Congo’s Illegal Gold Trade Seen Benefiting Foreign Companies

(Bloomberg) -- Foreign companies and armed groups are profiting from an illegal trade in gold in eastern Democratic Republic of Congo despite international regulations intended to clean up the sector, Global Witness said.

One Chinese company that operates gold-dredging boats in the region smuggled as much as $17 million worth of the metal out of the country during a 12-month period between 2014 and 2015, the London-based advocacy group said in a report published Tuesday. Armed groups made as much as $25,000 a month in illegal taxes extorted from artisanal diggers and received at least two assault rifles and $4,000 from the company over a two-year period, it said.

Since 2010, international regulations including Organisation for Economic Cooperation and Development guidelines on responsible mineral-supply chains and the U.S. Dodd-Frank Act have sought to curb the trade in so-called conflict minerals. Due diligence and traceability programs have reduced opportunities for armed groups, of which at least 60 continue to operate in eastern Congo, to profit from trade in tin, tantalum and tungsten. No comparable program has been introduced for gold, which is more transportable and more valuable, leading to an increase in illegal gold mining.

Requirements ‘Ignored'

Last month, the United Nations said that Congolese exporters were ignoring due-diligence requirements to source gold from validated, conflict-free mining sites and described the lack of a functioning traceability system for gold as a “particular area of concern.”

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, but Congo's Chamber of Mines in February said that as much as 400 kilograms of illegal gold leave the South Kivu province alone every month.

Much of the smuggled gold is sold to buying houses in Dubai, Global Witness said. In other cases, provincial authorities in South Kivu falsified documents to obscure the link between gold and non-validated mining sites, it said.

“States have a responsibility to ensure that companies do no harm, including checking supply chains for links to conflict and human rights abuses -- Congo and the United Arab Emirates have dramatically failed in this respect,” Sophia Pickles, senior campaigner at Global Witness, said in an e-mailed statement.

Congo is also Africa's top producer of copper and the world's largest source of cobalt, which is used to make rechargeable batteries.

To contact the reporter on this story: Tom Wilson in Kinshasa at twilson128@bloomberg.net. To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Karl Maier