I am focused on reimagining outcomes in artisanal and small-scale mining (ASM). As my understanding of the sector grew, I learned about major opportunities for improving lives, ecologies and economies in ways that make financial sense.
Basics like human rights and the dignity of work that we can all relate to are inconsistent in the sector, but ‘formalisation’ can be paradigm changer. Opening the door for investors and artisanal miners to communicate, which I will describe in this article, is a prerequisite for fundamental change.
With 45+ million miners operating across close to 100 countries, ASM produces gold and other precious metals, a broad variety of critical minerals, as well as construction materials. Democratising access to finance is a key prerequisite for unlocking value in the sector and delivering the minerals growth that the world craves.
What is the work?
ASM is largely informal, operating outside of official economies – estimates range from 70% through to 90%, depending on which study you choose.
Estelle Levin-Nally, founder of Levin Sources, and a recognised global expert on artisanal mining, defines formalisation as: “the transition toward organised and professionalised systems of production in and through which responsible business conduct and sustainable development are more feasible and desirable, and thus more likely.”
In a tangible way, formalisation is the process of transitioning miners towards apt governance, where stable predictable equitable business relationships become a norm. Governance through co-ops, companies or associations becomes the basis for equipping, training and transitioning miners to good practices.
Productivity is directly increased through these shifts. Along with improving what mining looks like on the ground, downstream value chains are transformed, shifting from potentially predatory intermediates towards credible value chain partners.
Why is formalisation important?
Multi-dimensional value is delivered when formalisation is successful. Benefits can include the following:
- Financial – productivity increases are the basis of returns, while increased critical minerals supply contributes to further downstream value-add.
- Social – lives of miners are improved as formalisation takes hold. Along with increased dignity of work, positive impacts include improved human rights adherence, gender equity, child labor elimination, mining safety and reduced poverty.
- Environmental – Forest Smart Mining practices, which are an aspect of formalisation, support improved ecological oversight, ranging from reforestation through to improved biodiversity protection.
- Economic – stable predictable business relationships that are developed are a basis for broader regional sustainable development.
This value has not been delivered largely because artisanal and small-scale miners lack access to capital that is needed to change current paradigms. Investors don’t have a strong understanding about artisanal mining in general, and specific opportunities cannot be analysed without significant effort.
Risks appear large, and investors lack a common ‘language’ with miners that would lower barriers to entry.
Barriers to entry need to be lowered
Investors and miners need to find a common language; one that makes it easy for investors to target choices based on informed realities on the ground.
ASM delivers a broad variety of benefits which can be subdivided into asset classes. For instance, an asset class may relate to child labour elimination, or biodiversity protection or increased value from productivity growth.
Bifurcating opportunities makes it possible to target capital based on the specific focus of differentiated investors. These asset classes become a language of sorts between miners and finance, where opportunities are outlined and then chosen.
Existing blockchain and AI technology makes a marketplace possible where digital choices are made. As projects are invited to participate, specific opportunities are shared at an asset class level.
Validation ensures that project profiles reflect reality, which requires expert review. Investors make choices, which AI capabilities combine into blended capital stacks that fund projects or groups of projects.
Given the compelling reasons for greater focus on ASM, it is natural to expect this kind of digital marketplace to become prominent, where blockchain, tokenisation, validation and richness of dialogue and choice are all norms.
With this, mining and impact investors, as well as large mining companies that understand the value of collaboration with ASM, will be able to target projects based on their specific value proposition imperatives.
ASM as a strategic opportunity
Strategic opportunities in artisanal mining are clear. Formalisation, involving shifts towards stable predictable equitable business relationships, improves productivity, which is the basis for financial returns and an enabler to bridging looming supply gaps.
Along with productivity gains, the lives of miners, ecological oversight and economic development could all improve. Combined value extends from local miners through to regional economies, all the way to global value chains.
Attracting investors requires a common language that removes barriers to entry – targeting needs to be easy, transparent and based on trust. Asset classes are a natural basis for a digital marketplace that does precisely this.
With multiple organisations, such as The Blended Capital Group, Capitals Hub Canada and the Alliance for Responsible Mining to name a few, focused on delivering this value, a mature digital marketplace that combines tokenisation, blockchain and easy to navigate dialogue between investors and miners appears to be imminent in the foreseeable future.
Rob Karpati is Partner at The Blended Capital Group. To continue the conversation, connect with Rob on Linkedin