Four central banks sign new framework to enable responsible gold sourcing from small-scale miners in domestic currency
The World Gold Council (WGC) announced on Wednesday that four central banks have committed to signing ‘The London Principles’, a set of operating guidelines for responsibly sourcing gold from small-scale domestic miners.
The London Principles are a set of operating principles to help structure and formalize Central Bank Artisanal and Small-Scale Gold Mining Domestic Purchase Programmes (ASGM DPP), and the four inaugural signatories are the central banks of Colombia, Ecuador, Mongolia, and the Philippines. The WGC said in the announcement that the commitment of these institutions “represents progress towards more responsible gold sourcing practices worldwide.”
“The World Gold Council is committed to improving transparency, trust and integrity across the entire value chain,” said David Tait, chief executive officer of the World Gold Council. “By using the market power and visibility of central banks, who are often the largest or even sole legal buyer of ASGM production in their countries, we hope to instill responsible gold sourcing practices in countries where ASGM is prevalent.”
Artisanal and small-scale gold mining (ASGM) is an important source of livelihood for ordinary people in many gold-producing countries, with some estimates suggesting that 15 million people around the world make their living from ASGM. “However, [ASGM] is often unfortunately associated with illicit activities, lack of environmental protection, labour abuses, and other harmful practices,” the WGC said. “ASGM DPPs offer a route to help bring responsible artisanal and small-scale gold miners into the formal supply chain.”
In recent years, some central banks have launched programs to buy gold produced by domestic artisanal and small-scale gold miners in local currency. “The schemes are mutually beneficial as small-scale miners can sell their production to a trustworthy source that offers transparent buying processes and pricing,” the WGC noted. “In addition, central banks can add gold to their official reserves using their local currency, allowing them to grow their reserve assets without having to sacrifice other hard currency reserves.”
As gold is priced and sold in U.S. dollars internationally, the ability for countries to purchase domestic gold in their own currency can be a significant advantage over acquiring bullion through the global gold markets.
“Over the last two years we have worked with central banks who operate ASGM DPPs to exchange best practices and learn from experts,” said Head of Asia-Pacific (ex-China) & Global Head of Central Banks Shaokai Fan at the World Gold Council. “We are pleased to see the group evolve into ‘The signatories of The London Principles’, a trusted circle of central banks who adhere to the most stringent requirements for ASGM DPPs.”
“The participants in this initiative believe that well-structured ASGM DPPs have the potential to contribute to sustainable development, support formalisation and raise ESG standards,” Fan added.
Tait called it “a critical moment for artisanal and small-scale gold miners,” and said the WGC envisions that the original signatory banks “will provide a blueprint for others that are considering how to help formalise domestic ASGM to the benefit of their economies and the people who earn a livelihood from this industry.”
The 12 London Principles encompass commitments to: Legal frameworks, resourcing and transparency; Community well-being; Mercury reduction; Due diligence; Progressive improvement; Formalization; Incentives; Rule of law; Accessibility; Access to ‘clean’ finance; Refining purchased gold; and International cooperation.
Source: https://www.kitco.com/