Is there a way around the sale of ‘blood gold’?
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These days, even if gold prices are down a bit from recent highs, itâ€™s hard to find a trinket that doesnâ€™t swallow the paycheck. Now thereâ€™s something else you have to consider: it could be dripping in blood.
As 2013 draws to a close, gold is at the end of a 13-year price party that has powered a burst of exploration and gold mine development on every continent except Antarctica. It has also driven some of the worldâ€™s most brutal mining practices, as armed militias enslave whole populations, driving them to mine at the point of a gun. In the circles that monitor such activity, a phrase has emerged that should send fear into the hearts of miners and bullion dealers: blood gold.
According to the Washington, D.C.-based Enough Project, the infamous M23 rebel group is still mining conflict gold in the Democratic Republic of Congo, despite the surrender of its leader, Bosco Ntaganda, to war crimes investigators in The Hague this year.
The M23 and other armed groups in the Congoâ€™s goldfields smuggle gold to Uganda and Burundi, where they sell it to international buyers. The gold flow out of Congo is about $500 million a year. This illicit gold joins another $2 billion worth from South Africa, where criminal syndicates employ miners in unsafe, often hellish conditions, paying them a pittance to loot the countryâ€™s gold mines. Some of the miners are forced to live underground in the furnace-like labyrinth of the deep mines for such long periods that, deprived of sunlight, their skin turns gray. In South Africa they call them â€śghost miners.â€ť
The torrent of bloody gold is indistinguishable from innocent gold because of the way that gold refiners take gold from multiple sources. A refinerâ€™s concern is not origin, but purity. In London, the worldâ€™s biggest bullion market, the standard known as â€śLondon Good Deliveryâ€ť stipulates bars refined to a gold purity of 995 parts per thousand.
Refiners typically buy gold from many mines, and also from scrap dealers — the â€śgold for cashâ€ť trade. In Russia and the Persian Gulf, they also buy large amounts of gold mined by brutalized Congolese and the impoverished and victimized illegal miners of South Africa.
Few laws are in place to control the flow of stolen gold. In the United States, the Dodd-Frank Act makes companies account for the origin of minerals they buy that might come from the war zones of central Africa. This makes it harder for militias to sell such minerals as tin or tungsten. But gold is so portable — you can stuff $30,000 of it in a pants pocket and $700,000 in a briefcase — that smugglers move it easily to countries that are not scrupulous about where it comes from.
This raises the question: is a stream of â€ścleanâ€ť gold possible, so a purchaser could know that her ring or bracelet was made of gold mined only from knowable sources? The answer is yes.
The diamond industryâ€™s history suggests how it might work. When the campaign against blood diamonds was at its height, Canadian diamond miners and polishers created a rigorously monitored separate stream of â€śice diamondsâ€ť — gemstones mined in the Arctic and certified free of taint from the murderous diamond fields of then-war-torn countries such as Angola and Sierra Leone.
Whatâ€™s more, they sold them at a premium.
But how would clean gold work? First, the refinery would have to stop its cycle, clean the plant, and introduce the gold from the mine that wanted to keep its production stream discreet from other gold.
Is this likely? â€śWe just couldnâ€™t do that,â€ť a spokesman for Johnson Matthey, a respected firm of gold refiners, told me. â€śWe couldnâ€™t run our business that way; it would cost too much.â€ť Others disagree. â€śIt would be expensive,â€ť said Marguerite Nadeau, a vice president of the Royal Canadian Mint, which operates a gold refinery as part of its business, â€śbut we have done it.â€ť
When the Canadian government started selling gold coins in 1979, the enabling legislation stipulated that the coins be struck from Canadian gold. But demand outstripped the supply of purely Canadian gold, and they dropped the practice. Nevertheless, they showed it could be done.
A separate clean-gold stream is possible if demand appears either from jewelry manufacturers looking for a way to add value to their products, or from bullion dealers whose clients, such as bullion funds, were threatened with disinvestment because of bad press about blood gold.
That press could be just around the corner. A U.N. expert panel studying conflict gold has just delivered its report to the Security Council, which is expected to publish it in January.
PHOTO: Boys pan for gold on a riverside at Iga Barriere, 25 km (15 miles) from Bunia, in the resource-rich Ituri region of eastern Congo February 16, 2009. REUTERS/Finbarr O’Reilly/Files