Conflict Minerals Proposal Puts Gold Market at Risk

"The legislation will be 'pretty problematic' for the gold industry."

If legislation designed to stop the trafficking of 'conflict gold' among other metals from the Democratic Republic of Congo is implemented in its current form, it is going to be "pretty problematic" for the gold industry at large, says World Gold Council CEO Aram Shishmanian.

According to Shishmanian, the legislation runs the risk of stigmatizing gold because the way it is drafted assumes guilt until innocence is proven, "All gold is conflict gold until proven not to be under this law yet the DRC accounts for only 0.6% of total mined production."

In a supplement to its main submission on the subject to the SEC called Responsibly-Produced African Gold: The Value at Risk, the Council points out that the current legislation looks at not only the DRC but also those countries with which it shares a border such as Tanzania in an effort to track how the metal is transported.

This conflation of countries with legitimate mining industries, could result in significant damage to the gold market within countries not only which share a border such as Tanzania but also other African gold producers.

As the WGC explains, "the DRC is a long way from Ghana and yet the complexity of the gold supply chain, uncertainty regarding the compliance costs of the proposed rules and the naming of all gold as a 'conflict mineral' risks stigmatizing gold from this country in the eyes of consumers as it may from all other gold-producing countries in Africa."

The concern is that gold manufacturers and, indeed, primary producers in search of new projects, could decide that the greater costs associated with reporting and auditing to ensure that they are 'conflict free' could lead to an unintended boycott of African mining.

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