New tool could help Brazil’s crack down on illegal gold mining

Brazilian gold aggregator Fênix DTVM and Minespider, which runs a traceability platform for tracking down the precious metal through the supply chain, completed this week the first stage of a project that aims to make Brazil’s gold sector transparent.

The two companies have integrated traceability in gold sourcing and processing activities and delivered the first fully traced gold bar to Fênix’s client. By the end of 2023, Fênix DTVM plans to aggregate 100% traceable gold with the Minespider traceability platform, based on blockchain technology.

The milestone comes as Brazil’s government is increasing efforts to crack down on illegal gold mining in the Amazon, through legislation that would require electronic tax receipts for the buying and selling of the precious metal.

Electronic tax receipts can be an important tool for eradicating illegal mining,” Christian Ecker, Client Partner at Minespider, said in an interview.

Currently, gold is sold with paper receipts based on the “good faith” of the seller, making it impossible to trace its origin.

“Paper documents can be more easily faked or edited (…) If done right, electronic receipts can make this harder and thereby reduce gold laundering and smuggling,” Ecker said. “It might also make tax collection more efficient.” 

The electronic receipt, or “nota fiscal” in Portuguese, would identify the name and tax number of the seller, the operation where the gold was extracted, as well as the authorization number of the mining licence.

Brazilian President Luiz Inacio Lula da Silva is preparing legislation to add transparency to the sector and end deforestation, which surged to a 15-year-high under his far-right predecessor, Jair Bolsonaro.

Lula has also pledged to take better care of indigenous populations in the Amazon who are threatened by armed, disease-carrying wildcat miners.

According to Instituto Escolha, Brazil exported 229 tonnes of gold with “serious evidence of illegality”, between 2019 and 2022. The figure, the report says, accounts for almost half of all local production.  

Mining industry lobby group Ibram’s figures are equally alarming. It claims that close to half of the 100 tonnes of gold Brazil produces each year is thought to be illegally mined and laundered by financial brokerages that are regulated by the central bank

Fênix DTVM and Minespider Fênix DTVM and Minespider’s solution can be integrated with legacy systems and could, potentially, help the government achieve its objectives.

“This tool enables transparency about gold’s provenance as buyers know where it’s coming from,” Ecker said noted. “We want to get to a point where this traceability is considered ‘normal’ and buyers expect transparency and are skeptical about non-transparent gold.”

Fênix DTVM and Minespider will expand the use of their platform to all supply chains with the overall goal of having 100% traceability across all suppliers and operations by the end of 2023.