Gold Mining - Weighing up the Costs

Panos Press Release May 1996

As demand for gold hits an all-time high, more and more cash-strapped countries are opening their doors to gold-mining interests. A new report published by the Panos Institute examines whether the increased demand for gold can benefit the development of Third World countries.

The Panos report - The Lure of Gold: how golden is the future? - highlights the need for tight economic and environmental measures if developing countries are to benefit from gold-mining. It warns that "without new safeguards the lustre of gold may well turn out to be as illusory for developing countries as the fabled El Dorado."

More than 70 countries - 31 in Africa - have now changed their mining laws to attract foreign investment, many offering a host of incentives, including reduced taxes and the lifting of foreign ownership restrictions. With international creditors banging at their doors, the appeal of boosted production and export earnings can be strong. On the ground mining creates jobs for the under-employed and unemployed and can help develop infrastructure.

"The problem is that the economic rewards of mining - jobs, schools, roads and power plants - are often outweighed by other costs. One important step would be to develop mining policies which ensure a fair share of profits go to local communities, as well as protecting the environment and miners" says Nigel Cross, executive director of the Panos Institute.

Demand for gold is higher than ever before - 3,642 tonnes in 1995 as against the previous record of 3,573 tonnes in 1992. Transnational corporations and an aggressive new breed of 'junior' mining companies are now rushing to stake their claims to gold in new territories such as Ecuador, Ethiopia, Vietnam, Laos and Central Asia.

Predictions are that in 20 years about half of global production will come from territories used or claimed by Indigenous Peoples.

Most forms of gold-mining can have severe environmental and health costs - caused, for instance, by the use of cyanide and mercury in the gold-production process. Each year 80-100 tonnes of mercury is discharged into the Amazonian river system. Blood tests on the Kayapó people show that 25% have high levels of mercury.

Worldwide around 10% of gold is now derived from small-scale mining, and it is estimated that this sector now produces up to 20% of Africa's gold. But although the proceeds could be invested in local communities, the fact that the industry is largely illegal and unregulated means that most earnings leave the country. The use and development of non-polluting technologies, as well as training and government backing, are badly needed to support the small-scale sector.

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