Fairmined Certification is a great achievement for artisanal and small-scale mining organizations (ASM), one that requires a high degree of human and financial commitment. Once this first goal of becoming certified is achieved, however, mining organizations face subsequent challenges. They must continue developing their organizations and working hard to fulfill all of the requirements to remain certified. In addition, from the point of view of marketing and the supply chain, the ASM organizations must overcome a wide variety of challenges that, together with the particular challenges inherent in performing mining activity, could lead to the suspension or, in the worst case, decertification of a certified mining organization. Below we will summarize some of the obstacles responsible ASM organizations must surmount in terms of commercialization.
What challenges must an ASM organization overcome to maintain Fairmined Certification once on the market?
In the first place, it is important to underscore that one of the key factors for guaranteeing that an ASM organization retains its certification is the group’s motivation and ability to sell its certified gold in the Fairmined chain. Nevertheless, this is not always easy. We have identified some of the issues that cause mining organizations to decide not to sell their entire supply of certified gold, or that cause a delay in starting to export.
1) Production and cash flow: ASM organizations with monthly production volumes lower than 1,000 grams are advised to wait until they have accumulated a viable amount of mineral to export, since the fixed costs of exporting can be high. In addition, whereas selling the gold locally generally allows them to count on the money from the sale to be available immediately and free of the risks of fluctuating prices of dollar and gold, the logistics involved in the export process delays the availability of the revenue for a longer period of time. This situation seriously affects the cash flow of the ASM organizations and can lead them to decide to sell their gold outside the Fairmined chain.
Although the Fairmined Premium is a great incentive for ASM organizations to become certified, in some situations the miners prefer to sell locally to have immediate cash flow, rather than having the Fairmined Premium saved in an account for investment in the development of the organization at a later date.
2) Formalization costs: Small-scale mining operates in an informal environment where it is customary to make sales outside of the formally constituted market, so as to ensure the cash flow of the organization and avoid tax obligations. Formal and certified ASM organizations, on the other hand, must fully comply with the law of their countries of origin, which may cause their exporting and operating costs to exceed their financial capacities.
3) Exporting logistics: Bolivia, Peru, and Colombia have recently made modifications to their laws that directly impact export procedures and pose new challenges for small-scale miners in the trade of their certified gold.
These new requirements have the greatest impact on mining organizations that operate with lower production levels, and therefore smaller revenue streams, which limits their access to viable alternatives for compliance with the new requirements (for example, certificates of analysis, compliance officers, transportation in armored vehicles, etc.). Moreover, many ASM organizations are located in remote areas far from major cities, and this greatly increases the complexity and cost of transportation to the point of export.
4) Burdensome national mining legislation: Despite advocacy for the formalization of ASM organizations, unfortunately the laws passed in some countries did not seem to take into account the realities of artisanal and small-scale mining organizations. Instead of promoting responsible ASM organizations, sometimes governments draft laws that cater to larger-scale mining, placing additional burdens upon ASM organizations that can make their operations unsustainable.
5) Management: A lack of experience or knowledge and slow processes within ASM organizations hinder their ability to respond in a timely manner to purchase offers.
6) Conflicts of interest and lack of confidence: Within the mining organizations we can find detractors of certification that stir up doubts, delaying the process of marketing certified gold. Additionally, miners are distrustful of new buyers, fearing they will not get paid after delivering their gold.
7) Fairmined auditing costs: The cost of auditing represents an economic burden for mining organizations, especially those with smaller production levels and less human resources within the ASM organizations. Although they have been advised that the premium can be invested in paying for the audit, there is still too great a lack of financial planning and a sustainability perspective for them to earmark part of the premium for annual audit fees.
What solutions exist for the aforementioned problems, and what does ARM do to support ASM organizations in overcoming these challenges?
The main mechanisms that ARM uses to support ASM organizations in commerce-related issues are:
1. Providing informational tools and consulting to help the ASM organizations understand the export and trade processes, as well as providing guidance in identifying viable logistical alternatives for their exports.
2. Facilitating the relationship with buyers and promoting Fairmined Certified Gold supplies to potential buyers.
3. Informing ASM organizations of their rights and duties in selling their certified gold.
How can these risks be further mitigated?
1. More closely hand-holding the ASM organizations through the processes of commercialization, for example personally accompanying the miner in some key steps and including marketing topics in their preparation for certification. It is essential to hold periodic consulting sessions, to visit the mine, and to participate in meetings attended by partners and workers, in order to maintain the organization’s compliance with the Fairmined Standard and the miner’s interest in selling certified gold.
2. Training in other related aspects, such as business planning, decision making, leadership, international negotiation, and internal management, that allow them to make informed and efficient decisions.
Working within the ASM organizations environment
1. ARM coordinates with other organizations or institutions that offer mining-related services to create synergies of support for the miners.
2. ARM lobbies for the public policies and legislation affecting mining to consider the realities of the ASM organizations.