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In the Amazon, will gold mining get the last word?

A vast area of the Amazon rainforest has lost government protection, proving once again the extraordinary influence money has in the ethically cloudy industry.

Last Wednesday, Brazil rescinded protection for an Amazon nature reserve the size of Denmark, allowing it to be explored for minerals, including gold.

The news was met with dismay both domestically, with one senator calling it “the biggest attack on the Amazon in the last 50 years,” and internationally, with the World Wildlife Fund warning of an “international outcry.”

Brazil is one of the most closely watched countries in the world in terms of environmental factors, so its willingness to revoke official protection for a portion of an international treasure like the Amazon speaks louder than words:

“When it comes to gold, money matters.”

A pristine rainforest in peril

The area in question, called National Reserve of Copper and Associates (Renca), spans 17,800 square miles in the northern part of the country, near the city of Belém. Established in 1984, it’s noted for being a pristine portion of the world’s largest rainforest, which has been degraded by agriculture, oil drilling and mining in other areas. President Michel Temer‘s decree opens about 30 percent of it to exploration for gold, copper, manganese and iron.

About 70 percent of the Renca will remain covered by other laws meant to protect forest and indigenous cultures, but social justice groups are critical of President Temer’s record in these areas, too. The World Wildlife Fund said it feared “deforestation, the destruction of water resources, the loss of biodiversity and the creation of land conflict”.

A week after Temer’s decree, a federal judge issued an injunction, saying the removal of protection can only be done by an act of Congress. However, Temer’s attorney general has said he plans to appeal the judge’s decision, indicating Temer and his administration want the plan to steamroll forward, even if under a different guise.

Under watchful eyes, deforestation continues in Brazil

In the late 1980s and early 1990s, great swaths of the Amazon disappeared as Brazil pursued economic growth and development at a breakneck pace. Due in large part to international pressure and scrutiny that followed, Brazil greatly decreased the rate at which the Amazon is compromised.

However, since 2014 or so, Brazil has increasingly asserted itself on the global stage. It sees the Amazon as a Brazilian asset, not one that belongs to the world, and so has balked at international attempts to preserve the rainforest. An unfortunate consequence is that deforestation of the Amazon, both legal and illegal, has increased.

With gold, money talks

While there are many factors contributing to the destruction of the Amazon, the monetary value of gold is a leading cause.

Of the minerals thought to exist in Renca, gold is the most valuable. The gold mining industry currently produces approximately 3,155 tons of mined gold each year. That may seem paltry in comparison to the 63 million tons of aluminum produced annually, for example, but at current prices, the value of annual production of gold amounts to US$108 billion, compared with aluminum’s US$94 billion.

As is often the case when economic rewards can be great, the supply chain created by gold, from its mining to its refinement to its sale and investment, can be fraught with moral and legal threats. Environmental problems, of course, can be one of them, as can be human rights concerns, especially given the armed conflict in gold-mining areas like Central Africa.

A recent white paper brings clarity to an area that has, in the past few years, become surrounded by regulatory rules, guidelines, and initiatives, and explains how these changes and proposals are affecting the gold supply chain.

How gold refiner attitudes differ across the world

Responsible businesses and investors want supply chains that are above reproach. Those are not easy to come by with regard to the gold industry, which is notoriously secretive; some gold refiners won’t even divulge their capacity, let alone their turnover.

Even so, the following guidelines will help businesses know what they may be getting into.

Europe and North America

In the majority of cases, countries in Europe and North America tend to have the highest standards. For example, the majority of European refiners have stopped taking metal from the conflict region of Africa entirely, and more than one has stopped taking metal from Africa at all. At least one refiner goes to all new mines before signing any agreements and to existing operations at least annually.

Asia

In Hong Kong, where refining is largely recycling, regulations are in line with Europe and are much stricter than in mainland China. While measures are widely promoted by government authorities, the regulations are not being strictly enforced and implemented within the country.

Latin America and Africa

“Agents” in parts of Africa are not always vetted fully, while some illegal material is coming out of Peru and some entities in Colombia appear to be skirting the regulations. There are suggestions that some operators in a number of other Latin American countries are also using questionable practices.

Learn more

Regulatory Changes and their Impact on the Gold Supply Chain

GFMS Research & Forecasts now available on Thomson Reuters Eikon

 

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