Australian Financial Review: Perth Mint annually buys up to $200 million in 'conflict gold' from murderer

Section:

By Angus Grigg
Australian Financial Review, Sydney
Thursday, June 11, 2020

https://www.afr.com/companies/mining/revealed-perth-mint-and-the-convict...

The Perth Mint, owned by the West Australian government, buys up to $200 million of "conflict gold" annually from a convicted killer in Papua New Guinea, a breach of its global accreditation and internal policies.

An investigation by The Australian Financial Review can reveal that the historic mint has repeatedly ignored staff concerns over purchases from small-scale gold miners in PNG, a practice heavily criticised for using child labour, degrading the environment through the use of mercury, and promoting conflict.

... Dispatch continues below ...



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Chaired by former Rio Tinto chief executive Sam Walsh and backed by a state government guarantee, the Perth Mint is the largest refiner of newly mined gold in the world and in February said it was at the "forefront of setting the highest possible ethical standards."

But insiders, speaking on the condition they remain anonymous, said the mint is paying little more than lip service to this pledge by dealing with PNG firm, Golden Valley.

It is owned by Justin Parker, who was convicted of manslaughter in August 2017 and sentenced to 13 years' jail after beating his helicopter mechanic to death. He was released on parole last year.

Despite Mr. Parker's conviction, he has retained full ownership of Golden Valley and it remains a large supplier to the mint, regardless of internal reservations.

When a mint employee asked a delegation of senior managers from Golden Valley how they dealt with competition in PNG, a representative said, "It's easy -- a gun to the back of the head."

Luke van Boehm, the managing director of Golden Valley, denied a comment like this was ever made by anyone at the company.

But he said the Perth Mint had never conducted an audit on its supply chain and conceded that mercury was often used by those it purchased gold from and that children were involved in mining with their families.

"In a country like PNG, all the family gets involved," he said during a phone interview.

He said Mr. Parker was no longer a director of Golden Valley but continued to have some input into its operations.

Ciaran O’Faircheallaigh from Griffith University, who has studied small-scale gold mining in PNG and cited Golden Valley in his research, said the Perth Mint could never claim its gold was ethically sourced.

"They would have no idea where the gold came from. They would not have a clue," he said of the mint.

Both Mr. O’Faircheallaigh and Mr. van Boehm said small-scale gold mining provided much-needed income at the village level in PNG and entire communities often depended on it for their livelihood.

Mr. van Boehm said efforts were being made to phase out the use of mercury.

"We are trying to encourage the use of other chemicals," he said.

The mint insiders said buying from Mr. Parker was highly profitable, as the margin from Golden Valley was 10 times higher compared with other corporate customers such as Newcrest or Lihir Gold.

"Golden Valley is happy to take a cheaper price because the gold is being washed through a government-backed institution," said one insider. "They know if someone did proper due diligence, then maybe the metal would not be accepted."

Mr. van Boehm said he was not aware of this discount and denied his gold would be rejected by other refiners.

The mint insiders said in previous years Golden Valley had sold up to 50,000 ounces to the mint, worth $137 million at today's prices. They said this had increased to about 80,000 ounces last year or $200 million at current prices.

Richard Hayes, chief executive of the Perth Mint, said he could not comment on individual customers but was acutely aware of the "complex issues" associated with small-scale gold mining in developing countries.

He said five of the mint's largest PNG customers, who bought from small-scale miners, were subject to audits as the country was rated as a "medium risk."

"All our customers have been granted and currently hold export licences from the Bank of PNG and due diligence documentation accompanies all shipments from the nation," Mr. Hayes said in a statement.

Like the consumer backlash over "blood diamonds," which forced buyers and cutters to be more accountable at the end of last century, the gold industry has sought to stamp out "conflict gold" and ensure the integrity of its supply chains in recent years.

This is part of a broader push by companies and government bodies to ensure they meet their environmental, social and corporate governance (ESG) responsibilities.

In the gold sector, the move toward ethical sourcing has been led by the world's largest gold exchange, the London Bullion Market Association (LBMA), which traces its roots to 1750 and the East India Company.

The LBMA is loosely regulated by the Bank of England.

Under the LBMA's responsible sourcing policy, refiners such as the Perth Mint commit to not buying gold that promotes conflict, human rights abuses, including child labour, and is sustainably sourced.

"Failure to adhere to the LBMA’s Responsible Sourcing Programme will result in the removal of the refiner from the Good Delivery Lists," said the LBMA's chief technical officer Nick Harby in a video explaining the policy.

In a February press release, the Perth Mint said it had "long been at the forefront of setting the highest possible ethical standards across all its operations."

In launching an ethical supply chain solution, Mr. Hayes talked about "child labour and other abhorrent practices" and how this contrasted with "ethically sourced [gold] from mines in Australia and the United States."

He made no mention of the mint's purchases of alluvial gold from PNG, of which Golden Valley is among the largest buyers.

Nor did he mention that these small miners frequently use child labour and often remove impurities through the use of mercury, which is banned in Australia,

"The use of mercury causes serious environmental and health problems. It is unambiguously awful," said Professor O’Faircheallaigh.

In addition, he said, silt from the gold mining often had an adverse effect on food supplies and water quality downstream, due to increased levels of sediment in rivers.

Professor O’Faircheallaigh said the mint could never say with any confidence that the metal it buys from Golden Valley was ethically sourced.

"Some of it may be" ethically sourced "but equally there would be a high proportion where mercury was used," he said.

A 2016 report co-authored by Professor O’Faircheallaigh also identified Golden Valley as a supplier of mercury.

"Dealing in bulk mercury can be remarkably lucrative," the report said, noting the likes of Golden Valley could expect a 10-fold markup.

Mr. van Boehm said the company did sell some mercury but had sought to educate miners on its correct use to avoid the worst side-effects of the chemical. These include physical and mental disabilities in children and compromised development, according to an article published in European academic journal, Chemistry.

"The health effects on the miners are dire, with inhaled mercury leading to neurological damage," it said. "The communities near these mines are also affected due to mercury contamination of water and soil and subsequent accumulation in food staples, such as fish."

Another researcher, who asked to remain anonymous due to fear of reprisals, said small-scale gold mining had a highly negative impact on remote villages in the PNG highlands.

The researcher said when gold was discovered, children were often taken out of school and there was an influx of outsiders.

"Suddenly there are guns in the village, along with conflict and crime, which had previously not existed," the person said. "It is definitely not ethically sourced gold."

Typicall, gold from these villages would make its way down to a regional centre, where an aggregator such as Golden Valley would purchase it. From here it would be flown by helicopter to Port Moresby and then on to Perth.

* * *

Metals Authority Probes Perth Mint over Gold-Sourcing Claims

By Neil Hume
Financial Times, London
Monday, June 15, 2020

The body that oversees London's $5-trillion gold market is investigating allegations that the Perth Mint, one of the industry's biggest refiners, processed tainted metal from small-scale miners in Papua New Guinea.

The London Bullion Market Association said it had launched a review after claims in the Australian media that Perth Mint had bought material from artisanal miners in PNG, which have a reputation for employing children and using mercury to mine gold.

"As the global authority for precious metals, LBMA maintains the highest standards for responsible sourcing," it said in a statement. "We therefore take very seriously the recent allegations relating to The Perth Mint and its sourcing from Papua New Guinea." ...

... For the remainder of the report:

https://www.ft.com/content/4c569519-a3f2-48a7-a267-a639c450ec42

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