Fighting corruption in mining poses tough challenges

Rampant graft afflicting the mining industry has led to a massive loss of public revenue in many countries. A new report shines a light on the risks of corruption occurring at the very start of the mining process.

Corruption is a widespread problem in many natural resource-rich countries. Mining in these places is a contentious, graft-prone trade and enjoys poor reputation, epitomizing rampant loot of raw materials and crony capitalism while contributing to enormous environmental degradation and social unrest.    

Nature and Environment | 01.03.2018

A new report now shines a light on the risks of corruption occurring at the very start of the mining process, where key decisions are made about whether, where and under what conditions mining is permitted.

The approval process is the first link in the mining value chain and ensuring that this process is graft-free could lead to more transparency and accountability in the sector.

The report, titled Combatting corruption in mining approvals: assessing the risks in 18 resource-rich countries, was published by Berlin-based NGO Transparency International on Tuesday, December 5.

The study's authors carried out research in 18 different countries, encompassing a diverse range of legal and socio-economic environments. The countries included major mining economies such as Australia, Canada and South Africa as well as emerging ones like Cambodia and Kenya, among others. 

The researchers conducted interviews with stakeholders from civil society, multilateral organizations, governments and the mining industry to gather input for their study.

They conclude that corruption risks exist in mining approvals regimes of countries worldwide, regardless of the nation's stage of economic development, political context, geographic region, or the size and maturity of their mining sectors.

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"Natural resources are too often vulnerable to corruption. We see this across the world as citizens are denied the wealth that is part of their natural heritage…The goal of this work is to lead to a greater understanding of corruption risks in the mining approvals process so that corruption can be countered at the very start of the process," Delia Ferreira Rubio, chair of Transparency International, was quoted in the report as saying.

Huge revenue loss

In many countries, rampant corruption afflicting the mining industry has led to a massive loss of public revenue, estimated to be worth hundreds of millions of dollars every year.

In July this year, Global Witness, a London-based campaign group, released a report stating that the Democratic Republic of Congo was losing a fifth of all of mining revenues because of corruption and mismanagement.

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Likewise, in Uganda, graft was stifling investment in the sector and eroding benefits and opportunities for Ugandans, Global Witness said. Numerous other countries share similar tales.

Read more:

 - Panama Papers: Africa's elite are plundering their countries

- Bolivia's Evo Morales plans lithium mining offensive

The corruption-related losses in these places blow a big hole in their state coffers and diminish the ability of their governments to provide public services like healthcare and education by reducing the funds at their disposal. In this way, graft plays a significant role in condemning these resource-rich nations to remain among the poorest in the world.

"Corruption at the start of the mine lifecycle compromises the rest of the process - impairing how operations are monitored and regulated, undermining the collection of taxes and royalties and damaging the mining industry's social license to operate," the Transparency International report stated.

The researchers underline the various problems that could arise as a result of graft in mining approvals. They point out that corruption can result in environmentally unsound and socially destructive mining projects being approved, rights to a country's mineral wealth being granted to unqualified or unethical operators, and politicians or government officials taking advantage of their position to profit from their interests in the sector.

Society

Back-breaking work

Deep down, a miner in a rural artisanal gold mine chisels gold ore out of the earth. The shaft team is composed mainly of excavators and bag porters. Miners spend six to eight hours down the shafts each day. The work is physically demanding. At this mine, around 200 kilograms of ore must be excavated to extract one gram of gold

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Sacks of rocks for a gram of gold

A miner maneuvers through a narrow tunnel junction, as his colleague waits in line. The bags of ore he has been heaving through the mine, in the direction of the mineshaft entrance, are in front of him. After agriculture, artisanal mining is the most important livelihood in the eastern Democratic Republic of the Congo (DRC).

Society

30 kilos per load

A bag porter carries his load downhill from the mine for processing. The porters are paid 500 Congolese Francs - about $0.35 (0.29 Euros) at current Eastern Congo exchange rates - per bag by the shaft managers, and can make up to several dollars per day. They are among the lowest earners at the mine and, at this site, are often those who have migrated from other areas.

Society

Encased in the rock

A man kneels in front of a rock slab while breaking down gold ore with a grinding stone. Next, the remaining ore is manually ground down between two rocks to release the gold. This is a slow and arduous process; one plastic basin can take several hours to work through. Water carriers and ore porters are visible moving up and down the mine hill, in the background.

Society

Valuable mud

A man pours ore onto a sluice. The fine ore purchased by specialist sluice teams is mixed with water and poured onto sluices. Due again to its high density, the remaining gold sediment sticks to the sluice blanket while the excess flows downhill. The sediment is then gathered and sieved in a plastic basin using mercury.

Society

First sales

A local on-site trader assesses how much to offer for the gold a client has brought him. The gold and mercury compound seen in the trader’s plastic dish is a dull metallic grey at this point in the treatment process. Many miners will look to sell these small gold quantities to on-site traders.

Society

Refining gold

A 'big trader' heats the gold and nitric acid over a hot stove to rid it of any remaining impurities. Big traders deal in far larger quantities of gold than the local traders; they frequently trade more than several kilograms of gold in one week. Their profit margins are smaller than the local traders, but they trade in greater volume, which assures them a much higher income.

Society

Precious powder

After heating, the gold is weighed on an electric scale. At this stage, the gold has reached between 92 and 98 percent purity, depending on its origin.

Society

Red-hot riches

Once melted, the gold is cast in an ingot mould. After removing the red-hot crucible from the furnace, a worker at the gold smelter pours the molten gold into a graphite ingot mould for casting. Inside the furnace, the gold reaches temperatures of 1,500 degrees Celsius. It takes around 20 minutes to melt several kilograms of gold.

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Cooling period

A freshly cast gold ingot is deposited by a worker on the work surface; the ingot mould remains smoking hot.

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Ready to go

With a gold content of 4.163 kilograms, this ingot has a market price on the London Fixing of about $167,056 (about 145,000 euros) on the day it was produced. Annual gold production in the eastern DRC has been estimated at more than 11 tons, but most continues to be smuggled out of the country. In 2015, official artisanal gold exports for the DRC were recorded at just 254 kilograms.

Key weaknesses

The report came up with a long list of key risks and weaknesses in the mining approvals regimes.

It criticized the "revolving doors" of personnel between government and industry. "If not properly controlled, the movement of staff between industry and government [revolving doors] can lead to personal interests taking precedence over the public good," it said.

Furthermore, the study noted that if rules for opening land to mining are not clear or transparent, "investors can take advantage of decision-makers' discretion and offer bribes in exchange for access to land." As such, curbing authorities' discretionary power is crucial to cutting corruption.

To this end, the authors said, establishing a fair and transparent licensing regime is essential. The process should have clear rules and an effective licensing authority, with a complete and accurate register of licenses.

Another critical step is the effective evaluation of a mining project's impact on the social and environmental situation. "Effective verification of environmental and social impact assessments (ESIAs) is also needed to guard against the risk that license applicants will knowingly provide incorrect information about the potential impacts of their projects," the report said.

"By understanding the corruption risks faced in diverse jurisdictions, we are in a better position than ever to work towards ensuring mining contributes to sustainable development," said Serena Lillywhite, chief executive officer of Transparency International Australia.

Nature and Environment

Exit coal - now!

One day before COP23, thousands of anti-coal mining activists gathered to urge a complete phase out of coal for use in power stations. The protesters, dressed with in protective white suits, walked for about 10 kilometers — from a nearby village to the Hambach coal mine.

Nature and Environment

Block the destruction

Hambach is the largest CO2 emitter in Europe. Its expansion has already partially cleared out a 1,000-year-old forest and left several ghost villages behind — with more to come. Activists believe the climate talks going on in Bonn, only 50 kilometers away, are a complete nonsense while the mine keeps running.

Nature and Environment

Fighting in peace

Despite a heavy police presence, the mood for Sunday's protest was very peaceful. The protagonists waved colourful banners and wore painted faces. Some brought guitars and played music - at least during the first part of the day.

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Attention: danger to life

As protesters approached the mine, police officers moved in and began blocking the march. With loud speakers, they warned the demostrators that they were trepassing on private property and they posed a risk to security.

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Run, run, run

As the drew closer to the mine, the long line of demonstrators suddenly burst into life, with many people running and shouting, forgetting the many kilometers they had already walked.

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A one-day success

Activists said that blocking this type of coal infrastructure was the best way to make their voices heard for an immediate transition away from coal. And yes, at least for a while, the giant digger stopped operating. The hundreds of activists who made it to the coal mine hailed the stoppage as a great success.

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No more coal for climate

Anti-coal activists say no other place in Europe represents the dependence on coal for electricity as well as the Hambach mine. Among the many signs carried by protesters, one of the often repeated ones was: Exit coal, protect the climate.

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Far from an end

Towards the end of Sunday's march, two more groups who had gotten separated from the main demonstration, joined up with their comrades. Here you can see the police have lined up to prevent their advance.

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Time for action

The activists were successful in shutting down parts of the Hambach mine for just a day. But whether politicians will take any long-term measures regarding coal mining during the COP23 climate conference remains to be seen.