Dominic Raab: From Illicit Gold to China's Choke Hold, Our Supply Chains Are Broken

Key Concepts

Artisanal and Small-Scale Gold Mining (ASGM): A significant sector accounting for 20% of global gold supply, often exploited by criminal networks.
Silence is Golden Report: An influential report by Dominic Raab and the World Gold Council highlighting the illicit gold trade's role in funding conflict and terrorism.
Coalition for Action on ASGM: An initiative involving the UN, OECD, World Bank, and World Gold Council to integrate efforts in law enforcement, development, and environmental protection related to ASGM.
Central Bank Purchasing Schemes: Initiatives where central banks buy gold directly from artisanal miners, aiming to provide legitimate miners with viable supply chains.
London Principles: World Gold Council principles guiding responsible central bank purchasing schemes for artisanal gold.
Local Processing Plants: Facilities established to process ASGM gold closer to the miners, improving their access to markets and reducing reliance on distant refiners.
G7 and G20 Summits: Key international forums where discussions on ASGM and strategic minerals are being pushed to gain political momentum for reforms.
Value Addition, Beneficiation, Price Stability: Topics increasingly discussed at G20 summits, potentially overshadowing security crackdowns on illicit flows.
Orolegal Plus Program (Brazil): A successful program formalizing artisanal miners, reducing mercury use, and integrating them into formal supply chains.
Traceability Technology (GPS): Tools used to track gold, though challenging once melted and across borders.
Formalization: The process of bringing ASGM into legal and regulated systems.
Critical Minerals: Essential raw materials powering modern technology and defense, with significant geopolitical implications due to supply chain concentrations.
Rare Earths: A key category of critical minerals where China holds a dominant position in extraction and processing.
Onshoring and Friend-shoring: Strategies to build domestic or allied supply chains for critical minerals.
Hub and Spoke Model: A strategy combining onshoring where feasible with "friend-shoring" with trusted partners for essential supply chains.
Public-Private Partnerships: Collaborations between governments and private entities to finance and develop critical mineral projects.
Patient Capital: Long-term investment required for mining projects, often needing government support to overcome market volatility and competition.
Permitting Reform: Streamlining the process for approving mining projects to accelerate development.
Bespoke Market: A concept for creating specialized trading arrangements among trusted partners for critical minerals.
Commodity Compact/Western OPEC: The idea of allied nations stabilizing critical mineral prices among themselves to counter dominant market players.
OEMs (Original Equipment Manufacturers): Industrial players who are increasingly being urged to support ESG-grade critical minerals.

Summary

The Geopolitical Weaponization of Critical Minerals and the Illicit Gold Trade

The current market volatility is exacerbated by Beijing's strategic control over critical minerals, leading to threats of 100% tariffs from the US, though these are deemed "not sustainable." This situation signals a potential new global conflict over essential raw materials. Dominic Raab, former UK Deputy Prime Minister and Foreign Secretary, and a co-author of the "Silence is Golden" report, discusses the ongoing efforts to address the illicit gold trade and the broader challenges of securing critical mineral supply chains.

Progress and Challenges in Addressing Artisanal and Small-Scale Gold Mining (ASGM)

A year after the "Silence is Golden" report, Raab notes that the "silence has been broken," but tackling the issue is a long-term "marathon, not a sprint." Significant progress includes the launch of the Coalition for Action on ASGM, integrating efforts from the UN, OECD, World Bank, and World Gold Council to align law enforcement, development, and environmental initiatives.

Key developments on the ground include:

Central Bank Purchasing Schemes: Initiatives in Latin America (Colombia, Ecuador), Mongolia, and the Philippines are linking central bank gold purchases with artisanal miners. These schemes aim to provide legitimate ASGM miners with safe and viable supply chains, operating in accordance with the London Principles.
Local Processing Plants: The establishment of local processing facilities, such as the Dina calls Inca 1 plant in Peru and similar schemes in Tanzania, allows artisanal miners to process their gold closer to home, improving their market access.

Raab emphasizes the need to distinguish between responsible artisanal miners and criminal actors, avoiding a blanket condemnation. The goal is to get ASGM issues onto the agenda of G7 and G20 summits to provide political impetus for reforms.

The Role of G7 and G20 in Addressing ASGM and Strategic Minerals

While the G20 agenda is shifting towards "value addition, beneficiation, and price stability," Raab advocates for these discussions to be integrated with security crackdowns on illicit flows. He highlights Brazil's leadership in formalizing ASGM through programs like Orolegal Plus, which has brought 120,000 artisanal miners into formal supply chains and reduced mercury use by 40%.

Raab believes that Brazil's success, including its use of GPS traceability technology, can be replicated in other regions like Africa and Southeast Asia, though it may require more capacity building. He remains "stubbornly optimistic" about the potential for progress with the right political will and international integration.

Formalization of the ASGM Sector: Scalability and Challenges

The vision of global ASGM formalization is seen as achievable, requiring both legislative frameworks and practical implementation on the ground. The challenge lies in supporting artisanal miners who may lack basic documentation. Local processing plants, coupled with reasonable pricing and links to central bank purchasing schemes, can provide a "positive lifeline."

Countries like Colombia, Ecuador, the Philippines, and Mongolia are identified as early signatories to the London Principles, demonstrating potential leadership. However, challenges like corruption, drug trafficking cartels diversifying into mining, and security issues (e.g., the Wagner Group's involvement in the Central African Republic) persist. Raab stresses that progress will be incremental, with each reform representing a step forward against illicit actors.

The Global Scramble for Critical Minerals: China's Dominance and Western Response

The West has been "asleep at the wheel" regarding critical minerals, allowing China to control 60-70% of the rare earth market and over 90% of refining and processing for minerals like graphite. This concentration, built over 20 years through a concerted command economy plan, creates a significant supply chain chokehold.

The exponential demand for critical minerals, driven by data centers, smartphones, EVs, and defense, necessitates building alternative supply chains. Key strategies include:

Public-Private Partnerships: Governments providing financial support and facilitating permitting to unlock private investment.
Hub and Spoke Model: Combining onshoring with "friend-shoring" with high-trust partners. Examples include Brazil and Vietnam for rare earths, and Appian Capital's Gibsland Critical Minerals and Virginia Atlantic Strategic Minerals for graphite.

Raab argues that Western countries' short-term thinking has contributed to this dependency. He points to the US Department of Defense's investment in MP Materials, a rare earth project, as an example of government intervention to secure supply, though the sustainability of such high floor prices across the board is debated.

Building Alternative Supply Chains: Friend-shoring and Public-Private Partnerships

The West needs to play to its strengths and adopt longer-term planning. Government seed capital is crucial for mining projects, which require "patient capital." The US Export-Import Bank's inclination to finance projects with domestic supply chain security is a positive development.

The concept of friend-shoring is vital, with countries like Brazil, Vietnam, the Philippines, Chile, Argentina, and Saudi Arabia emerging as potential partners. For uranium, Canada, Australia, and Namibia are key allies. The formula involves integrating government support with private sector investment, with companies like Appian Capital playing a role in project delivery.

The involvement of OEMs is also critical, as a significant portion would pay a premium for ESG-grade critical minerals. Failure to secure these supply chains could lead to increased costs for industrial players.

The Balance Between Government Support and Private Capital

While Raab is a proponent of free markets, he acknowledges that the current critical mineral market is "broken" due to China's dominance. The right balance between government support and private equity is essential. Appian Capital's rigorous project assessment highlights the need for government support to de-risk projects and make them commercially viable.

The US, EU, Australia, and Canada need to collaborate with "non-aligned countries" and demonstrate greater agility. The Mineral Security Partnership under the Biden administration is seen as well-intentioned but broad, while the current administration's "transactionalism" is leading to specific deals.

The Role of Price Floors and Bespoke Markets

The US Department of Defense's price floor guarantee for MP Materials, while bold, is unlikely to be scalable across all critical minerals due to cost. Raab suggests exploring bespoke markets among high-trust partners and the possibility of tripartite concepts for critical mineral funds.

Permitting reform is also a critical element, as the US and Canada have slow mine permitting rates. Streamlining this process, without compromising ESG standards, is essential.

Towards a New Commodity Compact for Critical Minerals

The idea of a "western OPEC" for minerals, where allied nations stabilize prices among themselves, is being explored. While distinct from price fixing, these collaborations aim to incentivize investments that wouldn't otherwise occur. The US, Australia, EU, and Japan are already engaging in such pacts, with minimum volume clauses and guaranteed pricing.

This collaboration aims to avoid the volatility and price manipulation seen in open markets, lock in OEMs, and cater to a wider range of countries' needs with flexibility.

The New Model: Public-Private Partnerships and De-risking Investment

The new model involves public-private partnerships where governments take on geopolitical risk through equity, loans, and price guarantees, enabling private capital to invest. This approach aims to remove short-term risk and encourage patient capital, essential given the exponential demand for critical minerals.

Government support can also extend to diplomatic assurances, infrastructure development, and security guarantees in less stable jurisdictions, thereby unlocking projects that private investors might otherwise avoid.

Action Plan for G7 Leaders and Mining CEOs

Dominic Raab's top three action points for G7 leaders and mining CEOs to build secure Western supply chains for strategic metals are:

Seed Capital: Government-provided seed capital to unlock private sector investment.
Permitting Reform: Streamlining the mine permitting process.
Hub and Spoke Model: Onshoring where possible and friend-shoring with trusted partners where necessary.