Gold? What gold?

Mining traceability solutions are just beginning, and we can expect their relevance to grow as countries, investors, and buyers\’ supply chain awareness increase

Gold is not a new topic around here. We have discussed it in three previous posts

• Mining in Brazil – when ESG disclosure failed

• Expert selection – countries leading the green gold run

• Green and Gold ETFs

And now it is time for a fourth round. Gold is a precious metal that, for centuries, has occupied a central position in human transactions. Nowadays, it represents safety and security in portfolios, and its value is – at least until now – taken for granted. What can mine (rs) the gold value is its source and origins, and this theme will become increasingly relevant in the following years.

I get back to the theme because it has become central in Brazil during the last few years, and the solutions being developed might serve as a benchmark for other developing economies producing gold. In Brazil, illegal mining is responsible for deforestation of 10% of the total amazon forest. Besides this already big issue, it gets more sensible that a relevant proportion of these land areas are indigenous reserves. The Brazilian Federal Public Ministry suggests that only in the Tapajós basin the illegal mining is six times bigger than the legal one – meaning 30 tons of illegal gold and $1B per year of undeclared products1.

It\’s become an issue of national attention as many indigenous communities have been found with severe signs of malnutrition, and their lack of resources has been tied to the conflicts they have been facing against the miners. This story is long, and its end seems far solved. However, we focus on what can reduce illegal extractivism: gold mining traceability.

When we discussed the \’green gold\’ eETFs, we raised that its creation followed investors\’ movement towards having a clearer picture of what they own and to respond to these demands that ETFs would address  ESG metrics regarding their gold origin, production process and suppliers\’ ESG integration. Its vital factors were:

• Community integration

• Proper measurement of emissions and pollutants harm generated;

• Well-developed and addressed risks and risk management;

• Transparency

In Brazil, the Federal Police (FP) experts hope to receive a sample of gold taken from illegal mines in Yanomami lands, in Roraima2, to discover the metal\’s chemical characteristics in the region. This identification will allow the authorities to determine when the metal came from mines in the indigenous territory. Created by the FP in 2020, the Ouro Target program has 300 samples from Amapá, Mato Grosso, and Paraná and aims to make the ore extracted and sold in the country chemically traceable. For this, thousands more samples need to be collected.

While 2022 was a much weaker year in the number and value of deals of alternative solutions compared to 2021, we cannot say the same for companies developing mining traceability solutions, as last year was a record one in terms of capital raised.

In the map above, we can see in blue the global regions that are HQs to companies developing mining traceability systems. They usually walk close to blockchain technologies and AI – creating all-in-one solutions for sellers and buyers. Our next article, for paid subscribers only, will dive deep into these companies, their investors, and the industry expectations.

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