* Congo's informal mines plagued by armed presence
* Industrial mines see illegal diggers among greatest
* Informal mining supports up to 10 million Congolese
By Aaron Ross
MONGBWALU, Democratic Republic of Congo, Dec 16 (Reuters) -
W hen Guy Robert Lukama looked out at thousands of illegal gold
diggers hacking away at the verdant hills in remote northeastern
Congo, he glimpsed opportunity where previous owners saw only an
Lukama's former employer, South Africa's AngloGold Ashanti
, had for years sought to develop the 3,260 square
kilometre Mongbwalu concession but pulled out partly due to
concern over the sprawling blue-tented camps full of miners.
When he led a buyout of AngloGold's 86 percent stake in the
Mongbwalu Gold Mine (MGM) last year, Lukama knew he couldn't
chase them away if he was to succeed in mining any of the 2.5
million ounces of gold estimated to lie trapped in the earth.
Instead, he decided to put them on the payroll.
"We cannot avoid the fact that...we (have) to manage the
presence of (the diggers)," Lukama told Reuters.
It is an innovative attempt to address one of the knottiest
problems facing industrial miners around the world and the first
initiative of its kind in Congo, where up to 2 million people
mine with rudimentary tools, most illegally and in dangerous
While some mines in South America and elsewhere in Africa
have experimented with similar concepts, MGM's could be the most
ambitious, particularly in light of concerns over so-called
Congolese "conflict minerals".
Armed groups have long dominated small mines in eastern
Congo, a legacy of nearly two decades of war and unrest.
A study by the Antwerp-based International Peace Information
Service found that 64 percent of gold miners in Congo work under
the influence of armed actors, most commonly government
Once the scene of militia violence, Mongbwalu is peaceful
these days but the police and army continue to levy illegal
taxes on artisanal miners.
"It's a very fundamental problem," said Valery Mukasa, chief
of staff to Congo's mines minister. "We don't need armed men
where there is mining."
The 2010 U.S. Dodd-Frank financial reform law requires firms
sourcing gold and the "3Ts" - tin, tungsten and tantalum - from
Congo or neighbouring countries to conduct supply chain due
Traceability schemes, such as "bag and tag", which labels
minerals by point of origin, have helped reduce armed influence
over 3T extraction but have proved unworkable for gold, which is
much more lucrative.
In his shop in downtown Mongbwalu, one middleman boasted
that he once smuggled abroad 850 kg of gold - worth almost $34
million at current prices - bought from local diggers.
"You put the gold in the suitcase and you drive into
Uganda," he laughed, brandishing a 500 gram brick of solid gold
in one hand, a Ugandan driver's license in the other.
A panel of U.N. experts estimated in 2013 that 98 percent of
Congo's artisanal gold production was illegally smuggled out of
Lukama's solution depends on establishing partnerships with
cooperatives of about 100 diggers each who will work limited
plots that can be monitored for evidence of armed influence.
They will be given better equipment and access to areas with
high ore grades but which are not suitable for industrial
mining. Most importantly their ore will be processed more
efficiently at MGM's industrial plant, allowing the company to
pay them better than the smugglers.
MGM plans to start buying from local miners next month and
pour its first gold in the first quarter of next year.
"If MGM helps us with small things ... people are going to
accept it because they are looking for a livelihood and nothing
else," said digger Freddy Ngoy, 44, over the churning of pumps
draining flood water from the recent rains.
"OUTSIDE THE BOX"
Not everyone is happy with MGM's plan.
Since March, as the company has laid the groundwork for its
scheme, tens of thousands of new illegal diggers have flocked to
its concession. Lukama and local activists say they are backed
by local military and political officials.
Congo's army spokesman did not respond to requests for
comment. The director of the provincial division of mines
referred questions to the governor of Ituri province, who did
not respond to requests for comment.
Even if the initiative succeeds in Mongbwalu, there's no
guarantee other companies will be willing to replicate it, said
Gregory Mthembu-Salter, a former member of the U.N. panel of
experts specialising in mining supply chains.
"The precedent is a difficult one for industrial miners to
swallow because they like to deny the presence of artisanal
miners on their concessions," he said.
MGM estimates around 25,000 diggers mine its concession
illegally. Others put the figure as high as 100,000. At most the
new scheme will employ around 1,500 informal miners.
Though MGM's initiative also aims to promote agricultural
jobs and develop infrastructure that should boost the local
economy, Lukama fully recognises its limitations.
But with up to 10 million people, or around one in seven
Congolese, economically dependent upon the informal mining
sector, Lukama said it's imperative that companies play a role
in improving those livelihoods.
"We are not there to fix all the problems ... In a
post-conflict area, you should from day one keep in mind how to
make it beneficial for most of the stakeholders," he said. "We
have decided to think outside the box."
(Editing by Joe Bavier and Susan Thomas)