THE RISKS AND REWARDS OF ARTISANAL GOLD MINING IN

UNCLAS BAMAKO 000441


E.O. 12958: N/A
TAGS: ECON EAID ETRD EINT EAGR ML
SUBJECT: THE RISKS AND REWARDS OF ARTISANAL GOLD MINING IN
MALI


1. (U) Summary: Artisanal gold mining accounts for four
percent of Mali's total gold production. In contrast to
industrial mining, artisanal mining is unregulated by the
Malian government and plagued with problems such as the use
of child labor as well as the use of mercury in the process
of gold refining. A program funded by the U.S. Department of
Labor and implemented by the International Labor Organization
(ILO) aims to eliminate the worst forms on child labor in
Mali, including mining. On May 27-28, the Embassy visited
several artisanal and one industrial mine in Kenieba, the
largest gold producing region. There was no evidence of
child labor during this visit, though numerous health and
safety risks remain. End summary.

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Artisanal Gold Production in Kenieba
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2. (U) On May 27-28, the Embassy visited several artisanal
and one industrial gold mine in Kenieba, in western Mali.
The Kenieba Valley is Mali's primary gold producing region,
the site of Mali's largest industrial gold mines and most
intensive artisanal production. In 2006, artisanal miners
produced 2,100 kilograms (kg) of gold, or four percent of the
total 51,957 kg produced in Mali that year. According to the
Prefect of Kenieba, more than 90 percent of the adult
population in the region is involved in mining. Gold
prospectors, who are generally villagers in the same region,
dig holes in zones that have not already been delineated in
mining concessions. In these "couloirs d'orpaillage", there
is no requirement to register mining activity; as a result,
the Kenieba landscape is littered with abandoned mining pits.


3. (U) Men and women are equally involved in mining
activities. Men's operations, however, tend to be larger in
scale, with pits measuring more than 70 meters deep and often
involving a network of horizontal shafts. These also tend to
be more capital intensive, with crews of more than 20
individuals working a single shaft, whereas women usually dig
their pits, measuring one to two meters, individually. Miners
typically use mercury to refine the gold dust they find,
which is more common than gold nuggets that need only to be
washed with water. One entrepreneur we interviewed, who
employed a total of 40 people at two different sites, was
insistent that all of the mercury he used was subsequently
recuperated and did not seep into the ground. He
acknowledged, however, that all of his workers handled
mercury and he could not oversee each aspect of the
operations at both sites. The lack of regulation of
artisanal mining makes it difficult to assess the extent of
negative health impacts of the use of mercury on the local
population. The Prefect of Kenieba said that, in spite of
the fact that almost the entire adult population in his
district was involved in gold mining, he was not aware of any
systematic or unusual health problems. The Prefect's
reticence is telling of the general lack of awareness of this
issue.

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Is Child Labor Disappearing, Or Just Less Visible?
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4. (U) Because of the intensity of mining activity, Kenieba
is one of the sites targeted in a USD 3.5 million project to
combat child labor. The "Support for the Preparation of the
Mali Time-Bound Program" (TBP) is funded by the U.S.
Department of Labor (USDOL) and implemented by the
International Labor Organization and the International
Program for the Elimination of Child Labor (IPEC). The TBP
seeks to develop a national strategy to eliminate the worst
forms of child labor in Mali. This includes the adoption of
legislation enumerating and criminalizing the worst forms of
child labor, the creation of statistical databases, and the
formation of institutions designed to implement and oversee
Mali's child labor policies. The program also sets out to
prevent 9,000 children from participating in the worst forms
of child labor, including both those who have already been
laborers and those who are at risk.


5. (U) No child labor was evident during the visit to
Kenieba. In a June 9 meeting, Technical Advisor of the TBP
in Mali, Michel Gregoire, was optimistic that the TBP had
made some headway in combating child labor in the region. He
cited a February 2009 survey funded by the USDOL called the
Direct Beneficiaries Monitoring and Reporting study (DBMR),
which verified the TBP's tally of how many children had been
prevented from entering the workforce. The study tracked the
children listed as success stories to confirm that they were
attending school. Ultimately, the DBMR revealed a ten
percent margin of error, which Gregoire felt was indicative
of the TBP's success to date. This measure of success is
problematic, however, as children sometimes serve as laborers
for several hours after returning from school, on weekends,
or between school sessions. In reference to mining, Gregoire
said the real measure of success of the program would be seen
when school was out of session. Thus, the fact that no
children were working in mining during our visit may have
been the result of a combination of factors, including the
success of the prevention program, the time of day, and
seasonality.

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The Economics Of Artisanal Gold Production
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6. (U) For most of those involved in artisanal mining, income
is unreliable. One year may be profitable, allowing for the
purchase of a motorcycle or television set, while other years
may yield no returns. For those entrepreneurs who have the
means to invest some capital, the economic calculations can
be quite a bit more favorable. A Malian entrepreneur, Issa
Camara, said he had produced 4.29 kg of gold, worth USD
103,000, in four months using a team of 40 people. Three
years after starting his mining operation, Camara had far
surpassed the initial CFA 35 million (USD 70,000) investment
he made and he continued to expand his operation. In another
instance, a Malian worker managed an operation that was
financed by a Dubai businessman, who had provided the costly
pump and generator. This worker said his team typically
produced between 3-7 kilograms of gold per year, worth an
average of USD 72,000 - 182,000. The Dubai businessman did
not visit the mine and received his payment in gold during
periodic trips to Bamako.


7. (U) There are three qualities of gold produced in Mali:
20.70, 21, and 22 carats. Once purified, the first could be
sold for 9,500 CFA (USD 19) per gram, the second for 10,500
CFA (USD 21) per gram, and the third for 11,500 CFA (USD 23)
per gram, which increased by an additional 500-1000 CFA (USD
1-2) per gram once it reached the Bamako markets. Prices
wereset according to the second fixing of London. Camra
generally sold the gold he produced to a handfl of buyers
with whom he had a relationship, somtimes directly to buyers
coming from abroad or t middlemen in Bamako.


8. (U) Asked about the exort of gold, Camara described the
two most common scenarios for transporting gold from Mali.
In the first, gold was purchased at a gold "comptoir" in
Bamako, which took care of gathering the requisite paperwork
from the National Office of Geology and Mines (DNGM) and
customs office, and ensured that duties were paid. The
second, and more common, scenario was that a buyer purchased
directly from a producer or middleman. Once at the airport,
the buyer was responsible for paying customs duties.
Camara's description revealed the murkiness of exporting gold
from Mali. Malian law allows for the export of gold only in
the form of bars. As evidenced by Camara's description,
however, gold dust is exported routinely. This corresponds
to the Embassy's experience in answering commercial inquiries
from U.S.-based buyers who are almost invariably negotiating
transactions to purchase gold dust from Mali. One U.S. buyer
said that dust was preferable to bars because it was more
difficult to substitute with a non precious metal.

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Canadian Company Resumes Operations
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9. (SBU) Avion Resources Corp, a Canadian based company, has
restarted production at the Tabakoto and Segala
gold mines in Kenieba through its purchase of Nevsum, the
Canadian firm that previously operated the two mines. Avion
Acting Director Lyndon Blackberry said the company was poised
to double production from the current 100,000 oz per year
from the two pits. Avion's relations with the neighboring
communities were smooth, according to Blackberry, due in
large part to the fact that the company consulted the Prefect
of Kenieba when hiring workers from the area. This allowed
the Prefect to recommend individuals in return for favors or
support. Asked about the greatest challenges to doing
business in Mali, Blackberry said unequivocally that it was
the time and expense to clear goods and materials through
customs. This was in spite of the fact that the Malian
government allows the duty-free import of machinery and other
inputs for the first three years of a mining operation, and
Blackberry said delays and requests for bribes were common.

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Comment
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10. (SBU) It was heartening that we saw no evidence of child
labor during this visit. Even if this was due, in part, to
the seasonal nature of child labor in the artisanal mining
sector, it also seems clear that the U.S. Department of Labor
funded program to combat child labor has had a discernible
impact in the region, evidenced also by the signs advertising
the program in and around Kenieba. What was troubling,
however, was the lack of awareness of both workers and
officials of the health risks posed by mercury use, as well
as the lack of oversight with regard to the most basic of
safety standards. Given the prospect of striking gold,
however, it is clear that the risks have been outweighed by
the potential reward. End comment.

MILOVANOVIC