Ending the toxic relationship between gold and mercury

As a precious metal that has fascinated mankind for what experts believe to be more than four and a half thousand years, gold is one of the few commodities to protect and uphold its value, thanks to its multifaceted status of being in finite supply while permeating into the desirable and strategic arenas of our global social and economic systems. Unfortunately, it is also this level of demand that has led to less sophisticated markets using mercury-dependant artisanal and small-scale gold mining (ASM) as a livelihood, not only resulting in significantly adverse health effects, but the largest source of mercury pollution on earth. In this month’s blog, I will be highlighting the issues surrounding ASM, what risks its processes pose along the value chain and what solutions can be presented that will eliminate the practice without harming artisanal mining communities, but before going further, it is perhaps best to start by understanding why miners choose to engage in mercury-dependant ASM and why it still exists in the 21st century.

In spite of gold’s glamourous appearance, its method of extraction has long been associated with either slave or prisoner labour, illustrating the harsh working conditions required for just a small uptake. In fact, it wasn’t until the last century where more sophisticated equipment enabled gold to be extracted without a great deal of hardship. Dating from as far back as ancient Egypt, through to the Islamic Empire, Greeks, Romans and the era of global expansionism, gold mining often came at a high price, a fact that helped to reinforce its value firstly as a decadent display of wealth; a great example being the tomb of Tutankhamen, through to its origins as a monetary currency as an alternative to barter trade, driven by leaders such as the ninth caliph, Abd al-Malik ibn Marwan, who is widely credited as the first to issue Islamic coinage, having ordered the removal of his image on gold coins in place of verses from the holy Qur’an. During this period, the Umayyad dynasty rule extended to include the Iberian Peninsula in the west to the edges of the former Persian Empire in the east, ensuring the widespread use of its currency, long after the caliphate ended in 750.

From ancient history to today, five key events occurred that solidified gold’s intrinsic value starting with the establishment of the first hallmarking practice in London, whereby verification of quality could be established. Next, the ramping up of minting by the strategic, maritime city of Venice in 1422, a step that ensured its usage spread quickly along the major global trade routes of the Silk Road and thirdly the introduction of the gold standard by the United Kingdom in 1717, the first nation to give the commodity a nominal value against an existing currency.  Seventy-five years later, the United States followed suit, until 1933 when President Franklin D. Roosevelt approved the suspension of the dollar’s convertibility into gold at $20.67, which was followed by the Gold Reserve Act of 1934 that restored the Gold Standard and saw the statutory price of gold increase by just under $15 per troy ounce, or 69%, to $35 per ounce in a fiscal move to help the US reflate their way out of the Great Depression - sounds familiar? As well as stimulating the world’s largest economy, this move also incentivised miners to increase output, while encouraging foreign holdings to be moved to the U.S, and while temporary restrictions were imposed on U.S citizens to own or trade gold, the laws were eventually relaxed, leading to both free private holding and trade, with the Nixon administration’s suspension in 1971 of gold convertibility signalling the official end of the modern-day Gold Standard and the departure from the post second world war era of global fixed exchange rates in favour of the FIAT system, a policy which remains in place to this day.

Thanks in part to these actions, gold achieved the trifactor of being a highly secure investment class, regarded as a de facto reserve for the world’s central banks, while retaining its allure as a decorative precious metal for the jewellery industry and increasingly, as a necessary element in the manufacturing of sophisticated medical and technical equipment. Certainly, for anyone who was fortunate enough to hold bullion in 1971 they would have benefited from a price appreciation of 5,800% by August 2020, when the gold price reached an all-time high of $2,072 per ounce, illustrating its historic performance as a sturdy investment and one that is unlikely to lose significant value anytime soon. Indeed, the table below clearly demonstrates that using whichever time metric you may choose, gold is clearly the world’s best performing mainstream asset class.

With all this being the case, it is perhaps easier to understand why unskilled, rural villagers look to gold as a lucrative form of income, regardless of the potential health risks or damage being done to the environment, particularly as a resource that sits literally in the ground beneath them and while large scale and junior mining companies account for the lion’s share of extraction, it is estimated by USAID that ASM still accounts for around 20% of the world’s supply and while not all ASM activities include mercury, its low cost and high efficiency make it an attractive proposition. As a process, elemental mercury is used to extract gold from ore as an amalgam, which is then isolated by hand and heated, thereby distilling the mercury and isolating the gold. Unfortunately, this practice also accounts for approximately 400 metric tons of airborne elemental mercury each year and countless cases of poisoning to both miners and communities, and while elemental mercury is commonly known as a neurotoxin that can cause extensive health defects including tremors, emotional instability and insomnia, its effects in the form of methylmercury have shown to cause loss of peripheral vision, lack of coordination, impairment of speech, hearing, walking and muscle weakness.

Bearing in mind that while ASM only accounts for 20% of the wider mining output, that figure still includes more than 70 countries and as many as 19 million miners, with some reports suggesting around 4 – 5 million of those being women and children. As a practice that is considered to be poorly supervised by local authorities, ASM has become widely associated with social conflict as well as human and labour rights violations. As a by-product, newly discovered mines also attract concentrated volumes of people that can put a strain on water and food resources, which again add to the potential for conflict.

Away from the mining communities and further down the supply chain, the subject of mercury-dependant gold posing a risk to flight safety as a toxic health hazard to crew and passengers or as a corrosive to the aluminium material of an aircraft has been mentioned by several stakeholders over the years, however, as of today, I am unaware of any formal data to prove or disprove such opinions. For those interested in the debate surrounding hand-carry gold, DMCC is in the middle of conducting its follow up session on Tuesday 04th May at 16:00hrs (GST). Should you wish to join the debate, please click on the link and register your attendance.

Fortunately, there are several organisations which are helping to slowly improve the wider industry, starting with high-level organisations such as the United Nations, whose Guiding Principles on Business and Human Rights was unanimously endorsed by the UN Human Rights Council in 2011. Built on three pillars that highlight the responsibility of the state to protect against human rights abuses, for businesses to act responsibly and to jointly provide greater access for victims of human rights abuses, the UN has been supported by other international organisations such as the OECD, whose Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas has become widely-endorsed as a guide for countries seeking to solve the challenges faced; most effectively by the World Gold Council who operationalised the framework through its Conflict-Free Gold Standard in October 2012.

Within more regional programmes, organisations such as the 12-member-state-backed, International Conference on the Great Lakes Region (ICGLR) has outsourced an independent auditing framework to companies such as Martello Risk, who ensure that the full ASM supply chain is correctly licenced from miner to buyer and while this is mainly focused on the three ‘T’s’ of tin, tantalum and tungsten, gold is also included within its mandate.

In addition to the solutions presented for the human rights element, there are also several mercury-free concentration methods that are able to ensure ASM communities can continue to operate, without the serious risks currently faced. Depending on the type of ore or sediment, other minerals present, gold particle size and the availability of utilities, miners could be trained to use either gravity, magnetic or chemical methods as a mercury-free alternative that would benefit all. Arguably the most straightforward replacement would be the substitution of mercury for borax, which is not only harmless, environmentally friendly and cheaper than mercury, but also more effective at yielding higher quality gold.

In terms of engaging a more collaborative model, there is a great potential for large-scale mining companies to work with governments and local authorities to create a more formalised framework for the sector, similar to the work conducted by the ICGLR, while providing training programs that educate and support industry best-practice. Additional support could further be provided through the fair compensation to ASM miners in the event of large-scale mining encroaching on existing small-scale mines.

With an estimated 50,000 tonnes of gold still remaining to be extracted or roughly 20% of the estimated finite supply, ensuring changes are made to the ASM industry is not only a worthwhile pursuit in terms of preventing adverse health and environmental damage, but an opportunity for the wider industry to collaborate and find solutions that benefit the entire supply chain and not just the few.