Open Collections

Business solutions to the formalization of artisanal gold mining

University of British Columbia

Artisanal and Small-scale Mining (ASM) exists in virtually every developing country with accessible mineral deposits. Typically ASM is an informal or in some cases illegal activity with numerous problems associated with it including mercury pollution, non-existent health and safety standards and abusive child labour practices. Furthermore ASM is often regulated to a “subsistence” activity that, along with poor financial management among the miners, keeps participants trapped in a cycle of poverty. Nonetheless, ASM is remarkably productive and has the potential to be extremely profitable as well as environmentally and socially responsible given guidance and formalization. Efforts to formalize ASM activity thus far have been government-led, top-down, heavy-handed attempts to police an activity that employs an estimated 20-30 million people world-wide, often in remote places and often in situations where they believe they have no economic alternative for survival. Not surprisingly, these efforts have met with limited success. The productive and potentially very profitable nature of this activity, where there is no shortage of demand for their extremely fungible product, lends itself readily to a business approach. Franchise businesses are effective in markets where consistency in operations and production are required, especially where such operations are attractive to capable local operators. The franchise model offers access to finance, improved technical capacity for increased recovery, business management expertise, access to banking and personal financial guidance, and a mechanism to reduce environmental and social risk. Furthermore, investors are increasingly wary of investing in junior mining companies as country-risk, resource nationalism, and social license to operate act as impediments to a project’s timely entry to production. ASM offers high social license with local operators and well-diversified country risk. Thus, a small-scale gold mining franchise offers an appealing opportunity to manage, as well as diversify against, such risk factors, while remaining in an extremely profitable and hitherto unexplored market. The reality in many places in Latin America is that partnerships with community locals have a much higher success rate than businesses without. Even nationals from other localities experience difficulties such as additional or longer permitting and harassment. This dynamic provides additional advantages to franchise structures.

Text

2016-01-05

Attribution-NonCommercial-NoDerivs 2.5 Canada

http://hdl.handle.net/2429/56231

Mining Engineering

University of British Columbia

UBCV

http://creativecommons.org/licenses/by-nc-nd/2.5/ca/