London Symposium: Artisanal mining growing in South America, Pan Am Silver exec says

Pan American Silver (TSX, NYSE: PAAS) is working with small-scale miners in Peru to help them raise production standards and sell their gold to central banks – an effort that isn’t without its challenges.

Record-high gold prices have contributed to a surge in illegal mining across the globe. Artisanal and small-scale miners now account for about 20% of global gold supply – about five times the level that was seen in the 1990s – and 80% of employment in the industry, according to World Gold Council (WGC) data.

The trend is even more pronounced in Peru, where more than 300,000 artisanal and scall-scale mining operators generate about 25% of the country’s gold exports, WGC figures show. Peru’s informally produced gold is worth about $8 billion a year, according to Brent Bergeron, Pan American Silver’s senior vice president of corporate affairs and sustainability.

Artisanal and informal mining “is growing throughout Latin America,” Bergeron said Monday in London at the International Metals Symposium.

“What we did as a company when there were informal miners working on our concession is that we helped them formalize themselves first, in terms of their partnership, to create a cooperative of their own so that there was a management structure in place to be able to bring in all of their partners, their coop partners, and formalize them with the national government,” Bergeron said. “So we’re in the process of doing that right now.”

Vancouver-based Pan American Silver has two active operations in Peru – the Huaron polymetallic mine and the Shahuindo gold mine – in addition to having mines in Argentina, Bolivia, Brazil and Chile.

Together with the WGC, Pan American Silver is also working to connect Peru’s informal miners with gold buyers such as central banks, Bergeron said.

“There’s a really good project that has been started by the World Gold Council, where they’re actually partnering with the central banks in different countries,” he said. “We’re trying to establish this in Peru. I know they’re doing it in Ecuador, they’re doing it in Brazil right now, whereby the central banks will buy the gold from these informal miners that have become formalized by the government – which, to me, is an important part because it’s the full length of the supply chain.”

While informal miners “are increasing their standards in terms of how they’re operating, their environmental standards, also their labour standards,” they need help connecting with gold buyers, Bergeron said.

“If they don’t have a place to actually sell (gold), then they’ll just go back into the organized crime supply chain, which is not where we want it to go,” he added. “So these types of projects, looking at them from beginning to end, are extremely important. That’s an example of what we’ve been doing because it is an issue.”

Bergeron spoke on a panel about the challenges and opportunities in Latin American mining.

While new political leaders in countries such as Argentina have shown a greater openness toward mining projects, foreign miners must do a better job of demonstrating the industry’s benefits to local communities across Latin America, said former Anglo American (LSE: AAL) CEO Mark Cutifani.

“There is a movement of the conversations to the centre,” Cutifani said during the panel discussion. “Over time, that’s positive, that’s encouraging, and maybe to encourage that, we have to find our voice in terms of helping people understand mining’s role in society. I don’t think we do that well. And if we can be a constructive voice in that convergence to the centre, as more people are aware of how people are achieving growth and improvement from poverty and other circumstances, I think we can make a real positive difference. So I’m optimistic, but there are areas where that still looks pretty tough.”

Mining’s main problem in Latin America is that the industry is often associated with colonization, said Orla Mining’s (TSX: OLA; NYSE: ORLA) chief sustainability officer, Silvana Costa.

“Mining came in as a colonizer,” Costa, a native of Brazil, told conference participants. “The colonizers came in and removed our resources. They took our wealth, our resources, to other countries, to benefit other people’s lives. That is a difficult kind of narrative to get over. Mining can be a source of pride, a source of economic development. It’s a little bit of a longer journey depending on which country you’re in.”