Rebels, Army Profit From Gold in Congo Despite Controls, UN Says

Rebels, Army Profit From Gold in Congo Despite Controls, UN Says

21/06/2106

• Traders ignoring requirements to source from validated sites
• Gold exports under-declared by at least $174 million in 2015

International regulations aimed at curbing the trade in so-called conflict minerals have failed to stop rebel groups and elements of the army in eastern Democratic Republic of Congo profiting from gold mining in the region, according to a United Nations group of experts.

The lack of a functioning traceability system for gold is a “particular area of concern,” the panel, which monitor sanctions on the Congo, said in a report to the UN Security Council published June 16. “Gold from non-validated mining sites, and therefore possibly benefiting armed groups, is laundered into the legitimate supply chain and, subsequently, into the international market,” it said.

Gold production has increased exponentially in Congo from almost nothing in 2011 to 25.5 metric tons (820,000 ounces) last year, as commercial mines run by London-listed Randgold Resources Ltd. and Toronto-based Banro Corp. have started up. Officially, only 583 kilograms of gold was produced by artisanal and small-scale miners last year, much of which was sold in Dubai, the panel said, citing government statistics. The real figure is suspected to be much higher, it said.

Illegal Mining

Congo’s Chamber of Mines in February said that as much as 400 kilograms of illegal gold leaves the South Kivu province alone every month. Congolese exporters under-declared exports by as much as $174 million in 2015, depriving the state of tax revenue, the panel said in the report.

Since 2010, when the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act included a requirement for listed companies to disclose their use of conflict minerals -- tantalum, tin, tungsten and gold -- sourced from Congo and adjacent countries, significant efforts have been made to clean up mineral-supply chains in the region.

Due diligence and traceability programs for tin, tantalum and tungsten have reduced opportunities for armed groups, of which at least 60 continue to operate in eastern Congo, to profit from trade in the minerals. No comparable program has been introduced for gold, which is more transportable and more valuable, leading to an increase in illegal gold mining.

Rebels Profiting

The UN experts found that Congolese exporters are ignoring due diligence requirements to source gold from validated mining sites, aggregating metal sourced from multiple sites, some which are not validated, and under-declaring exports to national and provincial authorities. In doing so, exporters in the Congo are “enabling the laundering of illegitimate gold that is not conflict-free into the international supply chain,” according to the report.

In one example, five dredge owners operating on the Lubero River in North Kivu province told the UN experts that members of the rebel Democratic Forces for the Liberation of Rwanda were enforcing a tax of 5 grams (0.16 ounces) of gold a month, worth about $205 at current prices.

In South Kivu province, the UN experts said that members of the Congolese armed forces were controlling parts of the gold trade in the Misisi area. Soldiers operate an illegal barrier between mining and processing areas, collecting 500 Congolese francs ($0.52) from each digger entering the mine and 1,000 francs from those bringing product back out, the group said.

To address the problem, the military in March told the UN it would rotate all officials working in the area in the near future.

Congolese army spokesman Leon Richard Kasonga said by phone from Kindu that he hadn’t yet seen the UN report and couldn’t immediately comment.

By Thomas Wilson

Bloomberg

UN Report: http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/2016_06_forecast.pdf