Precious Metal: Criticism mounts over ‘dirty gold’ imports

By Paula Dupraz-Dobias

Refiners are still importing gold from questionable sources in Peru, a report published to coincide with the world’s largest watch fair, Baselworld, has found. But those in the watch industry say that sourcing clean gold is not always easy.

The detailed study, by the Swiss branch of the non-governmental organisation the Society for Threatened Peoples (STP), showed that some international refiners continued to import gold from producers responsible for environmental pollution and human rights abuses.

“Gold that has been processed for many of the products on display [at the fair] is suspected to include dirty gold,” the STP said in a statement.

Baselworld, with over 1,400 exhibitors, including some of the top watch brands, opened on Thursday.

Peruvian authorities estimate that some $1.8 billion (CHF1.6 billion) worth of gold originates annually from illegal sources. STP says roughly half of all Peruvian gold exports are delivered to Switzerland.

Peru’s illegal mining

Illegal mining has been responsible in Peru for the deforestation of more than 50,000 hectares, according to the Carnegie Institute, and high levels of mercury pollution.

Labour NGO Verité reported recently that there underage workers were being used in mines and there were incidence of people trafficking.

Last year, the Society for Threatened Peoples condemned Swiss mining companies for security contracts concluded with Peruvian police forces involved in violently subduing community protests.

Swiss importance

Switzerland, which is home to four of the nine biggest international refineries, is at the same time a transit point for approximately 70% of gold worldwide.

Illegal mining in Peru has been responsible for deforestation, pollution and labour violations, it has been reported.

Switzerland has already shown awareness of the issue, launching the Better Gold Initiative, to facilitate the export of responsibly produced gold from Peru to consumers in Switzerland.

STP based its latest findings on publicly available information from the Peruvian tax and customs authority, the SUNAT, and recorded all individual gold shipments by air from Lima between 2012 and 2014.

Metalor and MKS/PAMP

The study shows that while Swiss refineries, including Metalor and MKS/PAMP, appear to have stopped buying gold from dubious traders following local press reports exposing the metal’s provenance, other refiners, particularly in the United States (such as Atomic Gold, NTR Metals and Kaloti Metals), have stepped in to buy from the questionable Peruvian exporters.

Ticino-based refiner Valcambi, the report says, continues to import most of its gold from the vast Yanacocha mine, where five people died during protests against the mine’s expansion projects.

In 2012 a Peruvian daily, El Comercio, accused PAMP and Metalor of importing gold from the Amazonian region of Madre de Dios, in southeastern Peru. Peruvian exporters E&M, UMT and AS Peru, among others, were named by a major gold producing family accused of illegal mining in the region.

“For most exporters who could no longer sell to Swiss refineries anymore… there were other dubious companies who we think may now be exporting dirty gold in their name,” Christoph Wiedmer, director of STP Switzerland, told swissinfo.ch.

Wiedmer said that while some gold refineries had acted positively, “they are still not enforcing the required due diligence process”.  He said refiners have “a major say in accepting or not dirty gold”.

Better Gold Initiative

This is a Swiss-sponsored responsible mining initiative offering artisanal gold miners direct access to markets, better environmental respect and more transparency.

It is a Private-Public-Partnership between the Swiss Better Gold Association (SBGA), a group of major refiners and jewellers, alongside Max Havelaar Switzerland, a fair trade organisation, and the Swiss State Secretariat for Economic Affairs SECO.

Switzerland’s involvement in the initiative stems from its key role in the international gold trade.

Companies respond

Metalor responded to the report in a statement saying that it “does not knowingly source any gold from any conflict or higher risk area, but has been fully supporting the development of multi stakeholder standards for the responsible sourcing of minerals”.

Jay Schnyder, vice president of marketing and refining at PAMP, told swissinfo.ch that his company was very concerned about the origin of its gold. He said that  PAMP had stopped buying from Peru, with the exception of from just a couple of  “internationally recognised mines”.

PAMP’s website states that “PAMP rigorously monitors its suppliers, regardless of industrial purpose, to ensure that each supplier meets stringent criteria of impeccable ethics and business practices”.

Schnyder welcomed the Peruvian government’s efforts to legalise some of the thousands of miners working illicitly who satisfied certain criteria. He however expressed concern about the short deadline issued for this ‘formalisation’ of miners.

The Peru environment ministry said recently that it only expected a few thousand of the estimated 10,000-70,000 miners to gain official approval to operate.

Thomas Hentschel, the director of the Better Gold Initiative, believes that “refiners recognised that there was a problem and changed their habit”.

STP’s report showed that Swiss refiners continued to buy gold from visibly dubious sources until November 2013, the month that the Better Gold Initiative was launched in Lima.

Ticking time

According to the watch industry periodical, IW Magazine, gold watchcases and bracelets use 30 tonnes of the metal a year and 90% of the yearly 500,000 gold watches are produced in Switzerland.  Represented at Baselworld, Rolex, the magazine says, is the biggest watchmaker of all, with 200,000 pieces.

Geneva-based Le Temps newspaper has previously reported that Rolex was Metalor’s biggest client. However, Rolex did not respond to questions by swissinfo.ch on its sourcing of gold.

Representatives of other watchmakers did not exhibit particular sensitivity to the issue.

“As far as we are concerned, the origin of the gold does not interest us. I think that the majority of others will give you the same reply,” Esteban Salmon, marketing representative at De La Cour watches, told swissinfo.ch.

Salmon explained that his small, niche company sourced its gold from Metalor. He said that choosing to use responsible gold was a matter of cost and business policy.

The STP’s Wiedmer says time is ticking on the issue. “It is now time that each of the watchmakers also take a clear position saying publicly what kind of gold they are using,” Wiedmer said.

But for Hentschel of the Better Gold Initiative, a change in jewellers’ consumer awareness “doesn’t happen from one day to the next. It is a process”.

In: swissinfo.ch