):54. Also, since mercury-containing waste can be expensive to treat, a profitable way to handle this mercury by-product can be to sell it to the black market.
See INC2 technical briefing documentation for further information from Indonesia.
17
In 2008, small-scale gold mining released an estimated 1,000 tones of mercury to the environment per year. 40
percent is released directly into the atmosphere (400 tones) and circulates around the globe contaminating
fisheries worldwide.55 The remainder enters local waterways and soils (600 tones) but much of this may later
also escape to the atmosphere. The Mercury Watch database 56 estimates that releases from small-scale gold
mining have increased roughly 30 percent to 1,320 tones per year in 2011.57 If ASGM production produces
approximately 330 tones of gold per annum, this means for every 1kg of gold mined, 3 of mercury can
potentially be lost to the environment depending on the processing method. This translates into roughly one third
of global mercury use. By comparison, coal burning releases 800 tones of mercury to the environment through
atmospheric emissions per year.58
Mercury is used in different ways the sector and so it has various impact pathways (See Box 3.). Figure 4. shows
a typical work flow with the embedded externalities from the reefs/rocky ore worked in ASGM practices. The
work flow in general is divided into three streams:



Upstream – ore mining: alluvial type, reef type, etc.;
Middle stream – ore processing into gold (20-60 percent purity);
Downstream – metallic gold (100 percent pure gold) and end-sale.
In reality, there is no clear division between each stream. In some places, depending on the type of the minerals
and ore traces, the upstream and middle stream activities merge. Mercury is added usually in the middle stream
and downstream.
Two methods are largely responsible for mercury releases to water and air in ASGM practices: whole ore
amalgamation and open burning.59
Whole Ore Amalgamation
In this process mercury is added to all the ore being processed crushed, ground or sluiced. Whole ore
amalgamation is an intensive use of mercury and dramatically increases the amount of mercury released to
the environment compared to treating concentrates. In some cases, this excess mercury approaches 90 percent
of what is used. While it does not occur in all ASGM practices worldwide, this practice accounts for a
growing portion of mercury demand in ASGM worldwide.
Open Burning
Miners and gold shop owners heat amalgam to recover gold. Amalgam is burned openly without a vapor
capture system such as a retort or fume hood. This is done with a torch and crucible or even more crudely in a
shovel or metal pan over an open fire or directly on wood coals. When openly burned mercury vapors are
released to the air and can be inhaled by the miners, their families and others nearby, and then enter the
atmosphere and travel globally contributing to mercury pollution worldwide. Further, when burning occurs
indoors or in urban centers, surfaces in these places become contaminated and elevated levels of mercury
persists long after the initial burning (months to years). The practice produces atmospheric mercury emissions
estimated at 400 metric tones per year worldwide.60
55
See Telmer and Veiga (2009); Pirrone et al. (2010); UNEP (2010)
www.mercurywatch.org
This does note include the increased estimate for Peru (150 tonnes) based on recent findings from Swenson (2011).
58
See Pirrone et al. (2010); UNEP (2010)
59
Adding cyanide after mercury whole ore amalgamation is recognized as one of the most dangerous and polluting technique in gold extraction. However, in the context of the
mercury treaty, it is mercury use that is the primary concern and therefore the mercury-cyanide interaction is not explored further in this paper.
60
See Telmer and Veiga (2009)
56
57
18
Figure 4. Typical ASGM Work Flow and the Embeded Externalities
Reefs/Rocky Ore Example
Capital Investor(s)
Equipment/production
investor
Shaft/Hole
exploration
‘Expert’
Rehabilitation
UP-STREAM
(ORE MINING)
E
Digging
Crushing
Load/
unload
Supporting team
(pumping the air, fire,
supplies, etc.)
Transporter
Capital Investor(s)
Fine
Crusher
Unit
Equipment/production
investor
MERCURY
ADDED
Ball-Mills Unit
‘Expert’
E
MIDDLESTREAM
(ORE
PROCESSING )
E
E
Tailings
handling
Supporting team
(generator set up, diesel
fuel supplies, etc.)
Mixing, burning
amalgam (40-60%)
Transporter
Cyanide Plant
Unit
‘Expert’
Capital Investor(s)/
intermediaries/ gold
trader
Intermediate
Gold buyer/
kiosk
E
MERCURY
ADDED
Metallic gold
process
E
E
= Externality costs of
health, environment, social
fabric, and culture
DOWN-STREAM
(METALIC GOLD
AND END-SALE)
Gold shop/
jewelry shop
Adapted from Ismawati, Y. (2011, June 22). Slide presented at the Central Sulawesi Regional Consultation workshop on Development National
and Regional Approach on Environmentally Sound Management of Mercury in Southeast Asia focusing on ASGM and Health Care Sector. US
Department of State Grant No. SLMAQM-11-GR-027.
19
Box 3. From drops to pour-flush: Mercury in Indonesian ASGM Activities
In the early stage of almost in any potential gold mining, miners start with a panning technique, to find out the
quality of the potential ores from that area. Mercury is introduced as part of this process.
In Poboya, Palu, Central Sulawesi, Indonesia, artisanal and small scale gold mining activity started in 1998 with
traditional, non-mercury methods and was considered as a subsistence livelihood activity. Mercury was
introduced by one particluar gold buyer who visited the community mining along the river every Monday and
Thursday to collect the gold nuggets bring fresh mercury supplies. He taught the villagers to add some drops of
mercury in the final panning process.
The ball-mill process has been introduced by miners from North Sulawesi to other potential small-scale gold
mining areas all over the country. The ball-mill process runs for four hours, 3-4 times within 24 hours. Mercury is
added in each ball-mill tumbler at levels of about 300-500 gram per 4 hours. After four hours the water inside the
ball-mill will be poured out and ball-mill bottom will be washed out to get the amalgam. The process is repeated
3-4 times to get a good and solid amalgam. Some mercury is flushed out during the process and ends up in the
tailing pond.
After several ball-mill process, the amalgam will be squeezed and then burned in an open space to get 40-60
percent of gold. There is no data available as yet on how much mercury is released into the air during the process
but a brief mercury sampling using a Lumex analyzer in one of the ball-mill units in Poboya has shown a high spike
as high as 50,000 nanogram/cubic meter during the ‘buang kabur’ or the ball-mill pour-flush process. The average
results of mercury in the ball-mill processing areas are between 3000-6000 nanogram/cubic meter.
Source: BALIFOKUS survey for the “Development National and Regional Approaches to Environmentally Sound Management of
Mercury in Southeast Asia” with focus on the ASGMand Health Sectors in Indonesia and the Philippines. US Department of
States, Grant Award No. SLMAQM-11-GR-027, June 2011.
B. TECHNIQUES FOR SIGNIFICANT REDUCTION AND ELIMINATION OF MERCURY
One solution to decrease mercury input and emissions confirmed and emphasized at the UNEP Global Forum on
ASGM includes emission control through the use of fume hoods and retorts (See Box 4. for a case study on a
mercury vapor capture system being pioneered in Indonesia), mercury re-activation to avoid dumping of “excess
mercury” and avoidance of whole ore amalgamation through pre-concentration. Usually more than 90 percent of
mercury employed in the process can be removed from the amalgam, bottled and reused. It must be noted
however that there is no guarantee that reused mercury will be captured and reused thereafter.
Box 4. Mercury vapor capture system: Case study of Indonesia
A study of more than 200 square kilometers in the Galangan area of Central Kalimantan in Indonesia found the area
was “extremely environmentally degraded from deforestation, desertification, and mercury contamination as a result
of artisanal gold mining.” Substantial dredging, amalgamation, and amalgam-burning have resulted in mercury
pollution. Moreover, the urban area of Kareng Pangi, where amalgam is burned in gold shops, is “quite contaminated
with mercury because none of the many gold shops have any environmental controls and no retorts are used.” In 2006
the GMP helped install mercury vapor capture systems in the shops in Kareng Pangi; three years later, a visit to the
town found that the fumes hoods were still in operation, a testament to their practicality and effectiveness in the gold
shop context.
Source: UNIDO Global Mercury Project (2006b): 6, 8, 10, 18.
Preferred techniques involve concentrating the ore prior to amalgamation using gravity separation through the
use of simple sluices, jigs or centrifuges, greatly reducing the amounts of mercury consumed and emitted. A
third effective way of extracting gold without using mercury is the process of direct smelting. Smelting is a hightemperature melting process used to recover metals from ores and concentrates. This method has been
developed, tested and commercialised. Chemical leaching can also be done typically using cyanide chemical
extraction, the only other widely-practiced method. This also presents risks to human health and the environment
however.
20
The cost profile of the techniques used to significantly reduce or eliminate the use of mercury in gold ore
extraction is such that capital, legal costs and payback periods can block the introduction of these techniques,
though the operational cost thereafter is lower than mercury-intensive production processes (See Table 9.).
Methods that do not reduce productivity and generate clear financial benefits are more likely to be readily
adopted. These techniques should be categorized into two different approach: non-mercury techniques and
mercury emission reduction techniques. Although some techniques still need to be tested and proven in the field,
various non-mercury techniques are already available on the market.
Table 9. Costs of and Barriers to the use of Non-Mercury Techniques for Gold Ore Extraction
Alternatives
Remarks
Dollar Cost in United
States dollars **
Centrifuge
No mercury
Sluice
No mercury
$1,000–10,000.
Average 4,000 for a good
ASGM centrifuge
$50 – 1,000
Magnetic Carpet
Clean GoldTM
Shaking table
Direct smelting kit
No mercury
$50 – 500
No mercury
No mercury
$20,000
$1,000
Obstacles/Barriers
Initial cost, energy, water, technical know-how,
legal status
Water (although can also be dry), high cost, high
energy use
Preferably for alluvial ore or fine crushed ore
Relatively expensive, need preliminary treatment
Cost, energy, technical know-how, quantity of
material that can be processed
Source: Global Forum on ASGM (2010)61 and UNEP Conclusion Workshop on National Strategic Planning for ASGM, Siem reap, 22-24 March 2011. 62
Figure 5. Range of Non-Mercury Gold Extraction and Processing Options
Centrifugal
method
Expensive
Shaking Table
Shaking Sluice with
magnetic separator
Cost
Magnetic Sluice
Magnetic pan
Wooden/
plastic pan
Cheap
Complicated
Simple
Application
Source: Ismawati, Y. (2011). Presentation: Technical Aspect. Conclusion Workshop National Strategic Planning on Artisanal and small-scale gold mining,
Siem Reap, 22-24 March 2011.
61
Meeting Report available at http://www.unep.org/hazardoussubstances/GlobalForumonARTISANAL AND SMALL-SCALE GOLD MINING/tabid/6005/Default.aspx
Meeting Report available at
http://www.unep.org/hazardoussubstances/Mercury/PrioritiesforAction/ArtisanalandSmallScaleGoldMining/Meeting/ConclusionWorkshop/tabid/51724/Default.aspx
62
21
Many of these methods however are not suitable for small sized particles of gold only and electricity is needed
for these techniques – two conditions not always present in ASGM. As such, arguments have been made for use
of borax to replace mercury (See Box 5.) and placing an emphasis on disseminating retort technologies.
Box 5. Borax replacing mercury: The Experience in the Philippines
More than thirty years ago a group of innovative small-scale gold miners in Benguet, Northern Luzon discovered that
borax (sodium tetraborate decahydrate) can replace mercury in the gold extraction process. Since then borax has been
used daily by around 15,000 miners in that area. These miners have been observed to earn substantially more money
from avoiding the cost of mercury inputs and increased efficiency in recovery of gold. The use of borax to replace
mercury certainly avoids mercury damage to health and environment; however it should be noted that borax, while
not acutely toxic, has found to be potentially toxic to development by the US EPA and under the EU’s REACH
programme.
The borax process has not spread from Benguet to other parts of the Philippines. Investigations in 2007 in Zamboanga,
Mindanao and Camarines, Luzon showed that during the whole-ore amalgamation process, the miners were loosing
large quantities of mercury and gold (250 gram mercury and 15 gram gold per ton). This lack of dissemination is
perhaps due to the dominance of ‘back-yard’ ASGM activities that supplement other livelihood earnings in this
country, meaning that artisanal miners do not migrate and spread new techniques as such.
In this context, a Danish financed small-scale mining project was initiated in March 2011. The project has funding for
three years and has two goals. One is teaching and training small-scale miners to use borax instead of mercury. The
other is to teach health providers and local mining communities in the Philippines about the symptoms of mercury
poisoning.
The first training of miners in using borax was carried out in August 2011 in the Kalinga area of Northern Philippines.
Trainers were miners from Benguet who have used borax for many years. The training proved to be a great success.
The miners almost doubled their gold recovery without investing in new equipment. Over the next three years,
trainers from Northern Philippines will train miners from Kalinga and Camarines in the use of the borax method. The
project is financed by the Danish Project Fund and is carried out by the Danish NGO Dialogos, the Philippine NGO Ban
Toxics, University of Copenhagen, Benguet Federation of small-scale miners and the Geological Survey of Denmark and
Greenland.
Source Perez et al. (2007); US EPA (1997); ECHA (2010)
The video can be found at http://youtu.be/X6Sawj0HyF0
C. FINANCIAL AND EXTERNAL COSTS OF INACTION ON MERCURY USE IN ASGM
Whole ore amalgamation and open burning production processes appear profitable only if certain financial,
health and environmental impacts – including the opportunity and future option costs of land use – are not
accounted for. These hidden costs for miners, their families and the communities they live in and support
reduces benefits to be had from ASGM immeasurably. Furthermore, it is crucial to understand that mercury
pollution is not just a localized concern. As a pollutant that is transported globally and bio accumulates in fish
species that are traded worldwide, it concerns populations both in and far beyond mining communities.
1. Financial Implications of Mercury Use in ASGM Operations
The costs of investing in mercury reduction/elimination in ASGM operations are typically better understood than
the benefits of doing so (See Box 6.). This means that interventions to encourage miners to change to reduced or
non-mercury techniques must make a strong case for the financial benefits of this course of action. Non-mercury
techniques can be introduced to ASGM stakeholders describing the advantages and disadvantages of each
technique techniques for various levels of processing as shown in Figure 6. below, as well as the cost
implications including both investment and operational costs for each option. Methods that do not reduce
productivity and generate clear financial benefits are more likely to be readily adopted, health and environment
externalities not withstanding.
22
Box 6. Estimated Costs of Defensive Expenditures in the Philippines
An attempt to quantitatively assess the economic cost of mercury pollution was made by the Philippine Institute for
Development Studies in 1999. Using the defensive expenditure approach in the economic valuation of mercury, the
authors estimated that about PhP933.5million (US$201132million) is required annually for the purchase of protective
equipment and facility to control the occurrence of future mercury pollution in small-scale mining in the country. The
estimate was made on the assumption that there are 250,000 small-scale gold miners in the Philippines, where
215,000 of them are involved in processing. This figure represents an ‘avoided cost’ approach and does not estimate
the external economic impacts of mercury use in this sector as such.
Source: Israel & Asirot (2000)
Figure 6. Informed Choices for Non-Mercury Gold Processing Techniques
Source: Ismawati, Y. (2011). Presentation: Technical Aspect. Conclusion Workshop National Strategic Planning on
Artisanal and Small-scale Gold Mining, Siem reap, 22-24 March 2011.
The amount of mercury used and lost during mining depends on the amalgamation approach used. In cases
where the whole ore is amalgamated, losses of mercury can be very large – as high as 20 units of mercury lost to
recover 1 unit of gold.63 Existing estimates suggest that mercury used in ASGM costs the miner US$0.20-0.50.64
Continuing with the 20:1 ratio, if 20g of mercury is used to produce 1g of gold, mercury inputs could cost the
miner as much as 13-30 percent of earnings.65 In the case of gold extraction from sulfides in particular, miners
can end up resorting to extremely polluting yet ineffective, costly measures.66 This is highly variable however.
Sometimes mercury is used as a currency within gold supply chain transactions making it seemingly free to
miners.
Where only a gravity concentrate is amalgamated, losses are normally about 1.3 units of mercury for each unit of
gold, but can be significantly lower if a mercury capturing system is used when the amalgam is burned. 67
Furthermore, if these emissions to air are trapped by fume hoods or retorts, mercury can be recycled and
reactivated by simple processes 68 , allowing miners to use their mercury numerous times (indefinitely in a
perfectly closed circuit, though this never happens in practice).
The potential for cost reduction for artisanal miners is an important consideration. A significant portion of
mercury used can also be recovered if amalgamation is done in closed amalgamation pools and the tailings are
63
See Telmer and Stapper (2007)
www.mercurywatch.org.
65
Prices on world markets for mercury trebled in 2010, from US$650 per flask to US$1,850 per flask (35 kilos) – rising from about US$20 to $50/kilo. Calculating on the basis of
the average gold price to date for 2010/11 (US$1,416.34) and the 70 percent supply model, if 1g of gold earns roughly US$46 on the market, artisanal and small-scale site bosses
down the chain might get US$32. The mercury input cost to produce this 1g gold could be anything between US$4-10 (based on 20g of mercury being used).
66
Hinton et al. (2003): 100
67
See Veiga et al. (2006); Telmer and Stapper (2007)
68
This is known as the Pantoja Process – after Dr. Freddy Pantoja who pioneered a mercury reactivation method which produces sodium- mercury amalgam which is more
effective at amalgamating gold than pure mercury. See Veiga et al. (2006): 59-61.
64
23
reworked to recover the lost mercury. Additional gold is also recovered in this process and so this is an
economically favorable practice. The UNIDO Global Mercury Project (GMP) estimates that a 50 percent
reduction in mercury use in ASGM could easily be obtained simply by carrying out these two practices. In many
cases this represents zero cost or even additional profits for miners. The benefits are threefold: significantly less
use of mercury, cost reduction in basic production inputs (See Box 7.), and more efficient gold amalgamation
through using reactivated mercury.69 However, the method depends upon miner acceptance and implementation.
Many field workers have reported that miners simply do not use retorts, despite the good reasons for doing so.70
The most significant shift from mercury-based ASGM process to non-mercury mechanical and physical
techniques will require a moderate capital investment which can be facilitated by donors or international
financial institutions. A pilot project currently on going in Bornuur Mongolia producing 250 grams of gold daily
valued at US$7,000 involves capital investment of approximately US$120,000. 71 Implementation requires a
formalization process and proper planning for plant siting and regulatory reform.
Box 7. Mercury Abatement Project: Success in Ghana
In Ghana, a direct smelting technique is being introduced to the ASGM community to replace the use of mercury in the
sector.
About the process: Smelting is a high-temperature melting process used to recover metals from ores and
concentrates. Fluxes are added to the concentrate to assist melting and react with impurities so that the metal
separates out. The final products are pure metal and a glassy slag containing the unwanted components.
Advantages: The process does not use any mercury; instead it utilizes non-toxic, cheap chemicals like borax, sodium
carbonate and silica sand. It can be used for all types of ores and it has a recovery rate of 99.9 percent. The process is
cheap, quick, suitable for processing small batches of concentrate and the input materials are locally available.
Cost comparison of Mercury Amalgamation and Direct Smelting
AMALGAMATION
1
2
3
Item
Half teaspoon of mercury
(27 g)
Cost (GH¢)
4.00
Heating of amalgam
(charcoal)
Smelting
Total
6.00 (US$2011 4.14)
DIRECT SMELTING*
1
Item
4 Crucibles
(2 operations)
Cost (GH¢)
1.60
0.50
2
Flux (2 x 200 g)
1.20
1.50
3
Gas (2 x 0.75 g)
1.20
Total
4.00 (US$2011 2.76)
*The direct smelting kit has an initial cost of about 800 USD
Challenges: The initial cost of the smelting kit machine can prove to be a hindrance to the acceptability of the process
to miners. Ensuring the kits are readily available can also be a challenge. Government support will remain of vital
importance for the success of the project. Furthermore, pre-concentration needs to be much more efficient. Whereas
miners may apply mercury to 20kg of concentrate produced from a sluice, direct smelting only works on much smaller
volumes of higher grade material – 50g for the Ghanaian kits.
This is a UNIDO sponsored study to assess and reduce mercury pollution from artisanal gold mining (Project US/GHA/99/128). As part of
Ghana’s Mining Sector Support Programme (MSSP), sponsored by the European Union, the Mercury Pollution Abatement Project was
designed to investigate viable possibilities for processing methods to substitute mercury in the artisanal and small-scale mining.
2. Economic Implications of Human Health Impacts
Approximately 5 percent of mercury used in whole ore amalgamation is released into the air– in the case of open
burning this often inhaled by the miner/processer. The remaining 95 percent largely makes its way from mining
69
In formalized businesses operating in a context of relatively well established institutions, other private costs from mismanagement of mercury can include compensation,
reputational impacts and remediation costs. Given that ASGM are largely informal undertakings, these costs are not considered here however.
70
UNIDO (2008), Gunson A. J. , Veiga M.M (2004)
71
Sustainable Artisanal Mining Project, Mongolia. http://www.sam.mn/en/institutional-structure-a-social-issues/institutional-structure.html. Accessed by 27 June 2011.
24
tailings into waterways and onto land with further serious consequences for human health. 72 Evidence of
mercury pollution emissions from ASGM has been gathered in many countries including the Philippines,
Thailand, Tanzania and Mongolia, and surveyed globally73.
With an estimated 4.5 million women working in artisanal mining, many of childbearing age, low-level exposure
to infants during gestation and breast-feeding is a risk.74 1-2 million children may be involved in artisanal and
small-scale gold mining, with children as young as three years-old working within or outside the family unit. 75
They work in dangerous conditions which expose them to mercury which in turn has implications for their future
economic prosperity and that of their families, communities and country. Health costs of child laborers exposed
to hazardous chemicals such as mercury will be relatively higher than the health cost incurred to adults exposed
to the same toxics substances because adverse effects for children are more severe.76
Burden of disease evidence links mercury poisoning and numbness and tingling, vision abnormalities and
memory problems in adults. 77 Moreover, consequences can be permanent as medical treatment is not always
effective. Two subpopulations are crucial in looking at health impacts of mercury exposure: those on whom
mercury has more severe effects and those who are exposed to higher levels of mercury. Children are uniquely
vulnerable to mercury effects, particularly through direct exposure due to extensive child labor practices in the
sector as well as maternal exposure when women ingest or inhale mercury particles. As a potent neurological
toxicant that interferes with brain functions and the nervous system, mercury has been shown to be particularly
harmful to neurological development of babies and young children.78
Methodologies for determining mercury exposure in people involved in ASGM have been developed.79 As part
of the UNIDO Global Mercury Project (GMP), a health assessment methodology was designed to complement
environmental assessment, providing indicators of the level of mercury poisoning and its health effects on
mining and surrounding communities by exposure to mercury vapors and by ingestion of contaminated food, in
particular fish – this in turn has implications for global commercial fisheries as well as human health.80 Small
amounts of mercury entering the natural environment over time are bio-magnified in marine food chains.
Significantly, fish contributes an important source of animal proteins to the diet of the world’s poorest people 81
including the rural communities that are at the center of discussions on artisanal and small-scale gold mining.
Even with moderate levels of contamination, mercury concentrations for local fish consumers appear to
contribute significantly to body burden in this population (See Box 8.).82
Levels of mercury in the body are expressed in terms of parts per million (ppm), 1 part of mercury per million
parts of body tissue. A hair concentration of 1ppm mercury is equal to 1 milligram of mercury per kilogram of
hair. The average level of mercury in the hair for low-risk populations is 2ppm. The National Research Council
(NRC) of the National Academy of Sciences determined that a body burden of 1 ppm in hair results from steady
state exposure at the US EPA reference dose (RfD). The report notes that “…it may be argued that derivation of
a RfD for methylmercury is inappropriate, given that there does not appear to be a threshold for adverse
neuropsychological effects based on available data”.
Health assessment for mercury exposure in ASGM communities combines information from biological samples
associated with medical exams to evaluate the level of exposure that the pollutant caused, or may cause, to
individuals. Particular sampling procedures used must be site-specific, taking into consideration the
consideration the characteristics of the mining activity; the biodiversity of the region; the accessibility and
availability of resources; and likely exposure risks.83 Miners in Indonesia, the Philippines, Colombia, Guyana,
Zimbabwe, Tanzania and Brazil are found to have mercury levels up to 50 times above World Health
72
Telmer and Veiga (2009):137. The example given is that if 20 g of mercury is consumed to produce 1 g of gold, then 19 g of mercury are discharged to water and 1 g of
mercury is emitted to the atmosphere. See also Pirrone et al. (2010).
73
See for example – Philippines: Appleton (1999); Thailand: Pataranawat et al. (2007); Global:Telmer and Veiga (2009)
74
See Telmer and Veiga (2009)
75
Ibid.
76
See ILO (2011)
77
See Bakir (1973); Harada (1995); Debes et al. (2006); Gardner et al. (2010); Trasande et al. (2010)
78
See United States EPA (1997); Bose-O’Reilly et al. (2010)
79
See UNEP(DTIE)/Hg/INC.2/9 - Methodologies for determining mercury exposure in people involved in artisanal and small-scale gold mining, available at:
http://www.unep.org/hazardoussubstances/Mercury/Negotiations/INC2/INC2MeetingDocuments/tabid/3484/language/en-US/Default.aspx
80
See UNEP (2011) UNEP(DTIE)/Hg/INC.2/9
81
FAO (2009):Part I:5.
82
See Trasande et al. (2010)
83
See UNIDO (2004)
25
Organization limits. Mercury-exposed mothers in Indonesia, Tanzania and Zimbabwe have been documented
with elevated inorganic mercury levels in breast milk.84
The effects of mercury poisoning are known and documented. What is missing is the economic ‘translation’ 85 of
this information that allows these effects to be better integrated into political and financial decision-making. For
example, increased health benefits from better mercury management can result in lower costs for hospitals or
wider health care operations, not to mention avoided productivity losses attributable to mercury poisoning.
Research into what causes poverty in rural communities also shows that illness of a family member or death of
the primary earner is an important factor that pushes households into poverty.86 Human health consequences
from mercury pollution manifest in not only loss of well-being, pain and suffering, but also privately-captured
medical expenses, loss in worker productivity, and potential loss of IQ within a population, which in turn has
important economic consequences.87
Box 8. Philippines Mercury Pollution and Mining Studies
During the gold rush period in the early 1980's, fish and shellfish monitoring results showed levels above the
recommended level of 0.5ppm due to mercury pollution from small-scale gold and mercury mining activity detected in
tailing ponds, canals and river systems and coastal waters – up to five times higher than the standard. Close to a
former mercury mine in Palawan, several studies of the environmental impact were undertaken prior to 1990,
assessing mercury concentrations in sediments of Honda Bay which is a reclaimed area from cinnabar ore in Puerto
Princesa, reported high concentrations of mercury in jetty wastes and nearshore interfacial sediments.
Human body burdens among a sample of 130 subjects indicated that all Palawan residents in the study are subjected
to high mercury exposure, as compared with control populations. Estimated mean blood Hg values ranged from 8.817.6ng/ml for the five sub-groups, with a maximum individual value of 74.1ng/ml. Such values are typical of
populations consuming fish at a daily frequency.
A health assessment of community members within 10km of the mercury mines showed that majority of old people
who were residents in the area and former miners had elevated blood mercury levels requiring detoxification. Ten
children with elevated blood mercury levels with positive physical examination findings were also detoxified.
Anecdotal evidence has priced this medical intervention at US$1,000 per patient. Correlation studies comparing a
similar area with naturally occurring undeveloped mercury rich resources showed negligible effects on health and
environmental quality.
In 2000, a study was commissioned by the United Nations Industrial Development Organization (UNIDO) to investigate
the effects of mercury contamination in regions affected by gold mining operations in Diwalwal, Monkayo,
Compostella Valley. Results showed that mercury levels in the Naboc River –the major river system draining the
operations in the gold rush area– exceeds all drinking water quality criteria, as well as recommended water quality
criteria for the protection of aquatic organisms and their uses. The investigation also reported that mercury
concentration in bottom and suspended sediment in the rivers exceeds the Toxic Effects Threshold for the Protection
of Aquatic Life by factors of up to 55 and 166, respectively. Mercury levels in rice and other food crops were found to
be within appropriate safety standards. Nevertheless, if fish or shellfish from either river are regularly consumed,
intake levels of mercury (or methylmercury) may exceed WHO guidelines, with negative impacts on human health.
Source: Appleton (1999); Narvaez (2002)
For the most part, existing studies linking mercury exposure to economic estimates have been conducted in
countries more economically developed than those where ASGM takes place on significant scales. Furthermore,
no economic valuation studies approximating the health costs from mercury use in gold mining have been
uncovered specific to the ASGM context (See Table 10.).88 Important to note in the context of a global mercury
See Bose-O’Reilly et al. (2008)
Estimation of economic values for health impacts uses costs of illness including days of work lost, lost wages, and medical expenses; judicial decisions of compensation
payments; Years of Potential Life Lost (YPLL); Disability Adjusted Life Years (DALYs); and, Value of Statistical Life (VOSL). In terms of susceptibility, children tend to
respond differently to similar exposures as they are less able to metabolize, detoxify or remove pollutants than adults. Yet, because of the reliance on productivity and income
valuations as a proxy for nonmarket human health impacts, care must be taken to represent impacts on children’s health appropriately in economic valuations. Similarly, the
disparity in predicted lifetime income earnings between developing and developed countries is problematic. What is important is not particularly the absolute amount of income
lost, but amount lost relative to proportion of overall income and opportunities for replacing or insuring against lost income.
86
See Khan (2001); Fisher et al. (2009)
87
See U.S. Department of Labour (2010); ILO
88
Based on an extensive literature search conducted as part of the Costs of Inaction Initiative currently in progress at UNEP Chemicals Branch. For further information see the
UNEP Chemicals Branch Mainstreaming website.
84
85
26
treaty is that mercury is transported and deposited globally. As such, economic implications of environmental
impacts from mercury pollution stemming from artisanal and small-scale use of mercury are not purely local.
One study by the Nordic Council of Ministers (2008) report estimates global annual damage costs for ingestion
of methyl mercury at US$20058billion (US$20119.2billion) for by-product emissions and US$20052billion
(US$20112.3billion) for emissions from intentional use of mercury under a ‘status-quo’ scenario.
Table 10. Selected Studies of Estimated Health Costs of Anthropogenic Mercury Exposure89
Country,
Region
Impact Pathway
Health Impacts
Economic Valuations
Source
United
States
Air pollution, exposure to
toxic chemicals and other
environmental pollutants
Children's health problems caused
by exposure to toxic chemicals and
other environmental pollutants
Exposure to mercury (methyl
mercury) cost $5.1 billion.
Trasande and Liu
(2011)
Global
Ingestion of methyl
mercury
Loss of IQ (Intelligence Quotient)
Sundseth et al.
(2010)
Global
Mercury emissions to
water, air and landinhalation, contaminated
food consumption (fish)
Loss of IQ (Intelligence Quotient)
following ingestion of methyl
mercury/consumption of
contaminated fish
Global
Mercury emissions to
water, air and land
United
States
Mercury emissions to
water, air and land – prenatal exposure.
Dose-response function (DRF) using
estimates of IQ decrement as
function of mercury concentration
in blood, as well as correlations
between blood concentration and
mercury ingestion
Loss of IQ (Intelligence Quotient)
for children born with elevated
cord blood mercury levels
A global assessment of societal
damages based solely on loss of
IQ suggests that the annual
cost will be approximately
US$3.7 billion (2005 dollars) in
2020.
US$ 8 billion annually (in 2005
dollars) from by-product
emissions
US$ 2 billion (in 2005 dollars)
from emissions from
intentional use of mercury in
the status quo scenario in
2020.
US$ 2.9 million (in 2005 dollars)
from inhalation of mercury
Mean estimate of the global
average of the marginal
damage cost per emitted kg of
Hg is about $1,500/kg
$8.7 billion annually (range
$2.2 – 43.8 billion in 2000 US$)
Trasande et al.
(2005)
United
States
Mercury emissions to
water, air and land from
coal-burning. Total
population exposures
from contaminated food
consumption (fish).
Ranges from US$75 million to
US$4.9 billion based on various
cohorts and two scenarios for
capping of mercury
emissions.90
Rice and Hammit
(2005)
Japan,
Minimata
Mercury emissions to
water – contaminated
food consumption (fish)
One-off expenses of 7, 671 Yen
FY1989
Japan
Environment
Agency (1991)
Cost of illness, loss of IQ
(Intelligence Quotient), value of
statistical life, health related
quality of life. Loss is weighted by
gender, body weight, age with
background mercury thresholds
taken into account.
Health damage compensation
89
Nordic Council of
Ministers (Pacyna
et al.) (2008)
Spadaro and Rabl
(2008)
For a recent overview of relevant socioeconomic studies of economic benefits from reduction of mercury pollution from anthropogenic sources please see literature review of
Sundseth et al. (2010): 390-392
90
Scenarios 1 and 2 are predicted benefits to result when power plants face annual mercury emissions caps of 26 tons and 15 tons, respectively. For Scenario 1, the predicted
annual benefit associated with IQ increases in the annual birth cohort ranges from $75 million to $194 million. The corresponding annual benefit predictions for Scenario 2 are
$119 million to $288 million. The monetized benefits associated with avoided cardiovascular events and premature mortality are predicted to be much larger than the
neurotoxicity benefits. Monetized annual benefits are $48 million and $86 million in Scenarios 1 and 2 if the population is just fish consuming men. If these cardiovascular
effects are experienced by the whole U.S. population, then the monetized annual benefits are predicted to be $3.3 billion and $4.9 billion in Scenario 1 and Scenario 2,
respectively.
27
3. Economic Impacts of Environmental Degradation
The majority of nonmarket valuation literature has focused on health impacts, particularly in chemicals
management. But the rural poor depend largely on agriculture, fishing, forestry, and related small-scale
industries and services91, and as such, the livelihood implications of environmental degradation are also crucial.
When considered as an asset –a source of resources, an investment with positive returns, a flow of vital goods
and services– ‘the environment’ can be considered as natural capital that generates valuable goods and services
that not only support human life, but also productive livelihoods. An environmental asset base is constructed of
healthy, productive ecosystems which generate economically important ‘goods’ such as timber, fisheries,
minerals…etc. and ‘services’. The UN Millennium Assessment (2005) 92 defines ecosystem services as “the
benefits people obtain from ecosystems. These include provisioning services such as food and water; regulating
services such as flood and disease control; cultural services such as spiritual, recreational, and cultural
benefits; and supporting services, such as nutrient cycling, that maintain the conditions for life on Earth.”
In many cases, mercury-containing tailings from small-scale gold mining activities are dumped into or besides
bodies of water, and this results in the contamination of soil, rivers, stream, ponds and lakes for long periods of
time, posing a threat to water quality, forestry and biodiversity and ecosystem functioning. Ecosystem effects are
difficult to evaluate given that we know relatively little about the links between mercury pollution and ecosystem
service quality. However, conflict has been observed between miners and other non-mining community
members because of incompatibilities in land use between polluting mining activities and other natural-based
livelihoods, such as agriculture or aquaculture production, and even large scale miners.
Trade data is like a ‘burden of disease’ indicator for economic implications from environmental pollution in that
a clear link can be seen between environmental quality and commercial earnings. For example, there is a clear
and proven link between mercury exposure and fish consumption. Fisheries (both wild capture and aquaculture)
provide livelihoods for an estimated 43.5 million people worldwide and are often the most valuable agricultural
exports from developing countries. In 2006, estimated first-hand value of global capture fisheries production
amounted to US$200691.2 billion, while aquaculture production for the same year is valued at US$200678.8
billion.93 World exports of fish and fishery products reached US$200685.9 billion, of which a large proportion
originates in developing countries.94 Access Agreements are also a form of international fisheries trade whereby
the right to fish within the Exclusive Economic Zone (EEZ) is sold to Distant Water Fishing Nations (DDFNs)
providing an important source of revenue for many developing country governments. 95 Crucially, there is a
significant overlap between top fish/fish product producers and low/medium development status gold producing
countries: Cambodia, Mozambique, Togo, Uganda; China, Guatemala, India, Indonesia, Philippines, Thailand,
Vietnam (See Figures 7. and 8.). But trade linkages give the environmental cost of mercury pollution from
ASGM a global dimension if fish exports are linked to mercury pollution incidents. When fish stocks become
contaminated with mercury, fishing livelihoods are compromised (See Box 10. on the Minamata case) –
potentially in both local and distant water fishing and fish products industries.
91
See Khan (2001)
UN Millennium Ecosystem Assessment (2005)
FAO (2008), Part I:5
94
Ibid.
95
The 1982 United Nations Convention on the Law of the Sea (UNCLOS) establishes the 200-nautical mile Exclusive Economic Zone (EEZ). Since then, access agreements
allowing the distant water fishing fleets of developed nations to fish in other States’ waters in return for ‘access fees’. These are typically government-to-government payments,
often considered unfair as they are rarely based on resource rent values and are estimated at no more than 5-10 percent of catch values. UNEP (2008)
92
93
28
Figure 7. Major Marine and Inland Capture Fish Producers in 2006
Source: FAO (2009): Part I, 11
Figure 8. Major Aquaculture Fish Producers in 2006
Source: FAO (2009): Part I, 19
29
The environmental exceptions – Article XX – of the World Trade Organization (WTO) General Agreement on
Tariffs and Trade (GATT)96 allow nations to adopt trade measures necessary to protect “human, animal or plant
life or health” subject to certain conditions 97 once measures are not arbitrary or unjustifiable discrimination
between countries or disguised restrictions on trade. 98 Consumers, on the other hand, simply decide in the
supermarket aisles. Mercury contamination has implications for commercial agriculture and fisheries production,
with potential for significant economic consequences resulting from consumers’ desire to avoid mercury
exposure (and the associated costs) rather than actual poisoning (See Box 9.)
Much depends on knowledge making it to the market however. Fish labeling and certification programmes are
growing in number and improving in quality, but there is room for improvement. 99 Many of these schemes
include provenance as an important contribution to meeting growing public and retailer demand to know where
food products originate. Mercury-in-fish testing, while not included in the majority of certification schemes, is in
place in North America since 2005.100
Box 9. Perception matters – Food Contamination Scares in early 2011
January 2011: Dioxin Contamination Concerns for German Eggs and Pork
The discovery of the toxic chemical dioxin in animal feed has triggered a health alert and hit sales of German eggs and
pork between early January and end of February 2011. German officials said feed tainted with dioxin had been fed to
hens and pigs, contaminating eggs, poultry meat and some pork. Concerns led to sales of produce from 4,700 farms
being halted. The cost for farmers was estimated at €50-60 million per week throughout the crisis (US$67-80 million).
April 2011: Food Exports for Japanese Food Exports in the wake of Fukushima
Around 50 countries imposed restrictions on Japanese food imports after the nuclear plant Fukushima was damaged
in the earthquake of 11 March 2011. America and the European Union both put products from Fukushima and other
prefectures on a watch list, requiring radiation tests. India was the first country to impose a blanket ban on all
Japanese food imports on 6 April 2011. Given that fishing and farming account for a small part of Japan’s total
exports, the direct economic impact of radiation fears on consumer demand in export-destinations is thought to be
minor. Yet, the high quality reputation of Japanese-sourced food will probably suffer for some time to come.
May 2011: E-Coli Outbreak in Germany
Following a fatal outbreak of e-coli food contamination in northern Germany suspected to be linked to cucumbers
(and later bean sprouts), German consumers – and European consumers more generally– stopped eating fresh
vegetables. Russia banned all fresh vegetable imports from the European Union on 2 June 2011. The Dutch
horticulture industry association, Productschap Tuinbouw, estimates the crisis is costing farmers in The Netherlands
€50 million (US$73 million) per week. Spanish producers have demanded compensation from Germany and the EU
for losses they fear could amount to €200 million (US$293million) a week.
Source: The Economist, ‘A spreading cloud of economic and human costs’ 7 April 2011; BBC World News, ‘India bans imports of all Japanese
food’, 6 April 2011; Financial Times, ‘Farmers reel as outbreak hits demand’, 3 June 2011
96
The GATT establishes the core legal principles of the WTO with which all Parties must endeavour to comply.
The justification must be scientifically based and the need for trade measure clearly demonstrated. States can not require another country to adopt a certain technology;
differences in conditions prevailing in other countries must be shown to have been taken into account; negotiations must precede unilateral measures; foreign countries must be
given time to adjust; and, due process must be followed.
98
See http://www.wto.org/english/tratop_e/gatt_e/gatt_e.htm, last accessed 30 March 2011. For relevant case law, see Australia – Salmon (& Article 21.5 – CANADA)1 (DS18),
EC – Asbestos 1 (DS135) http://www.wto.org/english/res_e/booksp_e/dispu_settlement_e.pdf;
http://www.wto.org/english/tratop_e/dispu_e/dispu_agreements_index_e.htm?id=A19#selected_agreement
99
See UNEP (2009a)
100
See Safe Harbor® for more information.
97
30
Box 10. Minamata’s Lessons for Costs of Inaction on Mercury Pollution
Minamata, a fishing village in the south of Japan, is the site of one of the most well-known industrial pollution
incidents involving mercury. In the 1940s and 50s, symptoms of methylmercury poisoning – or what later came to be
known as Minamata disease – were observed in fish, animal, bird and human populations in the area. In 1959, Chisso,
a chemical company (acetaldehyde and vinyl chloride), was scientifically proven as the source of the organic mercury
causing Minamata disease. Despite this, Chisso, supported by the Japanese government, continued to emit mercurypolluted effluents into the sea until 1968. The human tragedy of Minamata is of an unbelievable scale – 101 direct
deaths caused, 800 contributed to and tens of thousands diagnosed with brain and other nervous system damage.
Since 1943, community groups, fishermen’s cooperatives and Minamata victims made tremendous efforts to get
recognition of and compensation for damage to human health and the environment resulting from mercury
contamination. After a difficult series of processes, some compensation has been granted, though application
processes are still ongoing.
After several decades, the mercury-containing sludge remained in the bay. In order to remove the sludge safely and
quickly, and to protect the health of the residents, the prefectural government implemented a clean-up project in
1977. As much as 1.51 million m3 of highly contaminated sludge (more than 25ppm mercury) was dredged from
Minamata bay over 14 years and placed on 58Ha of land for a cost of JPY 48.5 billion or approximately US$600 million.
In June 2011 the former site manager of the landfill project raised concerns at the meeting organized by the Ministry
of Environment of Japan, about the safety of the sludge landfill due to the vulnerability of the seawall steel piles which
contain the waste. The lifetime of the steel was estimated to be less than 50 years and no seismic design was taken
into account at the time of construction. No changes were made to the landfill after these concerns were raised,
leaving the community with unclear answers about the future safety of the mercury-contaminated site.
There is no clear and official data about the number of victims. From various sources it was noted that there are still
huge number of unknown victims and their status needs to be further certified, acknowledged and compensated.
Victims compensated to 2010:
Those who were recognized (as of Dec. 31, 2009)
2,271
1995: Those who accepted the political settlement
approx. 11,000
2004: Those who were recognized by Supreme Court
51
Victims to be compensated (Mainichi Shimbun March 29, 2010)
Those who applied for recognition (as of Feb 28, 2010)
7,608
Those who received free medical treatment (as of Feb 28, 2010)
26,670
Those who may be identified later
not known
Estimated total number of compensated victims
More than 47,600
In addition, commercial fishing, an important local economic activity, was severely affected through death of fish
stocks and collapse of trade. Ultimately, the compensation paid to commercial fishers was a moderate US$100million
or US$430kg kg−1Hg at 2010 dollar values. This value reflects how authorities delayed banning fishing in local fisheries,
and the fact that no ban on fishing was enacted in more distant areas despite fish caught there being found to contain
unsafe mercury levels. Ironically, reducing monetary losses for commercial fishing meant health costs in the region
were drastically increased.
Minamata victims are also insisting on establishing a health and welfare system so that victims can live secure lives
within their society, and undertaking comprehensive health studies of the entire contaminated region in order to
clarify the full extent of damage caused by Minamata disease.
Source: Hylander and Goodsite (2006): 361-363; Takeshi Yasuma. Citizens Against Chemicals Pollution (CACP), Japan. MoE Minamata
Meeting on June 26, 2011; SOSHISA, the Supporting Center for Minamata Disease. http://www.soshisha.org accessed on July 8, 2011.
31
With globalization, national competitiveness becomes increasingly significant, as does international reputation
and social license to operate (local and international) for foreign direct investment (FDI) streams. Countries have
suffered substantial economic losses as a result of environmental pollution if not in terms of exports, then in
decreases in capital investment, private business development and tourism revenues related to actual or
perceived environmental quality. Extrapolation from one contingent valuation study conducted suggests the
global environmental benefits from reduction of mercury pollution could range between US$9.4 – US$12.1
billion. 101 Yet, the economic links between mercury contamination and environmental goods and service
production is virtually unexplored. Just one example of compensation payments for closure of commercial
fisheries has been documented for Minamata, Japan.102 Mercury pollution in sediment or on the bottom of rivers
and ocean bed are costly to clean-up or remediate; but again, clean up of mercury contaminated sites, especially
soil, has not yet been given adequate attention.
In ASGM, the lack of monitoring and evaluation of the impacts of mercury pollution from ASGM operations is
largely why these types of economic analyses have not been conducted. Some ASGM sites are located in remote
areas, far removed from government centers. Local agencies do not, for the most part, have adquate monitoring
equipment or geographic information systems to enable them to do this time of work. Moreover, environmental
standards for specific parameters such as mercury in sediment, mercury in water, and mercury in soil do not exist
in many developing countries due to limited capacity and resources, both financial and human.
Section II. Key Conclusion
However rudimentary or conservative the economic estimates of potential benefits of reducing or eliminating mercury in
general, and in ASGM in particular, this data strongly suggests that prevention of mercury pollution can produce vast
health and economic benefits at the local, national and global level. Reduction and elimination of these exposures before
they occur may actually accelerate economic development.
101
Sundseth et al. (2010): 391 using the results of Jakus et al. (2002)
See Japan Environment Agency (1991); Hylander and Goodsite (2006).
102
32
III. CHALLENGES AND OPPORTUNITIES
Recent price trends for gold suggest that mercury-related health and environment impacts, as well as other
environmental problems related to ASGM are set to increase unless other actions are taken. As explored in
Section I, gold prices from 2009-2010 are already driving new exploration activities in the formal gold sector,
and mining operations are seen to be shifting to regions where ASGM activities are most prevalent. There is a
need to craft solutions but some particular challenges exist. Certain factors show, however, that opportunity
exists for overcoming these barriers and pushing for a transition in ASGM practices globally.
Box 11. The Challenges
Mercury is cheap and trusted in the process of gold amalgamation. The risks can be high in gold mining. Any element
that maximizes financial benefits from engaging in small-scale mining contributes to making it a worthwhile activity –
and mercury is perceived just as such. Its use is deeply embedded in the sector as a whole –even in large scale
operations until the relatively recent transition to cyanide use. Gold supply chains can include informal exchanges of
mercury between ‘middle-men’ and miners for free, low cost or as working capital and loans. Mercury is also a lowpriced technology to miners (without considering the high health and environmental costs imposed on themselves,
their wives and children, friends and wider community). Efforts to reduce or eliminate mercury use in gold mining
must also prevent the development of a more deeply rooted black market for mercury.
ASGM is typically informal. The extent to which ASGM is integrated into the formal economy varies greatly from place
to place. In many countries, ASGM practices very often found side by side or encroaching large scale gold mining
consession areas intentionally and unintentionally. If formalization processes are not in place to allow for land claims
to be made and kept in a manner that is accessible and manageable for artisanal miners, miners’ vulnerability to other
‘shocks’ can increase over the longer term encouraging the use of mercury to lower financial risks even more.
Illegal mercury supply to the sector. The mercury supply to the ASGM is a crucial point. Elemental mercury use in
ASGM sites is typically illegal and very rarely known as legally supplied. Miners usually acquire mercury from illegal
suppliers who may have acquired it from diverting legal supplies (i.e. for the dental or chlor-alkali industries) or
smuggling. Known sources of illegal mercury traded and used in ASGM sites are from Germany, Spain, US, European
Union, Algeria, Saudi Arabia, Italy, Kyrgyzstan and China.Recovered mercury from other sectors (i.e. oil and gas sector)
have been identified as another potential domestic source that should be considered in mercury supply chain
assessments. In many countries where ASGM is present, mercury trading is conducted underground involving powerful
agencies, making it difficult to stop.
Lack of finance for artisanal and small-scale miners. One of the reasons mercury is used in gold mining is that it allows
the miners to produce gold –and therefore income– quickly. As miners do not have savings or direct access to finance,
they need ‘ready money’ for subsistence or to purchase inputs for continued production. A barrier to progress is access
to finance with which to transition to ‘low or no’ mercury gold production. Crucially, hidden financiers and local
investors interested in investing their money in the gold extracting business do exist. The challenge is how to include
these hidden third pary financiers and investors formally. Mining rights are the banking collateral of the mining sector.
Without mining rights, there is no possibility of getting formal financing for mercury-free techniques.
Lack of finance at the national level for investing in sustainable ASGM livelihoods. The legal status of ASGM in some
countries, plus the missing economic argument for investment in programmes to reduce and eliminate mercury or
alternative practices, has meant that relatively little national funding has been made available to this sector.
Furthermore, poor capturing of resource rents in the formal sector, i.e. mining royalties and taxes, has contributed to a
reduced ‘pot’ from which work could arguably be funded. A ‘windfall’ mentality in national policymakers, large-scale
mining companies and miners can lead to short term thinking vis-à-vis broader development choices that do not
include mining or mobilizing necessary financial resources to ensure significant reduction or elimination of mercury,
amongst other sources of negative impacts, in this activity. Additionally, there is a challenge to define sustainable
ASGM livelihoods which are quite different from the ‘sustainable’ mining definition as promoted by the large scale gold
mining companies.
Sources: Wright and Czelusta (2003):1, cited in Lahiri-Dutt (2006); Veiga et al. (2006):54; Siegel and Veiga (2009);; Interviews with gold miners and gold investors in Palu,
Central Sulawesi, Jakarta, Surabaya, Bombana, Bali and West Lombok conducted by Ismawati, Y. In July 2011; Formalization document
33
Box 12. The Opportunities
The outlook for gold. Public attention is firmly fixed on gold due to the ‘gold rush’ resulting from increasing use of gold
for industrial production purposes (i.e. electronic products manufacturing activities) financial crises and, more
recently, concerns over currency stability and inflation in many countries. As long as the demand for gold as an
alternative investment option remains high, a window of opportunity on reforming ASGM exists because of revenue
increases in the sector generally, and indeed, at the national level in gold producing countries.
The Mercury Treaty. Mercury trade in many countries is restricted but not banned. When legally binding instrument
on mercury currently under negotiation comes into force, it is expected to have a gradual impact on the availability of
mercury globally, including in artisanal and small-scale activities. This lack of availability is likely to motivate transition
to other mining and processing techniques, but care must be taken to prevent growth in the black market for mercury
for use in ASGM.
Growing ESG (Environment, Social, Governance) risk awareness in the finance sector. The UN-backed Principles for
Responsible Investment (PRI) and United Nations Environment Programme Finance Initiative launched the PRI
Universal Owner Project to assess the most material external costs to investors. The resulting study PRI/UNEP FI (2010)
Universal Ownership: Why environmental externalities matter to institutional investors estimates that in 2008 the
World's top 3,000 public companies were responsible for a third of all global environmental damage to the value of
US$2.15 trillion. The most environmentally damaging business sectors are utilities, oil and gas producers, and industrial
metals and mining. Those three accounted for almost a trillion dollars worth of environmental harm in 2008. The study
suggests that workers and retirees could see lower pension payments from funds invested in companies exposed to
environmental costs. It recommends that investors should exercise their ownership rights to encourage companies and
policy-makers to reduce environmental externalities, and request regular monitoring and reporting from investment
managers on how they are addressing exposure to environmental and social risks.
New Corporate Social Responsibility (CSR) awareness in the mining sector. There are a number of different standards
recently developed that both result from and inform a new level of corporate social responsibility (CSR) in the gold
mining sector. Solidaridad compares eight of the leading initiatives in the precious metals industry in a benchmark
study based on stakeholder views released in March 2011. These initiatives are highly controversial and sometimes
rejected by civil society groups as re-branding an extremely harmful activity as "green". An opportunity exists in
conducting due diligence on mineral supply chains for corporations to contribute positively on the issue of mercury
and artisanal and small-scale mining. Creating targets to support the reduction or elimination of mercury use in this
sector as part of CSR strategies could lead to better technical and financial flows to small-scale miners and promote
budding suppliers of mercury-free gold.
New market creation mechanisms to differentiate gold sources. A niche market for fair trade artisanally-mined gold is
emerging. Associated with this niche market is the opportunity to raise awareness on this issue and promote cleaner
ASGM practices. Supply of fair trade gold to the market remains limited to date however.
Sources: Wright and Czelusta (2003):1, cited in Lahiri-Dutt (2006); Veiga et al. (2006):54; Siegel and Veiga (2009); PRI/UNEP FI (2010) , accessed 20 April 2011; World Gold
Council (2011); Formalization document; Stark and Levin (2011);Fair Trade Foundation, 17 March 2010, accessed 16 November 2010.
Section III. Key Conclusion
The widespread use of mercury in ASGM points towards the complexity of finding appropriate measures to mitigate
problems associated with its use. The consensus suggests that this mercury reduction is possible though a number of
challenges must be overcome in the process.
34
IV. ENABLING THE TRANSITION: POLICY AND FINANCING
OPTIONS
Reiterating the views of many experienced practitioners in this field103, a purely political solution will not solve
what is essentially an economic problem. Although safer alternatives are available, currently mercury functions
as a financial ‘tool’ for impoverished miners due to its low cost, easy accessibility and efficiency. The question
is how to make appropriate sustainable development decisions against a backdrop of large external costs from
harm to human health and the environment and what transitional approach can be promoted for better and safer
livelihood activities. This will necessitate law and markets working together at national, regional and
international levels to coherently align economic, environmental and human health goals.
A. A NOTE ON INSTITUTIONAL ARRANGEMENTS
Coordination and coherency with other policies is an important condition for success in transitioning to low-no
mercury use in artisanal and small-scale gold mining. If policy goals – and the measures to meet these – are not
aligned, the only outcome can be an undermining of the efforts and investment being made.
One key element is the legal status of artisanal and small-scale mining. If this is designated as an illegal activity,
little can be done through official means to remedy the aforementioned problems plaguing this industry. This
includes mechanisms to recognize property rights and capacity building for miners – quite possibly the lynch pin
enabling ASGM to provide poverty reduction and economic development opportunities while improving
environmental management and social conditions. In this case, progress is likely to depend on the will and
recognition of international organizations and associations, as well as national agencies and relevant local
stakeholders.
Even where lawful, or extra-legal, strong regulated control, monitoring and enforcement are not likely to be
successful in many ASGM set-ups. They are often marginalized communities, geographically removed from
central government reach. ASGM can be a secondary, informal economic activity to some other livelihood (e.g.
farming). Furthermore, gold ‘rushes’ led by new finds or new economic drivers mean constant migration, everchanging community members and numbers of miners. Lack of monitoring measures, trained
inspectors/investigators and law enforcement personnel combined with other factors, such as security, can render
a legal approach ineffective and ambiguous. In this context, realistic legal reform, institutional arrangements
suited to national capacities, and economic options to support and incentivize desired changes are central to
workable solutions.
B. AN OVERVIEW OF INTEGRATED POLICY STRATEGIES ON MERCURY-USE IN ASGM
Integrated policy making is a framework for including ‘economic, social, environment (ESE)’ implications and
interactions in policy cycles, helping policy goals/development to correspond with the policy environment.104
Given the particular challenges in tackling mercury-use in artisanal and small-scale gold mining, the need for
ESE integration through combining ‘top-down’ and ‘bottom-up’ approaches described below is evident. Cost
effective policy interventions must look at where the incremental cost of action on reducing or eliminating
mercury in ASGM can be reduced by creating synergies with other activities in the sector or locality. There is
also an important ‘sizing’ consideration – countries must evaluate how best scarce resources are allocated and
spent.
1. Formalization
Low profits and high costs of formality-complex, as well as lack of formal property rights and institutional
structures, such as miners’ associations, cooperatives or federations, fuel continued illegitimate mining in
developing countries.105 Formalization is widely considered as one policy response with the potential to provide
avenues for legitimate capacity building for miners, community outreach on health, education, alternative
103
See Hinton et al. (2003); Telmer and Stapper (2007)
UNEP (2009b):14-19
Lahiri-Dutt (2006): 17
104
105
35
livelihoods training for local economic diversification and, where desired, nurturing ASGM itself as a safe,
viable livelihood as part of rural poverty reduction efforts. Formalization also provides opportunity for better
small-scale mining practices in designated areas from the planning stage until the post-mining stage integrated to
the local development plans strategy and policy. The process of formalization represents a challenge for
policymakers given the geographic location and ‘hidden economy’ characteristics of both ASGM set-ups and
communities. But given the potential rewards in terms of poverty reduction, it is a challenge worth surmounting
–if not completely then at least to some extent.106 However, even in the absence of formalized structures for
miners, outreach to communities on health and education form part of the state’s obligation to respect, to protect
and to fulfil basic citizens’ rights, regardless of their occupation, that are guaranteed in most countries under
their constitution.
2. Market-based policy instruments
As incentive measures, economic instruments aim to re-align private interests with public policy targets through
altering market signals, which include prices and information and ownership rights to highlight true impact of
consumption and production choices and encourage desired lasting changes in behavior.107
Crucial to viable ASGM is the question of property rights. Apart from the legal question of how to recognize
property rights, in economic terms the absence of property rights creates disincentives for environmental asset
(or common property) protection and sustainable management because the benefits can not be fully captured by
‘owner’ entities through increased return on investment (e.g. productivity gains) or selling of the property right.
Examples of property right–based instruments include: Communal Tenure and Common Property Rights,
Payments for Ecosystem Services (PES), transferable development and grazing rights and tradable permits and
quotas.
It is difficult to argue for full and correct assigment of ‘property rights’ in ASGM practices. In many countries,
land encroached for artisanal and small-scale mining are state-owned land or protected forest and other
ecosystems. Many questions also exist with respect to the property rights of local or forest communities. In
practical terms however, mining title or permit regimes are crucial to articulating both the rights and
responsibilities of ASGM operators. The challenge in the context of artisanal mining is to develop mining title
systems that can serve small-scale miners and not just junior and other mining companies, often to the detriment
of artisanal and small-scale miners.
A second set of market based instruments108 relevant for reducing/eliminating mercury from artisanal and smallscale gold production include government and/or qualified third party applications of certification, labeling,
environmental reporting or public information disclosure schemes that provide information along supply and
consumption chains about environment and health risks in the production gold, enabling market creation for
‘mercury-free’ gold.
3. Sector-based solutions
Mining companies have difficulties in convincing many stakeholders of the value they bring to the localities and
countries in which they operate, in part due to extensive environmental degradation that frequently accompanies
their operations. While some believe that mining operations will ultimately leave employees, local communities
and nations better off financially in the short-term, industry provision of key public services like health and
education raises questions. Particularly as sustained service provision is not the norm. 109 One way in which they
can contribute is in providing technical support and cleanup of contaminated sites resulting from artisanal and
106
See forthcoming UNEP Analysis for Stakeholders on Formalization in ASGM Sector based on Experiences in Latin America, Africa and Asia. More information available at:
http://www.unep.org/hazardoussubstances/FormalizationDocument/tabid/56052/Default.aspx
107
The objective of this realignment is to create conditions whereby markets do not ‘fail’ in their objective to achieve efficiency. This essentially infers that more is gotten out of
the resources in use, through reorganization or technological improvements for example, or new resources are found and exploited. Economic instruments can also be designed to
recover costs of government environmental management programmes and for revenue-raising beyond the costs of government service provision. These roles are not mutually
exclusive but understanding the difference between each is important for policy-makers in deciding to use these instruments or not and how the choice, design and
implementation of specific instruments will vary according to the objectives they are expected to fulfill.
108
See forthcoming piece from UNEP: An Analysis of Economic Instruments in Sound Management of Chemicals for more information on economic instrument use in chemicals
management.
109
See MMSD (2002)
36
small-scale operations. Furthermore, mining royalties can incorporate non-monetary items such as safety
equipment for artisanal miners or retorting materials (See Box 13.).110
Box 13. Large-Scale and Small-Scale ‘Working Together’: SAESSCAM in Congo (DRC)
SAESSCAM (Service d’Assistance et d’Encadrement du Small-Scale Mining) is the Congolese State’s technical
assistance and training service to the artisanal and small-scale sector, including extension services. An international
NGO, supported by a number of large-scale companies operating in the Katanga Province, and various mining
industry consulting partners have been working with SAESSCAM to develop a strategy for artisanal mining regulation,
strengthening and transition. Programs with SAESSCAM have included training in financial and information
management, mine safety, community development and targeted health and gender projects.
Sources: CASM-IFC CommDev-ICMM (2006)
4. Supporting entrepreneurial development
Leveraging ASGM communities’ capacities to generate wealth independently is crucial. Productivity
comparison of mercury-intensive ASGM and alternatives must demonstrate that ‘clean’ ASGM or alternative
livelihoods will generate similar, if not better, returns over similar time frames and comparable capital
investment demands for the miners. 111 A second option is to support diversified value-added activities and
auxiliary enterprises. Furthermore, entrepreneurial training can be provided as part of formalization process.
5. Community-based solutions
Switching to mercury reduction or elimination technologies and methods includes some transaction costs beyond
capital investments. Where banditry is common, miners are vulnerable to attack during this process and therefore
the quicker, unsafe burning off of mercury is better if they are to increase their chance of keeping the proceeds of
their mining activities. When miners are organized, the use of retorts, and other mercury reduction technologies,
tends to be more sustainable. Acknowledgement or integration of miner’s groups into local community-based
organizations or indigenous peoples’ organizations will provide stronger local support and ensure the benefits of
the ASGM activities trickle down to local communities.
C. FINANCING THE TRANSITION
Mobilizing financial resources is a critical aspect of encouraging adoption of cleaner technologies in artisanal
and small-scale gold mining. Main sources of finance currently identified include multilateral and bilateral
funding, national budgets in gold producing countries, the private sector, and private investment enabling
miner’s access to capital at the local level.
1. Multilateral and bilateral funding sources for reducing or eliminating mercury in
ASGM operations112
The Global Environment Facility (GEF) operates as a mechanism for international co-operation for providing
new and additional grants and concessional funding to meet the agreed incremental costs of measures to achieve
agreed global environmental benefits in the following areas: biological diversity; climate change; international
waters; ozone layer protection; land degradation; and persistent organic pollutants. It is also the designated
financial mechanism for a number of Multilateral Environmental Agreements, which also newly includes sound
chemicals management as a cross-cutting topic for these.
The Strategic Approach to International Chemicals Management (SAICM) sets out a comprehensive policy
framework for the achievement of global chemicals management objectives, including in relation to multilateral
environment agreements, and the financing of their implementation. A full range of financial arrangements to
support the broad chemicals management objectives of SAICM are set out in its Overarching Policy Strategy.
These include supporting the initial capacity-building activities for the implementation of SAICM objectives
110
See World Bank (2006)
See Spellberg and Kaplan (2010)
A key supporting document for this section is Financing the chemicals and wastes agenda, Note by UNEP’s Executive Director UNEP/GCSS.XI/INF/8
111
112
37
under the new SAICM “Quick Start Programme” and its voluntary, time-limited trust fund. The Quick Start
Programme (QSP) is a dedicated financial mechanism of the SAICM designed to support initial capacitybuilding activities in developing countries and countries with economies in transition for the implementation of
Strategic Approach objectives through its QSP Trust Fund. The Programme is time limited with disbursement of
funds due to cease by 2013 (See Box 14.).
Box 14. Testing Guidance on a National Strategic Plan for ASGM in the Philippines and
Cambodia with the SAICM Quick Start Program
As per the request of the Governing Council of the United Nations Environmental Program (UNEP), the UNEP
Chemicals Branch initiated regional projects in South-East Asia under the Quick Start program of the Strategic
Approach to International Chemicals Management (SAICM). The project involved the formulation of guidance
document for Governments in the development of a national strategic plan relating to improving practices and
working conditions in artisanal small-scale mining (ASM) and reduce its impact on the global environment.
The guidance document was used by the Philippines and Cambodia in drafting their National Strategic Plans for
reducing domestic mercury use in ASM activities. Regional collaboration and coordination was a key aspect of this
process and multiple stakeholders were consulted throughout the development of the NSP. The preparations and
production of the Cambodian and Philippine NSPs totaled $93,500, and $78,500 respectively.
The Swiss Agency for Development and Cooperation (SDC), founded on the principles of poverty reduction and
economic self-reliance, is an international cooperation agency housed within the Swedish Federal Department of
Foreign Affairs (FDFA). The SDC has been active in Mongolia since 2001, after a series of harsh weather
conditions that devastated much of the country and Mongolia’s national economy. Their Natural Resource
Management office has been assisting the national government to create a pilot project to create a sustainable
ASM sector. This pilot project, entitled “Support to Artisanal Mining in Mongolia” (SAM) was designed to
tackle the social and environmental issues that result from mining operations. Running for eight years, the SAM
project aims to implement knowledge gained from small scale and artisanal mining field programs to create a
meaningful and valuable outcome for the mining communities of Mongolia.113
The Canadian Government has committed to supporting Peru in raising socio-environmental standards of
extractive industries. Through the Peru-Canada Mineral Resources Reform Project (PERCAN), the Canadian
International Development Agency (CIDA) and the Peruvian Ministry of Energy and Mines (MOU) have joined
forces to reach the goals of the PERCAN project. The project intends to implement sound mining practices in
key mining communities throughout Peru, ensuring that the benefits of economic growth reach all sectors of
Peruvian society.114
The US State Department has also been involved in reducing mercury releases from ASGM in Francophone
West Africa. The project seeks to raise awareness of mercury issues among stakeholders and the sustained
reduction of mercury use and release in the sector.
The World Bank has supported a number of activities and is playing a number of different roles, including
trustee of donor funds, financial contributor and implementing agency. Recent examples of their ASGM work
include Mongolia, the Congo (DRC), Papa New Guinea and Tanzania115
In terms of private foundations, the Mitchell Kapor Foundation has made persistent organic pollutants (POPs)
the focus of its grant-making. The Ford Foundation made a US$2.2 million grant to Vietnam in 2006 to bring
critical health services to people living with dioxin-caused long-term disabilities. The third is the Wellcome
Trust, the largest charity in the UK, which funded a film on the presence of flame retardants in breast milk.116
Swiss Agency for Development and Cooperation, SAM Project Annual Report – 2008 (2009)
Canadian International Development Agency (2011)
Mongolia: Mining Sector Technical Assistance Project (2008-2010, US$10.3million); Congo (DRC):Growth with Governance in the Mineral Sector Project (2010-2015,
US$50million); Papa New Guinea: Second Mining Sector Institutional Strengthening (US$18.7million, 2008-2013); Tanzania: Extractive Industries Transparency Initiative
(US$0.3million, 2010-2012).
116
Financing the chemicals and wastes agenda, Note by the Executive Director UNEP/GCSS.XI/INF/8
113
114
115
38
2. National sources of finance
International funding sources are often time limited and project-focused rather than continuous and targeted to
support programmatic delivery of public services. For this reason, many consider national sources of finances to
be central to securing sustainable, secure resource flows for securing progress.
The national budget is a key potential source of financing for public projects or programmes. Yet development
aid rarely focuses on chemicals and wastes management; these issues are also seldom included in countries’
requests. 117 Often, governmental departments responsible for implementation, monitoring and reporting on
interventions to reduce or eliminate mercury use in ASGM can find its priorities –and the corresponding budget
allocations– superseded by vital national priorities like education or health. Key to creating an enabling
environment for reducing mercury pollution from artisanal gold mining is support for national policy makers to
keep a high level of priority and visibility to this issue. Increasing political and financial support is likely to
require linking knowledge of harms to human health and the environment, alternative livelihoods and poverty
reduction, and the related Millennium Development Goals (MDGs).
Budget-making is an iterative process involving several back-and-forth exchanges between central budget
committees and Line Ministries during both preparation and execution phases. This is, in reality, a political
process in which ministries must make a strong, substantiated case linked to development priorities in order to
receive funding.118 Linking significant reduction or elimination of mercury in ASGM or planning for alternative
livelihoods to national development priorities illustrates clearly how this goal contributes to poverty reduction
and economic development. Through shaping and responding to government development policy, proposals for
appropriation of funds for achieving reduction/elimination of mercury in ASGM are likely to be considered more
seriously.
a) Multilateral/bi-lateral sources for national programmatic and project development
National budgetary cycles operate in the context of changing development aid modalities. Country-specific aid
delivery frameworks have been evolving away from project-driven and donor managed development
assistance119 towards the new framework of Budget Support, which is defined as “a method of financing a
partner country’s budget through a transfer of resources from an external financing agency to the partner
government’s national treasury. The funds thus transferred are managed in accordance with the recipient’s
budgetary procedures.” 120 The main characteristic of this new modality is that development aid funds are
channeled directly through the budget of partner countries and spending decisions are based on a nationally
developed strategy defining the national development priorities.
National development strategies are usually contained in National Development Plans (NDPs) and/or Poverty
Reduction Strategy Papers (PRSPs), which form the primary development policy framework and medium-term
planning tools in many countries. In many cases, the NDP/PRSP implementation mechanisms are tied to national
budget process through the Medium Term Fiscal Frameworks (MTFFs) and Medium Term Expenditure
Frameworks (MTEFs), which details allocations of public expenditure over 3-5 year periods. As such,
understanding the development priorities identified as part of the national intensive, cross-sectoral dialogue that
takes place on development planning is a first step to securing national and external funding. The guidance on
developing a National Strategic Plan for the artisanal and small-scale gold sector will be important in this
process (See Box 14. above).
Partnership funding for development, as channeled through national budgets, is potentially one of the largest
sources of sustainable funding; but only if links are made between mercury pollution from ASGM and
development priorities.
117
Ibid.
Individuals, institutions and organizations engaged in lobbying activities in general seek to persuade decision-makers of why certain issues, policies or laws should be
supported or rejected. Lobbying in order to influence political decisions is recognized as a legitimate and necessary part of the democratic process, despite some negative
connotations associated with the practice. The same is true of internal lobbying as part of national budgetary processes.
119
For more information on the change from project to budget support, see: Oversees Development Institute (2006):10; Bird (2007); Booth and Fritz (2008).
120
OECD/ DAC, cited in Lawson and Bird (2008):23.
118
39
b) Capturing windfall gains from formal gold resource exploitation for the longer term
Where ASGM is illegal or largely informal, not much can be done in terms of raising money from the sector
itself to finance reduction/elimination of mercury within it. Mining royalties are typically based on the value,
weight or volume of formal mineral production and are paid regardless of profitability of private mining firms.
This revenue stream may provide a possible source of finance for necessary mercury reduction/elimination
efforts, as well as cleanup of contaminated sites in the artisanal and small-scale portion of the gold sector.
Royalties may have dramatic impacts on rates of return on investment or negligible effects depending on how
the tax is introduced and whether or not it can be offset against corporate or other taxes. For national
policymakers, a key word is ‘balance’: mining royalties, whatever their form, should ensure fair compensation
for the loss or use of the country’s natural resources without jeopardizing the wider social benefits to be had
from developing the mining sector. There must also be balance however in how the gains and costs from mining
activities are distributed.
Firstly, there is the question of reasonable share of gains between mining companies and the nations within
which the mining activity takes place. Then there are questions of how local communities, who bear the majority
of mining-related negative impacts (or costs), are rewarded in comparison to how much royalty revenues are
retained by government (central or provisional). Furthermore, who are the winners and losers within local
mining communities? Who benefits from gainful employment, training or other social investments by large-scale
operators and who loses livelihood capacities – be they artisanal miners, farmers or fishers – and more, including
quality of health and environment. Are mining royalties redistributed to this portion of the population? In reality
the answer to this question is no, but it makes sense that they should be and, as such, this is an avenue of funding
that should be explored in the future.
Given corporate social responsibility (CSR) targets, some companies may prefer to see royalties distributed, at
least in part, at the local level. This helps strengthen companies’ negotiation positions when it comes to
establishing favorable royalty system and rate with governments. Even if minimizing local environmental and
social negatives is not part of the company’s mission per se, it may be important to their investors, customers
and the public in their home countries and therefore helps to minimize negative reputation impacts. Much
depends on the political stability of the country. Typically, mining companies prefer to pay an efficient
government that delivers social services in rural mining communities rather than providing these services.121 Yet
this is often not feasible due to corrupt or ineffective governmental agencies or officials.
The advantages and disadvantages of royalties have been well discussed. 122 Tax obligations are a key
consideration in investment decision-making. As such, there are sound social welfare arguments against
charging royalties or at least royalties that ask too much. However, civil society needs to see direct benefits
coming from development of such sectors beyond employment impacts. Essentially, mining companies want a
social license to operate at minimal cost, including avoiding paying for their external costs, which ultimately
burden local communities.
According to the World Bank (2006) report on mining royalties, most of the world’s nations impose a royalty tax
on producers of minerals, though methods, rates and justification varies widely. Most mineral rich nations have
initiated regulatory reform of their mineral sector over the past two decades, but evidence suggests that redistribution considerations have been poorly incorporated into this restructuring (See Table 11.).123
Another avenue that has yet to be fully explored is requiring companies to pay for their negative environmental
impacts, be it contamination, use of water, deforestation, etc. Assuming there is structural capacity for such a
program within a nation, such strategies help to monetize the negative impacts of the extractive industry that can
be funneled to poverty alleviation programs in mining communities and move towards cost internalization in the
industry which is necessary to correct market failure.
As with most policy prescriptions it is important to consider the social controversies it may instigate, this is
especially relevant in the case of artisanal and small-scale gold mining. The royalty schemes described above
may appear to help mining communities by providing additional financial support, but the larger picture shows
121
World Bank (2006): 205
See World Bank (2006); Parsons (2008)
Ibid.
122
123
40
that this may not be the case. A significant number of government officials and large-scale workers feel that
small-scale workers should pay royalties despite their low incomes. If such royalties are imposed on large scale
operations, the resulting backlash from the national government and local community may make life even more
difficult for artisanal miners.
The Extractive Industries Transparency Initiative (EITI) sets a global standard for managing revenues from
natural resources. It strengthens governance by improving transparency and accountability in the extractives
sector through the verification and full publication of company payments and government revenues from oil, gas
and mining. Eleven countries are now EITI ‘Compliant Countries’. 124 Twenty-four other countries have
candidate status.125The EITI has also won the support of over eighty global investment institutions (collectively
managing over US$16 trillion), three hundred Civil Society Organizations and International Organizations,
including UNEP, the World Bank, IMF, African Development Bank, Asian Development Bank, the InterAmerican Development Bank, the European Bank for Reconstruction and Development, and the European
Investment Bank and a number of significant donor governments. However, LSM and ASM have some
significant differences that can affect these types of initiatives.
ASM involves a variety of stakeholders including miners, middlemen, gold shops, jewelry companies, etc. As a
result, the crucial transparency issue in ASM is not only about the company payments and the transparency of
government revenues as emphasized in LSM, but also the fairness of pricing across the supply chain. Therefore
the tranparency and accountability surrounding payments and transactions should be established for all ASM
stakeholders and government revenues from the ASGM sector and should also be publicly published. This public
knowledge of price disparities and revenue obtained by each stakeholder can help ensure a more financially
balanced supply chain.
Table 11.
Mining Royalty Revenue Capturing, Collection and Distribution in Developing and
‘in Transition’ Regions
Region
Royalty Scheme Design
Apportioned
Africa
 Largely imposed by central governments
 Majority value-based royalties with rates around 3percent
 Most mining codes provide for royalty deferment or
exemption in exceptional cases
Collected by the central government
Apportioned through central budgets
Asia & Pacific
 Some central government, some provincial and local
government
 Unit-based royalties on bulk minerals and value-based
royalties on other minerals at rates between 2-19.5percent
 A few nations allow for deferment or reduction of royalty
payments in difficult economic periods
 Some local authorities impose ground water retribution
and fix land rent
Collected by the central, provincial or
local governments and apportioned
through central or provincial budgets.
What happens in the case of local
authorities??
Latin America
 Imposed by central/provincial governments
 Typically value-based royalties, ranging from 2-3percent
 Some large producer nations do not impose royalties e.g.
Mexico, some Argentine provinces
 Deferment is not usually allowed where royalties do exist
Royalties are generally distributed to
mandated parties rather than central
treasuries
Source: Summarized and adapted from World Bank (2006)
124
Gold producers: Azerbaijan, Ghana, Kyrgyz Republic, Liberia, Mongolia, Nigeria and Niger.
Gold producers: Burkina Faso, Cameroon, Democratic Republic of Congo, Côte d’Ivoire, Gabon, Guatemala, Guinea, Indonesia, Mali, Mauritania, Madagascar, Mozambique,
Peru, Tanzania, Togo and Zambia.
125
41
3. Enabling miner’s access to capital at the local level
Research from Tanzania demonstrates that where miners had access to social and financial capital required to
own a pit or hold a claim, even if inactive, tend to avoid slipping into extreme poverty.126 Moreover miners can
be eager to re-invest profits or look to private investors for capital investment in mechanization to scale-up lowno mercury production efforts, once mining rights are formally recognized.127 Though there is little data and no
blanket recipe for success, access to capital by miners themselves is being hailed as key in securing progress on a
larger scale.
a) Facilitating Flows of Private Investment to Mining Communities
A certain level of competition arises between countries vying to attract investment flows. The intensity with
which a country must compete in this fashion depends on its investment climates, i.e. the expected rate of return
for investors and the associated level of risk for a particular project.128 Therefore, nations pursuing funding from
private investment in the mining sector must think critically about both return and risk from mining activities.
The role of investment houses, banks and insurers in making decisions related to financing in the mining sector
is central. These bodies are key in driving responsible investment that delivers ‘triple bottom line’ returns. As
discussed previously, large-scale corporations benefits already from the ‘cheap’ exploration services that smallscale activities provide. ASGM sub-sector can benefit from the financial and technical ‘know-how’ and
resources of the formal mining sector in making the transition away from mercury-based production. There is
scope for the finance sector to become the lever by which the large-scale and small-scale segments move
towards working better together (See Box 15.). But first, mercury use in ASGM would have to be clearly linked
to the ESG (environment, social, governance) risks for large-scale formal entities who engage in formal money
markets.
Box 15. The UN Principles for Responsible Investment
The United Nations-backed Principles for Responsible Investment Initiative (PRI) were devised by the investment
community. They reflect the view that environmental, social and corporate governance (ESG) issues can affect the
performance of investment portfolios and therefore must be given appropriate consideration by investors if they are
to fulfill their fiduciary (or equivalent) duty. The Principles provide a voluntary framework by which all investors can
better align their objectives with those of society at large.
See www.unpri.org for more information.
Private investment mechanisms for ASGM have not been analyzed in great depth for this sector. These need
further exploration, as lack of investment at the local level is likely to be the key enabling condition for progress
in this sector. One point is certain however. A critical enabling condition for private investment is whether or not
ASGM is legalized and integrated into the formal economy. Furthermore, mining titles, permits and other legal
instruments must be designed to reflect conditions in ASGM. Finally, local investors do exist but formalizing
these hidden third-party financing arrangements is a challenge.
Ethical market creation and product differentiation instruments have received some attention in ASGM
discussions. Certification, labeling, environmental reporting and public information disclosure schemes can
provide information along supply and consumption chains about environment and health risks in the production
gold generating demand for ‘mercury-free’ gold. The challenge of differentiating gold produced with nonmercury techniques from mercury-amalgamated gold and concerns over segregated supply chains, feasibility
costs and verification, amongst other difficulties, are real obstacles. Some initiatives exist in other areas that
provide models for how these may be overcome (See Box 16.).
126
See Fisher et al. (2009)
Geological information and long-term mining planning can also be influential in attracting private capital investors. See Hinton et al. (2003)
See World Bank (2006)
127
128
42
Box 16. Incentivizing Responsible Production of Palm Oil – the GreenPalm Certificate
Trading Platform
Round Table on Sustainable Palm Oil (RSPO)-certified palm oil is available, at a premium, on the market; however
buyers have been slow on the uptake despite many major manufacturers and retailers making commitments to
support sustainable palm oil production. Part of the problem is the complexity of sourcing sufficient volumes of
certified, traceable sustainable palm oil – and the cost entailed in segregating this from existing supply chains. In many
cases, it may not be possible to identify the origin of palm content for certain. This leaves manufacturers in the difficult
position of trying to source ethically while being unable to find out if they are supplied by sustainable suppliers.
To solve this problem, the RSPO has allowed a novel route to the sustainable palm oil market for both demanders and
suppliers. GreenPalm is a “book and claim” initiative which rewards producers for adopting sustainability methods and
enables businesses to off-set their use of palm without the need for expensive segregation of the oil in existing supply
chains. Certificates corresponding to tonnes of sustainable oil production are sold by RSPO-certified oil producers to
end-users of palm oil wishing to support sustainable palm oil development within existing supply chains – but the oil
itself is not part of the trade. A certified sustainable producer can trade oil on the world commodity markets as normal
and still make a sustainability premium through the separate sale of their certificates. Palm oil purchasers can buy oil
on standard markets, but support nascent sustainable palm oil production through purchasing and retiring sustainable
palm oil certificates. The initiative incentivizes sustainable production at source to drive positive change in palm oil
supply chains, making responsible, ethical production methods commercially attractive.
As GreenPalm certificate trading is not tied to the supply chain, producers large and small alike can benefit. Smaller
businesses, likely to be excluded from other RSPO mechanisms can still earn a GreenPalm premium. They include
producers who sell oil only to their domestic markets, and smallholders whose fruit goes to the major mills for
processing. In all, GreenPalm is a flexible, interim measure to support palm oil users while they make the necessary
supply chain changes – or, as with complex blends or derivatives, to allow them to fund sustainable production in the
absence of available certified supplies.
Source: Forthcoming UNEP-IUCN publication on International Payments for Ecosystem Services; GreenPalm.org
b) Public Private Partnerships129
Public Private Partnerships (PPPs) encompass a wide variety of relationships between the not-for profit and for
profit sectors. Within PPPs, these two sectors work together to promote a specific social benefit. The
partnerships between private companies and mining communities go beyond the traditional commercial
transaction of most aid projects; these initiatives involve the exchange of services, complimentary goal setting
and imply recognition of good social outcomes in the long term. Private projects of this sort offer marked
benefits to communities and require complementarities between the parties’ interest in order for them to function
effectively. Ideally, these complementarities can be found when both parties can achieve their goals only thought
cooperation.
Governance arrangements are also very important in ensuring effectiveness and sustainability of PPPs. Ensuring
that the each party is represented equally or to the extent that was laid out in the initial project outline will ensure
that concerns and priorities from each side are included into the project. While one advantage of PPPs is that
they help promote Corporate Social Responsibility (CSR) through promoting a different behavior in the private
sector, there are concerns that inappropriate PPPs can at best amount to privatization of the public sector, and at
worst undermine the goals of the public sector institutions involved. Given the possibilities for unfavorable
results, it is incredibly important to set out three key aspects of the partnership prior to beginning the project:
appropriateness, representativeness, and accountability. Once these aspects of the project are solidified, it is
appropriate proceeded with any subsequent actions.
Some successful PPP examples are emerging from artisanal and small-scale gold sector (See Box 17.) but further
models need to be identified and analyzed to better inform further discussion of PPPs as financing mechanisms
for transitioning to low-no mercury gold production in this context.
129
Financing the chemicals and wastes agenda, Note by the Executive Director UNEP/GCSS.XI/INF/8
43
Box 17. Public-private partnership: success story of Mongolia
Bornuur Artisanal Small Scale Miners Association (BASMA), Mongolia, is an example of a public-private partnership
which has been successful in providing financial assistance to the livelihood of its members and the establishment of
mercury-free gold processing plant. The law of Mongolia bans the use of mercury and when the government enforced
this, many roller mills were confiscated. This prompted the artisanal miners of Bornuur to organize, pool their
resources and seek support from the government and the Swiss Agency for Development and Cooperation to establish
mercury-free processing plant. The plant employs former artisanal miners and helps generate income for members
through processing services. The association, which is composed of about 300 miners, has also established a company
which provided loans to the artisanal miners for startup capital. BASMA was also instrumental in uniting artisanal
miners, strengthening their capacity on safe mining, financial management and cooperation with local miners to
address immediate needs at the local level. The association was also responsible in resolving land issues in small-scale
mining areas.
Source: Global Forum on Artisanal and Small-scale Mining, Manila, December 2010
c)
Microfinance
Throughout the past 30 years, microfinance has been branded as a key policy and programme intervention tool
for poverty reduction and community based economic and social development. The terms Microfinance and
Microcredit are interchangeable in practice and both refer to the provision on tiny loans to the poor to help them
establish or expand an income generating activity. Ideally, these systems allow impoverished persons to escape
poverty and gain a stable and health lifestyle. The early impacts of Microfinance (MFI) systems were positive,
but were evaluated under very thin criteria and without robust evidence to support the project reports. While
initially instituted to spur enterprise, evidence suggests that MFI has often been used to cover basic consumption
needs.130 While examples do exist of successful MFI initiatives, there are quite a few examples of unsustainable
microcredit indebtedness in developing countries.131
Miners in developing countries have expressed increased interest in microfinance loans in the belief that a
village banking model might work where tradition MFI systems may have failed.132 Within the ASGM context,
it should be clear what the microcredit will be provided for. The amount of loan given through microcredit is
very small compared to capital or operational costs that can be incurred in transitionning to reduced mercury or
alternative practices, depending on the technology being considered. A provision of soft loans with, for example,
one-year grace period for a formal ASGM miners groups (cooperative, association or federation) applying nonmercury technique is likely to be both more attractive and effective. In 2001, Indonesia’s Ministry of
Environment, supported by KfW, introduced soft loan within the framework of IEPC (Industrial Efficiency and
Polution Control) for small and medium scale companies in their cleaner production and polution abatement
program.133
D. THE NEED FOR A LONG TERM STRATEGY
A natural precondition to securing national sources of finance is the formalization and recognition of the ASGM
sector by the national government. If the sector is not formalized, the acquisition of funds from the private sector
and national government is essentially impossible. Parallel with formalization processes, local governments
supported by the central government, national and international agencies, should also develop a Strategic Plan
for the ASGM sector based on the Polluter Pays and Precautionary Principles. In this, government entities need
to be equipped with adequate tools and measures to periodically monitor the implementation of the new legal
entity, especially its environmental, socio-economic and health impacts performance for the long term.
A Long-Term Strategy means to integrate (or mainstream) selected issues in the ASGM sector into national
development planning processes, in accordance with a country’s development priorities. It aims to increase
130
See Dichter (2006)
See Banking with the Poor Network (2009); WSJ ‘Debt Trends In Peru’s Personal, Microfinance Sectors Spark Warnings’, 16 December 2010, accessed 6 June 2011
See Spiegel (2009)
133
Source http://www.greengrowth.org/download/green-business-pub/Greening_of_the_Business/Governments/Laksmi_Dhewanthi_Indonesia_Policy_Initiatives.pdf
131
132
44
awareness of the full scope of the sector and its externalities among high level officials and other stakeholders by
involving them in the process of situation and needs analysis, and of priority setting, and to build technical
capacity of participating agencies to advocate for their priorities in advance of and during development planning
cycles. Following which, it is hoped that more funds from national budgets will be allocated for tackling the
issue at stake. The UNDP-UNEP Partnership Initiative for the Integration of Sound Management of Chemicals
into Development Planning process aims to assist countries in building these links (See Box 18.).
An analysis of nineteen national poverty reduction strategy papers (PRSPs) and PRSP interim reports, country
assistance strategies and national development plans (NDPs) in fourteen gold producing countries known to have
some ASGM activity shows that this sector is rarely linked to economic development or poverty reduction goals.
Management of mercury used in this activity is mentioned only briefly in one country’s PRSP. Neither are legal
reforms and financing requirements for a ‘clean’ and productive ASGM sector well-reflected in these
documents. Exceptions are Mali, Philippines, Congo and Tanzania (See Table 12.).
The ASGM Long-Term Strategy will allow countries to consider questions such as developing alternative
livelihoods and the long-term impact of the sector on other priority development sectors.
Box 18.
The UNDP-UNEP Partnership Initiative for the Integration of Sound Management
of Chemicals into Development Planning Processes
In support of SAICM, and in line with the Global Partnership between the United Nations Development Programme
(UNDP) and the United Nations Environment Programme (UNEP), which aims to increase collaboration and joint
activities between the two UN agencies to better support internationally agreed environment and sustainable
development goals espoused by partner countries, UNDP and UNEP developed a Partnership Initiative to help
countries to:
1. Identify specific areas of chemicals management that are likely to result in concrete human health, environment and
economic benefits as a result of introducing sound management practices, and put in place a plan to begin addressing
identified national priorities.
2. Assess the adequacy of national development strategies in terms of protecting the environment and human health,
and determine to what extent identified national chemical management priorities can be integrated into national
MDG-Based development planning.
3. Improve the mainstreaming (integration) of chemicals management priorities into national discussions,
development processes, policies and plans.
The UNDP-UNEP Partnership Initiative draws on the unique support services provided by the two cooperating
agencies. With funding secured from the Swedish Government (through the Swedish Chemicals Inspectorate - KemI)
and the SAICM Quick Start Programme Trust Fund, the Partnership Initiative has been applying the “Integrating SMC”
methodology in a number of pilot countries. These pilot countries’ experiences and lessons learned will further inform
strategic policy and economic guidance related to the interaction of sound management of chemicals and the MDGs.
Source: UNDP-UNEP PI (2009)
Section IV. Key Conclusion
Fiscal decentralization is at the heart of discussions here – increasing funding for better mercury management
through seeking additional international funding, national central budget allocations, and diverting mining royalty
revenues to support mercury reduction and elimination and cleanup of contaminated sites improve the lot of
artisanal miners and the communities in which they work and live and enabling private flows of capital to this sector
are key for transitioning to low-no mercury gold production. Crucial to acknowledge however is that without
recognized and defendable mining rights, and integration to some extent of artisanal mining in the formal economy,
financing of mercury reduction and elimination efforts is not likely to be sufficient or sustainable.
45
Table 12. Analysis of National Development Planning Documents for Countries with ASGM Activities
Guyana
13,000
Bolivia
50,000
Mongolia
68,000
PRSP (2003) & PRSP
Progress report (2005)
Peru
85,000
PRSP (2005)
National Development
Plan 2009-2013
PRSP (2002) & PRSP
Progress report (2006)
PRSP (2001)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
-

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
-
-
Mozambique
100,000
Peru Country Strategy
Paper (with EC) 20072013
PRSP (2006)
-
-
-
-
-
-
-
-
-
-
-
Mali
200,000
PRSP (2008)



-

-




-


-

-
-
Indonesia
300,000
Congo (DRC)
300,000
Interim PRSP (2003) &
UNDP MDGs in Indonesia
(2008) & MDG Report for
Indonesia (2007)
Agenda 21 Strategic Plan
& WB Country Assistance
Strategy 2004-2007
Medium Term National
Development Plan 20042010
PRSP (2007)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-


-


-



-

Tanzania
500,000
PRSP (2010)


-

-
-


-



-


-

-


-
-


-
Ghana
500,000
PRSP (2005)
46
Microfinance to be
made available for
ASG Miners
-
Policy cost estimate
included
-
Regulatory
instrument
planned/existing
-
ASGM& mercury
linked to Poverty
Reduction
Auxiliary Enterprises
mentioned
10,000
300,000
Priority Action
Planned
Ecuador
Philippines
Responsible mining
promoted
5,000
300,000
ASGMlinked to
poverty reduction
Cambodia
Brazil
ASGMMention with
mercury
Development Planning
Document
ASGMlinked to
Environmental
Quality
Estimated
ASGM
Activity
(Nos. of
miners)
ASGMmention
Country
CONCLUSION AND RECOMMENDATIONS
The sound management of chemicals is essential if we are to achieve sustainable development, including the
eradication of poverty and disease, the improvement of human health and the environment and the elevation
and maintenance of the standard of living in countries at all levels of development. 134 The Millennium
Development Goals (MDGs) aim to achieve this through setting clear targets for reducing poverty, hunger,
disease, illiteracy, and environmental degradation, and promoting social objectives such as universal primary
education and the empowerment of women to be achieved by 2015.
Economic sustainability is key to improving human welfare –but conventional economic growth is not
enough. Investment in built capital to fuel economic growth must coincide with investment in natural and
social capital which make substantial contributions to the fundamentals of well-being: security, basic
material for good life, health, and social relations.135 Where ASGM is encouraged through public policy as a
matter of poverty reduction and economic development, sight must not be lost of social conditions, as well as
the need to maintain existing biodiversity and ecosystem services. Greater prosperity for miners must also
come with greater responsibility, whereby the contribution to local and national economies is maximized
through better environmental management, and externalities and post-mining rehabilitation have been
considered since the beginning.
This report synthesises existing knowledge and studies to frame the economic argument for investing in
mercury reduction/elimination in artisanal and small-scale gold mining, including often omitted negative
external consequences. It provides an analytical foundation and background information through the ‘lens’ of
economics for concurrent and future studies on mercury and artisanal and small-scale gold production based
on readily available information. Some observations and priorities for further work distilled from this
analysis are:
1. Stronger economic case-building on the net benefits of reducing or eliminating mercury in ASGM is
required through systematically documenting case studies and supporting further economic assessment
work, particularly on trade-related impacts and health and environment external costs. There is an
interesting connection between mercury pollution and fish labeling/certification schemes to be further
explored in the context of raising awareness on mercury health impacts. The objective here would be to
draw stronger links between fish/fish product trade –particularly involving developing countries– and
mercury contamination, as well as the global dimension of economic impacts from mercury pollution.
2. It is important to recognize that without legal, defendable mining rights, and integration (to some extent)
of artisanal mining in the formal economy, financing of mercury reduction and elimination efforts is not
likely to be sufficient or sustainable.
3. Multilateral and bilateral funding opportunities for mercury-use in ASGM need to be better understood,
particularly as SAICM’s Quick Start Programme will cease in 2013.
4. An opportunity for synergy exists between the guidance developed on National Strategic Plan for ASGM
and the UNDP-UNEP Partnership Initiative on integrating sound management of chemicals into
development planning. Cooperation may facilitate better integration of ASGM in national development
processes, and subsequently, national budgets.
5. In terms of national government resources for reducing and eliminating mercury in artisanal gold mining
practices, understanding how mining royalties can be designed and negotiated to include some
component on transfer of cleaner gold production technologies and cleanup of contaminated sites would
have practical applications on cost internalization. Growing corporate social responsibility in the mining
sector is an important part of the context for future explorations on mining royalties.
6. There are some notable gaps in knowledge and practical examples for artisanal and small-scale mineraccess to capital at the local level can be better facilitated. The possibilities and challenges for
microcredit (microfinance) in ASGM need to be better understood in particular. Furthermore, identifying
and analyzing models for scaling up successful financial and technical solutions –within the gold sector
or in other areas with parallel challenges– would create a new learning opportunity informing future
efforts.
134
135
See the Dubai Declaration on International Chemicals Management (2006)
See the documentation for the Millennium Ecosystem Assessment (2008, 2010) and Costanza (2009) for further information.
47
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III
APPENDIX A.
Table A1. Gold (Mine) Producing Countries by UN-Designated Human Development Status and
Least Developed Country Listing
Low
Medium
High
Least
Developed
Country
Very High
Benin (The Republic of)
Algeria
Argentina
Australia
Burkina Faso
Bolivia
Armenia
Canada
Benin (The Republic
of)
Burkina Faso
Burundi
Botswana
Azerbaijan
Finland
Burundi
Cameroon
Brazil
Japan
Cambodia
Congo (DRC)
Cabo Verde (The Republic
of)
Cambodia
Bulgaria
Korea (Republic of)
Congo (DRC)
Cote D'Ivoire
China
Chile
New Zealand
Ethiopia
Ethiopia
Dominican Republic
Colombia
Poland
Guinea
Ghana
Equatorial Guinea
Costa Rica
Slovakia
Guinea
Fiji
Ecuador
Spain
Guinea Bissau (The
Republic of)
Kenya
Liberia
Gabon
Georgia
Sweden
Guinea Bissau (The
Republic of)
Lao People's
Democratic Republic
Liberia
Guatemala
Guyana
Iran (Islamic Republic of)
Kazakhstan
United Kingdom
United States
Mali
Mauritania
Mali
Honduras
Malaysia
Mozambique
Mauritania
India
Mexico
Myanmar
Mozambique
Indonesia
Peru
Niger
Myanmar
Kyrgyzstan
Romania
Senegal
Niger
Lao People's Democratic
Republic
Russian Federation
Sudan
Nigeria
Mongolia
Saudi Arabia
Papua New Guinea
Morocco
Serbia
Tanzania (United
Republic of)
Togo
Senegal
Namibia
Turkey
Uganda
Sudan
Nicaragua
Uruguay
Zambia
Tanzania (United
Republic of)
Togo
Uganda
Zambia
Zimbabwe
Philippines
Venezuela
South Africa
Suriname
Tajikistan
Thailand
Uzbekistan
Vietnam
Sources: British Geological Survey (2011); UNDP (2010); World Factbook 2011; UN Least Developed Countries Programme,
http://www.unohrlls.org/en/ldc/related/60/
Notes: 1. The British Geological Survey of Mining Production 2005-2009 originally excluded Benin, Cabo Verde (Republic of),
Cambodia, Madagascar, Togo, Guinea Bissau (Republic of). These countries are members of the Economic Community Of West African
States (ECOWAS) with whom UNEP Chemicals Branch has recently engaged on mercury issues. For this reason, official gold mine
production statistics, where available, were included in this analysis. Figures, where available, are included for Cambodia to complement
a number of UNEP Chemicals Branch projects ongoing in this country.
IV