A practical example of 'solving' the artisanal mining challenge

We know that 'solving' the artisanal mining challenges is something we need to do. It will be good for the wider economy, adding material new production. It will improve the livelihoods of millions of people around the world, allowing them to work more safely and earn a fair living. And it will improve the local environment. Put that way, it's an easy choice.

We also know that it's complicated. It involves numerous organisations, often with conflicting or unclear objectives. It's not as simple as creating regulation and licences. But it is possible. People have done it, or at least started it, as formalisation is a process, one that can last for years, if not generations.

Rob Karpati, at The Blended Capital Group has written on work carried out in Mozambique, home to an estimated 640,000 artisanal miners.

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Artisanal mining is strategic for the energy transition.

From Rob Karpati - The Blended Capital Group

Artisanal mining is a huge diverse sector, including 45 million miners working in over 80 countries. An estimated 85% of these miners operate informally, lacking governance structures and financing access needed to deliver improved social, economic and ecological outcomes.

Formalization represents a tremendous opportunity to step-change both lives and economies, but what does success look like, what are the key success factors and what is delivered?

What is Artisanal Mining Formalization?

Estelle Levin, founder of Levin Sources and a recognized global expert on artisanal mining, defines formalization as ‘the transition toward organized and professionalized systems of production in and through which responsible business conduct and sustainable development are more feasible and desirable, and thus more likely.’

Transitions to stable predictable equitable business relationships through enhanced governance, access to financing, value chain redefinitions and mining practice improvements are all implicit in formalization.

What is Delivered by ASM formalization? Or why should we do this?

Formalization shifts social, economic and ecological impacts.

1. Social – formalization reduces the vulnerability of artisanal miners to bad actors, reducing poverty, improving safety and the broader dignity of work
2. Economic – productivity increases 2X, 3X or even 5X when good mining practices and broader stable predictable business relationships increase operational capacity. This goes directly to value for miners, for investors and for communities through broadened sustainable development
3. Ecological – along with increased critical mineral supply that supports the energy transition, formalization reduces mercury contamination as well as deforestation.

Keys to Success

Formalization is not a one-size-fits-all process, but a flexible framework that engages differing miners and communities based on their specific realities.

Success requires:

1. Starting with voices of miners and neighboring communities – solutions are collaboratively developed, not externally imposed
2. Consideration and engagement with broader stakeholders – artisanal miners operate in a broader business ecosystem – for instance, formalization solution designs need to engage and consider impacts on governments, investors and downstream value chain players
3. Legal frameworks matter – regulatory environments that recognize the legitimacy and unique nature of ASM are table stakes for enabling the investment and engagement that facilitates formalization
4. Sustainable structures – apt governance for formal artisanal miners may involve companies, coops or associations – sustaining gains from near-term engagement involves ensuring that robust governance structures are in place that allow artisanal miners to benefit from ongoing formalization
5. Capacity development – a broad suite of business capabilities is needed to successfully run a company, coop or association; along with enhancing specific mining related skills that range from the use of PPE to improved tunnel designs, focus on governance and business capabilities is essential for sustaining gains
6. Theories of change based on solution designs need to be clear – miners, investors and broader stakeholders need to understand what will be delivered and why it makes sense
7. Last but not least, the pace of formalization will vary, and depends on the ‘speed of trust’, as relationships with miners are developed in ways that generate buy-in

Mozambique – an Example

The scale of the challenge

An estimated 640,000 artisanal miners operate in Mozambique, 385,000 mining gold and with the other 255,000 mining gemstones, tantalite, clay, construction materials and coal.

Approximately 1/3 rd of the miners are female, 2/3rds are male. As with other countries, the vast majority of these miners operate informally, vulnerable to a lack of safety, poverty and predatory actors. Also, similar to elsewhere, legal frameworks have historically been biased toward the interests of large scale miners, but the country now has a strong focus on enabling a transparent robust ASM sector.

There are over 50 ASM associations in place, meaningfully and increasingly contributing to the country’s economy.

The government has come to understand that formalization goes beyond just having licenses in place. Success requires governance, good mining practices, value chain streamlining and beyond – in short, it involves ensuring that sustainable businesses are in place that add value for miners and neighbouring communities, while fostering sustainable development and ecological oversight.

To that end, a project was conducted by Levin Sources, the Alliance for Responsible Mining and Genesis Lda in 2021-22 with the intent of operationalizing the country’s ASM development strategy. The project was financed by the country and by the World Bank.

Towards ASM formalisation in Mozambique - Levin Sources

Explore how a Mozambique government project is helping ensure ASM miners can make the most out of the minerals and metals they extract.

Levin Sources

Locations selected

Four diverse co-ops across three locations were selected for the project, aimed at supporting formalization, shifting toward good sustainable mining practices while building capacity in the country to extend gains to further associations.

A gold co-operative in Tete, a gemstone co-op in Zambezia and two co-ops extracting clay in Inhambane were selected for the project. (Editor's note - this is an important reminder that ASM is not just about traditional minerals, it also involves mining for clay, and in some countries, sand and gravel)

Participative approaches were used across the four co-ops, involving stakeholder dialogues, collaborative solution design and capacity development geared toward sustaining gains. Focus areas of work included:

1. Organizational and governance support
2. Legal and licensing support
3. SHEA creation and training
4. Technical training and capacity development
5. Introductions to environmental impact assessments and management
6. Market analysis and marketing planning

Along with collaboration and capacity development with miners themselves, capacity development and collaboration with government officials was core to the process, ensuring buy-in while positioning state personnel to extend gains.

The Outcomes

The project contributed to formalization in all three locations, targeting different specifics based on what made sense at the ground, while also building capacity for both miners and government officials in order to position sustaining and extending gains. Specifics that were delivered include:

1. At Inhambane – organizational development, market analysis and business management
2. At Tete – assisting in setting up sustainable water management
3. At Zambezia – integrating environmental management into formalization approaches
   

In all cases, clarity that strengthened formalization delivers social, ecological and economic gains is essential. Delivering benefits in sustainable ways starts with dialogue, where ground-level realities and the voices of miners have status in identifying opportunity areas and in defining and delivering solutions.

Summary - What did the Mozambique project deliver

Artisanal mining formalization makes strong economic sense. The dignity and productivity of work are improved when effective governance is fostered that delivers stable predictable equitable business relationships.

For miners, this results in improved lives, poverty reduction, safety improvements, and reduced vulnerability. For communities and broader value chain stakeholders, economic benefits include potential sustainable development result along with ecological gains from reduced contaminants and deforestation. Many investors find the combination of social and economic gains commercially attractive.

When considering the scale of ASM, it is also clear that formalization can be a strong strategy for delivering public policy. The project in Mozambique is a good example of what success looks like. The government understood that delivering social and economic gains from artisanal mining is more then simple permitting.

Levin Sources, the Alliance for Responsible Mining and Genesis Lda carried out the work in a collaborative way, with miners and neighbouring communities being central to solution design and implementation, with broader stakeholders, notably government officials, explicitly engaged in the process, and with diverse solution areas defined and implemented through flexible frameworks that reflected specific realities in differing situations.

As The Blended Capital Group works with strategic investors, we are confident that a robust investment marketplace will mature in support of ASM formalization, where diverse financial instruments are in play for engaging in diverse situations. As this investment marketplace matures, it positions governments and experts like ARM and Levin Sources to broaden social and economic gains at scale as broad-based engagement programs take hold.

Please read: important legal stuff.