ANALYSIS REPORT

FINAL REPORT

Submitted by David Johnson

October, 2020
TABLE OF CONTENTS

GLOSSARY OF TERMS AND ABBREVIATIONS ................................................................ 3

EXECUTIVE SUMMARY ...................................................................................................... 4

SECTION ONE – INTRODUCTION ...................................................................................... 5

SECTION TWO – ANALYSIS ............................................................................................... 8

SECTION THREE – CRAFT IMPLEMENTATION .............................................................. 17

APPENDICES..................................................................................................................... 23

2
 GLOSSARY OF TERMS AND ABBREVIATIONS

ARM Alliance for Responsible Mining

ASM Artisanal and Small-scale Mining

CRAFT Code for Risk mitigation for ASM engaging in Formal Trade

DDG Due Diligence Guidance for Responsible Mineral Supply Chains

GASMFP Ghana ASM Formalization Project

GCR Gold Coast Refinery

GEPA Ghana Export Promotion Authority

GGL Goldridge Ghana Limited

GIPC Ghana Investment Promotion Centre

GNASSM Ghana National Association of Small-Scale Miners

GRA Ghana Revenue Authority

GSA Ghana Standards Authority

HG Hibridge Group

LSM Large Scale Mining

MinCom Minerals Commission

MSM Medium-Scale Mining

MLNR Ministry of Land and Natural Resources

MMIP Multi-sectoral Mining Integrated Project

NACOB Narcotics Control Board

NHIS National Health Insurance Scheme

OBG Oxford Business Group

OECD Organization for Economic Cooperation and Development

PMMC Precious Minerals Marketing Company

SOE State-Owned Enterprise

TOR Terms of Reference

UMaT University of Mines and Technology

WiM Women in Mining

3
 EXECUTIVE SUMMARY

This supply chain analysis was commissioned by the Alliance for Responsible Mining (ARM), as part of
a broader study into the Artisanal Small-scale Mining (ASM) sector in Ghana commissioned by
Solidaridad, ultimately aimed at promoting responsible mining in the sector and facilitating formal
trade through the introduction and implementation of risk mitigation and due diligence principles into
the sector’s operations and trade. Specifically, this is to provide a reasonable basis for the creation of
supply chains that will be compliant with the Code for Risk mitigation for ASM engaging in Formal
Trade (CRAFT).

The project analyzed the chain of gold trading in the ASM sector, from mine to export, focusing
primarily on the mines supported by Solidaridad, as per the terms of reference (TOR) for the project.
It identified the various players in the ASM supply chain, their respective roles, and the dynamics and
nuances of the gold trade in Ghana.

Given the role and impact of regulations on the ASM sector, this assignment looked at applicable
regulations, including the various legal and regulatory frameworks that could support, or potentially
pose a challenge to the adoption of CRAFT.

The assignment involved engagements with key stakeholders in Accra and field visits to Solidaridad-
supported mines in the Western and Ashanti Regions of Ghana. The mines have been the subject of
earlier investigations and analysis by ARM, which determined their readiness and preparedness for
CRAFT adoption. To situate the project within the broader ASM context, focus group discussions and
interviews (structured and semi-structured) were held with local miners, mine owners, different
categories of gold dealers, an academic, regulatory agencies, exporters, and other mines not
supported by Solidaridad. Observations were also made, particularly during mine visits.

At the end of the project it was realized that, at one end of the spectrum, the supply chain of the ASM
sector could be a simple one-step process, where the ASM miner is also the holder of an export license,
and is able to go through a relatively straight-forward administrative process to export gold. With such
a chain, it is relatively easier to trace the origin of gold, down to the mine and even the pit where the
gold is produced.

At the other end, the chain could be a complex multi-link process, involving different miners, mine
locations, and several traders in any given transaction. In such trade networks, providing assurance
for the source of gold and the mining practices involved in the gold production is much more difficult
and complex, and would require a robust traceability system.

Between the two ends of the spectrum, though, there are varying layers and degrees of complexity in
the supply chain of gold, depending on the demand and supply dynamics and the number of players
within the chain.

This project outlines the potential challenges with the introduction of CRAFT, as well as opportunities
that could be harnessed to ensure a successful implementation of the framework. It recommends a
phased approach to CRAFT adoption and suggests concrete steps for implementation. It also proposes
key action points that need to be considered for a more sustainable CRAFT-aligned ASM sector.

4
 SECTION ONE – INTRODUCTION

1.1 Context

The Artisanal and Small-scale Mining (ASM) sector in Ghana, even though has been in existence for
centuries, only received legal recognition in 1989 with the promulgation of the Small-Scale Mining Act.
The Act sets out the processes for the acquisition of a small-scale mining license and outlines the legal
framework for the regulation of ASM activities. Since then, however, the scale and complexity of small-
scale mining operations have grown immensely over time, leading to a debate as to whether the
existing legal framework is adequate to effectively regulate the sector. Indeed, some have strongly
argued that, owing to the evolution and increasing sophistication of the sector, there needs to be a
holistic review and re-categorization of ASM, to allow for the creation of a medium-scale mining
(MSM) sector with its associated fit-for-purpose regulations.

Various information sources and statistics confirm that the ASM sector’s contribution to Ghana’s total
gold production has increased steadily since its legalization and record keeping. According to the
World Bank, the sector’s contribution has increased from 5% in the 1990s, to 11% in the 2000s, and
30% in the 2010s. Officially, the sector is currently believed to contribute about 35% to Ghana’s annual
total gold production. This percentage is, however, disputed by major stakeholders in the sector, who
strongly argue that small-scale mines produce as much as their large-scale counterparts, if not more.

With an increase in production from the ASM sector, however, comes the problematic issues of
environmental and social impacts, which have been a subject of intense public discourse, particularly
in the past few years. ASM operations, their impact, contribution, and regulations, have been a
sensitive political issue, particularly between the leading political parties, as well as traditional leaders
and advocates. It is quite clear, though, that a thorough and meaningful assessment of the sector
cannot be done without looking at the legal and regulatory framework that governs it.

While large scale mines are first given exploration or prospecting licenses, and subsequently granted
mining licenses after successful exploration, small-scale mines, on the other hand, are provided with
mining licenses at the outset. Most small-scale mines, therefore, bypass the exploration phase, which
would otherwise have helped to focus mining activities on defined and proven ore-bearing areas. In
determining areas to mine, ASMs are sometimes guided by historical and other non-scientific
information, with little regard for proper mine planning, pit design, modeling, sequencing, etc.
Unfortunately, this approach to mining, particularly the absence of exploration data, leaves much
larger environmental footprints than otherwise would have been required if the mining were based
on empirical exploration data. It is worth stating, though, that the Minerals Commission (MinCom) is
considering carrying out preliminary exploration of all potential mining sites before issuing mining
licenses to ASMs, in an effort to address the trial and error approach.

1.2 Responsible small-scale mining

In response to environmental and other concerns, the ruling New Patriotic Party (NPP) government,
on assumption of political office in January 2017, immediately instituted a ban on small-scale mining
activities, with the intent to sanitize the sector and reduce its environmental impact. The ban was
initially expected to last the first few months but was extended severally until December 2018 when
it was eventually lifted. During the period of the ban, the Multi-sectoral Mining Integrated Project
(MMIP) was developed, with support from the World Bank, and in consultation with key mining sector
stakeholders. The MMIP was designed to clean up the sector, introduce livelihood enhancement,

5
promote formalization, and ensure good environmental governance. According to the Oxford Business
Group (OBG), “Through improving environmental protection and overall regulation, the reforms
should boost Ghana’s reputation as an ethical supplier of gold and minerals on an increasingly
demanding global market. By tackling illegal and informal mining activities, and encouraging small
scale miners to obtain licences, the government also hopes to raise its income from the segment.”

The rational for the ban continues to be a subject of much debate, as illegal mining is widely known
to exist, and environmental degradation ongoing.

Currently, very few small-scale mines, particularly those under Solidaridad’s programme and the
government’s model mining programme, take up meaningful environmental stewardship. The sheer
number of small-scale mines scattered across mining districts, the remote location of mining
concessions, and the lack of resources, make it difficult for the regulator, Minerals Commission, and
other official monitoring agencies (such as the small-scale mine committees located in mining districts)
to effectively monitor the operations of ASMs and ensure compliance with existing laws and
regulations on environmental management.

With the prevailing condition, the introduction of a responsible mining framework, such as CRAFT, will
not only help individual mines, but also complement government’s effort at building a legal small-
scale mining industry and supply chain, increase national revenue from the sector, and boost the
profile of the country as a preferred destination for ethical ASM gold.

1.3 Background to the study

The Alliance for Responsible Mining (ARM), as part of its objective of transforming the ASM sector into
a socially and environmentally responsible activity, while improving the quality of life of artisanal
miners, their families and communities, has developed a strategy of connecting miners with formal
and fair supply chains. An underlying principle of this strategy is to engage ASMs for them to
progressively appreciate and adopt risk-mitigation and good practices in mineral production, in
exchange for improved market deals. In pursuant of this, ARM, together with Resolve, and with the
participation of a multiplicity of stakeholders, including Solidaridad, developed a Code of Risk-
mitigation for ASM engaging in Formal Trade (CRAFT). The CRAFT framework is a tool for ASMs to
demonstrate eligibility to sell minerals –including gold-, and for the industry to source them in
compliance with the Organisation for Economic Cooperation and Development (OECD) Due Diligence
Guidance (DDG) for Responsible Mineral Supply Chains and legislations derived from DDG. CRAFT is
further intended to be responsive to reputational challenges of responsible supply chains.

Solidaridad, in partnership with ARM intends to introduce a CRAFT framework in Ghana, particularly
for the small-scale mines that it supports. ARM has already carried out a study of the individual mines
supported by Solidaridad and analyzed their operations in relation to the CRAFT. This assignment
(supply chain analysis) is meant to provide further information and guidelines for a successful CRAFT
supply chain implementation in Ghana.

2.1 Objectives

The overall objective of this project was to identify the risks and opportunities, deterrent effects and
incentives for the establishment of legal CRAFT-compliant supply chains in Ghana, focusing on mines
supported by Solidaridad. The assignment is to help determine the official conditions to be able to
trade in gold and understand the roles of the different players along the supply chain from the mining
sites to the international markets.

6
To achieve the above stated objective, various players along the ASM supply chain were identified and
mapped, from the national to the local and mine level. The stakeholders identified and targeted for
the analysis included regulators, industry associations, gold traders, gold exporters, gold miners, and
employees of mines. A full list is provided as an Appendix (1).

2.2 Methodology

The analysis involved desktop reviews, 28 structured and semi-structured interviews, two focus group
discussions, and observations at two mines. Desktop reviews provided useful information on the
existing regulations, policies, and developments within the sector, particularly the successes and
challenges associated with the introduction of different policies and interventions. The structured and
semi-structured interviews allowed respondents to address specific questions, while also providing
the needed context for more thorough understanding of key issues. This was particularly important in
appreciating the relative successes or otherwise of specific interventions in different mining
jurisdictions. The focus group discussions were deployed in engaging the miners and mine
management, proving helpful in bringing forth valuable information for the purpose of this
assignment. Observations were carried out at mine sites, which then formed the basis for more in-
depth probing and questioning.

2.3 Mission planning

Working off a stakeholder list, which was agreed with ARM and Solidaridad, interviews were
scheduled with the respective stakeholders, nationally and at the local level (mine and district level),
with the support and assistance of Solidaridad’s local team. The interviews were planned to start at
the national level during the first week of September, and then at the local level the week after, and
back at the national level for a couple more days for fact-checking, clarifications, and alignment. A
schedule of the interviews is provided as an Appendix (2).

Even though the initial intention was to separately interview the Customs Division of the GRA and the
Bank of Ghana, it was realized, through interviews with the other stakeholders (PMMC and MinCom),
that the involvement of these institutions in the supply chain was minimal. PMMC and MinCom also
provided information on the role of these institutions in the chain, rendering separate interviews with
them redundant.

Currently, local refineries are not actively involved in the ASM sector supply chain and were thus not
actively included in the study. However, information was still obtained on the status and performance
of refineries, especially with regards to the ASM sector and the potential of participation in CRAFT
DDG and adoption.

7
 SECTION TWO – ANALYSIS

“The first mine was a small scale mine, and the last mine to close will be a small-scale mine.
The rest will find themselves in between.”
Ishmael Quaicoe, Lecturer, UMaT

3.1 ASM sector overview

Whereas different terminologies may be assigned to different sizes of small-scale operations, ASM
operations can be categorized broadly into three – artisanal, semi-mechanized, and fully mechanized
operations.

Artisanal mining

Artisanal mining operations are the least sophisticated of the three, in terms of technical and
organizational complexity. Artisanal mining involves individuals or groups of miners working on an
open concession or in underground shafts (locally called “ghettos”). With limited capital to invest, a
lot of these miners are sponsored, in the form of equipment, food, and other livelihood support, by
would-be gold buyers and entrepreneurs. There is an established convention where these
buyers/sponsors purchase the gold from the sponsored miners at a discount, as a means of
maintaining goodwill and sustaining the support. Mined gold is also used as a means of payment to
offset the sponsorship value over time. The equipment and technology used for such operations are
usually locally made.

In terms of sales, there are different selling or purchasing arrangements for the ore mined by artisanal
miners. Raw or unprocessed ore may be sold directly to a sponsor, after samples are taken and tested
to estimate the quality and quantity of the gold. In some cases the sponsor may be a mill owner, who
then undertakes the milling, processing (extraction), and sale of the gold to a local trader.

Mined ore may also be shared or split between the miner(s) and the sponsor, either equally or in three
parts, with the miners retaining two parts, and the sponsor receiving one part, depending on a pre-
determined sharing arrangement.

Artisanal miners also have the option of processing their ore. This is done through washing, panning,
usually gold-mercury amalgamation (amalgam), burning/heating of the amalgam (to remove
impurities), and smelting to remove even more impurities and end up with “pure” gold. Gold is usually
exported in this form (after the smelting) for further refining at refineries. At any point in the
processing stages, the miner may also decide to sell in whichever form to augment cash flow or meet
other operational and personal commitments.

There are occasions where the amalgam gold (locally called “balls”) is sold at the mine site (at a
discounted price, locally termed “bush price”) to a gold buying agent (bush buyer), or where the
burnt/heated amalgam (sponge gold) is sold to a gold trader in the locality.

8
 Gold-mercury amalgam

The bush buyer is usually funded by a local buyer who resides in the locality or major town. A bush
buyer could act as “agent” for several local buyers. The price of the balls is negotiated between the
miner and the buyer and is not directly pegged to the world gold price. This is because, at this point in
the processing stage, the quantity and purity of amalgam gold cannot be scientifically determined.
Amalgam gold is sold based on its weight. It is measured locally, using “matches,” “blade,” and
“pound” as units of measurement.

Ten (10) matches make one (1) blade, and ten (10) blades make one (1) pound. One hundred and
twenty-nine (129) pounds make one (1) kilo, even though amalgam gold is not usually sold in large
volumes such as kilos. It must be emphasized, however, that amalgam gold contains mercury and
other metals, and that the true weight and purity of the gold can only be determined after the mercury
and other metals have been extracted, hence why its sale is not directly tied to the gold price.

Artisanal miners may trade their gold daily or weekly, depending on the volumes mined, the proximity
of the mine to a selling point, or the cash-flow needs of the miner. The low-volume individual
producers usually sell on a daily subsistence basis, in blades or in matches, while the larger volume
producers trade their gold once a week, in pounds or kilos in a refined (smelted) state. Miners usually
work six days a week and use their off days (locally called “breaking day” or “taboo day”) to trade their
gold.

Apart from being sold as sponge gold or amalgam, gold may also be sold in a refined state, after
smelting. Smelting involves burning at high temperatures, and subsequently dipping the gold in an
acid solution to remove mercury and other metals. Due to the extremely high melting point of gold
(higher than the mercury), the mercury evaporates during smelting, leaving the pure gold. However,
this gold still contains other metallic impurities that are alloyed with the gold (silver, palladium,
antimony, etc.), which is usually removed by dissolution in acids or cyanide, and electrolytic selection.

Once smelted, the gold is then placed on a gold water density testing machine, to determine its weight
and volume. It is at this stage that the price is usually pegged to the world market price.

9
 Water density testing device

If gold is to be sold after smelting, the weight and volume figures, as well as the proposed (buyer’s)
unit purchase price, are then fed into a software application (app) that was designed for gold dealers
in Ghana by Ghana Gold Market. The app then automatically calculates the pounds, density, carat,
and price of that piece of gold.

Ghana Gold Market software application interface

The miner or seller of a piece of gold is not obliged to sell to the first potential buyer. The gold trade
is competitive, and traders or mines would typically shop around, bargain, and sell to the highest
bidder.

Semi-mechanized ASM operation

This kind of operation employs a combination of mechanization and manual labour, and the
production volumes are much higher than artisanal operations. The machinery and equipment may
be imported (such as excavators) or locally manufactured (such as sluicing units). Semi-mechanized
operations may be financed by financiers who may own the concessions, may be in partnership with
concession owners, or may simply be entrepreneurs who invest in the mining operations.

Semi-mechanized operations mostly have both permanent salaried workers (paid monthly) and casual
workers (paid daily, weekly, or as and when they work). The organizational structures are well defined,
usually with the owner(s) having the complete and final say. Semi-mechanized operations typically

10
mine and carry out the gold-mercury amalgamation process –when used- on site. The heating of the
amalgam and smelting are usually done remotely, mostly in a dedicated facility close to or within the
premises of the owner. Such operations usually sell their gold in a smelted form.

In a competitive gold trading market, and with the London Bullion Market Association (LBMA) price as
a guide, gold from these operations may be sold to a trader, agent (these terminologies will be
explained later) or directly to an exporter. In some cases, the concession owner may have an export
license, and will thus export directly to a foreign entity or refinery.

Fully mechanized ASM operation

Though not a common phenomenon in the ASM sector, there are a few fully mechanized ASM
operations where almost the entire chain of mining activities is fully automated and mechanized, with
higher production volumes and less labour. As expected, this requires heavy capital outlay and owners
of such operations usually export directly. Though fully mechanized operations do not typically fit the
traditional ASM definition (with large labour force, use of simple mining tools, etc.), in Ghana such
sophisticated operations fall under the ASM legislative/regulatory framework, since they still do not
meet the criteria to be classified as Large-Scale Mining operations. This is part of the reason why some
industry experts have called for a further recategorization of the country’s mining sector into Artisanal
and Small-Scale Mining (ASM), Medium-Scale Mining (MSM), and Large-Scale Mining (LSM), with the
fully mechanized ASM operations being re-classified as MSMs.

3.2 Solidaridad-supported ASMs

For this assignment, only mines supported by Solidaridad were visited, even though information on
others was reviewed. Owners of the visited mines, management personnel, and other ancillary
workers were interviewed for this project. There were also focus group discussions. A past executive
of the Ekom Ye Ya Cooperative mine was also interviewed, who provided a historical account of the
journey towards the formalization of the small-scale mining sector in Ghana. The specific mines that
were used for this project were Obeng, Agya Pa Ye, Solution, and Beaver mines. Being all semi-
mechanized, these mines exhibited the characteristics of the semi-mechanized operations described
above. They were all involved in alluvial gold mining, and adhered to the following process:

Simplified alluvial gold extraction and processing

The mines employ 30 to 40 permanent employees each, with some having over 300 casual workers.
Interestingly, while some of them pay their permanent employees monthly, and casual workers daily
or weekly, at least one mine, Beaver, had a different payment arrangement. Permanent employees
are rather paid weekly, while casual workers are paid a fixed monthly allowance. The reason for the

11
monthly payment for the casual workers, it was explained, was to ensure that these workers remain
punctual to work during the course of the month. The mine facilitates the workers’ registration unto
the National Health Insurance Scheme (NHIS), and they also earn monthly “bonus,” depending on the
mine’s operational performance and an individual worker’s output for that period.

The mines operate either four-hour back-to-back shifts, or eight-hour back-to-back shifts. While some
of the mines (for example, Obeng and Egya Pa Ye) have dedicated agents who buy their gold, others
(such as Beaver and Solution) shop around, after the weeks’ production, seeking the best price.

In terms of sales, Egya Pa Ye and Obeng mines each has a dedicated buyer (major trader or aggregator)
who offers a competitive price, based on the selling price at the time of sale. Even where another
major trader is offering a slightly higher price, their dedicated trader is able to match that price. For
these two mines, the relationship with the trader is of utmost importance.

With Beaver and Solutions mines, they usually sell to the highest bidder. Typically, they would call a
few traders, ask for the going price, bargain, and sell to the highest bidder. Just like Egya Pa Ye and
Obeng, Beaver and Solution mines are not sponsored, and so are not compelled to sell their gold to a
particular buyer.

Regarding pricing, it worth mentioning that, even though the price is pegged to the LBMA price, in
reality, the price is determined by the prevailing conditions at the time of sale (how much the major
traders are willing to pay), and is usually at a discount of between 3% and 6% of LBMA price, which
includes the operational, logistics, and other costs of the traders. The price is, thus, fixed by the major
traders/aggregators.

Even though there are potential benefits to the miners, in terms of pricing, if the miners aggregate
and sell their gold together, the process and logistics of coordinating the aggregation require time
(away from their core mining activities) and financial resources. This is a disincentive for the miners
who would rather focus on their mining activities since there is no shortage of off-takers.

The mines usually provide their own transportation for the gold, and this is not necessarily captured
as an additional cost.

All the mines identified funding as a major challenge to their operations, and the ASM sector generally.
It was understood that the banks consider ASM operations as risky ventures, compelling concession
owners to fall on family, friends, and sometimes wealthy individuals/sponsors to raise funding for their
capital-intensive operations. The mines unanimously agreed that the cost of acquiring/renting/leasing
machinery (excavators) remains a significant barrier to their operations and expansion.

Obeng and Egya Pa Ye mines are financially stronger, and own their own equipment, while Beaver and
Solution mines use a combination of owned and leased equipment. In relation to this, an equipment
leasing scheme was being introduced where ASMs, through GNASSM, were to be given an opportunity
to acquire excavators and pay over a period. Beaver mine expressed an interest in being part of this
scheme. However, due to the unfavourable conditions being proposed by the leasing entity,
negotiations have stalled, and the leasing arrangement has since been suspended.

Managing community relations and paying compensation for land and crops was identified as an issue
of concern. To maintain good relations with the surrounding communities, the mines allow community
residents to work on the concessions, even if as casual workers. Residents who are not employed by
the mines (either as permanent or casual workers) may still scavenge for gold on the concession. They
then sell the gold back to the concession owners at a discounted price.

12
3.3 Understanding the trade dynamics and price determination

Ultimately, the local gold trade price is influenced by the world gold price, as determined by the LBMA.
Gold exporters, who are the last link in the local supply chain, offer to buy gold at the LBMA price,
discounted by a percentage, depending on the taxes (such as withholding tax) and other statutory fees
(such as assay fees) to be paid. Depending on volumes of purchase, who is selling the gold (either a
miner or a trader/agent), the business model of the exporter, and other factors, the discount could be
less than 1%. There are exporters who reduce their profit margins (to less than 1%) and offer a more
competitive price to the trader or miner, to secure more volumes and earn loyalty.

There are general demand and supply (pull and push) forces, as well as the number of trade nodes
along the chain, that influence gold trade prices along the chain.

The supply chain of the gold trade could be a simple one-step process – from the local miner to a
foreign entity (where the miner has a gold export license), as illustrated on the next page.

The prices determination, in such an instance, is tied directly to the LBMA price and discounted
through negotiations between the miner and the buying entity.

Since most miners do not have export licenses and direct contact with foreign buyers, other
intermediaries come into play. The supply chain could, therefore, consist of several transactional
processes and players, such as illustrated below:

13
Simplified gold trading processes showing the active players along the chain in different colour codes, while the
inactive players are in grey.

It must be stated that the illustrations above are simplified and do not fully describe the extent of
networks and complexities of the chain. A local trader or town trader, for example, could sell directly
to an exporter, and so can a bush buyer sell directly to a town trader or major trader, thereby by-
passing the local (and town) trader.

The trade could be driven by a foreign buyer (refinery, individual, or company) or by the gold
producer/miner.

In the former arrangement (top-to-bottom), the foreign entity may request for gold through a local
exporter, specifying the quantity, purity, payment arrangement, timeframe for delivery, and other
transactional details. The local exporter then contacts a known mine or trader for the supply. Where
the volumes required are more than a particular miner or trader can deliver within the stated
timeframe, the exporter may purchase from more than one mine or trader. The transportation
liabilities could be borne by either the exporter or the miner/trader, depending on the agreement.

In a miner-driven transaction (bottom-up), the miner who is willing to sell might either offer the gold
to a dedicated trade partner or to whoever might be willing and able to purchase the quantity being
offered at the best possible price.

Depending on the location of a mine, and its proximity to a major gold trading hub, such as Tarkwa,
there could be several buyers along the chain before the gold is exported. In major trading hubs, there
are usually different tiers of traders, based on their financial strength and legal status (licensed and
unlicensed). There are active gold trading transactions between the traders so it is not uncommon for
traders to sell their gold to other (larger and financially stronger) counterparts in the same locality
who are able to offer slightly higher prices.

Major traders (who, for the purpose of this analysis, will also be called aggregators) play a significant
role in the trade chain. These are usually primary financiers of the gold trade who sometimes invest
in mining activities as well. They also prefinance a network of local buyers/agents (usually unlicensed)

14
who reside or operate in gold producing areas. The local agents, upon the advise of the major traders
(regarding prices, volumes, etc.), buy directly from miners or from bush buyers. Through this financing
arrangement and networks, the major traders wield power and influence, and can drive gold prices at
the local level. This ability to influence prices is particularly felt when there is cash or credit crunch,
and the major traders are the ones with the liquidity.

A
simplified version of a typical gold supply chain flow with key actors

Gold prices in major gold trading hubs, such as Tarkwa, are generally higher than the prices in
surrounding gold-producing communities, such as Bibiani, Wassa Akropong, Bekwai, etc. The prices in
these communities are rather benchmarked to prices in Tarkwa, and not necessarily the LBMA. An
exception would be where a miner in any of these communities has a direct link to an exporter and so
trades directly.

The gold trading industry was once dominated by Ghanaians. Currently, however, Indians control
about 80 to 90% of the gold trade, and act as major traders (aggregators), as well as exporters. Unlike
the Ghanaians who occupy and focus on specific nodes along the chain, the Indian companies in the
gold business are purposely structured to control the entire chain of the gold trade. With access to
cheaper credit abroad, they invest heavily in the chain by prefinancing mining and trading activities,
including setting up trading shops in major gold producing areas. Their proximity to the mines and
major trading hubs give them direct access to the miners, as well as other local traders. Offering
competitive prices, they buy large volumes to compensate for small profit margins. While the
Ghanaian law makes it illegal for foreigners to engage in small-scale mining, there is no such legal
restriction on foreign participation in the gold trade.

3.4 The role of Precious Minerals Marketing Company

The Precious Minerals Marketing Company (PMMC) Limited has undergone changes in name and
mandate since it was first established in 1963 as the Ghana Diamond Marketing Board. It was renamed
Diamond Marketing Corporation in 1972 and Precious Minerals Marketing Corporation in 1989 before
its current name in 2000, with a conversion in status from a State-Owned Enterprise (SOE) to a Limited
Liability Company.

Until 2016, one of the key functions of PMMC was to buy and sell gold produced by the ASM sector.
The company was, thus, the only official exporter of gold from the small-scale mining sector. With a
change in mandate in 2017, however, PMMC has since become the national assayer of all gold

15
produced for export, from both the small- and large-scale mining sectors. Through this assay function,
PMMC determines the true value of gold for export, from which the government, through the Customs
Division of the Ghana Revenue Authority (GRA), applies the necessary taxes.

With the new role as sole assayer, PMMC relinquished its role as purchaser and exporter of gold from
ASMs. Following this, it liberalized and facilitated gold trading by issuing licenses to would-be gold
traders and gold export companies. PMMC has issued over 190 gold buying licenses and about 20 gold
export licenses. There are several other gold traders who operate without the requisite licenses in the
gold producing areas.

Even though it no longer purchases and exports gold, PMMC remains a credible source of reference
for international refineries and entities that intend to purchase gold legitimately from Ghana. Though
it neither vouches for any of the gold exporting entities, nor the authenticity of their products, PMMC
still plays an important match-making role of providing a list of exporters in good standing to
international buyers, upon request.

The gold export process

In preparation for export, gold exporters prepare an invoice to cover the export (showing evidence
and price of purchase), a packing list (which states the content, weight, purity, etc.), and an indication
of the value of the export (based on the day of export). These documents and the accompanying gold
are sent to the Kotoka International Airport, where the gold is inspected by the Narcotics Control
Board (NACOB) to ensure that narcotics are not being smuggled with the gold. The gold is then assayed
at the PMMC assay laboratory at the airport to determine or confirm the weight and purity. PMMC
issues a certificate to cover the assay and a 3% withholding tax is then charged by GRA, based on the
assayed value. Once payment is made the export is closed and affixed with Customs and PMMC seals.

A Customs Declaration documentation is then generated, and the product/export specifications are
then fed into an online Customs Administration and Management System (UNIPASS) for approval. The
approval, when issued, is printed and sent to the Customs office for the gold to be released to the
designated airline for export.

There is a legal requirement for 80% of the value of all gold exports (as well as other export
commodities) to be repatriated back to Ghana, within 30 days of the export. This repatriation is
received through the exporter’s bank. If this is not done, and the exporter is not able to provide an
official bank receivable document to cover the repatriation, the exporter will be disabled in the
UNIPASS system and will not be able to carry out subsequent exports until such repatriation is done.

The use of the banking system to facilitate the gold export transaction and the subsequent repatriation
makes it relatively easier to track the movement of funds, and thus, helps in the prevention of money
laundering.

Cost breakdown

Apart from the withholding tax mentioned above, costs that are borne during gold export include
PMMC assay cost of 0.1772% (of the value of export), Minerals Commission cost of 0.2%, freight fee
(determined by the airline), and NACOB fee of 25GHS (which is about US$4) per consignment.
Regarding the NACOB fees, it must be noted that there could be several consignments during one
export, either to different clients/recipients, or different consignments to the same client. The 25GHS
is charged per consignment (and not necessarily per export). The exporter charges around 0.15% for
third-party exports (exporting on behalf of a third party that does not have an export license).

16
 SECTION THREE – CRAFT IMPLEMENTATION

Based on available literature, interviews, discussions, and observations, CRAFT implementation in

Ghana is feasible, given that the ASM sector is generally quite matured and largely formalized. Also,
majority of the high risks identified and highlighted in the OECD DDG have either been addressed or
are not present or could be addressed through a mitigation strategy to be implemented by the miners.
That said, the successful implementation of CRAFT would have to consider the following analysis:

4.1 SWOT analysis

17
4.2 Practical way forward for CRAFT – next steps towards adoption

It is clear, from the analysis, that the lesser the nodes and number of players in the supply chain, the
easier it will be to ensure a CRAFT-compliant supply chain. Based on this, ideally, a CRAFT-compliant
chain should have only the mine(s) and the exporter, or alternatively, the mine, a major trader, and
the exporter in the local supply chain.

It has already been established that the Solidaridad-supported mines, and specifically the four mines
used for this project meet the minimum requirements for legal trade. The mines also, collectively, are
able to produce more than the minimum volumes needed for export on a regular basis. An earlier
study (by ARM) confirmed that the gold production of the various mines (supported by Solidaridad),
together, are between 1.5 – 5.5kg/month, which is more than the 1kg minimum volume required for
export.

On the strength of the information gathered through this project, two schemes are being proposed:

1. Miner-Exporter Scheme: With this scheme, the mines (supported by Solidaridad) will sell their
gold directly to an exporter, having completed smelting of the gold produced. This will be
done weekly, with the exporter arranging for the transportation and security of the gold to

18
 Accra through the exporter’s agent. The individual mines will arrange for the gold to be
transported from the respective mining areas to Tarkwa, as is currently the practice (except
for Agye Pa Ye mine which transports its gold to Kumasi). This scheme will make it possible for
the mines to receive higher prices for their gold (possibly between 1% to 3%), since the various
middlemen (traders, agents, bush buyers, etc.), will be eliminated. With the absence of the
middlemen, and with the mines selling their gold directly to the exporter, the possibility of
traceability is greatly enhanced.

The aggregation of gold from the various mines by an exporter’s agent will also help to reduce the
cost of transportation and security. The exporter confirmed that such arrangements have been done
in the past, where the cost of transportation, security, and insurance were included in the operational
cost of the exporter. A minimum volume of 10kg is usually required to warrant such an arrangement.
The exporter mentioned, however, that for the well-established mines that appreciate the importance
of having security, insurance, etc., even 2kg of gold could be transported under such protocols.

2. Miner-Aggregator-Exporter Scheme: This scheme is similar to the Mine-Exporter scheme

described above but adds an extra node to the chain by introducing an aggregator between
the mine and the exporter, ideally to be based in Tarkwa (or a major trading hub). Liaising
between the mine and the exporter, the aggregator should have the capacity to fund the
purchase of gold in large volumes and, possibly, pre-finance some mining activities. Funding
is a significant bottleneck to ASMs and, as such, the presence or existence of a financier, with
fair financing terms and arrangements, will be a game changer.

There are already some of such aggregators/financiers who ARM/Solidaridad will need to engage once
the necessary commitments have been sought from the mines. There is the option of either working
with an already established and licensed top-tier aggregator/financier or, alternatively, build the
capacity of a mid-tier aggregator/financier who might be more incentivized with the prospect of
getting regular supplies from well-established ASMs. Such a mid-tier aggregator should, however, be
in a position to support the mines financially, if need be. A needs assessment will need to be carried
out on the mines to identify their specific needs.

Graphical representation of the two proposed schemes

19
Even though both schemes will efficiently drive the CRAFT initiative, the preference is to have a Miner-
Exporter Scheme. If well implemented, the Miner-Exporter Scheme will provide more benefits to both
the miners and the exporters, while guaranteeing a more effective traceability system. The preference
for such a scheme has been confirmed by an exporter, who disclosed that dealing directly with the
mining entity allows for better and more flexible price negotiation (usually discounted at between 3%
to 6% of LBMA spot price). Practically, while buying from the miner is preferred, the exporter is usually
compelled to also buy from agents in order to meet volume demands of foreign refineries and other
buyers. The exporter affirmed the company’s willingness to, in principle, trade exclusively in
responsibly produced gold if the production volumes can be guaranteed.

It will be helpful to undertake due diligence on the exporter to ensure that the exporter is also aligned
to the OECD DD principles.

4.3 Partnership identification for CRAFT implementation

This project has identified Gold Coast Refinery (GCR), Goldridge Ghana Limited (GGL), and Hibridge
Group (HG) as suitable potential partners for CRAFT implementation. These companies are involved
in the purchase and export of gold and have already made firm commitments towards CRAFT-
compliant supply chains. Being exporters themselves, they fit into the Miner-Exporter Scheme
described earlier.

GCR, by virtue of its sustainability mandate and due diligence obligations under LBMA rules, focuses
on responsibly mined gold from the ASM sector. However, because there isn’t yet a robust system in
place to drive responsibly mined gold in the ASM sector and the company is yet to secure dedicated
volumes of gold from the large-scale mines, the refinery is yet to begin full-scale operations, despite
the substantial capital invested in the refinery. For GCR, therefore, being able to acquire substantial
volumes of responsibly mined gold from the ASM sector to feed the refinery is a critical business
imperative with a strong business case. The company is, thus, willing to support the development of
responsible supply chains for the ASM sector.

On its part, GGL plays an active role in the ASM sector and has pledged support for the promotion and
implementation of CRAFT in Ghana. The company undertakes, among others, gold trade and export,
and is about to sign a Memorandum of Understanding (MoU) with GNASSM to support responsibly
mined gold. It has already funded projects aimed at mercury elimination in the ASM sector.

HG, as well, trades and exports ASM gold. The company promotes responsibly produced gold through
the provision of technical services to the small-scale mining sector and is an advocate for
implementing a tagging/hallmarking system that will facilitate traceability of gold.

Fortunately, Solidaridad has an ongoing relationship with all these companies.

In terms of practical next steps, it is strongly recommended that ARM/Solidaridad undertakes the
following:

 Makes an initial selection of mines that are CRAFT-compliance ready (those far advanced in
meeting the requirements of, at least, Modules 1 to 4 of CRAFT).
 Carry out a gap analysis to identify the exact (financial, technical, etc.) needs of the selected
mines, and what will be required to enable them meet the production and other requirements
for a responsible supply chain.

20
  Engage GCR, GGL, and HG, with a view of assessing their capacity to address the gaps
identified in the gap analysis exercise.
 Facilitate the signing of a MoU between the mines and the exporters.

The potential challenge, particularly with Egya Pa Ye and Obeng mines, is to get them to sell their gold
to these entities (GCR, GGL, and HG), given that they have established a loyal relationship with their
respective buyers. During the gap analysis, it might be possible to identify areas where these new
entities can offer support to Egya Pa Ye and Obeng. Solidaridad’s relationship with these mines should
also be leveraged in this regard, since both mines are part of the Solidaridad’s supported mines. It
would also be worth sizing the interest of the buyers already engaged with Egya Pa Ye and Obeng to
assess their willingness to integrate a chain with either GCR, GGL, or HG.

While these are important next steps to be taken, the long-term sustainability of CRAFT would involve
more broad-based and policy-related efforts driven by different stakeholders at the national level.

4.4 Sustaining CRAFT

A comprehensive implementation plan needs to be developed, outlining the immediate steps to be

taken, as well as medium- and long-term strategy and plans aimed at mainstreaming CRAFT
compliance across the entire ASM sector.

To assure the sustainability of the project and creating long-term impact in the selected mining
organizations as well as broaden our reach in the Ghana ASM sector, we suggest to include the
identified mines in ARM’s Sustainable Mines Program, which is ARM’s new strategic program to
promote the progressive development in ASM gold supply chains based on the Craft and Fairmined
Standards. The aim is to transform ASM through multisectorial alliances between development
cooperation, philanthropy, governments and the gold industry in high impact programs, where initial
public funds (eg facilitated by Solidaridad) are complemented with funds from the private sector (gold
industry).

ARM, after having implemented the Fairmined initiative for more than 7 years, has already established
relationships with a broad variety of international market actors (refineries, manufacturers,
companies from the jewelry and financial sector) who have expressed their interest in not only
engaging in trade relationships with mining organizations complying with basic CRAFT criteria but may
also be willing to finance the miners’ development path to help them reach CRAFT compliance, and
even higher sustainability levels (eg working towards Fairmined certification).

Through the formulation of a second phase follow-up project, ARM and Solidaridad can work together
to collect the necessary public and private funds to help the mines reach CRAFT compliance and
establish formal supply chains that go beyond the national level, facilitating the trade of responsible
ASM gold from Ghana to US and European markets, creating long-term relationships between miners
and market actors that take co-responsibility in promoting a more responsible ASM gold trade.

Beyond this support to targeted mining organizations, broader themes should be considered for the
long-term sustainability of CRAFT:

 The introduction of hallmarks for responsibly produced gold should be explored. The Ghana
Standards Authority (GSA) is particularly receptive to the idea of hallmarking and has the
facilities for that. The Government of Ghana, through its agencies such as Mincom and GSA,
should work in partnership with the GNASSM to revise the current Code of Practice (CoP) for
the ASM sector, to ensure its alignment with the relevant DDG requirements. ASMs should be
educated on the revised CoP, through workshops and other programmes and Mincom should

21
 subsequently monitor and ensure compliance. Gold produced in accordance with the
provisions of the CoP should be hallmarked and traded as such.
 Similar to the hallmarking system described above, there should be a traceability mechanism
at the mine/operational level which will help trace gold to its origin. UMaT could be engaged
to look into the development of such a mechanism.
 There is the need to create awareness and advocacy around responsibly produced gold,
through well-coordinated communication and advocacy campaigns. There should be a
national effort to position Ghana as a destination for responsibly mined ASM gold. This can be
done through the Ghana Investment Promotion Centre (GIPC), Ghana Export Promotion
Authority (GEPA), and other allied agencies. Mincom and PMMC could also play leading roles
in promoting responsibly mined ASM gold by putting notices on their websites and linking
foreign buyers with local exporters of CRAFT-compliant gold.
 PMMC should explore the idea of introducing different categories of gold trading licenses,
where those who trade in CRAFT-compliant gold will have a separate license indicating as
such.

22
 APPENDICES

APPENDIX 1 – List of Stakeholders Identified and Targeted for the Analysis

- Minerals Commission (national and mining district levels – Accra, Tarkwa, and Bibiani)
- Precious Minerals Marketing Company - PMMC
- Gold exporter (A.A. Minerals)
- Gold refineries (Gold Coast Refinery)
- Women in Mining - WiM
- Federation of Ghana Goldsmiths and Jewelers Association
- Chamber of Gold Exporters
- Gold miner and exporter (Emmanuel Yirenkyi Antwi)
- Gold traders in Tarkwa and Bibiani
- Miners and mine management of Obeng mines
- Miners and mine management of Agya Pa Ye mines
- Mine management of Beaver mines
- Owner of Solution mines
- Ghana Standards Authority - GSA
- Ministry of Lands and Natural Resources - MLNR (Ghana ASM Formalization Project)
- Bank of Ghana
- Customs Division of the Ghana Revenue Authority - GRA
- Ghana National Association of Small-scale Miners - GNASSM
APPENDIX 2 – Schedule of Meetings
Activity Date
Meeting with PMMC and Federation of Goldsmiths and Jewelers Association Thursday, Sept 3
Meeting with Minerals Commission Tuesday, Sept 8
Meeting with Women in Mining Tuesday, Sept 8
Meeting with AA Minerals Thursday, Sept 10
Meeting with Chamber of Gold Exporters Thursday, Sept 10
Meeting with miner and exporter (Emmanuel Yirenkyi) Friday, September 11
Travel to Tarkwa Sunday, Sept 13
Meeting with gold traders in Tarkwa Monday, Sept 14
Meeting with Tarkwa District Minerals Commission officer Monday, Sept 14
Meeting with lecturer, University of Mines and Technology (UMaT) Tuesday, Sept 15
Travel to Wassa Akropong Tuesday, Sept 15
Meeting with Management and miners of Obeng mines Tuesday, Sept 15
Travel to Bibiani Wednesday, Sept 16
Meeting with Bibiani District Minerals Commission officer Wednesday, Sept 16
Meeting with gold traders in Bibiani Thursday, Sept 17
Meeting with Kom Ye Ya Co-operative Miners Association Thursday, Sept 17
Meeting with owner of Beaver Mine and Health and Safety Officer – Beaver Mine Thursday, Sept 17
Interview with owner of Solutions Mine Friday, Sept 18
Travel to Atuntuma Friday, Sept 18
Meeting with miners – Agya Pa Ye mine, Atuntuma Friday, Sept 18
Travel to Kumasi Friday, Sept 18
Travel from Kumasi to Accra Saturday, September 19
Interview with Ghana Standards Authority Wednesday, September 23
Interview with Ghana ASM Formalization Project (GASMFP) Thursday, September 24

23