Intro
Artisanal MiningWhy Switzerland Struggles with Dirty GoldTales from Peru
Wildcat gold miners have devastated the Peruvian Amazon, leaving large swaths of it poisoned and stripped bare. In a drastic move, Swiss refiner Metalor stopped all gold imports from South American artisanal miners after its main gold supplier in Peru was shown to be sourcing gold from those illegal mines.
But with gold prices the highest they’ve been in nearly a decade, the quest for the precious metal is heating up in a place where mining and criminal activities overlap and law enforcement is haphazard.
Illegal vs. Legal MiningThe Two Sides of Peru's Interoceanic Highway
Seen from the sky, the landscape on either side of Peru’s Interoceanic Highway looks identical, pockmarked with sandy plots of land and muddy pools of water. Yet the monotonous land is of strategic importance. It is the main transport artery into Peru’s southeastern region of Madre de Dios, where gold mining is booming.
"Only a few of us can work here legally.More common is illegality."
Weak law enforcement in large parts of this region means the situation is not as clear-cut as the Interoceanic Highway’s route suggests, and the government says. The weak implementation of mining regulations has led to widespread illegal mining here, which in turn has been responsible for large-scale deforestation and mercury pollution, experts say.
And some of that gold ends up in Switzerland, according to watchdog groups. They accuse Swiss refiners, jewellers and watchmakers for sourcing such “dirty gold”. That could soon have consequences. Lawmakers in Switzerland, the world’s leading gold refiner, are now debating harsher penalties for companies linked to human rights and environmental abuses.
But identifying “dirty” gold is hard. Criminal networks and illegal miners often try to conceal the illegal origins of their gold by mixing it with legitimately obtained gold before introducing it into the international gold market, according to the miners, traders and law enforcement officials swissinfo.ch met in Peru. This makes it difficult for Swiss refiners and gold-buying companies to know if they’re importing illegal gold.
Some gave up. In early 2019, Swiss refiner Metalor stopped sourcing from artisanal gold miners in Latin America altogether. The decision came after Peruvian customs officials seized 91 kilos of gold bars from local exporter Minerales del Sur destined for the Swiss refinery. The cargo is suspected by Peruvian authorities to have contained illegally sourced gold including possibly from Madre de Dios.
Operation Mercury
But the authorities are not giving up. The Peruvian army recently launched “Operation Mercury” in an area known as La Pampa, on the side of the Interoceanic Highway where mining is illegal. Forces occupied an area the size of a small country in order to drive out wildcat miners. At the same time, the authorities accelerated a programme to certify miners who meet environmental and social standards.
Getting it right
Trying to get it rightMiner Juan Ttamiña
The bit of land he is allowed to mine sits in the mining corridor – an area of roughly 500,000 hectares (the equivalent of nearly one million football fields) – where gold extraction is permitted provided that environmental and social standards are upheld.
Certification Requirements
Ttamiña has applied to the government’s formalisation programme, which aims to bring a legal footing to his work. As of mid-August, 4,500 miners had applied to be formalised; only 117 had been accepted. He hopes to soon join their ranks.
To be certified, Ttamiña must prove he is reforesting barren areas and adopting mercury-free mining techniques. In a purpose-built structure, he has installed a gold shaker table that separates the gold from dirt without using mercury.
In 1989, Ttamiña arrived to mine along the Pukiri river, near a town now known as Delta Uno in Madre de Dios. That was well before Madre de Dios became overrun by wildcat miners lured by high gold prices after the 2009-2010 financial crisis.
His hard work has paid off. Back then, the family only had a couple of wheelbarrows and basic water pumping engines to flush the ore. Now, the middle-aged miner employs 22 people who use modern excavators and trucks to move mineral matter on his “cuadricula”, or one-square-kilometre concession.
“Production is not always the same: today it could be more, but it could also be less,” explains Ttamiña as a pair of workers conclude a sweltering eight-hour shift rinsing gold ore, stationed at two chutes. They sleep on site in a single-story brick dorm.
His hard work has paid off. Back then, the family only had a couple of wheelbarrows and basic water pumping engines to flush the ore. Now, the middle-aged miner employs 22 people who use modern excavators and trucks to move mineral matter on his “cuadricula”, or one-square-kilometre concession.
“Production is not always the same: today it could be more, but it could also be less,” explains Ttamiña as a pair of workers conclude a sweltering eight-hour shift rinsing gold ore, stationed at two chutes. They sleep on site in a single-story brick dorm.
“They treat us like illegals, but the government knows who is and who isn’t."
The black market
Former Miner Walter BacaThe Black MarketHow it works
Evading the Law
Walter Baca is a former miner who now rents mining equipment. His extended family has been accused of illegal mining and is reported to have had financial relations with Metalor.
When we met him in Huepetuhe, Baca declined to comment on these allegations but he was willing to share his insights and personal experience in the gold trade.
“The greatest evader is the gold buyer,” he says. “People continue to work illegally because they have obligations [to the buyers].”
When we met him in Huepetuhe, Baca declined to comment on these allegations but he was willing to share his insights and personal experience in the gold trade.
“The greatest evader is the gold buyer,” he says. “People continue to work illegally because they have obligations [to the buyers].”
Baca is the nephew of a notorious couple – Gregoria Casas and Cecilio Baca – who were among the first settlers in the open pit gold mine of Huaypetue, where mining first began here. The couple, who owned 18 mining plots, was under criminal investigation for illegal mining and money laundering over many years, according the local investigative news outlet Ojo Publico.
Ojo Publico also reported on allegations by unnamed customs officials in Peru that Metalor made payments to bank accounts owned by members of the Baca family, including Walter Baca’s aunt and cousins. Members of the Casas-Baca family have repeatedly denied wrongdoing. Some members of the family have also said that their accusers have unfairly framed them to score political points or even for financial gain.
The former miner did not directly comment on the allegations against his relatives but said that many local traders engage in corrupt practices and in tax evasion. He accused them of manipulating the market by controlling prices and not invoicing purchase, while miners are held captive by what they owe the traders.
The former miner did not directly comment on the allegations against his relatives but said that many local traders engage in corrupt practices and in tax evasion. He accused them of manipulating the market by controlling prices and not invoicing purchase, while miners are held captive by what they owe the traders.
“When the gold reaches Lima, the buyers… combine their gold to sell to the same buyer,” Baca explains, claiming that buyer in some cases was Metalor.
Asked whether it was aware of any complicity among major gold buyers in Madre de Dios and the accusation that they combine purchases, Metalor responded, “No. [We do] not take any material from the region.”
A company spokesperson told swissinfo.ch that Metalor had been “very engaged” in the formalisation process in Peru and had raised its concerns over traceability with Peruvian authorities.
"All responses we got over time from the different authorities in Peru… were very reassuring,” said the spokesperson in an email.
“However,” he added, “we were disappointed because it turned out that the regulatory and enforcement framework is not robust enough.”
Asked whether it was aware of any complicity among major gold buyers in Madre de Dios and the accusation that they combine purchases, Metalor responded, “No. [We do] not take any material from the region.”
A company spokesperson told swissinfo.ch that Metalor had been “very engaged” in the formalisation process in Peru and had raised its concerns over traceability with Peruvian authorities.
"All responses we got over time from the different authorities in Peru… were very reassuring,” said the spokesperson in an email.
“However,” he added, “we were disappointed because it turned out that the regulatory and enforcement framework is not robust enough.”
‘People work on the run’
Is Baca worried about business now that Metalor is no longer buying gold from Peru? “The producers are not too concerned because there are always buyers here,” he says.
Baca says the absence of government authority before Operation Mercury left miners with the freedom to operate as they pleased. When the metal’s price rose, many invested in heavy machinery to be able to cut deeper into the jungle, polluting the waterways and subsoils with mercury as they advanced. Although Peru ratified an international treaty on reducing mercury pollution in 2018, the toxic heavy metal is still widely available for sale online in the country.
Baca says the absence of government authority before Operation Mercury left miners with the freedom to operate as they pleased. When the metal’s price rose, many invested in heavy machinery to be able to cut deeper into the jungle, polluting the waterways and subsoils with mercury as they advanced. Although Peru ratified an international treaty on reducing mercury pollution in 2018, the toxic heavy metal is still widely available for sale online in the country.
Baca blames previous government officials for complicity in deals that benefitted criminal networks purchasing gold. He believes the government should prioritise tackling corrupt gold buyers rather than focus so much on smaller mining operations.
“The formalisation process has no goal,” says Baca. “It is as if it is moving towards an abyss.”
Baca was a miner himself but branched out into other business after his mining equipment was blown up by the Peruvian military six years ago as part of an earlier crackdown on illegal mining. His new business involves leasing equipment “to miners in the formalisation process” – those seeking to operate legally.
“The formalisation process has no goal,” says Baca. “It is as if it is moving towards an abyss.”
Baca was a miner himself but branched out into other business after his mining equipment was blown up by the Peruvian military six years ago as part of an earlier crackdown on illegal mining. His new business involves leasing equipment “to miners in the formalisation process” – those seeking to operate legally.
Many of the miners who have been caught up in Operation Mercury, like Baca, found new ways to profit from the sector, locals say. Some have moved deeper into the jungle even closer to the Tambopata reserve or across the Interoceanic Highway into the mining corridor to continue to chase profits at the margins of the law.
Most miners fled the banned mining region of La Pampa when they learned of the operation, but over 200 people were arrested and millions of dollars worth of equipment has been seized and demolished.
Baca recalled his own experience in Huaypetue: “People work on the run. When the government bombs the camps and captures equipment, miners work like crazy. The government’s strategy is inadequate.”
Most miners fled the banned mining region of La Pampa when they learned of the operation, but over 200 people were arrested and millions of dollars worth of equipment has been seized and demolished.
Baca recalled his own experience in Huaypetue: “People work on the run. When the government bombs the camps and captures equipment, miners work like crazy. The government’s strategy is inadequate.”
Baca’s upscale villa overlooks a ragtag mining town full of elusive gold buyers, shady bars and nightclubs served by young women. These women, mostly from poor mountainous regions, are drawn by prospects of jobs as domestic workers or waitresses that often turn out to be false, according to law enforcement agents.
General Luis Vera, director of the Peruvian National Police's Environment Directorate, says in an interview in Lima that his troops found many such places when they went into the illegal mining region.
“There was a lot of abuse and disappearances because there was no public authority,” Vera says. “The overseers or the capitalists who had their illegal mining plot, had the authority.”
General Luis Vera, director of the Peruvian National Police's Environment Directorate, says in an interview in Lima that his troops found many such places when they went into the illegal mining region.
“There was a lot of abuse and disappearances because there was no public authority,” Vera says. “The overseers or the capitalists who had their illegal mining plot, had the authority.”
On the fringes of the illegal mining area, residents say miners still work overnight in an effort to escape detention. At dawn, after they finish work, the miners drop planks they use to drive their motorcycles over the swampy forest floor, into the undergrowth, effectively hiding their access routes.
“Sometimes you can hear the engines operating in the distance,” says Doris, a woman who runs a hostel located along the road. She declined to give her full name.
“There’s lots of gold out there. On a good day, they can make 1000 soles.” (The equivalent of CHF290)
“Sometimes you can hear the engines operating in the distance,” says Doris, a woman who runs a hostel located along the road. She declined to give her full name.
“There’s lots of gold out there. On a good day, they can make 1000 soles.” (The equivalent of CHF290)
Despite continued illegal mining activity, Operation Mercury is credited with slowing wildcat mining significantly in most of La Pampa’s environmentally devastated area.
Gold mining deforestation decreased 92% between 2018 (900 hectares) and the first half of 2019 (67 hectares), representing the situation before and after the start of Operation Mercury, according to the Monitoring of the Andean Amazon Project.
Gold mining deforestation decreased 92% between 2018 (900 hectares) and the first half of 2019 (67 hectares), representing the situation before and after the start of Operation Mercury, according to the Monitoring of the Andean Amazon Project.
"We are after those businesses who purchase the gold and give it the appearance of legality."
Colonel Luis Guillen Polo, the commander of Operation Mercury, explains that his forces are aggressively going after illegal gold buyers and traders, "not just illegal miners".
Cover-ups and pollution
Lies, cover-ups and pollution
Air contamination by mercury
(Purple and red mark the highest areas of contamination, and coincide with where gold furnaces are burning)
The Swiss connection
Bound for Switzerland
The “dirty gold” thus travels from illegal miners through an opaque network of gold buyers. It is then sold to foreign traders and refiners.
Credits
Credits
Credits
Fullscreen
Author: Paula Dupraz-Dobias
Photos: Sebastian Castañeda and Paula Dupraz-Dobias (Additional photos SDA-Keystone)
Graphics: Kai Reusser and Alexandra Kohler
Video: Sebastian Castañeda and Paula Dupraz-Dobias
Production: Dominique Soguel
Editor: Veronica DeVore
This story won second prize in the 2020 Fetisov Journalism Awards in the category Excellence in Environmental Journalism.
Photos: Sebastian Castañeda and Paula Dupraz-Dobias (Additional photos SDA-Keystone)
Graphics: Kai Reusser and Alexandra Kohler
Video: Sebastian Castañeda and Paula Dupraz-Dobias
Production: Dominique Soguel
Editor: Veronica DeVore
This story won second prize in the 2020 Fetisov Journalism Awards in the category Excellence in Environmental Journalism.
Appendix: Metalor responds
Metalor responds
Metalor responds
Fullscreen
Where do Peruvian investigations into exports by Minerales del Sur or other companies to Metalor stand right now?
To our knowledge, investigation of Minerales del Sur continues by the Peruvian authorities. However, since Metalor is not indicted in any way, we do not know further details.
Has the Peruvian public prosecutor reached out to Metalor since the seizure of 91 kilos of gold in 2018?
We have been asked to furnish information about the commercial relationship with had with Minerales del Sur and in this respect we provided all necessary documentation (agreement, invoices, proof of bank transfers, etc) in due time.
To your knowledge, was Minerales del Sur aware of the sourcing of the gold in that shipment?
The documentation associated to every shipment contained all the necessary details including the mine concession from where the material was sourced. We have no reason to believe that such information was incorrect but cannot guarantee that. The investigation will figure that out.
Is Metalor reconsidering purchases from Peru now that the government has reinforced its commitment toward formalising gold miners in Madre de Dios - which involves assuring that they comply to environmental and social standards - while clamping down on illegal miners in La Pampa?
We certainly welcome such statement but that has to be transformed into real and sustainable actions. Madre de Dios is a region from where do not take any material and we do not believe this will change, at least in the near future. However, and regarding artisanal mines, we are open to consider options but it has to be under a concerted effort by all parties involved (all governmental agencies, miners, local authorities and NGOs). So far we are not there. However, in Peru we continue to operate with industrial mines.
What is Metalor’s response to critics - including the governor of Madre de Dios - who say that the company should help miners in the formalization process and possibly support them in acquiring technology that avoids mercury pollution, rather than stopping purchases from the country?
Metalor has been very engaged in supporting the formalization process. This is the best way for the miners to get a fair price for their gold and hence improving their overall working conditions, including applying best practices that do not pollute the environment. However, Metalor cannot assume by itself this responsibility. As mentioned above, this has to be a concerted effort by all parties involved.
How much do you know about the source of gold from your direct buyers? How transparent are your sources about the origin of the gold?
See the above response about the documentation supporting every shipment.
Have you ever broken business relations with companies because they claimed to be producing more gold as mining companies than physically possible? If so, which companies?
We monitor volumes on a routine basis just to avoid situations like the one you describe. Yes, we have stopped relations due to compliance. We do not compromise values for business.
Has Metalor ever addressed concerns about the origin of gold, and perhaps lax legislation of the gold buying business, with Peruvian authorities?
Yes, at the time of engaging into the formalization process and on a regular basis since then. All responses we got over time from the different authorities in Peru (Minister of Mines, Activos Mineros, Formalization Office, Sunat), were very reassuring. However, we are disappointed because it turned out that the regulatory and enforcement framework is not robust enough.
Are you aware of any complicity amongst the major gold buyers in Madre de Dios, and whether they may trade/combine purchases amongst each other?
No. Metalor does not take any material from that region.
To our knowledge, investigation of Minerales del Sur continues by the Peruvian authorities. However, since Metalor is not indicted in any way, we do not know further details.
Has the Peruvian public prosecutor reached out to Metalor since the seizure of 91 kilos of gold in 2018?
We have been asked to furnish information about the commercial relationship with had with Minerales del Sur and in this respect we provided all necessary documentation (agreement, invoices, proof of bank transfers, etc) in due time.
To your knowledge, was Minerales del Sur aware of the sourcing of the gold in that shipment?
The documentation associated to every shipment contained all the necessary details including the mine concession from where the material was sourced. We have no reason to believe that such information was incorrect but cannot guarantee that. The investigation will figure that out.
Is Metalor reconsidering purchases from Peru now that the government has reinforced its commitment toward formalising gold miners in Madre de Dios - which involves assuring that they comply to environmental and social standards - while clamping down on illegal miners in La Pampa?
We certainly welcome such statement but that has to be transformed into real and sustainable actions. Madre de Dios is a region from where do not take any material and we do not believe this will change, at least in the near future. However, and regarding artisanal mines, we are open to consider options but it has to be under a concerted effort by all parties involved (all governmental agencies, miners, local authorities and NGOs). So far we are not there. However, in Peru we continue to operate with industrial mines.
What is Metalor’s response to critics - including the governor of Madre de Dios - who say that the company should help miners in the formalization process and possibly support them in acquiring technology that avoids mercury pollution, rather than stopping purchases from the country?
Metalor has been very engaged in supporting the formalization process. This is the best way for the miners to get a fair price for their gold and hence improving their overall working conditions, including applying best practices that do not pollute the environment. However, Metalor cannot assume by itself this responsibility. As mentioned above, this has to be a concerted effort by all parties involved.
How much do you know about the source of gold from your direct buyers? How transparent are your sources about the origin of the gold?
See the above response about the documentation supporting every shipment.
Have you ever broken business relations with companies because they claimed to be producing more gold as mining companies than physically possible? If so, which companies?
We monitor volumes on a routine basis just to avoid situations like the one you describe. Yes, we have stopped relations due to compliance. We do not compromise values for business.
Has Metalor ever addressed concerns about the origin of gold, and perhaps lax legislation of the gold buying business, with Peruvian authorities?
Yes, at the time of engaging into the formalization process and on a regular basis since then. All responses we got over time from the different authorities in Peru (Minister of Mines, Activos Mineros, Formalization Office, Sunat), were very reassuring. However, we are disappointed because it turned out that the regulatory and enforcement framework is not robust enough.
Are you aware of any complicity amongst the major gold buyers in Madre de Dios, and whether they may trade/combine purchases amongst each other?
No. Metalor does not take any material from that region.
Related podcast episode
Related podcast episode
In this episode of The Swiss Connection podcast, reporter Paula Dupraz-Dobias shares some behind-the-scenes details of working on this story.
Intro
Miner 1
Miner 3
Scroll down to continue
Swipe to continue
Swipe to continue
Why Switzerland Struggles with Dirty Gold
Illegal vs. Legal Mining
"Only a few of us can work here legally.More common is illegality."
Operation Mercury
Miner Juan Ttamiña
Certification Requirements
“They treat us like illegals, but the government knows who is and who isn’t."
The Black Market
Evading the Law
Former
‘People work on the run’
"We are after those businesses who purchase the gold and give it the appearance of legality."
Lies, cover-ups and pollution
Air contamination by mercury
Bound for Switzerland
