Expert Analysis

Confronting the Crisis of Illicit Gold Mining: NatGold, a Holistic Approach

Executive Summary

This white paper delves into the severe environmental and social ramifications of illicit gold mining operations prevalent in regions such as Africa, Latin America, and Southeast Asia. The unchecked expansion of these operations, driven by global demand and systemic poverty, has led to catastrophic environmental degradation and widespread human suffering. Furthermore, this paper proposes a novel approach using the NatGold™ Digital Mining model as a sustainable and equitable solution to these issues, leveraging technology and regulatory frameworks to create a system that benefits all stakeholders involved.

About the Author

Chris Hansen has spent his professional career focused on designing and implementing sustainable economic programs. His experience ranges from serving as Deputy Director at the Inter-American Institute for Cooperation on Agriculture (IICA) to providing leadership for the Colombian Enterprise Development Program under USAID. He has also made significant contributions to the Foundation for Sustainable Development in Latin America (FUNDES) and the International Finance Corporation (IFC/World Bank).

Environmental Catastrophe

Illicit gold mining contributes significantly to environmental degradation, contaminating rivers and waterways with heavy metals and destroying vast tracts of pristine jungles and forests. The resulting toxic tailings create uninhabitable wastelands, risking numerous plant and animal species, and putting many potentially undiscovered species at risk of extinction. Furthermore, extensive networks of poorly constructed tunnels and adits turn mountains into dangerous environments prone to collapses, posing lethal risks not only to local wildlife but also to human miners, including many children exploited for their ability to navigate these treacherous spaces.

Human Tragedy

Illicit mining imposes a dire human cost: an estimated 1 million children are forced into these mines in slave-like conditions, facing extreme dangers with little hope for a better future. Accompanying these operations are increased incidents of prostitution, drug trafficking, arms deals, and political corruption, further destabilizing regional security.

Global Implications

The United Nations reports that 20-30% of the global gold supply, valued annually at $15 billion to $25 billion, is sourced illegally. This gold is often laundered through complex networks of shell companies, eventually integrating into the legal market and reaching consumers unaware of its origins. In Latin America, illicit mining accounts for up to 94% of all mining activities in certain countries, underscoring the pervasiveness of the problem.

Call for Action

This dire scenario necessitates a concerted global response. Current enforcement methods, involving aerial bombardments and ground offensives, mimic the largely ineffective war on drugs and often result in additional death and destruction. A shift towards peaceful, win-win solutions that offer economic incentives is crucial. These must include alternative livelihoods for those economically dependent on illegal mining operations, typically driven by lack of education and viable alternatives.

Proposed Solution: NatGold Digital Mining Model

The NatGold model offers a revolutionary approach to address the issues surrounding illicit gold mining. By certifying and tokenizing remaining gold resources, this model transforms how gold’s value is perceived and utilized:

  1. Certification and Protection: Governments could implement programs to quantify and certify gold resources in affected areas, granting legal protections to these resources and ensuring sustainable management.
  2. Incorporation and Amnesty for Illicit Miners: Offering amnesty and legal employment opportunities to former illicit miners could help integrate them into a legitimate economy. By involving them in the digital mining process, they can transition from illegal activities to become stakeholders in a legal, regulated environment.
  3. Tokenization and Economic Inclusion: Through tokenization, certified gold resources can be monetized, creating a digital currency backed by real value. Profits generated can be shared with former illicit miners, providing them with a sustainable income and discouraging a return to illegal activities.

Conclusion

The challenges posed by illicit gold mining are complex and deeply entrenched within local economies and global markets. However, with innovative approaches like the NatGold Digital Mining model, there is potential for meaningful and lasting change. This model not only offers a sustainable solution to environmental and social issues but also redefines the economic landscape by providing equitable opportunities for those who have historically been marginalized by the global gold market. This is not merely a strategy for combating illicit mining; it is a vision for a more equitable and sustainable future in gold mining.

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FAQs

Why is the elimination of fees and royalties crucial in NatGold legislation?2024-05-03T15:33:15+00:00

To ensure the NatGold industry’s integrity and sustainability, it’s critical to eliminate ongoing state fees and royalties tied to traditional mining titles. Such ongoing annual costs, if applied, necessitate the issuance of new NatGold coins to cover them, risking the one-to-one correspondence between NatGold coins and certified gold resources. This could potentially dilute NatGold coins’ monetary integrity by introducing the possibility of devaluation within the ecosystem. Therefore, abolishing these fees and royalties is paramount to preserving NatGold coins as a reliable and devaluation-resistant store of value, safeguarding against the depreciation that could arise from ongoing state-imposed costs.

What is the Committee for Mineral Reserves International Reporting Standards (CRIRSCO) and what role does it play in standardizing global mining reporting practices. 2024-04-20T23:31:27+00:00

The Committee for Mineral Reserves International Reporting Standards (CRIRSCO) is a pivotal non-profit organization dedicated to harmonizing global mining reporting practices. It comprises representatives from National Reporting Organizations (NROs) from various countries, including Australia, Brazil, Canada, Chile, and South Africa. CRIRSCO provides the International Reporting Template (IRT), a framework that aligns national and regional standards into a globally recognized guideline, ensuring consistency and comparability in the reporting of mineral estimates, resources, and reserves worldwide.

Although CRIRSCO doesn’t have a central physical headquarters, it operates through its member organizations spread across these countries. This template aids in maintaining transparency and reliability in public reporting, which is crucial for investor trust and regulatory effectiveness in the mining sector. CRIRSCO’s international collaborations and its endorsement by global entities underline its significant role in shaping mining standards globally.

Why does NatGold only recognize certified gold resources and not certified gold reserves when determining tokenization ratios?2024-04-20T23:34:04+00:00

The essence of NatGold’s valuation lies in its innovative approach to digital mining, which capitalizes on the inherent value of gold’s existence rather than its physical retrievability. This method relies on the assessment of certified gold resources, which quantify the presence of gold irrespective of its extraction feasibility. Conversely, certified gold reserves evaluate the economic viability of extracting these resources, a consideration irrelevant to NatGold’s mission. The International NatGold Council upholds a philosophy that sidesteps the environmentally and financially costly process of physical extraction in favor of a more sustainable, digital approach.

By choosing to tokenize gold based on its certified existence, NatGold challenges the traditional mining paradigm, rendering the debate over extraction viability moot. This shift not only aligns with environmental conservation efforts but also redefines the utility of gold as a store of wealth. It renders the act of extracting gold only to secure it in vaults both illogical and wasteful. Through digital tokenization, NatGold ensures that gold can fulfill its monetary role while remaining undisturbed in the earth, showcasing a practical commitment to ESG principles and making a clear case for the absurdity of conventional extraction methods.

What is Tokenization?2024-04-20T23:35:52+00:00

Tokenization is the process of converting rights to an asset into a digital token on a blockchain. These digital tokens represent ownership or a claim on the asset, enabling it to be traded or managed on digital platforms. This innovative approach offers a secure and efficient means of handling assets, utilizing the transparency, immutability, and distributive nature of blockchain technology.

In the context of the NatGold model, tokenization involves creating digital tokens that represent ownership of a certain amount of gold resources, as certified by NI 43-101 reports. Each NatGold coin is a digital representation of gold resources, making the intrinsic value of gold easily transferable and accessible without the need for physical handling. This process democratizes access to gold as an investment, making it possible for individuals and institutions to invest in gold resources with ease and confidence.

Tokenization transforms traditional asset management and investment by breaking down barriers to entry, reducing costs associated with transactions and storage, and enhancing liquidity in the market. By leveraging blockchain technology, tokenization introduces a new era of asset utilization and investment, opening up opportunities for innovation and value creation.

What is the gold-silver ratio utilized in the NatGold Model to calculate NI 43-101 certified gold equivalent resources, and how is it calculated?2024-05-01T18:14:09+00:00

Historically, the gold-silver ratio has been about 47:1 for most of the past century, but it has averaged around 60:1 over the past 20 years. In the last decade, this trend has widened, and it is not uncommon to see the ratio exceed 80:1. Most monetary metal analysts recognize that, due to the store of value nature of both gold and silver, when the ratio expands above 80:1, investors tend to sell their gold holdings to buy silver, and vice versa when the ratio falls below the 60:1 level.

For the NatGold tokenization model, the International NatGold Council has adopted a conservative approach by setting the gold-silver ratio at 90:1. This setting means that one ounce of certified gold resources is equivalent to 90 ounces of certified silver resources, regardless of the classification—whether inferred, indicated, or measured.

For example, if 90,000 ounces of NI 43-101 certified silver resources are present in the indicated resource category, the 90:1 gold-silver ratio set by the International NatGold Council would yield a 1,000-ounce certified gold equivalent in the indicated category. This enables the title owner to tokenize the 1,000 ounces of gold equivalent indicated resources according to the established exchange ratios used by OroEx Corp. when digitally mining the resources into NatGold coins.