A responsible mining approach to the economic modeling of small-scale gold mining

Abstract

Artisanal mining, known as “garimpo” in Brazil, is a legal activity predicted in the Brazilian mining code. However, society's concern over the sustainable development of the Amazon rainforest and media coverage of illegal gold extraction have had the effect of marginalizing and condemning the sector as a whole. Known in the international literature as small-scale and artisanal gold mining (ASGM), this sector involves millions of miners across the world and hundreds of thousands in Brazil, who make a living from it, feed their families, and foster local economies. However, ASGM miners use techniques and operating procedures that, if not controlled, mitigated and eventually replaced, could lead to significant social and environmental impacts. There are growing concerns over ASGM activities, and buyers, investors, and industrial sectors are willing to pay more for a product created in a responsible manner. However, questions remain as to how much the transition to a responsible operation would cost, and whether buyers would really be willing to pay for it. This research presents a proposal for the economic modeling of ASGM operations based on immersive work in three cooperatives of legal ASGM miners in Brazil. The proposed approach considers the SDGs (United Nations Sustainable Development Goals) of the 2030 agenda, as applied to small-scale mining, and the corresponding actions that are needed, based on a detailed survey of the costs of the analyzed operations, with the aim of guiding small-scale mining activities towards greater responsibility and sustainability. In the proposed model, the average profit obtained from mining operations is guaranteed and the size of the bonus reverts to the responsible areas surveyed. A financial analysis based on our responsible model, which was developed for the cash flow for a hypothetical operation over 10 years, yields an IRR of 54 % and a payback of 2.54 years, thus demonstrating its economic viability.