Artisanal mining professionalization – integration of value and impact

Artisanal mining (ASM) is the largest global opportunity for combining value and impact that is almost wholly uncapitalized.  The sector, which supports 6% of the world’s population when the 45 million miners, the 225 million family members when including spouses and children, as well as the 134-268 million estimated by The World Bank as selling goods and services into the sector are all considered.  ASM operates in over 80 countries and is economically significant, producing 20% of our gold, significant amounts of other precious as well as large quantities of critical minerals that are in short supply.

With a non-mining corporate finance background, what have I learn about ASM and how have I applied these learnings?

Artisanal mining is diverse as well as huge

ASM is found across most countries in Africa, Latin America and Asia.  Commercial, statutory and cultural realities vary widely.  Legitimizing and professionalizing miners is not as simple as establishing land right permits.  Solutions need to be based on the voices of miners and neighbouring communities, where coops, companies or associations that support paths toward stable predictable equitable business relationships are put in place in ways that mirror local realities and that are led by locals who are on the ground over the long term.  

This means that flexible frameworks for engagement are essential - change is not driven through top-down solutions or from far away experts, change is developed in conjunction with those who will live with and own the change.  Goals ranging from capacity development, strengthened governance, improved practices, safety and value chains may be similar, but achieving these goals needs to be based on different paths in differing places so that the process is locally relevant.

The good thing is that organizations like the Alliance for Responsible Mining, Levin Sources and PeaceGold are natural partners for this work, bringing deep expertise and proven successful experience.

Artisanal mining – a multi-dimensional strategic opportunity

A. Artisanal miners share land with large scale mining (LSM) projects.  Collaboration, including LSM support toward ASM professionalization, changes relationships from potential conflict into joint productivity.  Mutual value derives in many ways, ranging from ASM often being an early indicator for LSM-based exploration, opportunities to share labor and local content networks, potential for sharing good practices and solutions toward environmental oversight, and changing narratives on responsible sourcing as joint responsible mining practices come into focus.  Along with those, offtake agreements can deliver fair prices for artisanal miners that are margin opportunities for large mines.  Thinking about large mines as anchors for significant ASM professionalization programs clearly makes sense in this context, as does the development of strong standards and practices around LSM-ASM relationship management.

B. Artisanal miners produce a variety of critical minerals that are in short supply along with precious metals and stones that are always in high demand.  Professionalization increases productivity as miners are trained, equipped and transitioned to good practices, making the sub-sector a strong strategic potential source of supply.  Increased productivity combined with shifts to stable predictable equitable business relationships also forwards strategic public policy goals, with professionalization being a natural driver of sustainable development.  Cross-stakeholder approaches for professionalization that consider governments through to downstream value chains makes sense given these dynamics.

Cross-stakeholder engagement is key to success

Given the diverse number and nature of stakeholders that are affected by the transformation of artisanal mining, a disciplined engagement and alignment approach is fundamental for success.

Artisanal miners themselves are central to the work, making their voices and those of neighbouring communities the starting and ending point for solution design.  Put simply, the miners whose work is changing need to understand, buy-into and support change, without which outcomes are not sustainable.  This need extends to the communities that are in the region, partially because miners and their families are extensions of these communities, but also because goods and services are procured by miners from businesses in the region, making alignment on equitable approaches essential.

Artisanal miners often share land with LSM’s, making the relationship with the large mining project very important.  LSM’s can serve as an anchor for significant professionalization programs, supporting capacity development as well as being involved in offtake arrangement that stabilize the flow of product between artisanal miners and downstream refiners.  Involvement in professionalization activities is not charity from the perspective of an LSM – productivity opportunities can displace risks – but commercial implications need to be clear upfront in order to facilitate engagement by large mining operators.

There are broader stakeholders that need to be considered when crafting professionalization programs – governments and the fit to public policy being one, downstream value chain players both in terms of eliminating predatory actors and in strengthening responsible sourcing protocols are another group.  The reality of artisanal miners operating in a broad commercial ecosystem means that considering a broad variety of stakeholders in this ecosystem is the starting point for aligned solutions.

Transparency is table stakes for investors

At-scale capital is needed for scaled professionalization, which requires interactions between investors and miners that build trust and transparency.  These kinds of interactions have been historically lacking, resulting in ASM being largely started of non-predatory capital.  Clarity of asset classes, discrete measurable KPI’s and disciplined validation protocols all contribute to a common language of sorts between miners and investors that supports capital flows.  

The complexity and opaque nature of the sector are barriers for investor engagement.  A focus on trust and transparency is meant to reduce these barriers.  Technology, and the potential for tokenizing assets in a blockchain-based environment, opens doors to investor interactions that were not available in the past.  The Blended Capital Group and Capitals Hub Canada are collaborating in standing-up a digital marketplace that precisely targets these needs.  Sustainability bonds, tokenized debt that incorporates discrete KPI’s and frames scaled ASM professionalization programs for specific country/mineral combinations, are an example of how innovative financing approaches combined with technology will come to meet the diverse needs of financing scaled professionalization based on at-scale capital flows.

Integration of commercially reasonable approaches is essential for sustained value 

ASM professionalization is not charity.  Sustainable business solutions that deliver long-term value for miners is central to the discipline.  Along with artisanal miners themselves, broad stakeholder value – for large scale mines, downstream value chain players, governments and of course investors – needs to be commercially realistic in order to gain and sustain traction.  

The flexible approaches that define and deliver sustainable value need to consider the business realities of what is being delivered – what do returns for investors look like, how are the lives and economic situations of miners and community members improve, how do large mining projects lower their risks while adding collaborative productivity, and how does responsible sourcing support the business needs of downstream value chain participants.  This is especially true given the shift away from public development finance as USAID has been eliminated and aid programs from other countries have been reduced.  Innovative approaches to finance, requiring trust and transparency, needs to be seen as a fundamental catalyst for this work.

In summary

I am not a miner.  

When I first learned about artisanal mining, what struck me is that most people I interacted with had never heard of the sector before, and even less persons understood the dynamics of ASM.  An investor in a far-away place – London, New York, Toronto or elsewhere – simply won’t consider ASM as an investment option if they don’t know what ASM is, and if the barriers for them to understand the sector are too high.  Progress needs to fold in significant increases in awareness, and a common ‘language’ between miners and investors that makes it relatively easy for investors to make informed choices.

Solutions themselves need to reflect the dynamic realities of a huge highly diverse sector – flexible frameworks are essential, a strong stakeholder orientation is key, and a strategic eye toward commercially realistic value is fundamental.  

The opportunities in the sector are compelling, the work around the digital marketplace described above will support the democratization of finance access in the sector, opening new doors for value.  It is clearly the right time to think about the best integrated ways to optimize value and impact across the huge sector, which is part of the broader mining industry’s opportunity of delivering increased critical minerals as well as precious metals in a changing world.

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