Tarnished gold: Illegal Amazon gold seeps into supply chain

São Paulo – These medals are being called the most sustainable medals ever made.

But a full AP review of public records found that the São Paulo-based company processed gold for a middleman accused by Brazilian prosecutors of buying gold illegally mined in indigenous lands and other areas deep in the Amazon, and linked it with the The middleman shares the ownership link. rainforest.

The Associated Press has previously reported in this series that gold exploration on indigenous lands has exploded in recent years, including opening illegal landing strips in forests for unauthorized planes to deliver heavy equipment, fuel and countermeasures. Shovel excavator to tear the earth. Find precious metals. President Jair Bolsonaro is the son of a prospector and weak government oversight has only exacerbated the problem of illegal gold mining in protected areas. Critics also accuse manufacturers of using an international certification scheme that shows they are not using minerals from conflict zones, calling it a “greenwash”.

“As long as the industry relies on self-regulation, there is no real traceability,” said Mark Pieth, a professor of criminal law at the University of Basel in Switzerland and author of a 2018 book called “Gold Laundering.” “People know where the gold comes from, but they don’t bother going back very far into the supply chain because they know they’ll be exposed to all kinds of criminal activity.”


Like the brown and black tributaries that feed the Amazon, gold illegally mined in the rainforest is mixed into the supply chain and merged with clean gold, almost indistinguishable.

The nuggets are flown out of the jungle in the dusty pockets of prospectors, transported to the nearest city, and sold to financial brokers. All it takes to turn raw ore into a tradable asset regulated by a central bank is a handwritten document certifying a specific location in the rainforest where gold was extracted. The fewer questions you ask, the better.

In many of these brokers’ Amazon outposts — the front doors of the financial system — gold became the property of Dirceu Frederico Sobrinho.

For four decades, Dirceu has embodied the Brazilian garimpeiro or prospector’s myth of self-reliance. The son of a greengrocer sells his produce near a notorious open-pit mine crowded with prospectors – including Bolsonaro’s father – who look like swarms of ants, which he discovered in the 1980s The mid-s caught the gold bug.

Today, from a high-rise building on Sao Paulo’s busiest avenue, he is a major player in Brazil’s gold rush, with 173 exploration areas registered in his name or pending applications, according to registrations with Brazil’s mining regulator. In the same building is the headquarters of Arnoro, the national gold association he leads. Dirceu – as he is known – was a partner at Marsam until last year.

But even with gold jewelry hanging from his fingers and wrists, Dirceu still proudly brags about his common man garimpeiro roots.

“If they don’t chase their dreams, you don’t inspire them to go into the forest,” he said in a rare interview in his corner office, which is studded with a giant jade sculpture. “People who trade in gold have this condition: they dream, they believe, they love it.”

At the heart of the Dirceu empire is F.D’Gold, Brazil’s largest buyer of gold from exploration sites, with purchases totaling more than 2 billion reais ($361 million) from 252 wildcat sites last year, according to the mining regulator. ). Only two international companies operating industrial-scale gold mines have paid more in royalties in 2021, a sign that artisanal exploration was once big business in Brazil — at least for some.

In August, federal prosecutors filed a civil lawsuit against F.D’Gold and two other brokers seeking an immediate cessation of all activities and 10 billion reais ($1.8 billion) in social and environmental damages.

The companies failed to act to prevent the illegal extraction of a total of 4.3 metric tonnes of resources from protected areas and indigenous territories where mining was not permitted, the complaint said. Dirceu said his company complied with all laws and implemented additional controls, but acknowledged that it was “impossible” to determine the exact origin of the gold it obtained.

The ongoing lawsuit is the result of a study published last July by the Federal University of Minas Gerais, which found that as much as 28 percent of the gold produced in Brazil in 2019 and 2020 may have been mined illegally. To reach this conclusion, the researchers combed through 17,400 transactions registered with the government by F.D’Gold and other buyers to determine where the gold was allegedly mined. In many cases, a given location was not an authorized location, or when cross-checked with satellite imagery, did not show any hallmark signs of mining activity – deforestation, stagnant waste pools – meaning the gold came from other sources place.


Regardless of its origin, all raw ore purchased by F.D’Gold ends up in Marsam.

According to André Nunes, an outside adviser to Marsam, F.D’Gold accounts for more than a third of the Gold Marsam process.

After nearly two years as a partner at the São Paulo-based refinery, Dirceu stepped down last year and his daughter Sarah Almeida Westphal took over management responsibilities. Nunes, who previously worked at F.D’Gold, said it was part of an effort to put different family members in charge of their own businesses, which operate as separate legal entities.

“Despite being the same family, it is important that each monkey has its own branch,” he said.

But on the day the AP interviewed Dirceu, Westphal could be seen working on a computer in F.D’Gold’s office.

More than 300 publicly traded companies list Marsam as a Refiner for Responsible Mining Disclosures, which they must file with the SEC. The refinery has been nearly the sole supplier to Brazil’s mint for the past decade, according to data provided to The Associated Press via a Freedom of Information request.

Achieving such strong sales globally is a seal of approval from the Responsible Minerals Initiative (RMI).

The certification program, run by the Virginia-based Manufacturers Alliance, came a decade ago when the U.S. passed legislation requiring companies to disclose their use of conflict minerals to fuel the civil war in the Democratic Republic of Congo.Later, its standards were supplemented by stricter guidelines set by the Paris-based Organisation for Economic Co-operation and Development, or the OECD.

Marsam is one of only two refineries in Brazil certified to meet RMI’s Responsible Gold Sourcing Standard and has successfully completed two independent audits. The last time was in 2018 by UL Responsible Sourcing, an Illinois-based consulting firm.

Marsam has not been charged with any wrongdoing by prosecutors and insists it only refines gold, not sells it, on behalf of third-party exporters and domestic suppliers.

The company introduced a supply chain policy in 2016, which it has been updating over the years, requiring it to seek information from suppliers when they publicly relate to illegal activities. They should also analyze the mandatory declaration of origin forms submitted by each customer. No such risks were identified in the most recent RMI report, and Marsam was moved to a lower risk category requiring audits every three years.

One problem, critics say, is the OECD’s RMI guidelines, which prohibit companies from paying little attention to environmental crime or the rights of indigenous communities. Instead, they target the risks posed by civil wars and criminal networks. In Latin America, only Mexico, Colombia and Venezuela, where drug cartels or guerrilla insurgents are active, are classified as conflict-affected and high-risk areas that require greater scrutiny of procurement practices.

“Certification implies a level of certainty that is not possible in the gold industry, especially in Brazil,” said David Soud, an analyst at IR Consilium, which recently prepared for the OECD. A report on illegal gold flows from neighboring Venezuela. “The result is a lot of blind spots that are easily exploited by bad actors.”


Goodman reported from Miami. Follow Biller and Goodman on Twitter, @DLBiller and @APjoshgoodman


Contact the Associated Press’ global investigative team at Investigative@ap.org or https://www.ap.org/tips/