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'Artisanal' gold mining not going away anytime soon, Franco-Nevada chairman says

The thorny issue of artisanal mining, a term that refers to a small-scale mining operation but is also frequently a euphemism for unregulated operations that play by a looser set of rules than traditional miners, is not likely to go away soon, Franco-Nevada Corp. independent Chairman Pierre Lassonde said.

As gold prices rise, the appeal of artisanal mines will only increase in jurisdictions where governments fail to crack down on the practice, Lassonde said during a keynote speech at the Denver Gold Forum on Sept. 16. The former executive of Newmont Mining Corp. said that with so many people in the world living on only a few dollars a day, the temptation of increasingly valuable gold deposits will encourage the practice.

"All they have to do is find one gram of gold and that's their almost yearly or at least monthly allowance," Lassonde said.

The International Institute for Sustainable Development wrote in a 2017 report that artisanal and small-scale mining has experienced "explosive growth" in recent years due to a rise in mineral prices and the difficulty of subsisting on agricultural and other rural activities. While artisanal and small-scale mining is often seen as a route out of poverty, it is also associated with a host of environmental, health and safety issues including links to child labor.

"An estimated 40.5 million people were directly engaged in [artisanal, or small-scale mining] in 2017, up from 30 million in 2014, 13 million in 1999 and 6 million in 1993," according to the report's executive summary. "That compares with only 7 million people working in industrial mining in 2013."

Despite lower productivity rates, artisanal mining practices accounted for about 20% of global gold supply, the report estimated. The mining sector and its customers have since been rolling out efforts to track and identify the source of mined materials to avoid potential issues with artisanally sourced products, particularly in the face of higher scrutiny from investors screening their portfolios for environmental, social and governance issues.

Similar to the way people looking for economic relief flocked to Alaska and California during the gold rush in the last century, those seeking economic refuge will pursue opportunities to mine smaller deposits of gold unless there is government intervention, Lassonde warned.

"You know, in the Amazon, there are no police forces, nobody looks," Lassonde said. "It looks like — from the air it looks like brain cancer. It's absolutely terrible."