With 150 million people dependent on small-scale mining, IBM, Minespider and BanQu are trialling blockchain solutions to keep them in supply chains despite the perceived high risks. Catherine Early reports
High-profile human rights scandals in the sourcing of cobalt have sent companies that use the metal in lithium batteries scrambling for initiatives to clean up their supply chains. (See Road to the clean economy shrouded in murk)
Campaign groups and others working with artisanal miners welcome these efforts, but worry that new regulations in the EU and US, coupled with the increased pressure on companies to take more responsibility for their supply chains, could have unintended consequences.
Some 40 million people in 80 countries make a living from artisanal mining, while an estimated 150 million are indirectly dependent on it. The fear is that if companies believe it is too risky to use artisanal mining in their supply chains, they could abandon the sector altogether.
Due diligence isn’t about avoiding risk, it’s about identifying risk and addressing it, and being transparent about that
Such concerns are not unfounded. At the end of last year, mine operator Eurasian Resources Group (ERG), which extracts and processes minerals including iron ore, copper and cobalt, announced a Clean Cobalt Framework as part of a plan to increase cobalt production four-fold.
The framework contains an explicit commitment not to use cobalt from artisanal mines. ERG stated that the sector accounts for 20-25% of global cobalt production, but that it was concerned about child labour and human rights issues associated with it, and that it needed to support its customers in responsible sourcing of the metal.
Lauren Armistead, business and human rights researcher and campaigner at Amnesty International, says: “Due diligence isn’t about avoiding risk, it’s about identifying risk and addressing it, and being transparent about that. Then all the actors in a supply chain can work together on the issue.”
Nathan Williams, founder and chief executive of Minespider, a blockchain protocol for responsible mineral sourcing, agrees that artisanal mining has been made “an easy scapegoat”. “There are legitimate problems, but they are used to distract from the problems that large-scale mines have,” he says.
“If the answer that the industry comes up with is that mining should [adopt] a ‘large-scale player only’ model, then we have to ask what else can these people do, and how can they feed themselves. That’s not an easy answer,” Williams says.
However, he adds that in order to de-stigmatise artisanal mining, the sector needs to be formalised, and that means a company buying downstream needs to be able to verify that a mineral came from artisanal mining, and knows the conditions under which it was produced.
You can’t just send blockchain into rural Africa and expect artisanal miners to use it, there needs to be some kind of onboarding
One possible solution is blockchain, which can provide an immutable record of information, such as what mine the mineral came from, whether it has a licence from the government, the quantity of the mineral sold, and at what price.
Initiatives so far have tended to focus on large-scale industrial mining, but some companies are now beginning to explore how to use the technology with artisanal miners. This is more challenging due to lack of access to technology and incentives for people to use it, but proponents admit that although difficult, it is not impossible.
Germany-based Minespider has open-source, public blockchain technology that is being piloted in Peru and Europe, so far just with large-scale mining companies. But it has always intended to expand use to the artisanal mining sector, Williams says. The technology is ready; it just needs agreement from government bodies, businesses and development agencies, and the company is working on this, he says.
In a whitepaper explaining how blockchain could be used to make mineral sourcing more responsible, Minespider suggests ways that the artisanal sector could be involved. These include developing an easier to use version of its specialised online application, and working with its partners to establish a comprehensive programme of training, microfinance and savings, as well as health and education services to incentivise people to participate in a traceability programme.
“You can’t just send blockchain into rural Africa and expect artisanal miners to use it, there needs to be some kind of onboarding,” Williams says.
IBM is also considering how to use its blockchain technology in the artisanal mining sector. In January this year, it established a consortium called the Responsible Sourcing Blockchain Network (RSBN), which includes automotive manufacturers Ford, Volvo and Volkswagen Group.
This has been successfully piloted on a cobalt supply chain from the Democratic Republic of the Congo via China and South Korea to the US, and is ready to be rolled out, according to Sai Yadati, who leads IBM’s blockchain work with industrial sectors.
The question is ‘can you give the miner the ability to prove their existence in the supply chain?’ That’s the biggest missing link
“Now that we know it works, we are looking into expanding the technology to the artisanal mining community,” he says. Responsible sourcing technology specialist RCS Global Group is also involved with the project. The company already has a strong focus on the artisanal sector through its data-driven mine-site monitoring tools, Better Sourcing and Better Mining.
Nicholas Garrett, the company’s chief executive, says that it is straightforward technology-wise to link the blockchain to its existing tools. Yadati agrees, and says the harder part will be incentivising miners to use the technology, and making it easy for them to do so.
Yadati is vague about the solution to this, but says all partners in the consortium are working on it, and Félix Tshisekedi, president of the Democratic Republic of the Congo (DRC), has said he supports the idea.
One company that claims to have a solution for using blockchain with artisanal mining communities is BanQu, which has been operating a blockchain platform based on SMS technology in the agricultural sector for three or four years. Its founder and chief executive Ashish Gadnis says the technology has to be kept simple as many people in developing countries do not have smartphones.
“A lot of the large global brands in the tech sector will try to make it complex, that you can’t just bring blockchain to artisanal miners. But the blockchain part is irrelevant: the question is ‘can you give the miner the ability to prove their existence in the supply chain?’ That’s the biggest missing link in mining and farming,” he says.
Information is added to the blockchain by the buyer, while the miner will receive a SMS message through the BanQu system confirming data such as the quantity sold and the price. This SMS is also stored on the blockchain, so it would be obvious to the end-user of the mineral if the buyer had not paid the correct amount to the miner as the data would not match, Gadnis explains. The miner then has a record of the fact that he is part of a legitimate global supply chain, which is very valuable in a sector with a lot of migration, he says.
Despite the progress made by companies, challenges remain in bringing blockchain to the artisanal mining sector
BanQu is focussing on major telecommunications companies, battery and smart phone manufacturers, and jewellery. It is hoping to announce the first roll out of the technology in two or more of these sectors by the end of the year, sourcing from a handful of cobalt mines in the DRC, Zambia or Madagascar, and precious metal or gemstone mines in Botswana, Peru or Colombia, Gadnis says.
Despite the progress made by these companies, challenges remain in bringing blockchain to the artisanal mining sector. The Responsible Business Alliance is trying to address these through its Responsible Minerals Initiative, and published guidelines specifically on blockchain in December last year.
The guidelines promote the adoption of a common set of definitions and concepts in the application of blockchain solutions in mineral supply chains, and consensus on what data should be included at each stage of the blockchain, so that systems are consistent and comparable.
BanQu's blockchain platform is focussed on telecommunications and phone producers. (Credit: ImYanis/Shutterstock)
They state that the blockchain should be designed so that small-scale operators have the necessary technical skills, are able to upload data with low or no internet connection, can access devices that support the app, can afford any fees, and have power to charge devices.
Michèle Brülhart, director of innovations at the RBA, says: “This is a standardised approach, but it’s a way of incentivising some of the programmes to consider the more challenging questions around how this technology is applied, so that good models emerge.”
Brülhart believes that the greatest potential for blockchain in artisanal mining comes from how it is integrated with other technologies, such as mobile money, which enables miners to easily and securely access the funds from the sale of the material they have mined.
Blockchain can highlight where there are ESG issues. But it’s not a silver bullet in countries where there is weak governance and a large unregulated sector
The guidelines are currently being revised to include lessons learned so far, she says, adding: “This is a very dynamic field: a year ago we didn’t have the same level of understanding of some of the issues and challenges that we do now as many projects are still in the early stages.”
But Armistead says that blockchain will only really work for artisanal mining in regions where it is regulated, where there are cooperatives through which technical training can be provided. For example, in the DRC many cobalt miners are forced to work in unregulated areas, as there are not sufficient regulated sites compared with the number of people trying to make a living in this way.
“Blockchain can highlight where there are environmental, social and governance issues so that companies can come up with ways of addressing them,” she says. “But it’s not a silver bullet in countries where there is weak governance, institutions and a large unregulated sector.”
Catherine Early is a freelance journalist specialising in the environment and sustainability. She writes for Business Green, China Dialogue and the ENDS Report among others. She was a finalist in the Guardian’s International Development Journalism competition.
This article is part of the in-depth Responsible Mining briefing. See also:
Road to the clean economy shrouded in murk
Communities fail to buy into Portugal’s lithium dreams