Covid-19, ASM and responsible sourcing: our early analysis

It’s three months since Chinese officials first announced COVID-19, the novel coronavirus causing respiratory illness, and the world is still grappling with its consequences.

In our latest Insights post, our experts look into how the rapidly evolving pandemic could impact responsible mineral supply chains and the artisanal and small-scale mining (ASM) sector.

In the three-parts analysis covering the likely breadth and depth of potential economic, governance and social impacts, we explore how industry, government and civil society can anticipate, monitor and respond to these changes proactively.

• The role of finance. Market restrictions and falling demand could result in a deflationary cycle in which supply slows down, affecting incomes and therefore the crisis resilience of rural populations. It may also result in opportunities for new market entrants and/or consolidation of market shares by existing traders – licit and illicit. This potential reconfiguration of national and international supply chains should be monitored and where possible consciously shaped, as ruptures with the status quo give rise to both risks and opportunities.
• Mineral prices. Impacts will vary across minerals. For instance, last month, gold saw vast price volatility whereas cobalt witnessed over a 10% price drop. It is difficult to speculate as to whether increased mineral prices at the international level would be reflected in spot prices for ASM production, as access to international markets becomes increasingly difficult due to travel restrictions. Asking these questions early on means we can identify and advocate for solutions that minimise negative impacts on ASM communities and take advantage of opportunities that may arise.
• Appetite of mid-stream actors to continue to invest in responsible ASM sourcing efforts. Key precious metals refiners have taken the unprecedented measure of temporarily shutting down operations. Depending on how long closures continue, they could see significant impacts on the responsible ASM gold supply chain. We should be engaging with relevant stakeholders early to understand what their appetite might be to sustain or increase ASM sourcing, if at all.

• Data is essential to inform good policy responses and private sector engagement, yet during the crisis, it is likely to be in short supply as data collection is complicated by restrictions in movement and the channelling of resources to more immediate humanitarian needs. Safely mobilising local networks and technology will be key to ensuring a steady stream of reliable data. Governments and the private sector should be proactive in considering how best this can be achieved.
• Threat to ASM formalisation efforts. Investment in ASM formalisation programmes worldwide has grown, yet there is a risk that increased public debt and a redirection of resources to manage the public health crisis could result in a reversal of this trend. This would undermine the long-term development of the sector, encourage greater informality and break down community trust in public institutions that cannot be easily restored. Continuing investments in the sector formalisation is crucial to ensuring peace and stability in fragile communities and may be vital in mitigating worst impacts of COVID-19 on ASM communities.
• A change in focus and extent of international technical and financial development cooperation. Bilateral and multilateral aid and loans have contributed to sustained ASM formalisation over the last 3-5 years. Yet with forecasts pointing towards a global recession or even depression, the resources channelled to international development may diminish, and those resources are likely to see re-orientation toward health and humanitarian support. As practitioners, we need to find effective ways to support these programmes at a time of resource scarcity, whilst continuing to make the case for ongoing support to minerals communities.

• Vulnerable groups are the most likely to be hardest hit. Vulnerable populations are the least well equipped to protect themselves against shocks, be they direct health impacts or indirect impacts such as loss of livelihoods and incomes. ASM populations will be disproportionately affected by the crisis as their annual incomes may be especially vulnerable to this crisis and they are already disadvantaged in terms of underlying health conditions and access to health services. We must seek to understand how these factors play out as the crisis evolves and provide timely advice and guidance to governments and communities as to how livelihood requirements and disease control measures can be reconciled.
• LSM-ASM relations. There has been a discernible shift towards recognition of the need to put in place holistic management solutions in relation to ASM to mitigate operational and ESG risks. Yet, with the potential for mines being put into care and maintenance and containment strategies coming into force, as well as workers being laid off, there is a risk that those who depend on the continuation of the activity (both ASM and LSM) for their livelihood feel aggrieved by decisions that are beyond their control. We must all work to identify these risks early, articulate the impact they could have on future operations, both commercially and in terms of social license and security, and seek collaborative solutions with industry to avoid them becoming a reality.