Conflict Gold in Spotlight as Investors Flock to Precious Metal

This content was published on July 17, 2020 - 12:23

(Bloomberg) --

As demand for gold as a haven surged during the coronavirus pandemic, concerns about sourcing the precious metal responsibly have again been thrust into the spotlight.

A report from Global Witness alleging one of the world’s biggest gold refiners has worked with a supplier that was at risk of having bought conflict metal originating in Sudan is the latest in a series of calls from advocacy groups urging the London Bullion Market Association to scrutinize producers more closely.

Gold, which is trading near an eight-year high, is one of four conflict minerals that U.S.-listed companies from Tiffany & Co. to Apple Inc. must trace and report on to the Securities and Exchange Commission. The same group of minerals will be covered by binding European Union due diligence rules starting from next year. Suppliers are coming under pressure to show they’ve got processes and policies in place to make sure the metal hasn’t financed conflict or been linked to corruption or human rights abuses.

In its report on Thursday, Global Witness alleges that Swiss refiner Valcambi SA bought large amounts of gold from Dubai-based Kaloti Precious Metals Group, which in turn was at risk of having purchased Sudanese conflict gold. It said there are gaps in the LBMA’s responsible sourcing standards that don’t generally require refiners to disclose their suppliers.

Valcambi declined to immediately comment on the Global Witness report. Kaloti said the allegations are not true.

“Kaloti is independently audited each year against the relevant standards and at no time has any conflict material, from any jurisdiction, including Sudan, been identified in any of its supply chains,” it said. “Furthermore, Kaloti has never sent any gold material sourced from Sudan to any Swiss refinery whatsoever.”

Valcambi has also denied Global Witness’s findings and said it conducts enhanced due diligence, the advocacy group said.

‘Holistic Process’

In a separate report published on Thursday, Bern-based non-governmental organization Swissaid also criticized the LBMA’s current standards, urging it to be “much more rigorous” on scrutinizing the supplies of its member refineries.

The LBMA said Friday that its responsible sourcing program “is designed to be a holistic process that engages all stakeholders” and that the association can’t tackle the issue alone. It said it “also recognizes that more needs to be done.”

The association is working with a third-party service provider to this year have new recommendations on how to further improve transparency, disclosure, and audit processes, Sakhila Mirza, an executive director and general counsel, said by phone. The LBMA will also publish its annual report with updates on the program and future developments in the coming weeks, she said.

Valcambi last month said it pledged to adopt a new system to increase transparency in its process for sourcing precious metals. Based on blockchain technology, the system will require the refiner’s potential gold suppliers to upload all due diligence information, including data and documents into a database, which will then be accessible to all appropriate auditing parties.

It’s not the only refiner coming under recent scrutiny.

Last week, activist group RAID asked the LBMA to suspend India-based refiner MMTC-PAMP, part of another Swiss major, MKS PAMP Group, over gold from a mine in Tanzania where there have been allegations of human rights abuses. The refiner denied all the complaints and allegations by RAID.

The LBMA also said last month it’s reviewing reported sourcing concerns at the Perth Mint over gold originating from Papua New Guinea.

(Updates with LBMA comments from ninth paragraph)

©2020 Bloomberg L.P.

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