Exploring the Gold Supply Chain.

Thursday, March 14, 2019

I have trouble visualizing some of our modern metaphors. How is it that a picture that I take of my family can be safely stored in a cloud? My mental picture of clouds is a mix of art and science…water droplets suspended in the sky that are moved and shaped by invisible wind…doesn’t sound like a secure place to store my precious photo.

And how is it that the components of my cell phone are provided by a chain?

A supply chain is the collection of processes and resources required to make and deliver a product to the final customer.
- Rajgopal 2016

In fact, the ‘chain’ metaphor can help us to identify the major processes (or links) that are involved in the sequence from mine to finished product.

Let’s take a high-level look at the supply chain for a mineral like gold ore as it moves from mineral in the ground to metal in a consumer product like a smartphone or a solar panel, and ultimately to recycled material.

Each participant in this chain knows their immediate supplier, but not their suppliers’ suppliers, and each is blind to the origin of the raw material present in that product.

It is this very lack of visibility that allows irresponsible sourcing to take place.

No one can say how much of the metal used in our daily lives has been responsibly mined. This is because we cannot yet track the journey of most metals from the ground, through smelting, processing and trading floors, to our homes and communities.

The gold supply chain consists of: 10s of countries where the mineral awaits; 1,000,000s of miners, both artisanal and industrial; 1,000s of local traders and exporters; 10s of smelters in different countries; 100s of traders of finished raw material; 100s of component manufacturers; 1,000s of manufacturers of the finished product; and 100,000s of different finished products to be sold to the end users.

The first process in the mineral supply chain is the government of the country where the gold is located. Each country regulates the ability to mine and mine ownership, as well as the human, environmental, safety and political conditions under which mining can occur.

Countries may cooperate in international regulation and guidance, or may govern independently. Countries, just like individuals, can be responsible or corrupt, laissez-faire or interventionist, nationalistic or global in their behaviours, and this variability means that some countries are much less effective than others in assuring responsible activities in the gold supply chain. Countries also vary in their permission or prohibition of artisanal mining, individual land ownership, and mining rights.

It is rarer to find a one-ounce nugget of gold than a five carat diamond.
-
World Gold Council, 2019

Gold in the ground is found in hard rock deposits as a mineral, where the financially minable gold content may be between 1 and 20 grams of gold per tonne of ore. Gold is also found in alluvial deposits where gold panning and sluicing can retrieve flakes and small nuggets of gold.

To get the gold ore out of the ground requires miners. Estimates say 100 million people depend on artisanal mining. About 7 million people are employed in industrial mining worldwide.

Artisanal and Small-Scale Mining (ASM) occurs in approximately 80 countries worldwide. ASM production supply accounts for 20% of mined gold. In some countries, LSM and ASM co-exist, while in others, artisanal miners and large corporations are in competition for the same resource.

Though the informal and poorly-mechanized nature of ASM may result in low productivity, ASM represents an absolutely vital subsistence activity for local populations. A typical ASM mining process includes digging the gold ore, transporting the ore (carried in bags or by wheelbarrow) to where it is manually crushed, washed, and filtered.

The filtered sediment is processed chemically, often with mercury, to yield a gold-mercury amalgam that is then sold to local traders. LSM extraction of gold typically involves machine crushing and milling the rock to a powder or slurry, then vat or heap leaching using sodium cyanide to yield impure gold.

To get the roughly separated gold from the ASM site to a smelter involves traders and exporters. At this step in the supply chain, gold can easily be redirected to illegal hands.

Local traders may purchase small quantities of gold amalgam from miners and sell it in turn to large traders. Or miners may act as a cooperative and sell to large traders directly. Large traders may then smelt the gold themselves or may ship the amalgam to a smelter.

Local traders may be the first to price the gold coming from individual miners, or pricing may be set by local politicians or chiefs, or in some countries, set by regulation. Each of the participants in the process between the miner and the smelter (mine supervisors, local tribal authority, traders, government officials, police, and others) can perform their work legally or illegally.

Assuring fair and responsible sourcing is fraught with challenge when so many hands can be involved in the process.

There are a variety of forms of transportation involved in moving gold ore from the mine site to the smelter.

Following the manual labour required to transport gold ore to the crusher and flotation equipment, gold amalgam needs to be assembled in sufficient quantity to be exported to smelters. In the case of ASM gold this involves land transport by a variety of means including bicycle, motor scooter, truck and trailer. Road transport may be subject to arbitrary taxation by local government officials or extortion by illegal groups.

Once accumulated in quantity sufficient to ship internationally, illegal gold may be mixed with responsible gold and presented as being responsibly mined.

The fungibility (one piece looks like another) of gold makes the determination of origin difficult at this point.

The smelter is considered the midpoint in the mineral supply chain, with processes before mineral arrival at the smelter being ‘upstream’, and distribution and manufacturing processes after metal production being ‘downstream’.

Smelters process not only mineral ore from LSM and ASM but also recycled material coming from a variety of sources. In a smelter, gold is released from its natural mineral state by melting and then reacting with chemicals.

The resulting doré gold is a semi-pure alloy of gold and silver that can vary in purity, so frequently it is then sent to refineries, where further treatment can bring the purity of the gold to nearly 100%.

The next process in the gold supply chain is the purchase, marketing, and distribution of purified gold.

This is done by global traders, many of whom provide logistic services in addition to the raw material in order to assure delivery to the customer. In our instance, this customer would be the manufacturer for the components of a smartphone or solar panel.

Gold is a very good electrical conductor. It does not easily corrode in air, while other very good conductors like silver and copper do corrode. Gold is malleable (can be shaped or formed) and ductile (can be easily drawn into wire).

For these reasons, gold is the preferred material used to make small electrical connectors, circuit traces, integrated circuits, transistors, and memory chips. A component manufacturer will need only minute amounts of gold for each component but will be making millions of components.

Our modern electronics are complex assemblages of dozens of small components, each of which contains gold. In fact, virtually any electronic appliance, that has a circuit board will contain gold, from old TVs and VCRs to GPS systems and solar panels.

There are nearly one billion smartphones produced each year. That’s a lot of consumers for this one supply chain.

There is one more process that should be considered in the gold supply chain, and that is recycling. 35–40 smartphones (without batteries) contain roughly 1 gram of gold, the same quantity that appears in a ton of lower grade gold ore in the ground. Recycled gold cannot replace our regular consumption, but it can contribute to a responsible supply chain.

It has been reported that organisers of the 2020 Olympic Games in Japan would like gold, silver and bronze medals to be sourced purely from donated electronics.

What an inspirational way to complete the gold supply chain!

- ABOUT THE AUTHOR

Lee Williams

Lee is a contributing researcher to Minespider. A Canadian living in France, he is an occupational physician experienced in injury prevention, chemical risk management, and international chemical regulation. Lee's career has extended from private medical practice to associate medical director for Michelin, and from President of the Occupational and Environmental Medicine Association of Nova Scotia, to chair of the Cobalt REACH Consortium technical committee. He is passionate about product stewardship.

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