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Understanding the ASM-LSM relationship: risk perspectives

Understanding the ASM-LSM relationship: risk perspectives

February 17, 2020, by Angela Jorns and Estelle Levin-Nally


In Part 1 of our "Understanding the ASM-LSM relationship" Series, we look into the different risk perspectives of LSM and ASM. In upcoming posts, we will look at how to deal with issues of illegality and criminality, discuss common misconceptions of ASM by LSM, and outline what industry standards say about best practices in engaging ASM.

Artisanal and small-scale mining (ASM) and large-scale mining (LSM) cover a sliding scale of different types of mining operations. This spectrum ranges from simple methods of extraction, aggregation and processing to methods using enhanced technology; from high labour intensity to an increased reliance on machinery; and from low capital needs to higher investment. In many countries, this range of scale is also reflected in the legal framework, where different permit regimes exist for artisanal, small-scale and industrial mining. Why, then, is ASM often seen as operating in competition or in confrontation with LSM, rather than as one amongst many forms of mining, and as an integral part of the mining industry?

A clash of perspectives

The relationship between LSM and ASM is often perceived as one of competition over the same land and resources. LSM may be faced with ASM operating in the same location, and vice versa. This is not only due to the geological endowment, but may also be for historical reasons. In some situations, ASM will already be present and exploiting the minerals before LSM companies obtain their permit. ASM miners have been called ‘barefoot prospectors’ and are often the first to discover deposits in remote, inaccessible locations. Indeed, some juniors highlight the presence of ASM in investor prospectuses as additional evidence to the market that a deposit merits investment for scientific prospection. Conversely, ASM miners (and their financiers) commonly move into an area in pursuit of opportunity following the presence and drilling activities of a junior or LSM company.

This then often leads to perceived or actual competition over mineral resources, not least due to a clash of different perspectives. The LSM company will see itself as the legal user of the land and owner of the mineral rights, having obtained permits from the authorities and adhered to the legal requirements. At the same time, ASM actors may also see themselves as the legitimate -if not formal or legal - users of the land and mineral. This can be due to their long history in the area and embedded role in the livelihoods of local communities. Or it may be connected to political power struggles, and a perception by ASM actors that LSM only benefits ‘wealthy foreigners’, government actors, and local elites. Lastly, the perceived legitimacy by ASM may also be derived from an overlap of the legal and the customary systems: ASM may have the implicit or explicit agreement of local landowners or customary authorities, sometimes even local state authorities, even though they might not have been able or willing to obtain a legal permit.

A short-sighted handling of risks

These different perspectives can lead to a conflictual relationship between LSM and ASM. LSM companies may face incursions and trespassing by ASM onto their concession, theft of minerals and other assets, damage to their infrastructure and equipment, and in the worst case also threats to the health, safety and security of employees and contractors. In such situations, LSM companies frequently choose to take a ‘hands off approach’, deciding not to engage with ASM and seeing this as the exclusive responsibility of the authorities. But this can later result in situations where LSM is forced to respond once the damage is done – with limited options except reactive firefighting, heavy handed crackdowns, and damage control. In this scenario, relationships commonly further deteriorate and tensions or the risk of violence increase. This can result in production losses with financial implications for the LSM company, lower investment ratings, or may in the worst case expose the company to allegations of human rights abuses, expensive law suits, cause reputational damage, or result in the loss of the social licence to operate.

From risks to opportunities

The different perspectives of LSM and ASM do not inevitably need to result in conflictual relationships. Proactive engagement and positive management of the relationship is possible. This can not only help mitigate the above-mentioned risks, but may in some cases turn them into opportunities, enabling multiple scales of mining to co-exist in an area. Various models of ASM engagement exist and have been trialled by LSM companies. Moving away from passive, reactive measures towards a more proactive approach, companies have come to recognise ASM actors as one of their stakeholders and to take steps to constructively engage with them. Often, this is done in collaboration with the government or civil society and other initiatives – particularly where elements of informality or illegality need to be addressed.

Beyond this, the models that try to address not only the risk perspective of LSM, but also take into account the risk perspective of the ASM miners, buyers, and financiers, may turn out to be those with the greatest long-term benefits for both sides. For ASM, the opportunities of collaborating with LSM and the authorities can be significant. They may get support in the formalisation process and in obtaining their legal paperwork, they may receive technical support and assistance to professionalise and increase the safety of their operations and, through that, they may get access to responsible buyers and markets that have previously shied away from sourcing from ASM. For LSM, the risk of direct or violent competition over mineral resources may be reduced over the long term. And for Governments, the different scales of mining foreseen in their legal framework may complement each other in transforming mineral wealth into benefits for local communities and the country as a whole.

A long way to go

Despite these opportunities, there is still a long way to go, and the majority of LSM-ASM relationships are still marked by competition and confrontation. More openness to testing out co-existence and collaborative approaches is needed. In our LSM-ASM blog series, we will explore these opportunities in further detail. In the upcoming posts we will look at good practices and standards for LSM’s engagement with ASM, delve into the issue of ‘illegality’ and criminality and what it means for engagement, and discuss the most common misconceptions held by LSM about ASM. Stay tuned!

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