‘Blood gold’ bleeds into U.S. sup­ply

Pre­cious metal prod­uct of il­le­gal min­ing, abuses

Baltimore Sun - - WORLD - By Andrew Wil­lis

Deep in the jun­gles of Colom­bia, thou­sands of small, il­le­gal min­ing op­er­a­tions, many un­der the con­trol of Marx­ist guer­ril­las or drug traf­fick­ers, are work­ing long hours to pull gold out of the ground.

Min­ers are dig­ging in out-of-the-way places such as Tim­biqui and Rio Quito. From there, the gold is hauled by boat, truck or small air­planes to smelters in Cali and Medellin.

En­ter the in­ter­na­tional gold re­fin­ers, armed with cer­tifi­cates of good busi­ness prac­tices, who buy the gold and in turn, sell to U.S. cor­po­ra­tions large and small. Un­der­scor­ing just how fraught global sup­ply chains can be, the gold finds its way into prod­ucts rang­ing from smart­phones to cars and gold coins made by the U.S. Mint.

Cor­po­ra­tions, buy­ing in good faith, as well as com­pa­nies that use gold for jew­elry, rely on or­ga­ni­za­tions whose task is as­sur­ing the le­gal­ity of the gold. Many, in­clud­ing Ap­ple and Gen­eral Mo­tors, also do in­de­pen­dent au­dits of their sup­ply chains, in­clud­ing gold and other me­tals.

De­spite those ef­forts, ex­perts say, il­le­gal gold slips through the sys­tem.

“It’s im­prac­ti­cal and un­fea­si­ble to ex­pect them to trace their gold to the mine of origin,” said Tyler Gillard, a le­gal ad­viser to the Or­ga­ni­za­tion for Economic Co­op­er­a­tion and De­vel­op­ment.

While much has been said about the ef­forts to crack down on il­le­gal min­ing in Africa, il­licit gold A man pans il­le­gally for gold at a site in the De­part­ment of Choco near the city of Quibdo, Colom­bia. min­ing and trad­ing in Colom­bia, Peru and Venezuela con­tin­ues to flour­ish qui­etly.

About 85 per­cent of the 59 tons of gold pro­duced last year in Colom­bia comes from op­er­a­tions with­out gov­ern­ment li­censes or en­vi­ron­men­tal per­mits, said San­ti­ago An­gel, head of the Colom­bian min­ing as­so­ci­a­tion.

Colom­bia’s two main le­gal gold min­ers, Mineros SA and Gran Colom­bia Gold Corp., to­gether pro­duced only 7 tons last year.

Though Colom­bia may rat­ify a new peace deal reached with the Revo­lu­tion­ary Armed Forces of Colom­bia, or FARC, many other groups there will con­tinue to profit from il­le­gal gold pro­duc­tion.

These out­lawed op­er­a­tions range from large- scale mines equipped with mas­sive dig­ging ma­chines worth hun­dreds of thou­sands of dol­lars, to sin­gle min­ers sift­ing for nuggets in jun­gle streams who hand over a per­cent­age of their pro­duc­tion to lo­cal guer­ril­las.

It’s what Jeremy McDer­mott, a co-founder of the In­Sight Crime re­search in­sti­tu­tion, calls “blood gold.”

Il­le­gal sales now sur­pass co­caine as the main source of in­come for il­le­gal groups, po­lice say. Be­yond fi­nanc­ing rebel ac­tiv­i­ties, the il­licit min­ing fu­els pros­ti­tu­tion, child labor and wide­spread en­vi­ron­men­tal de­struc­tion, ac­cord­ing to find­ings by the United Na­tions.

Fight­ing among armed groups in Colom­bia over rich gold de­posits has forced hun­dreds of thou­sands to flee their homes, con­tribut­ing to the na­tion’s roughly 7 mil­lion in­ter­nally dis­placed peo­ple.

The il­le­gal min­ing in­dus­try is “con­tam­i­nat­ing our rivers, doesn’t pay taxes and mis­treats work­ers,” An­gel said.

Asahi Refin­ing USA Inc. and Me­talor Tech­nolo­gies USA Corp. are among the largest U.S.-based re­fin­ers buy­ing gold from Colom­bia. While these com­pa­nies say they are care­ful to buy only legally mined gold, each pur­chased more gold from Colom­bia last year than was legally pro­duced, ac­cord­ing to data from Colom­bia’s sta­tis­tics agency.

That makes it math­e­mat­i­cally im­pos­si­ble that they bought only the le­git­i­mate stuff.

An­other U.S. buyer, Ele- metal LLC, did not re­ply to re­quests for com­ment.

“You can ask how much gold a com­pany is buy­ing and how much a coun­try pro­duced legally,” said Quinn Kepes, pro­gram di­rec­tor at Verite, a U.S.-based fair- labor or­ga­ni­za­tion. “We’ve seen a pat­tern of cer­tain U.S. re­finer­ies go­ing into ar­eas” that oth­ers have pulled out of.

Asahi Refin­ing is “very proud of our record and busi­ness prac­tices of re­spon­si­ble gold pro­cure­ment,” spokesman David Dor­ris said. The com­pany “rec­og­nizes the unique op­por­tu­nity it has to play a lead­ing role in the de­vel­op­ment and im­ple­men­ta­tion of sys­tems de­signed to de­tect and pre­vent com­mer­cial ac­tiv­i­ties that con­trib­ute to the finance of armed groups.”

Jose Ra­mon Camino, group gen­eral coun­sel for Me­talor, said his com­pany “is very much con­cerned with any pos­si­ble trade of il­le­gal gold or any kind of pre­cious metal hav­ing a doubt­ful origin. Such ma­te­rial is not ac­cept­able to Me­talor. We have a lim­ited num­ber of sup­pli­ers in Colom­bia with whom we have been work­ing for quite a while and that we know well.”

U.S. gold im­porters hold cer­tifi­cates of re­spon­si­ble busi­ness prac­tice from or­ga­ni­za­tions in­clud­ing the London Bul­lion Mar­ket As­so­ci­a­tion and the Re­spon­si­ble Jew­ellery Coun­cil. Both these groups say their mem­bers are sub­ject to rig­or­ous ap­proval pro­cesses. Asahi Refin­ing, Me­talor Tech­nolo­gies and Elemetal all have such cer­tifi­cates.

“All LBMA ac­cred­ited re­fin­ers on the Good De­liv­ery List have set up in­ter­nal­man­age­ment and risk-as­sess­ment sys­tems to avoid sourc­ing gold linked to con- flict, hu­man rights abuses, ter­ror­ist fi­nanc­ing prac­tices, as well as en­sur­ing that they com­ply with high stan­dards of anti-money laun­der­ing,” a spokesman for the as­so­ci­a­tion said.

“All RJC mem­ber com­pa­nies are re­quired to carry out hu­man rights due-dili­gence pro­cesses to as­sess the height­ened risks of ad­verse hu­man-rights im­pacts,” ac­cord­ing to a coun­cil state­ment.

The dilemma for end users is that once gold ar­rives in the U.S., there is no way to know whether some of it may have been pro­cured orig­i­nally from il­le­gal mines, leav­ing the gold free to en­ter the vast sup­ply des­tined for man­u­fac­tur­ing or other pur­poses.

Ap­ple, GM, Gen­eral Elec­tric, Ver­i­zon Com­mu­ni­ca­tions and Johnson & Johnson are a sam­pling of large Amer­i­can com­pa­nies that bought gold from these U.S. re­fin­ers, ac­cord­ing to their 2015 Se­cu­ri­ties and Ex­change Com­mis­sion con­flict-min­er­als re­ports. Many other com­pa­nies didn’t re­port their sup­pli­ers.

“Our team has con­ducted thou­sands of au­dits around the world, and we’ve had in­ves­ti­ga­tors on the ground in Colom­bia for the past sev­eral months,” said Ap­ple spokesman Ben Ko­bren. “While we have no ev­i­dence of il­le­gal gold en­ter­ing our sup­ply chain, we’ll con­tinue to in­ves­ti­gate.”

GMhas “a zero-tol­er­ance pol­icy” for cor­rupt busi­ness prac­tices and abu­sive treat­ment of em­ploy­ees by sup­pli­ers, spokesman Patrick Mor­ris­sey said.

GE, Ver­i­zon and J&J all say they strive for eth­i­cal sourc­ing, though, as Josef Skolde­berg, a GE spokesman said, “ac­count­ing for all min­er­als through­out com­pany sup­ply chains is very dif­fi­cult.”


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