John Reade:
Welcome to Unearthed, the World Gold Council podcast, where we dig into the people, places, and ideas shaping the gold market. I'm John Reade, senior market strategist for Europe and Asia at the World Gold Council.
Joe Cavatoni:
And I'm Joe Cavatoni, senior market strategist from the Americas. And we're back for part two with Argor-Heraeus here in Mendrisio, Switzerland. And we're here to talk about how this leading refiner is playing a key part of the gold industry.
John Reade:
And to do that, we're joined again by Dr. Robin Kolvenbach, CEO of Argor-Heraeus, to explore what responsible sourcing, traceability, sustainability mean in practice for the modern gold supply chain.
Joe Cavatoni:
Robin, thanks for joining us again.
Dr. Robin Kolvenbach:
Thank you very much.
John Reade:
We're going to talk, as we said, about responsible sourcing, we're going to be talking about ESG. Responsible sourcing has become one of the major issues for a precious metals refinery. Can you explain to the audience how Argor-Heraeus approaches this topic?
Dr. Robin Kolvenbach:
Yes, absolutely. So first of all, I would say I wouldn't necessarily see it as an issue, but I would rather see it as an opportunity. Because I think for a refinery like us, it can be both an issue and also an opportunity from the point of view of a strategic direction, and from also a positioning in the market. And overall, I think the overall gold market has the need to improve on responsible sourcing overall. I think there has been good steps since the introduction of the Responsible Gold Guidance, but overall, we have to do even more. It's a continuous improvement process, and we need to work on it. And for Argor specifically, I think our strategic or our vision is that we want to become the most responsible gold refinery and producer in the world. And why do we say become? Because we feel there's never an end to that.
John Reade:
You mentioned the Responsible Gold Guidance. Obviously, that's one of the things that's produced by the LBMA. I think they're on edition nine or 10 now. So I think that tells us in a way how far we've come in this process over the last 10 or 15 years.
Joe Cavatoni:
I think they're issuing the 10th guidance paper on RGGs now.
Dr. Robin Kolvenbach:
It's in the works exactly right now.
Joe Cavatoni:
And actually Robin, so this is something that actually, like you've said, it's been there for quite some time. I think it might have had different labels or different ways of talking about it previously. How have you shifted your staff, how have you shifted your resources to actually better address this? Because even though it has been there for quite some time, decades really, it seems like it's definitely much more pronounced. And how do you balance your resources to handle the growing expectation of being more public about it, being more aggressive about it, and actually weaving it into your business?
Dr. Robin Kolvenbach:
Yeah, that's a good question. So first of all, I think we designed our business model in a way that we can valorize on responsible sourcing. So if you look at gold refineries in general, there are some that rather earn upstream, and some that rather earn on downstream products. So our business model is clearly designed to earn on the downstream business and not on the upstream side, because if you want to earn money on the upstream side, you need to naturally compromise on your responsible sourcing and compliance standards.
John Reade:
Can we just unpack that a bit? So when you're talking about upstream, is that when you are doing the basic refining, taking in gold away from mines and maybe scrap, and then the downstream business is the more value-added products?
Dr. Robin Kolvenbach:
Exactly. That's how it is for us. So value-added products for us means investment products for private investors, ETFs, central banks and so forth, and specifically also, semifinished and finished goods for the luxury industry. So this market segment actually want to make sure that their reputational risks are managed properly. And hence, gold refineries are typically seen as the, let's say, watch dogs in the overall value chain. And hence, it's our job to make sure that we fulfill, on the one hand side, the Responsible Gold Guidance, and other guidances like the RJCC or PCOC guidances and whatever is out there. But those are probably the three most important guidances we work on. But on top, I think what Argor-Heraeus does is we go beyond that and actually also try to drive the industry beyond that. And for staffing, that means of course we have a full staffed sustainability team and a full staffed compliance team with I think approximately 10 members at the moment on the compliance side globally and four on the sustainability side. And it's really, I would say, part of our identity to be the responsibility leader.
Joe Cavatoni:
When we talk about this topic, do you spend time speaking with your competitors? And how do you balance out this competitive advantage versus compliance and regulatory adherence to these standards?
Dr. Robin Kolvenbach:
Yeah. I would say when I talk to my competitors, I see two groups, one that see it rather as a burden and stick to the minimal requirements that are laid out in the responsible guidance, and others feel, like us, the responsibility to actually move the needle and basically be even stronger or more strict than what the requirements are.
John Reade:
And is that typically, I would imagine the Swiss refiners would see the going beyond the minimum standards as something that they prefer to do, is that fair to say?
Dr. Robin Kolvenbach:
It's interesting because also in the Swiss environment, I think you see some heterogeneity. You see some that are more at the forefront and you are seeing some that are not that much at the forefront in this environment. But everyone that is part of the Swiss association where we launched a transparency platform recently is of course more on the forefront than not.
John Reade:
One of the things I'm interested in is obviously we speak a lot about sourcing material from mining companies. There is the recycling element as well of gold. Do you get much of your feedstock coming through from recycled material?
Dr. Robin Kolvenbach:
I mean, we have quite some recycled material in the factory, but the majority is loop material that we get back from our luxury customers. Because if you think about production of, let's say a watch case, 90% of the gold that you put in ends up in scraps and need to be refined. That's the majority of intake. Open loop scraps is rather small part of our-
John Reade:
So if I were to sell my partner's jewelry at one of these cash for gold places, it's probably not going to come back to your refinery.
Dr. Robin Kolvenbach:
It depends. We have very strict compliance requirements for those kind of dealers and we get some of those materials because also our customers want to have post-consumer scraps. So we need it as a feedstock, but probably there is other refineries that have more of that.
John Reade:
Right. I would imagine the compliance burden on trying to assure the supply from secondary material when you're going open loop becomes a lot more difficult.
Dr. Robin Kolvenbach:
That's absolutely right. I mean, it's interesting because the general public always believe that due diligence and compliance measures on mines is difficult. To be honest, it's the opposite. Mines is very simple. You have a very defined place where it's coming from, you can trace where it's coming from, and typically professional mining companies are anyway certified by three, four standards. With scraps, typically there is at maximum an ISO standard and then the sources they use is not one source, like one orebody, but it's whatever, 2,000 sources or 3,000 sources they have inflows. So from a due diligence perspective, scraps are much more complicated than mining material.
Joe Cavatoni:
You referred to the mining practices of being a very well-defined site location, well controlled, et cetera. Now you're referring mainly to the large scale mining that takes place. And then there's also artisanal and small scale gold mining that takes place. So talk to me a little bit about the large scale where you know where the site's coming from, how you track and trace from there, and how this builds into your ESG framework.
Dr. Robin Kolvenbach:
Yes. So we have a full, let's say traceability package developed over the last 20, 25 years. And the heart of it is an XRF analysis that we improved recently with aXedras. I mean, we're doing this analysis since long time, but now basically with the help of aXedras, we put quite some algorithms on top. And what happens is whenever there's a bar coming in, we drill it, we take an XRF analysis, and we analyze the site elements that are characteristic for the orebody where it comes from. And hence we can pinpoint exactly from which mine the material that we have comes.
John Reade:
And just for clarity, XRF is X-ray fluorescence.
Dr. Robin Kolvenbach:
Yes, exactly.
John Reade:
So you're basically shining X-rays at the gold. What reflects back you can then analyze to say not only what the gold is obviously, but everything else, those side elements.
Dr. Robin Kolvenbach:
Exactly, exactly. Because the nature basically has any... I mean the composition is 50 different side elements and this remains also after the treatment of the material at mines in there and it's characteristic for the orebody. And this make it very simple. And this is the difference also to scrap by the way, because scrap by definition went through a refining process and refining process has the aim to remove all of that. So there is no trace, no chemical trace anymore in it, which makes it basically impossible to trace it based on chemical features. But you are back to, let's say paper trail due diligence and tracing and that makes it much more complicated.
John Reade:
Interesting. So looking ahead, what sort of ESG challenges do you think will be the biggest for the refining industry going forward? I mean, we've got everything from carbon reduction, biodiversity, human rights, circularity. What do you think will have the greatest influence on the gold industry over the next decade or two?
Dr. Robin Kolvenbach:
That's an interesting question. I think if I look at the themes you talked about, I believe biodiversity combined with the ASM challenge is the biggest one because I feel carbon is well-defined, how to tackle it. The majority of mining companies where the majority of carbon footprint sits have programs and pathways what to do. Refiners also, at least we have a pathway to get to net-zero for Scope 1 and 2 by 2030. And the important thing is you can measure it very easily. You have exactly one KPI that you need to measure. If you talk about biodiversity, it starts with the challenge of what do you actually measure? And then you have a lot of places like artisanal small scale mines, which is also very difficult to look at, which have a huge biodiversity impact by the use of mercury or other chemicals that end up in nature. And this is probably the biggest challenge.
John Reade:
Yeah. And also lots of human rights elements regarding the ASGM sector as well.
Dr. Robin Kolvenbach:
Yes.
Joe Cavatoni:
So why don't you give us a couple of examples where you have opportunity and you see ASGM as a growth area. Do you see it that way or is that the right way to think about it?
Dr. Robin Kolvenbach:
We look at it from two things. First of all, we believe it's our responsibility to be part of improving the ASGM sector because we all earn on the gold supply chain and we cannot just close the eyes and say, okay, fine, it's whatever. One fifth coming from there, but we don't care. It's not the right thing to do. That the first thing to look at it.
Joe Cavatoni:
We would share that opinion, which is this is probably one of the most vulnerable spots for the gold market, but a huge opportunity to tackle down the challenges.
Dr. Robin Kolvenbach:
Exactly. I mean, for me personally, I have to say it's one of the biggest motivators actually to do this job because you can really make a difference to the world. And what we see is there is two markets at the moment that are quite active. One is the luxury market where we see certain brands that actually position themselves actively as making a positive impact on the ASGM, and they're also logically willing to pay a premium for the material. And then we see an increasing part of the investment market, I have to say it's a small niche, but there is certain consumers that are willing to pay a bit more for responsible materials, responsible investment products, specifically also from ASGM. And that's why Argor-Heraeus launched a product called Small Craft a few months ago, there you go, of course, which contains a mixture of gold from Fairtrade, Fairmined, and Swiss Better Gold mines, certified mines. And it comes at the lowest possible cost. So what I'm a true believer is that any ESG topic needs to have business sense because if it doesn't have business sense, it remains philanthropy. And hence we need to have products and consumers that are willing to pay for it in order to make it stay. Otherwise, we will have a hyper cycle and it will end soon, I think.
John Reade:
So you talk about a premium product. What sort of premium? What are we talking about? Big percentages or is it small percentages?
Dr. Robin Kolvenbach:
No, it's less than a percent of the overall gold price that's in there.
John Reade:
Okay. So that's not unreasonable, I think, if investors actually want to support this industry.
Dr. Robin Kolvenbach:
Exactly.
Joe Cavatoni:
So I want to talk about that just for a moment, because in a perfect world, all gold would have a standard which is adhered to. Yet we're talking about a component of the gold market fetching a mild premium. Why the premium? Is it because of the scarcity? Is it because of the extra cost of manufacturing? Help us understand why the premium.
Dr. Robin Kolvenbach:
Yeah. I think there is two reasons why the premium. Number one is manufacturing costs in a refinery are slightly higher because batch sizes are smaller. I mean, artisanal small scale mines produce whatever, a kilo per month, two kilos per month. So typically batch size of a refinery like ours is 240 kilograms per batch. So the batch size reduces, costs go up. That's number one, but that's the smaller part. The bigger part is that there's a premium that we pay to those organizations to actually give technical assistance to artisanal small scale mines to specifically improve their working conditions on the one hand side and specifically also phase out mercury from their operations by different techniques like shaking tables and other things.
Joe Cavatoni:
So you're actually speaking to an audience, a consumption category that's saying, "I want something special. I want something different. I want to make a change," and you're allowing them to funnel the flows to the market so that it can actually have the impact that you want it to have.
Dr. Robin Kolvenbach:
That's exactly right. And it's also important to mention that yes, those products are a bit more expensive, as I said, whatever, a percent more, but these percent doesn't remain at the refinery. It goes straight to the artisanal mines and to the communities and to the technical assistances there in order to make the improvements on the ground. The refinery actually, for us, it's not loss making, but it's also not one of our most profitable products. It's rather a commitment to our responsibility claims.
Joe Cavatoni:
Interesting. And what markets do you think have the biggest opportunity for you short term to be the source markets for artisanal and small scale mining?
Dr. Robin Kolvenbach:
I think what we see is that most of the organizations are active in South America, so predominantly Peru, Colombia, a bit of Ecuador, because there's other countries, of course, in the world, a lot where you have artisanal and small scale mining but it's just very difficult. And one country that's interesting coming upstream now is Mongolia. So Mongolia did quite some improvements in the last years already via the central bank, and they are probably also one of the most advanced countries in Asia.
Joe Cavatoni:
Interesting. And these countries, actually, the couple that you've mentioned, many of them have government structured frameworks around recognition, behaviors that they're expecting, plus central bank involvement like you've talked to. And our work around what we're referring to as a gold processing initiative is trying to harmonize all of that with technology and actually bringing that flow of gold, the source of gold into the mainstream. So someday, hopefully, we can take that premium back and have one source of gold.
Dr. Robin Kolvenbach:
Absolutely. And I think what the World Gold Council does with the London Gold Principles is actually the next step. So you saw Fairtrade, Fairmined starting, whatever, 20 years ago or ARM in this case, then Fairtrade stepped in probably 15 years ago, then 10 years ago, a bit more than 10 years ago, Swiss Better Gold. But this was all initiatives that were not scalable because they had a one to X relationship between people on the ground to minds. Well, if you think about the World Gold Council initiative, what it means is that you go to scale because you have the central bank doing essentially the job of those organizations, which is actually also the right place where it should happen. So that's why it's so important.
John Reade:
And I think that then has the potential to unlock much bigger sources of artisanal gold. And the continent you didn't mention so far really is Africa, where there is massive increases coming through in artisanal and small scale gold mining. But at the same time, we're seeing a lot of countries trying to get better control over that. I've seen the developments taking place in Ghana and Tanzania, for example. And with luck, that'll be a source of supply for you in the future.
Dr. Robin Kolvenbach:
Absolutely. And I think what is instrumental is, and that's also what the World Gold Council is working on, is processing plants. Because if you want to face out mercury, the best option is using processing plants and then you need traceability at the processing plant to make sure that the gold that you get in is actually coming from where you think it comes from. And this combination together with a strong, let's say, governance via central banks and governments generally I think is probably the sole option that I see at the moment to really get ahold of this problem and not do patches here and there, but to really do a systemic change.
John Reade:
Yeah, I think that's right. I think the industry activities so far have been unscalable, as you've said. I think some of the things that we're working on in conjunction with other organizations have the ability to really make this a quantitative impact on artisanal and small scale gold mines.
Joe Cavatoni:
So Robin, what are the top three markets where this product sells the most?
Dr. Robin Kolvenbach:
It's interesting because the by far number one market is the US where this product sells best at the moment. And then afterwards it's Europe where it also sells, but it's probably 10 times less successful in Europe than the US, which is completely opposite to what I thought to be honest.
Joe Cavatoni:
What you might hear in the media.
Dr. Robin Kolvenbach:
Sorry?
Joe Cavatoni:
What you might hear in the media.
Dr. Robin Kolvenbach:
What you might hear in the media and what is also my stupid prerequisites, I mean my probably European arrogance that basically strikes me from time to time.
John Reade:
So look, Joe, I think that's been a fascinating conversation. Refining is such an important part of the gold supply chain, and I think we've got some really decent insights here.
Joe Cavatoni:
John, I think it's probably the one piece of this supply chain in the industry that's least understood by particularly investors and those on the consumption side. So the fact that we're able to get this great insight from Robin, see the site, hear what's going on in the market, and also get really some intimate detail around what's going on in the consumption side with artisanal and small scale gold, I think it's been awesome and fantastic.
John Reade:
Robin, thank you very much for joining us and giving us such a clear view of how responsible sourcing is evolving across the gold value chain.
Joe Cavatoni:
And to our listeners, thank you for joining us. And if you've liked this program, listening to Robin, give us this insight on refining here at Argor-Heraeus from Mendrisio, Switzerland, subscribe to Unearthed where you subscribe for all your podcasts. And we look forward to seeing you again.
Welcome to Unearthed, the World Gold Council podcast, where we dig into the people, places, and ideas shaping the gold market. I'm John Reade, senior market strategist for Europe and Asia at the World Gold Council.
Joe Cavatoni:
And I'm Joe Cavatoni, senior market strategist from the Americas. And we're back for part two with Argor-Heraeus here in Mendrisio, Switzerland. And we're here to talk about how this leading refiner is playing a key part of the gold industry.
John Reade:
And to do that, we're joined again by Dr. Robin Kolvenbach, CEO of Argor-Heraeus, to explore what responsible sourcing, traceability, sustainability mean in practice for the modern gold supply chain.
Joe Cavatoni:
Robin, thanks for joining us again.
Dr. Robin Kolvenbach:
Thank you very much.
John Reade:
We're going to talk, as we said, about responsible sourcing, we're going to be talking about ESG. Responsible sourcing has become one of the major issues for a precious metals refinery. Can you explain to the audience how Argor-Heraeus approaches this topic?
Dr. Robin Kolvenbach:
Yes, absolutely. So first of all, I would say I wouldn't necessarily see it as an issue, but I would rather see it as an opportunity. Because I think for a refinery like us, it can be both an issue and also an opportunity from the point of view of a strategic direction, and from also a positioning in the market. And overall, I think the overall gold market has the need to improve on responsible sourcing overall. I think there has been good steps since the introduction of the Responsible Gold Guidance, but overall, we have to do even more. It's a continuous improvement process, and we need to work on it. And for Argor specifically, I think our strategic or our vision is that we want to become the most responsible gold refinery and producer in the world. And why do we say become? Because we feel there's never an end to that.
John Reade:
You mentioned the Responsible Gold Guidance. Obviously, that's one of the things that's produced by the LBMA. I think they're on edition nine or 10 now. So I think that tells us in a way how far we've come in this process over the last 10 or 15 years.
Joe Cavatoni:
I think they're issuing the 10th guidance paper on RGGs now.
Dr. Robin Kolvenbach:
It's in the works exactly right now.
Joe Cavatoni:
And actually Robin, so this is something that actually, like you've said, it's been there for quite some time. I think it might have had different labels or different ways of talking about it previously. How have you shifted your staff, how have you shifted your resources to actually better address this? Because even though it has been there for quite some time, decades really, it seems like it's definitely much more pronounced. And how do you balance your resources to handle the growing expectation of being more public about it, being more aggressive about it, and actually weaving it into your business?
Dr. Robin Kolvenbach:
Yeah, that's a good question. So first of all, I think we designed our business model in a way that we can valorize on responsible sourcing. So if you look at gold refineries in general, there are some that rather earn upstream, and some that rather earn on downstream products. So our business model is clearly designed to earn on the downstream business and not on the upstream side, because if you want to earn money on the upstream side, you need to naturally compromise on your responsible sourcing and compliance standards.
John Reade:
Can we just unpack that a bit? So when you're talking about upstream, is that when you are doing the basic refining, taking in gold away from mines and maybe scrap, and then the downstream business is the more value-added products?
Dr. Robin Kolvenbach:
Exactly. That's how it is for us. So value-added products for us means investment products for private investors, ETFs, central banks and so forth, and specifically also, semifinished and finished goods for the luxury industry. So this market segment actually want to make sure that their reputational risks are managed properly. And hence, gold refineries are typically seen as the, let's say, watch dogs in the overall value chain. And hence, it's our job to make sure that we fulfill, on the one hand side, the Responsible Gold Guidance, and other guidances like the RJCC or PCOC guidances and whatever is out there. But those are probably the three most important guidances we work on. But on top, I think what Argor-Heraeus does is we go beyond that and actually also try to drive the industry beyond that. And for staffing, that means of course we have a full staffed sustainability team and a full staffed compliance team with I think approximately 10 members at the moment on the compliance side globally and four on the sustainability side. And it's really, I would say, part of our identity to be the responsibility leader.
Joe Cavatoni:
When we talk about this topic, do you spend time speaking with your competitors? And how do you balance out this competitive advantage versus compliance and regulatory adherence to these standards?
Dr. Robin Kolvenbach:
Yeah. I would say when I talk to my competitors, I see two groups, one that see it rather as a burden and stick to the minimal requirements that are laid out in the responsible guidance, and others feel, like us, the responsibility to actually move the needle and basically be even stronger or more strict than what the requirements are.
John Reade:
And is that typically, I would imagine the Swiss refiners would see the going beyond the minimum standards as something that they prefer to do, is that fair to say?
Dr. Robin Kolvenbach:
It's interesting because also in the Swiss environment, I think you see some heterogeneity. You see some that are more at the forefront and you are seeing some that are not that much at the forefront in this environment. But everyone that is part of the Swiss association where we launched a transparency platform recently is of course more on the forefront than not.
John Reade:
One of the things I'm interested in is obviously we speak a lot about sourcing material from mining companies. There is the recycling element as well of gold. Do you get much of your feedstock coming through from recycled material?
Dr. Robin Kolvenbach:
I mean, we have quite some recycled material in the factory, but the majority is loop material that we get back from our luxury customers. Because if you think about production of, let's say a watch case, 90% of the gold that you put in ends up in scraps and need to be refined. That's the majority of intake. Open loop scraps is rather small part of our-
John Reade:
So if I were to sell my partner's jewelry at one of these cash for gold places, it's probably not going to come back to your refinery.
Dr. Robin Kolvenbach:
It depends. We have very strict compliance requirements for those kind of dealers and we get some of those materials because also our customers want to have post-consumer scraps. So we need it as a feedstock, but probably there is other refineries that have more of that.
John Reade:
Right. I would imagine the compliance burden on trying to assure the supply from secondary material when you're going open loop becomes a lot more difficult.
Dr. Robin Kolvenbach:
That's absolutely right. I mean, it's interesting because the general public always believe that due diligence and compliance measures on mines is difficult. To be honest, it's the opposite. Mines is very simple. You have a very defined place where it's coming from, you can trace where it's coming from, and typically professional mining companies are anyway certified by three, four standards. With scraps, typically there is at maximum an ISO standard and then the sources they use is not one source, like one orebody, but it's whatever, 2,000 sources or 3,000 sources they have inflows. So from a due diligence perspective, scraps are much more complicated than mining material.
Joe Cavatoni:
You referred to the mining practices of being a very well-defined site location, well controlled, et cetera. Now you're referring mainly to the large scale mining that takes place. And then there's also artisanal and small scale gold mining that takes place. So talk to me a little bit about the large scale where you know where the site's coming from, how you track and trace from there, and how this builds into your ESG framework.
Dr. Robin Kolvenbach:
Yes. So we have a full, let's say traceability package developed over the last 20, 25 years. And the heart of it is an XRF analysis that we improved recently with aXedras. I mean, we're doing this analysis since long time, but now basically with the help of aXedras, we put quite some algorithms on top. And what happens is whenever there's a bar coming in, we drill it, we take an XRF analysis, and we analyze the site elements that are characteristic for the orebody where it comes from. And hence we can pinpoint exactly from which mine the material that we have comes.
John Reade:
And just for clarity, XRF is X-ray fluorescence.
Dr. Robin Kolvenbach:
Yes, exactly.
John Reade:
So you're basically shining X-rays at the gold. What reflects back you can then analyze to say not only what the gold is obviously, but everything else, those side elements.
Dr. Robin Kolvenbach:
Exactly, exactly. Because the nature basically has any... I mean the composition is 50 different side elements and this remains also after the treatment of the material at mines in there and it's characteristic for the orebody. And this make it very simple. And this is the difference also to scrap by the way, because scrap by definition went through a refining process and refining process has the aim to remove all of that. So there is no trace, no chemical trace anymore in it, which makes it basically impossible to trace it based on chemical features. But you are back to, let's say paper trail due diligence and tracing and that makes it much more complicated.
John Reade:
Interesting. So looking ahead, what sort of ESG challenges do you think will be the biggest for the refining industry going forward? I mean, we've got everything from carbon reduction, biodiversity, human rights, circularity. What do you think will have the greatest influence on the gold industry over the next decade or two?
Dr. Robin Kolvenbach:
That's an interesting question. I think if I look at the themes you talked about, I believe biodiversity combined with the ASM challenge is the biggest one because I feel carbon is well-defined, how to tackle it. The majority of mining companies where the majority of carbon footprint sits have programs and pathways what to do. Refiners also, at least we have a pathway to get to net-zero for Scope 1 and 2 by 2030. And the important thing is you can measure it very easily. You have exactly one KPI that you need to measure. If you talk about biodiversity, it starts with the challenge of what do you actually measure? And then you have a lot of places like artisanal small scale mines, which is also very difficult to look at, which have a huge biodiversity impact by the use of mercury or other chemicals that end up in nature. And this is probably the biggest challenge.
John Reade:
Yeah. And also lots of human rights elements regarding the ASGM sector as well.
Dr. Robin Kolvenbach:
Yes.
Joe Cavatoni:
So why don't you give us a couple of examples where you have opportunity and you see ASGM as a growth area. Do you see it that way or is that the right way to think about it?
Dr. Robin Kolvenbach:
We look at it from two things. First of all, we believe it's our responsibility to be part of improving the ASGM sector because we all earn on the gold supply chain and we cannot just close the eyes and say, okay, fine, it's whatever. One fifth coming from there, but we don't care. It's not the right thing to do. That the first thing to look at it.
Joe Cavatoni:
We would share that opinion, which is this is probably one of the most vulnerable spots for the gold market, but a huge opportunity to tackle down the challenges.
Dr. Robin Kolvenbach:
Exactly. I mean, for me personally, I have to say it's one of the biggest motivators actually to do this job because you can really make a difference to the world. And what we see is there is two markets at the moment that are quite active. One is the luxury market where we see certain brands that actually position themselves actively as making a positive impact on the ASGM, and they're also logically willing to pay a premium for the material. And then we see an increasing part of the investment market, I have to say it's a small niche, but there is certain consumers that are willing to pay a bit more for responsible materials, responsible investment products, specifically also from ASGM. And that's why Argor-Heraeus launched a product called Small Craft a few months ago, there you go, of course, which contains a mixture of gold from Fairtrade, Fairmined, and Swiss Better Gold mines, certified mines. And it comes at the lowest possible cost. So what I'm a true believer is that any ESG topic needs to have business sense because if it doesn't have business sense, it remains philanthropy. And hence we need to have products and consumers that are willing to pay for it in order to make it stay. Otherwise, we will have a hyper cycle and it will end soon, I think.
John Reade:
So you talk about a premium product. What sort of premium? What are we talking about? Big percentages or is it small percentages?
Dr. Robin Kolvenbach:
No, it's less than a percent of the overall gold price that's in there.
John Reade:
Okay. So that's not unreasonable, I think, if investors actually want to support this industry.
Dr. Robin Kolvenbach:
Exactly.
Joe Cavatoni:
So I want to talk about that just for a moment, because in a perfect world, all gold would have a standard which is adhered to. Yet we're talking about a component of the gold market fetching a mild premium. Why the premium? Is it because of the scarcity? Is it because of the extra cost of manufacturing? Help us understand why the premium.
Dr. Robin Kolvenbach:
Yeah. I think there is two reasons why the premium. Number one is manufacturing costs in a refinery are slightly higher because batch sizes are smaller. I mean, artisanal small scale mines produce whatever, a kilo per month, two kilos per month. So typically batch size of a refinery like ours is 240 kilograms per batch. So the batch size reduces, costs go up. That's number one, but that's the smaller part. The bigger part is that there's a premium that we pay to those organizations to actually give technical assistance to artisanal small scale mines to specifically improve their working conditions on the one hand side and specifically also phase out mercury from their operations by different techniques like shaking tables and other things.
Joe Cavatoni:
So you're actually speaking to an audience, a consumption category that's saying, "I want something special. I want something different. I want to make a change," and you're allowing them to funnel the flows to the market so that it can actually have the impact that you want it to have.
Dr. Robin Kolvenbach:
That's exactly right. And it's also important to mention that yes, those products are a bit more expensive, as I said, whatever, a percent more, but these percent doesn't remain at the refinery. It goes straight to the artisanal mines and to the communities and to the technical assistances there in order to make the improvements on the ground. The refinery actually, for us, it's not loss making, but it's also not one of our most profitable products. It's rather a commitment to our responsibility claims.
Joe Cavatoni:
Interesting. And what markets do you think have the biggest opportunity for you short term to be the source markets for artisanal and small scale mining?
Dr. Robin Kolvenbach:
I think what we see is that most of the organizations are active in South America, so predominantly Peru, Colombia, a bit of Ecuador, because there's other countries, of course, in the world, a lot where you have artisanal and small scale mining but it's just very difficult. And one country that's interesting coming upstream now is Mongolia. So Mongolia did quite some improvements in the last years already via the central bank, and they are probably also one of the most advanced countries in Asia.
Joe Cavatoni:
Interesting. And these countries, actually, the couple that you've mentioned, many of them have government structured frameworks around recognition, behaviors that they're expecting, plus central bank involvement like you've talked to. And our work around what we're referring to as a gold processing initiative is trying to harmonize all of that with technology and actually bringing that flow of gold, the source of gold into the mainstream. So someday, hopefully, we can take that premium back and have one source of gold.
Dr. Robin Kolvenbach:
Absolutely. And I think what the World Gold Council does with the London Gold Principles is actually the next step. So you saw Fairtrade, Fairmined starting, whatever, 20 years ago or ARM in this case, then Fairtrade stepped in probably 15 years ago, then 10 years ago, a bit more than 10 years ago, Swiss Better Gold. But this was all initiatives that were not scalable because they had a one to X relationship between people on the ground to minds. Well, if you think about the World Gold Council initiative, what it means is that you go to scale because you have the central bank doing essentially the job of those organizations, which is actually also the right place where it should happen. So that's why it's so important.
John Reade:
And I think that then has the potential to unlock much bigger sources of artisanal gold. And the continent you didn't mention so far really is Africa, where there is massive increases coming through in artisanal and small scale gold mining. But at the same time, we're seeing a lot of countries trying to get better control over that. I've seen the developments taking place in Ghana and Tanzania, for example. And with luck, that'll be a source of supply for you in the future.
Dr. Robin Kolvenbach:
Absolutely. And I think what is instrumental is, and that's also what the World Gold Council is working on, is processing plants. Because if you want to face out mercury, the best option is using processing plants and then you need traceability at the processing plant to make sure that the gold that you get in is actually coming from where you think it comes from. And this combination together with a strong, let's say, governance via central banks and governments generally I think is probably the sole option that I see at the moment to really get ahold of this problem and not do patches here and there, but to really do a systemic change.
John Reade:
Yeah, I think that's right. I think the industry activities so far have been unscalable, as you've said. I think some of the things that we're working on in conjunction with other organizations have the ability to really make this a quantitative impact on artisanal and small scale gold mines.
Joe Cavatoni:
So Robin, what are the top three markets where this product sells the most?
Dr. Robin Kolvenbach:
It's interesting because the by far number one market is the US where this product sells best at the moment. And then afterwards it's Europe where it also sells, but it's probably 10 times less successful in Europe than the US, which is completely opposite to what I thought to be honest.
Joe Cavatoni:
What you might hear in the media.
Dr. Robin Kolvenbach:
Sorry?
Joe Cavatoni:
What you might hear in the media.
Dr. Robin Kolvenbach:
What you might hear in the media and what is also my stupid prerequisites, I mean my probably European arrogance that basically strikes me from time to time.
John Reade:
So look, Joe, I think that's been a fascinating conversation. Refining is such an important part of the gold supply chain, and I think we've got some really decent insights here.
Joe Cavatoni:
John, I think it's probably the one piece of this supply chain in the industry that's least understood by particularly investors and those on the consumption side. So the fact that we're able to get this great insight from Robin, see the site, hear what's going on in the market, and also get really some intimate detail around what's going on in the consumption side with artisanal and small scale gold, I think it's been awesome and fantastic.
John Reade:
Robin, thank you very much for joining us and giving us such a clear view of how responsible sourcing is evolving across the gold value chain.
Joe Cavatoni:
And to our listeners, thank you for joining us. And if you've liked this program, listening to Robin, give us this insight on refining here at Argor-Heraeus from Mendrisio, Switzerland, subscribe to Unearthed where you subscribe for all your podcasts. And we look forward to seeing you again.
