The Threat Of Galamsey To Ghana’s Gold Value Addition Efforts
ON WEDNESDAY, 5th October, 2022, I had the opportunity to participate in two meetings in Kumasi on the phenomenon of illegal artisanal (small-scale) mining, popularly known as galamsey.
These meetings were convened at the request of His Excellency, the President of the Republic. The first was with the National House of Chiefs and the second was with ninety selected MMDCEs from the mining districts in Ghana.
For me, the meetings were a demonstration of the President’s unwavering commitment to the fight against galamsey. Certain key decisions were taken which I believe will give Government an upper hand in this fight. The President, while recognising the contribution of small-scale mining to the economy, reiterated his position that he and his government are not against the economic activity of small-scale mining. Rather, what he detests is illegal and irresponsible small-scale mining.
The fight against illegal, destructive, and unsustainable small-scale mining has been approached in two ways. First is the regulatory enforcement where security operations are carried out to arrest perpetrators who are then prosecuted under the enhanced sanctions regime. The second is the reformative approach which include initiatives such as the community mining scheme, provision of mercury-free ore processing machines (gold katcha), the responsible small-scale mining awards, decentralisation and digitalisation of the licensing regime for small scale miners.
While Government continues to wage this war against galamsey, there are still some unscrupulous elements within our Ghanaian society who, motivated by the wealth the mineral resource will fetch them, continue to rape our environment and water bodies. Perhaps what is lost on these unscrupulous people is that, soon the gold they extract from the ground illegally and irresponsibly, may very well be blacklisted. In other words, if this phenomenon continues, gold from Ghana is likely to be rejected by the global consuming community. This is because it will be classified as not meeting responsible sourcing standards.
What Is Responsible Sourcing Of Gold?
Responsible sourcing of minerals such as gold is simply the process and practice of procuring gold ore in a way that respects human rights, protects human and environmental health, and combats forced labor, child labor, human trafficking and slavery.
As a gold producing country, responsible sourcing is crucial for Ghana if the country is to obtain full value for its precious mineral. The OECD Due Diligence Guidelines on Responsible Sourcing of Minerals provides a comprehensive framework for achieving this. This framework is generally accepted by industry stakeholders as a global standard for the responsible sourcing of minerals such as gold.
Galamsey’s Threat To Gold Value Addition
Gold value addition can be referred to as the act of processing gold ore so as to derive greater value from it. Gold value addition, therefore, will include refining the ore, jewellery manufacturing, minting of coins etc. It is estimated that value-added gold can fetch multiple times the value of the unrefined gold.
The value of gold is determined by two factors – weight and purity. Ghana’s gold ore (unrefined gold) usually comes at a purity of up to 23 carats. The value of 1kg gold ore 23 carats at today’s LME spot price is US$53,074.56 while the same weight of gold at 24 carats at today’s LME spot price is US$55,382.15. That gives you a difference in value of US$2,307 on 1kg. Therefore, for 1000kg, the loss in value will be US$2,307,000. As at the end of September 2022, the total gold exports from both small-scale and large scale was in excess of 94 tonnes at a value in excess of US$4.8 billion, with the small-scale sector contributing about 17% to this figure. If this volume of gold ore had been refined in Ghana before export, it would have earned the country much more in value.
For the first time in over a century since Ghana started mining gold, this Government has actively promoted value addition of the precious mineral. It is worthy to note that Government’s value addition drive is not for only precious minerals but other minerals such as bauxite. One of the fruits of this proactive endeavor is the establishment of Ghana’s first gold refinery in which Government, through the Precious Minerals Marketing Company (PMMC), has an equity stake.
The construction of the gold refinery, which started in 2018, is now complete. It has a daily capacity of 400kg. The refinery is a strategic investment which contributes immensely to Government’s value addition efforts. With this refinery, Ghana can now refine gold to 24 carats 99.99% purity, same quality as a good delivery bar. Government recognizes that to be able to obtain maximum value for the products of the refinery, it is necessary to obtain international certification. One such key international certification is the London Bullion Market Association (LBMA) Good Delivery Bar Certification. At present, Government is pursuing this international certification, which efforts are being led jointly by the Ministry of Lands and Natural Resources and the Ministry of Finance.
However, to be able to obtain the LBMA Certification, it is required that the refinery, among other things, operates at a total throughput of 10 tons of gold per year for a minimum of three years. It is imperative that the gold which is fed the refinery is marked as responsibly sourced. Responsibly sourced gold meaning that it is gold which is extracted legally, with due regard to the environment and devoid of conflict, human rights abuse and/or child labour.
The current phenomenon of galamsey poses a big threat to these value addition efforts by Government. It has the real potential to taint the gold d’ore which will be fed the refinery thereby making it extremely difficult to meet the responsible sourcing requirements and by extension the output capacity.
Furthermore, galamsey has the potential to affect the jewellery industry. Some of the products of refinery will go to serve as raw materials for jewellers within the local jewellery industry. If the gold is tainted as a result of galamsey, then what it means is that the jewellery will equally be tainted. This will thwart all efforts by this Government to promote the jewellery industry by seeking new international markets for Ghana’s jewellery particularly under the Africa Continental Free Trade Area (AfCFTA) Agreement.
It is for these reasons why it is imperative that we all support the fight against galamsey. Even for those actively engaged in this wanton rape of our environment for this mineral resource, it is time for them to rethink and reform, otherwise whatever gold they manage to extract will have to be disposed of on the black market which will fetch them a lesser value.
Conclusion
In sum, Ghana is still yet to realize the full benefits of its precious mineral resource, gold. If the objective to derive maximum value from gold is to be realised, then it is imperative that the extraction of the mineral resource is done in a legal, responsible and sustainable manner. We the people must not allow a few greedy ones among us to scuttle these efforts which will eventually inure to our collective benefit.
It is indubitable that gold, which is a significant contribution to our GDP, has the potential to propel us to realise our collective goal of a Ghana Beyond Aid. It is therefore our responsibility to ensure that we have a responsible and sustainable small-scale mining sector. This we can do by supporting the fight against illegal, irresponsible, destructive small-scale mining.
The writer is the Managing Director of the Precious Minerals Marketing Company (PMMC)