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The new gold rush

FILE - In this April 10, 2004 file photo, a man enters a tunnel dug with shovels in the Shinkolobwe cobalt mine, 35km (22 miles) from the town of Likasi in the Democratic Republic of Congo. U.N. Security Council Resolution 1540 of 2004 obligates governments to give a full accounting of their nuclear materials, but as U.S. President Barack Obama hosts a summit on nuclear security April 12-13 in Washington, many states have fallen short of the reporting deadline, including Congo, the source of the uranium for the first atomic bomb. (AP Photo/Schalk van Zuydam, File)

The first frontier: The Scottish Highlands

“Four billion?” It’s one of the more unusual parlour games I’ve played in my time and in one of the more unusual parlours. The setting is Cononish Mine, 650 metres below Loch Lomond park in the Scottish Highlands, and the game is “guess the dollar value of the dirt around you”. Amazingly I seem to have hit the nugget on the head first time, although my companion is playing his cards close to his chest.

“That’s probably not a bad figure,” laughs Chris Sangster, the CEO of Scotgold, an Australian-funded company that owns the rights to mine in the area. “There’s nearly $250 million here,” he says, as we go deeper into the kilometre-long shaft. “Multiply that by five, because we think we’ve got five similar deposits nearby, and if you expand the area…” He shrugs as his grin broadens. Sangster is a circumspect, quietly spoken man, and he is not getting ahead of himself. But I don’t need to be so cautious: $250m seems likely, $1.25bn very possible and $4bn not beyond the bounds of reason – all lying in the Scottish earth waiting for somebody to come and get it. Welcome to the damp British frontline of a gold rush that is having transformative effects all over the world.

Unthinkable just a few years ago, a gold price above $1,400 (£858) an ounce is now the norm and Sangster and I are surrounded by the stuff. Yet the mine is dead: where you’d expect the clank and clatter of a hundred industrial drills busy at work there is only an eerie silence. Inside the tunnel, a rusty piece of equipment, long out of date, lies idle. We are the only ones here: all is currently calm on the new frontier and this gold mine is yet to sell a single ounce.

The reason for Cononish’s silence is that the mine sits just inside the boundary of Loch Lomond and the Trossachs National Park, and near the Tay, a river protected by strict environmental and water-quality legislation. In August 2010 the park’s board, which is also the mine’s planning authority, rejected Scotgold’s latest planning application to begin mining.

First discovered in the mid 1980s, Cononish mine – then outside the boundaries of the national park – was dug and explored until the early 1990s. A vein of gold was struck, planning permission given, and tunnels thrust into the hillside east of the white peak of Ben Lui. After a few years, with the gold price plummeting, the tunnels were abandoned before commercial mining could begin. The Caledonia Mining Corporation took over in 1995 but was affected by the crisis of confidence in gold in the wake of the Bre-X fake gold scandal – in which a group of Canadian companies collapsed when the gold deposits they claimed they were sitting on in Indonesia proved to be fake. Scotgold bought the project in 2007. With prices then soaring and a very strong level of public support for the project, Cononish looked like, well, a gold mine and Scotgold began to invest, but the national park borders had changed and new permissions were needed.

“We are 650 metres below Loch Lomond National Park playing ‘guess the dollar value of the dirt around you’”

Over the years since then the gold price has gone up and up and the mine, though “small by most standards,” as Sangster puts it, should be highly profitable. “The gold price is good,”  he says, pointing to where the vein begins in the light of his head torch, “long may it remain so.” The vein he is showing me is about five metres wide. It is mainly quartz, which sparkles white against the dark surrounding rocks, and is laced with dark strands – these are where the gold is in its highest concentration. It is a high-grade ore – with up to ten grams of gold per tonne – and has relatively low extraction costs. This means that over 50 per cent of the predicted $250m worth of deposits should be profit. “At current gold prices, the project is robust. Very robust.”

While all sides agree that the project would bring economic benefits, the environmental impact is harder to gauge. Sangster stresses that this isn’t an open mine and talks of land recovery, of clean water, of working with the Environmental Protection Agency and of minimal surface impact. The objection from the planning authorities has been that the visual effect will be significant. The mine’s waste dump, a dam holding 820,000 tons of ground rock “tailings”, had been the centre of the controversy, with claims that it would permanently ruin the immediate area. There was objection to the proposal from mountaineering and wilderness groups such as the John Muir Trust, who said that the “remote and sensitive landscape” would be affected. Scotgold’s new application, which the John Muir Trust has “cautiously welcomed”, halves the size of this dam, limiting the potential for expansion of the mine, but cutting its surface footprint.

Looking at the mine from the damp turf of the Cononish valley, Sangster shows me where each aspect of the mine will sit on the hillside. For the seven and a half years that the mine would be in operation, there would be ten or 11 trucks moving the rock from the mine to the processing plant. Once there, some gold will be extracted on site, and the rest shipped abroad for smelting. It is a difficult scene to envisage. The mine lies under a steep rock face, with a waterfall tumbling down the side, which in the winter is a recognised ice climb. At the quiet entrance we find the local bobby, watching a pair of nesting peregrines. “They’ve been here over a hundred years,” he says.

The Royal Society for the Protection of Birds was one of the prominent conservation and environment groups, along with Scottish Natural Heritage, who objected to Scotgold’s plans. They said the mine would cause significant damage to local habitats and ruin the surrounding area.

They found support on the park’s board, but the vote was tight, failing by 12 votes to ten after a debate that lasted over five hours in Tyndrum village hall. Mike Cantlay, the park’s convener and chair of VisitScotland, voted against the proposal. “Thriving communities in the national park are fundamental and this has been an especially difficult application to consider,” he told The Guardian in August 2010. “The statutory aims of the national park are very clear: that we must give greater weight to our first aim, to conserve and enhance our natural heritage, therefore we can’t balance the potential economic benefits against the certain devastating long-term impact on this spectacular scenery.”

Down the road in Tyndrum I visit the village hall, where Scotgold recently held the latest of its community meetings. Three old ladies are teaching one another how to use laptops, and pouring endless cups of tea, benignly watched over by a fat spaniel called Ben. At the far end sits Joyce Russell. Russell is the Development Manager of the Strathfillan Community Development Trust (CDT). The CDT is a charitable company; it owns 100 hectares of land and is providing affordable housing to members of the community, as well as replanting native woodland on the edge of the national park. She is unequivocal and passionate when it comes to the question of the mine. “Ninety-nine per cent of the community support it,” she tells me, batting away any environmental objections. “Locally we don’t think that it’s intrusive at all.” With droves of young people leaving the community, the 50 permanent jobs that Scotgold proposes to create would, according to Russell, be a vital lifeline. “As soon as people found out that Chris and Scotgold were going to put in an application [to start mining], people just started going to see him, saying ‘I’ve got experience here, I can do this and this.’” There was talk of a gold mine visitors’ centre in the village with gold panning “experiences” and quaint boutiques selling jewellery made of Tyndrum gold at premium prices. Once the mine closes, Russell says, they will turn the tunnel itself into a tourist attraction.

The wildness of the landscape may be compromised, but Russell nonetheless seethes at the park board’s rejection of the Scotgold’s last application. “They were so foolish to turn it down. They’ve just been wasting time and money as far as we’re all concerned. It would be good for the village, good for the area and good for Scotland.”

There’s no guarantee that new explorations will reveal the additional windfall Sangster is hoping for, but he argues that the UK is under-explored for precious metals and minerals, and that the geology is in place. The same vein of rocks in which gold is found across the northern hemisphere runs through the UK. And it will take some time to evaluate other possibilities. How long, I ask Sangster. “Years. Years. First phase of drilling you find there’s something there. You sit back and evaluate it. Then you go back the next year and do some more drilling. Go back the next year and do some more drilling. The Cononish deposit took five years.” For him and Scotgold, this is, and has been, a long-term project.

One thing is for certain: it is not just the peregrine falcons who have their beady eyes on this corner of the Highlands. Sangster and Scotgold see a billion-dollar opportunity that’s too good to miss, planners and wilderness groups fear an environmental calamity and Russell is looking for a lifeline for an ailing community. Underneath it all lies a rich vein of precious metals that remains – for now – undisturbed.

The second frontier: The Democratic Republic of the Congo

Four thousand miles from Tyndrum and its relatively good-natured debates over tea in the village hall, a twin-engine Gulfstream private jet leased by a US-based oil company sits on the cracked runway of Goma airport in the Democratic Republic of the Congo. On board, according to local reports that emerger later, are four businessmen – an American, a Frenchman and two Nigerians. There is also US$6.5m in cash and over 435 kilograms of gold. As the plane attempts to take off, armed security forces drive on to the runway, churning up coal dust and lava chunks in their wake. In a scene straight from the most clichéd Hollywood thriller, the jet is intercepted before its wheels can leave the ground. The businessmen are all arrested on suspicion of smuggling gold from rebel territories in the Congo’s volatile east.

“We are cursed because of our gold. All we do is suffer. There is no benefit to us” – Miner, Democratic Republic of Congo

Weeks after the arrest, reports circulated in Kenya and the Congo that an estimated 2.5 tonnes of gold had been smuggled out of the Congo to a warehouse in Nairobi. DRC President Joseph Kabila and his Kenyan counterpart, Mwai Kibaki, vowed to launch an investigation, but within days Joseph Cheptarus, the senior Kenyan official investigating the case, was shot dead by four people outside his house.

For the majority of those living in the Congo, the high price of gold is more of a curse than a blessing. A United Nations report published last year put the gold trade in North and South Kivu provinces at around $160 million per year, with at least 80 per cent of it smuggled illegally out of the country. Competition to control the gold mines and trading routes has spurred a bloody conflict.

“Soldiers and armed group leaders, seeing control of the gold mines as a way to money, guns, and power, have fought each other ruthlessly, often targeting civilians in the process,” says a 2005 Human Rights Watch report. “Combatants under their command carried out widespread ethnic slaughter, executions, torture, rape and arbitrary arrest, all grave human rights abuses
and violations of international humanitarian law.”

“We are cursed because of our gold,” one gold miner told Human Rights Watch. “All we do is suffer. There is no benefit to us.”

But while the public outcry over blood diamonds has prompted an industry-wide crackdown, there is little publicity about blood gold, and thus little movement to cut off the market.

A bloody history

Gold was first discovered in north-eastern Congo in 1903 by two Australian prospectors. Exploitation of the gold started two years later and grew in scale each year. Following independence in 1960, the state nationalised many of the mining companies, including the Société des Mines d’Or de Kilo-Moto (SOKIMO) and the state-owned Office of the Gold Mines of Kilo-Moto (OKIMO). To date, OKIMO officials estimate that more than 400 tonnes of gold have been extracted from their concession and that much more remains. Though there is no precise estimate of how much there is in the ground, it is believed to be the largest gold reserve in Africa.

The transition of Congo’s gold from funding the country to funding others began with the 1994 war in neighbouring Rwanda and the resulting refugee crisis. The influx of hundreds of thousands of refugees – including members of the Hutu paramiliatary organisation the Interahamwe – destabilised the Congo/Rwanda border and by 1996 the area was home to a conflict between the Zairian forces and the Alliance of Democratic Forces for the liberation of Congo-Zaire (AFDL), the rebel movement led by Laurent Kabila and backed by Rwanda. This AFDL-led conquest of Eastern Zaire fundamentally altered the distribution of natural resources: gone were the civilian-managed business operations and in came the troops, the warlords and their friends who liberated the “liberated” territories of their resources.

By 1998, the conflict had escalated further and spread into the northern, western and eastern parts of the Congo. It became something of a free-for-all. Rwandan and Ugandan troops were involved alongside the Congolese army, with the assistance of Angolan, Namibian and Zimbabwean soldiers, as well as Sudanese and Chadian forces. It was the start of a five-year war that would claim over five million lives, Meanwhile, with an intimidated and cheap labour force, no taxes and willing buyers around the world, exploitation of resources like gold made for very lucrative business.

“Minerals were not the cause of the war,” says Jason K Stearns, author of ‘Dancing in the Glory of Monsters: The Collapse of the Congo and the Great War of Africa’. “But they played a huge part in making the war sustainable. The Rwandan president, Paul Kagame, went on the record saying that his country’s operations in the Congo were entirely self-financing, and the reason for that was the mineral trade. When the Rwandan army itself is involved – their own planes, their own people, their own companies – there is a clear interest in maintaining military operations in the eastern Congo for their own benefit.”

The end of the war did not end the insecurity. Eight years on and the Congo is still
plagued by instability, with Rwandan Hutu and local Mai-Mai militias at large in the east and Ugandan Lord’s Resistance Army rebels in the north. This, and the continued involvement of armed Congolese forces, means gold and other minerals that could be Congo’s lifeblood are being drained away via Congo’s neighbours. The figures appear to reinforce the point. Uganda, for example, officially produced a mere $500 worth of gold in 2007, yet the value of its gold exports totalled over $75 million.

“One of the problems with gold is that it is so easy to smuggle,” says Stearns. “You can put it in your pocket and walk across the border. The other is that everyone is involved. It goes beyond so-called actors or insurgent groups; the UN and the BBC have proved generals of the Congolese armed forces to be directly involved in the management of gold mines. It is [members of] the Congolese government, the Congolese army that are exploiting gold in a systematic fashion.”

However it leaves the Congo, illegal gold has little trouble joining the mineral mainstream. “The black market for gold is quite different from that for other contraband goods,” writes RT Naylor in ‘Wages of Crime: Black Markets, Illegal Finance and the Underworld Economy’. “With opiates, for example, although there are occasional interrelations, it is reasonable to differentiate between legal and illegal sectors… with gold, legally and illegally produced raw materials flow through the same channels to the same set of legitimate firms for refining and casting; and the product of these respectable refineries is then redivided into separate streams serving the overt and the covert portions of the market. Even then the cross-links do not stop. Legally sold gold can be diverted into illicit uses, while illegally obtained gold can end up in the hands of otherwise legitimate manufacturers or consumers.”

According to the United Nations, this flow from illegal mines into legitimate streams means the exploitation of the natural resources of the Democratic Republic of the Congo armies has become systematic and systemic. “Plundering, looting and racketeering and the constitution of criminal cartels are becoming commonplace in occupied territories,” says a 2010 report to the Security Council. “These criminal cartels have ramifications and connections worldwide, and they represent the next serious security problem in the region.”

Stearns puts it another way. “The real problem is the moral fibre of the country, which has been run into the ground after a century of misrule. As a tribal leader I interviewed for the book put it, you could have taken Mahatma Gandhi and thrown him into the Congo, and he would have either ended up on the margins of politics or he would’ve become a corrupt warlord.”

On 26th March, the impounded Gulfstream jet, the businessmen and crew – who had spent their time in the Congo under house arrest in a hotel – were released after having paid a $3m fine. The plane returned to the United States. In the eastern Congo the often dangerous work in the mines continues to be done by people earning, if they are lucky, $10 per day and what the UN describes as “the engine of the conflict in the Democratic Republic of the Congo” rumbles on.

The final frontier: e-waste

The gold machine has functioned in the same way for centuries, so we think we know what a gold mine looks like. Images of tunnels and open pits spring to mind. Shining nuggets in grey stone lit by a lantern in an underground alley, or mini mountains of ore, ready to be loaded on to ships the size of small islands. But gold’s story may be about to get a new chapter. and with the mineral’s historically high price, the new frontier is less exotic and closer to home. Its found in the old mobile phones that linger around the house, which have become serious assets to those who know what do with them. Put simply: there’s gold in them there handsets.

E-waste recycling sounds like a prosaic business, but for entrepreneurs, the numbers are irresistible. According to Michael Arms, who runs the Recycling and Environmental Blog for Pacebutler, an e-waste recycling firm, a tonne of gold ore will yield between 0.3 and 5 grams of gold. Some underground mines with high grades can yield more; Scotgold’s Cononish deposit has grades of up to ten grams. Even this, however, pales in comparison to the possible 280 grams of gold that is hidden in a ton of obsolete phones. The US Geological Survey estimates that the 130m-plus phones retired annually in the United States contain almost 3.9 tonnes of gold, two tonnes of palladium, 46 tonnes of silver and 2,100 tonnes of copper (also at record prices μ  24th Mar ‘The butterfly effect’) and businesses want those minerals. At the end of March, Mazuma Mobile become the first phone recycling company in the world to pay out £100m for unwanted phones.

All the above figures look set to grow and when you take in other e-waste sources the numbers are incredible. The United National Environment Program (UNEP) says around 40 million tonnes of e-waste are produced globally each year with levels likely to increase by 400 per cent in China and by 500 per cent in India.

With commodity prices hitting record highs, companies and governments are beginning to take the issue, and the opportunity, of e-waste more and more seriously. Companies such as Umicore already process large quantities of electronic waste, but there is enormous slack in the system. As new technologies are developed that could dramatically increase the amount of recoverable precious metal in e-waste, the drive to re-mine from used products becomes stronger.

So in far-flung parts of the world, hills of old computers and mobiles are piling up. In places like Lagos, Mumbai and Guiyu in the Guangdong province of China, the world’s e-waste is sifted and sorted by an army of workers. Electronics are ripped apart with basic equipment and toxic chemicals are used to dissolve plastics. The health hazards are manifold and the small-scale smelting and leaching is inefficient and environmentally damaging.

These companies are some way off being modern-age Rumplestiltskins, weaving gold from waste. Currently, the processes to recover metals from e-waste are fairly primitive, and the proportion of e-waste that makes it to the few higher-tech recycling plants is small, but efforts are taking place to change this. In the US, these efforts are receiving government support; in November, President Obama announced an e-waste task force, and investment is increasing.

New technologies in the area are closely guarded. One new enterprise is looking at exploiting biotechnology to harvest gold and other minerals from e-waste. It claims that there are strands of bacteria which, in environments with high concentrations of metals, can not only survive, but can draw the metals out of the environments. With new biotechonologies, it is possible that these bacteria could be used to mine gold from e-waste. If it is achieved, the company’s CEO, who wished to remain anonymous, says the rewards could be astronomical: “Let’s say $70 billion, and that’s just in the next few years.”

There’s more than a gold medal for the winner of this technology race. Whoever cracks the code will be a modern day Midas and a world where genetically engineered bugs munch through Apples and leave behind a trail of pure gold might be closer than we think.

Gold has long been a driving force of change. The original Gold Rush more than tripled the population of California in two years, led to a near-genocide of Native Americans and reimagined the American dream in the process. A hundred and fifty years later this coveted metal – be it in the foothills of the Highlands, smuggled across African borders or lying untapped in discarded motherboards – continues to draw millions onwards to glory, or disaster.

 

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