· 5 min read
Large scale mining (LSM) is carried out by formal companies, taking place underground and involving highly mechanized operational approaches that include considerable geologist and engineering support. Artisanal scale mining (ASM) is informal in 85% of case, taking place at or near the surface and through largely manual approaches that do not integrate the same level of geologist and engineering resourcing.
Despite the seeming differences, the 7 million people working on large scale mining and the 45 million artisanal miners are highly intersected.
Interdependencies
1. Artisanal mining is often an early indicator for LSM exploration. The very existence of ASM tells large mining companies that there may be potential reserves in the ground. As a general rule, artisanal miners are not paid royalties for being exploration indicators
2. Large scale and artisanal mining often co-exist on shared land concessions. A large mining project likely has rights to a large area of land, where parts of the land are in use by artisanal miners. Recognizing that ASM is often a traditional extension of nearby communities, the fact that land is shared makes ASM an integral stakeholder when LSM’s work toward earning social license
3. ASM often remines tailings dams that were created by large mining projects. This can destabilize the dam, resulting in significant safety concerns.
4. ASM sometimes remines closed large scale mining sites, which brings numerous governance and safety concerns
5. Large scale and artisanal miners can be engaged commercially in a number of ways, including offtake schemes, LSM support of ASM professionalization and the use of shared labor
6. There are a number of other potential intersections between LSM and ASM activities on a shared site, including the impacts of mercury use in ASM, joint water use and waste management activities
Why intersections matter?
With artisanal miners operating in over 80 countries, often sharing land with large scale projects, these intersections mean that LSM and ASM are highly symbiotic. Opportunities and risks are impacted by the quality of relationships for both large scale projects and artisanal miners.
Responsible mining standards and practices do not outline good LSM-ASM collaboration protocols in a fulsome manner. This is a gap given the realities of ground-level engagements. The World Gold Council, Copper Mark, ICMM and Mining Association of Canada are currently converging their disparate standards, which is an opportunity for integrating expectations on good approaches for collaboration with ASM and potentially for support of ASM professionalization.
Mining investors may not be concerned with LSM-ASM relationships on the surface, but of course investors care about risks and associated returns, both of which are impacted by these relationships. At worst, active conflict between the two sub-sectors at a project can impact production, generate legal risk and disruptive PR. At best, responsible collaboration eliminates these risks while opening the door for value through joint productivity gains. As the UN Mining2030 Investor Commission continues to outline investor expectations on good mining practices, it is reasonable to expect that the risk/return dynamics derived from effective collaboration will result in clear expectations that investors demand over time. Investors of course are not present at mining sites, which means that clear expectations need to be supported by transparent reporting that describes conformance to expectations.
Downstream value chain participants care about the stability of supply and about risks. Luxury jewellers, automobile manufacturers, electronics companies and other end use sectors require stability of supply that enable stable operations. LSM-ASM conflict can result in supply disruptions. At the same time, PR and legal risks resulting from responsible mining practices not being a norm can impact downstream consumer brands while also distracting leaders from their strategic focus. The bottom line, as with investors, is that end customers may not be directly concerned with LSM-ASM relationships and may try to insulate themselves from the impacts of these relationships so that they can claim to source responsibly, but the inherent risks that lack of collaboration creates can directly impact their businesses in fundamental ways.
Understanding of how LSM-ASM conflict impacts mining operations, which extend to investors and to downstream value chains, is maturing, and will reasonably be expected to result in increased focus on responsible practices, validation and traceability of responsible minerals over time.
Financing is critical
The Blended Capitals Group, Capitals Hub Canada and the Alliance for Responsible Mining are collaborating on enabling a digital marketplace that will democratize access to finance for artisanal miners. The blockchain-based environment will facilitate investor-miner dialogue through the development of common ‘language’ that centers around discrete asset classes and operational KPI’s. This is significant given that a mechanism is needed for delivering the capital that supports professionalization of ASM at scale, while also supplementing capital that LSM’s have access to through traditional mechanisms. Given the symbiotic nature of LSM-ASM relationships that bring joint opportunities and risks, centering KPI’s and asset classes around successful collaboration and the resultant financial, social, environmental and economic value that is delivered will increase transparency while positioning investor dialogues in more trust-based ways. As standards and good practices for operational collaboration between large projects and artisanal miners mature in coming years, process-oriented expectations will be facilitated that further strengthen investor dialogues and trust.
In summary
Even as large scale and artisanal mining are often seen to be different things, the reality is that they represents the two sub-sets of the overall mining sector, with a variety of intersections between them that make relationships symbiotic. A strong focus on relationships where apt engagement delivers collaboration moves the bar on productivity opportunities along with risks. Implications on productivity and on risks are dynamics that investors as well as downstream value chain participants care about from differing perspectives, which will continue to create pressure toward the codification of standards and the definition of good practices that outline what success looks like. To that end, innovative approaches to financing, which includes the digital marketplace described above, will be instrumental for supporting non-predatory capital flows that deliver the financing needed for ASM professionalization as trust and transparency become norms through the use of validated common language. It is time.
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