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INDIA INTERNATIONAL GOLD CONVENTION - 2017 Challenges faced while importing Dore (from ASM sector) INDIA INTERNATIONAL GOLD CONVENTION - 2017 Challenges faced while importing Dore (from ASM sector) from Ghana (in special focus) as well as other Gold producing countries across world. Anil C. Kansara – Director GGC GUJRAT GOLD CENTRE PTY LTD. , INDIA. 12 th August, 2017 11 - 13 August 2017, Grand Hyatt, Goa 1

PRESENTATION OUTLINE Ø INTRODUCTION Ø THE CHALLENGES Indian Custom Laws Other Challenges Dilemma of PRESENTATION OUTLINE Ø INTRODUCTION Ø THE CHALLENGES Indian Custom Laws Other Challenges Dilemma of Licensed Aggregators Ø SOLUTIONS TO THE PREVAILING CHALLENGES Ø CONCLUSION 11 - 13 August 2017, Grand Hyatt, Goa 2

INTRODUCTION It is a well-known fact that a healthy percentage (> 30%) of all INTRODUCTION It is a well-known fact that a healthy percentage (> 30%) of all world gold output of Gold Dore is produced by Artisanal Small Scale Miners or mining companies managed by a cluster or community known as “Association of Small Scale Mines (ASSM)” within countries such as Ghana, Burkina Faso, Mali, Ivory Coast or Cote d’ Ivoire, Sierra Leon, Guinea Bissau, Democratic Republic of Congo, Sudan, Tanzania, Cameroon, etc. 11 - 13 August 2017, Grand Hyatt, Goa 3

Continued ………. . It is equally true in many more countries such as Brazil, Continued ………. . It is equally true in many more countries such as Brazil, Peru, Argentina, Canada as well as Australia where many small and medium scale mining companies operate either individually or as cluster managed by a group providing the miners resources such as equipment, technology and working capital finance in lieu of Gold produced to recover the cost of finance. The challenges for importing Gold Dore produced by ASM, by Indian Refineries from such countries, are almost similar in nature. 11 - 13 August 2017, Grand Hyatt, Goa 4

THE CHALLENGES The difficulties are partly a creation of Indian Custom laws which require THE CHALLENGES The difficulties are partly a creation of Indian Custom laws which require following: 1. The Gold Dore must be shipped from the country in which it has been produced. 2. The Dore must be of minimum 5 Kg by mass. 3. The Assayed content on Gold should not exceed 95% 4. Each Dore must be accompanied by the packing list from the mining company in which it has been produced. 5. Each Dore must be accompanied by an assay certificate either from the mining company or from the assay laboratory attached to it. 11 - 13 August 2017, Grand Hyatt, Goa 5

Continued ………. Though the conditions at 1 & 3 are practically achievable, the rest Continued ………. Though the conditions at 1 & 3 are practically achievable, the rest are more difficult; in particular, the 2 and 3 conditions – a packing list of the mining company and Gold Dore must not weigh more than 5 Kg. 11 - 13 August 2017, Grand Hyatt, Goa 6

Continued …………. . The reasons why conditions 2, 4 and 5 are more difficult Continued …………. . The reasons why conditions 2, 4 and 5 are more difficult is due to the following: 1. Licensed small-scale mining companies do not have its own export license. 2. They do not have the capacity to produce 5 Kg; sometimes in a whole week of operation. (And thus sell whatever they produce daily to a local buyer in order to sustain production). 3. Gold content, particularly in alluvia mining is many a times more than 95%; hence the need to blend with lower grade gold to bring the purity down to 95%. 11 - 13 August 2017, Grand Hyatt, Goa 7

Continued…. . 4. In adequate weighing & smelting facility at mining site to produce Continued…. . 4. In adequate weighing & smelting facility at mining site to produce a homogeneously melted 5 Kg Gold Dore bar. 5. Absolute lack of facility of Checking purity of Gold by an approved method such as Fire Assay (most of the time it is water density at the most but not available with most) 6. To provide a packing list of a Dore weighing minimum 5 Kg. 7. Agreement of NDNC compliance with aggregator makes declaration of names of mining companies difficult. 8 11 - 13 August 2017, Grand Hyatt, Goa

Continued …… The above is true not only for Ghana but in many Gold Continued …… The above is true not only for Ghana but in many Gold Dore producing countries. Nowhere, except in India, do we come across Gold Dore importation regulation such as packing list from the mining company from which the Gold Dore is sourced as a mandatory requirement and also limitation on weight of each Dore bar. 11 - 13 August 2017, Grand Hyatt, Goa 9

The other challenges faced by refiners in India in sourcing Dore are: 1. The The other challenges faced by refiners in India in sourcing Dore are: 1. The wide gap that exist in currency exchange rate such as the one published by Bank of Ghana and the one being adopted by trade while buying and selling Dore in Ghana. 2. The analysis method adopted is Water Density Measurement which assumes the only impurity in Dore as Silver; the density of Silver being artificially lowered, enhancing Gold content between 0. 19% to 0. 21%. 3. The defects or voids in the Dore are not accounted for as density is relative to water displacement by corresponding volume of Dore and not by mass of Dore. 11 - 13 August 2017, Grand Hyatt, Goa 10

Continued…… 4. Nonexistence of Fire Assay method causing assay labs/exporters reporting Gold content with Continued…… 4. Nonexistence of Fire Assay method causing assay labs/exporters reporting Gold content with an average error of plus 0. 5%. 5. Lack of insurance providers for high valued Gold Dore at an affordable rate in most of the African region. and last but not in the least, the 6. Arbitrage of duty differential enjoyed by Free Zone refiners over that of Domestic Tariff Area refiners. 11 - 13 August 2017, Grand Hyatt, Goa 11

Dilemma of Licensed Aggregators A licensed aggregator in any country is the one who Dilemma of Licensed Aggregators A licensed aggregator in any country is the one who normally procures Dore from ASM, aggregates in to a large homogeneously melted bar for convenience of ease of handling and assaying and then exports with invoicing and its own packing list on behalf of a seller. Under such situation, packing list of mining company is not possible. Due Diligence in place at licensed aggregators’ end and its declaration of Gold being legal exported to a refiner abroad, such as licensed refineries in India, why not the clause “packing list from the mining company” be changed to “packing list from an aggregator”. 11 - 13 August 2017, Grand Hyatt, Goa 12

SOLUTIONS TO THE PREVAILING CHALLENGES Inadvertently, the law makers in India have made it SOLUTIONS TO THE PREVAILING CHALLENGES Inadvertently, the law makers in India have made it difficult for genuine refineries to import its main feedstock, the Gold Dore by imposing such impracticable condition such as “packing list from mining company. Most ASM have to sell their output to aggregators to sustain production. The condition needs to be amended as requested above, genuine refiners will continue to struggle for raw material to survive. 11 - 13 August 2017, Grand Hyatt, Goa 13

Continued ……… The perceptions need to be changed. The misconception of the lawmakers of Continued ……… The perceptions need to be changed. The misconception of the lawmakers of round tripping of worthless Gold being exported and reimported as Dore has absolutely killed the domestic refining industry using hardly 20% of their installed capacity. Scrap being not permitted to import by refiners and domestic market mainly controlled by companies providing loan against Gold, scrap traders and unorganized refiners, there is hardly anything to talk about challenges in sourcing scrap Gold. 11 - 13 August 2017, Grand Hyatt, Goa 14

CONCLUSION Ghana has been producing and exporting gold for centuries. It is precisely because CONCLUSION Ghana has been producing and exporting gold for centuries. It is precisely because of this reason that the government of Ghana identified gold as a one of the major sources of foreign exchange earnings. Though Ghana is the second largest producer of gold in Africa, the industry faces numerous problems resulting in a sharp decrease in production. The challenges faced by countries such as Ghana are lack of compliance of regulatory framework by ASM that is aided by traders flocking around who do not respect the mining laws of the country. 11 - 13 August 2017, Grand Hyatt, Goa 15

Continued ……. . The solution partly lies with the Gold Dore importers, adhering to Continued ……. . The solution partly lies with the Gold Dore importers, adhering to ethical business practice on sustainable base. Handholding by refiners with the regulators of such Gold producing countries and ASM will help Indian refiners source Dore responsibly as well as help those Government improve productivity by an inclusive, transparent and collaborative approach. 11 - 13 August 2017, Grand Hyatt, Goa 16

Thank you! 11 - 13 August 2017, Grand Hyatt, Goa 17 Thank you! 11 - 13 August 2017, Grand Hyatt, Goa 17