Dirty Gold: The Next Conflict Diamond?

How the industry is using the lessons learned from its last skirmish with NGOs to keep the newest one under control.

By Rob Bates, Senior Editor -- JCK-Jewelers Circular Keystone, 5/1/2005

It is not what Fifth Avenue retailers wanted days before Valentine's Day—a 15-foot-tall puppet named "Miss Goldzilla," carrying bags of fake jewelry, striding the streets in front of their stores, warning consumers off "dirty gold."

Miss Goldzilla's pamphlets called gold mining "one of the most destructive activities in the world" and accused miners of a variety of sins, from environmental hazards to human-rights abuses. They told consumers to ask their local jeweler "where the gold in their products comes from … [and] to support our call for reform of the mining industry."

"Miss Goldzilla" is the latest stunt from the No Dirty Gold campaign—a so-far haphazard affair run by a grab bag of nongovernmental organizations including Earthworks, Oxfam America, and Greenpeace. The campaign, launched a year ago, seems to have generated more interest in the industry than from the media or consumers, but there are signs it's increasing the volume. The campaign recently sent a letter to 50 high-volume retailers, asking them to commit to purchasing gold only from "responsible sources." It has organized No Dirty Gold educational tables at colleges and has persuaded over 10,000 people to sign its No Dirty Gold pledge posted at www.nodirtygold.org.

Like the campaign over conflict diamonds, many worry dirty gold could be a public-relations headache for the industry that throws a spotlight on some of the less-glamorous links in the jewelry production chain. It also raises the question of what responsibility jewelers have for what they sell.

And as with conflict diamonds, the industry is determined to work with the NGOs before things get worse.

Conflicts Noisier. It's unlikely that the No Dirty Gold campaign will reach the noise level of the fight over conflict diamonds, which attracted widespread media attention with its shocking pictures of African children with amputated limbs.

"We don't sense the environmental issues are getting the same degree of media coverage," said Michael Barlerin of the World Gold Council, who now represents the Council on the Responsible Gold Task Force, a group that mining companies formed in response to NGO concerns. "That being said, we are looking at it as if it were comparable."

One thing the industry learned from conflict diamonds is that it's best to cooperate early. Tiffany, which had conflict-diamonds protests outside two of its stores, recently surprised NGOs—in a positive way—when it placed an ad in The Washington Post expressing concern about the environmental impact of the Rock Creek Silver Mine in Montana. Tiffany's ad is now cited approvingly on the No Dirty Gold site.

So far, the charm offensive is working; the NGO campaigners say they are happy with what they've heard from the industry. "We are in the preliminary phases of entering into dialogue," says Oxfam spokeswoman Helen DaSilva. "Many retailers have expressed support for the objectives of our campaign. They are essentially on the same page. It's a great starting point for us, and we look forward to continuing our dialogue with them."

The latest NGO release specifically notes that "Tiffany & Co., Cartier, Helzberg Diamonds, and Harry Winston have voiced support for the campaign's objectives." The campaign "is looking for more retailers to join those leaders," says Payal Sampat, co-director of the No Dirty Gold campaign for Earthworks.

Dirty Goals. Still, support for goals is one thing. Carrying them out is another. And for now, the NGOs are vague on what they want the industry to do.

"We believe that jewelry retailers have the responsibility to ensure to their consumers that their products were produced ethically," says Sampat. "We are looking for a commitment from retailers to look at their supply chain, track their current sources for gold, and inform their suppliers that they are committed to sourcing gold from responsible sources."

The letter sent to the 50 retailers is more specific, asking for commitments that their gold has not been responsible for "forced displacement of communities," environmental damage, and human-rights violations, among other things. It wants them to have assurances for 30 percent of their gold products by 2006, 50 percent by 2008, and 75 percent by 2010. The letter says a forthcoming ad "will identify companies that have made commitments to help accomplish this as well as companies that have not."

The problem is that it's difficult—some say impossible—for retailers to make any kind of commitment about the gold they source. Tiffany has been increasing the amount of metals it buys directly from mines, but not many jewelers have Tiffany's buying power. "Most companies buy gold from a bank that buys it from multiple sources," notes Jewelers of America executive director Matthew A. Runci, whose job increasingly involves social and political issues. "There are so many layers where the product is not just passed on, but melted, refined, and then mixed with other gold."

Could there ever be a Kimberley Process for gold—or at least some "chain of custody" to identify where gold comes from? Barlerin says it won't be as easy to do as it was with diamonds—which wasn't exactly a cakewalk, taking several years and numerous meetings, laws, and United Nations resolutions.

"You are talking about a fragmented and highly complex supply chain," Barlerin argues. "Gold can be melted down and put back in the industry. The ring I'm wearing could be from Cleopatra's time, or could have been mined recently.… We shouldn't say a chain of custody can't be done. I am a believer that anything can be done. It's just a question of is it economically feasible and who would bear the cost."

The NGOs say they are taking this into consideration. "We believe that over the next few years there will be a chain of custody and independent verification," says Sampat. "Though it won't happen overnight and we are very much aware of that."

Even so, some retailers feel the campaigners are aiming at the wrong target. "What is really required is a focus on the mining processes and what constitutes best practices at the mine level," says Runci.

Sampat says the NGOs are working with the mining industry but it "is not necessarily going to get the message that it needs to clean up its act without hearing from its biggest consumers, U.S. jewelry retailers."

For their part, the miners say they are more than willing to talk. "The mining industry is in the process of engaging in dialogue with the NGO community," says Barlerin. But he contends that the miners are being tainted unfairly: "A lot of the NGOs' information is dated and not necessarily reflective of current practice. The primary players are adhering to rigorous standards, more than the NGOs are aware of."

Carol Raulston, senior vice president of communications for the National Mining Association, says the miners need to talk more not just with the NGOs but the rest of the industry. "We would all benefit from learning more about each other's businesses," she says, and adds that jewelers who want to hear the miners' point of view should go to www.responsiblegold.org.

No Boycott. As with conflict diamonds, the NGOs behind dirty gold stress they aren't calling for a boycott—although the difference between a boycott and a negative "consumer education campaign," is somewhat academic. A message like "The more you know, the less gold glows" may not explicitly tell consumers not to buy gold, but some will get that message regardless.

Which is why the stakes remain high. So far, though, the industry seems to be making the right moves. And Sampat says jewelers should not look at them as the enemy.

"This could be a real opportunity for retailers," says Sampat. "As things stand, this is an industry that is hurting people and the environment. And it doesn't need to be that way."

So How 'Dirty' Is It?

The conflict-diamond campaign was based around one undeniable fact: Civil wars in Africa were at least partly funded by diamonds. The nongovernmental organizations and the industry may have disagreed on the numbers, the possible solutions, and whether the industry deserved responsibility for it, but nearly everyone agreed on the central proposition.

"Dirty gold" is more complicated. The NGOs aren't talking about one issue, but a long list of issues. And there is little agreement on whether some of the issues are even problems.

Many of the NGOs' complaints, particularly the environmental ones, could be aimed at any mine, not just gold mines. Yet it should be noted that the NGOs aren't the only people who have problems with the gold industry. According to a story in last December's New York Times, Indonesian officials are investigating Denver's Newmont Mining for alleged violations of local pollution ordinances.

Below are a list of complaints about the gold industry taken from a "fact sheet" available at the No Dirty Gold Web site (www.nodirtygold.org/fact_sheet.cfm) along with the industry's responses, courtesy of Carol Raulston of the National Mining Association:

The NGOs Say: "A single gold ring leaves in its wake at least 20 tons of mine waste." (The NGOs admit this figure is their own but say it's "conservative" and based on consultations with experts. Their reasoning can be seen here: www.nodirtygold.org/pubs/20TonsMemo_FINAL.pdf.)

The Industry Says: Raulston points to a University of Nevada study that found, in 2003, metals mines in Nevada generate approximately 452 pounds of releases to air, water, on-site land management, and off-site disposal for each pound of gold and silver produced. "Only 5,418 pounds of releases were sent for off-site disposal—what the average American would think of as 'waste'—or about 0.005 pounds per pound of gold and silver produced," Raulston says.

The NGOs Say: "Open-pit gold mines essentially obliterate the landscape, opening up vast craters, flattening or even inverting mountaintops, and producing eight to 10 times more waste than underground mining."

The Industry Says: Raulston says that "U.S. federal and state laws require that the rock and soil removed to construct and operate the mine (whether underground or surface) must be reclaimed for an additional benefit. These benefits could include cattle grazing, farmland, wildlife habitat, recreation, etc."

The NGOs Say: "Cyanide is used by large mining operations to separate gold from ore. Cyanide pollution is a major concern. A rice grain–size dose of cyanide can be fatal to humans; concentrations of 1 microgram (one-millionth of a gram) per liter of water can be fatal to fish."

The Industry Says: "Cyanide has been used safely for many decades," Raulston says. "In North America, all employees that handle cyanide receive special training and either wear personal monitors or work in areas that are monitored for any unsafe levels of exposure. All cyanide solutions are contained, recycled, and, finally, neutralized."

The NGOs Say: "Metals mining employs just 0.09 percent of the global workforce but consumes as much as 10 per-cent of world energy."

The Industry Says: Raulston says that: "According to Environment Canada ... mining consumes about 4.4 percent of energy produced annually. Where mining does occur, it is usually the largest single source of employment (due to the generally remote location of most metals mines). In the United States, mining operations are also the highest-paying private-sector jobs in the states in which mines are located."

The NGOs Say: Between 1995 and 2015, approximately half the gold produced worldwide has or will come from indigenous peoples' lands.

The Industry Says: "I don't know how this is calculated," Raulston says. "The world's three largest gold-producing countries are South Africa, the United States (80 percent of U.S. gold is mined in n+orthern Nevada), and Australia. Assuming the NGO calculation is correct, a recent study by Stanford University on the impact of mining in South America points to the spinoff technologies and economic development that has come with mining—often for the first time—to these areas."

The NGOs Say: "Metals mining is the number one toxic polluter in the United States, responsible for 96 percent of arsenic emissions and 76 percent of lead emissions."

The Industry Says: Raulston admits that "metals mines are the largest reporting industrial sector in the U.S. Toxic Release Inventory." But she says that doesn't mean they are the largest polluter, noting that the TRI requires that metal mines report the weight of all listed minerals that remain in moved rock and soil. She also notes that "lead, arsenic, copper, mercury, etc., are all found naturally in the rock and soil at metals mines. ... If you look at the amount of emissions to air and water that metals mines report under TRI, they are about 1 percent of total U.S. air and water emissions."