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Peru says crackdown on illegally mined gold may cut exports 25 pct

Source: Reuters - Wed, 12 Feb 2014 12:27 AM
Author: Reuters
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By Mitra Taj

LIMA, Feb 11 (Reuters) - A crackdown on illegally mined gold in Peru has nearly frozen shipments from shell companies and will likely cut overall exports of the precious metal by 25 percent this year, officials said on Tuesday.

Peru is the world's sixth biggest gold exporter, producing around 140 million grams of gold last year.

About a quarter of the estimated $8 billion in gold shipped from the Andean country last year was likely exported by companies that acquire ore from illegal sources and evade taxes, said a customs official, who spoke on condition of anonymity, and Daniel Urresti, a high-ranking Peru official charged with tackling illegal mining.

They said stricter export rules, confiscations and criminal investigations would keep that amount of gold from legally leaving Peru this year.

Peru has largely failed to rein in an illegal mining boom that employs an estimated half million people and has destroyed large swaths of the Amazon rainforest, where some of the purest deposits are mined from rivers.

Officials said the new bid to target export companies and not just laborers has already shown results.

"Right now (illegal gold exports) are nearly frozen, the market is practically paralyzed," the customs agent said. "This year we should see gold exports drop 25 percent."

Gold shipments by established mining companies with known deposits are not being targeted and have continued as usual.

Urresti also said he expects gold exports to fall around 25 percent on tighter export standards this year, and said the black market price for a gram of gold had dropped to less than 70 soles (US$25) from 100 soles a few months ago.

"No one is buying illegal gold because they know they can't export it anymore," Urresti said.

The customs official said that since December, authorities have seized about a ton of gold from 19 companies suspected of asset laundering.

Most of the gold was confiscated from four companies, including C.G. Koening, a supplier of Canadian miner Dynacor , said the customs source.

Dynacor and C.G. Koening could not be reached for comment on Tuesday.

Last month Dynacor said it was holding off on buying gold ore from its suppliers because of the crackdown and said it complies with all regulations.

Two investment funds in the United States and a third based in Aruba helped finance some of the thwarted gold exports, the customs source said, declining to name the companies.

President Ollanta Humala and his environment, energy and mines and finance ministers have drafted stricter rules for gold exports that will be introduced in coming weeks, the customs source said.

Export companies will have to substantiate where they get their gold, and lab tests for purity will corroborate those claims. Businesses that buy ore from several different suppliers before processing and exporting the gold will likely come under special scrutiny, the customs source said.

Making sure that illegal gold producers do not find other ways to move the precious metal to foreign markets will not be easy, Urresti said.

The customs source said that some 300 kilos of gold that customs officials confiscated in December was recovered days later by the company after a provincial judge issued an injunction to release it and a team of lawyers and police officers picked it up.

By some accounts illegal gold mining is a bigger business than drug trafficking in Peru, which is now the world's top producer of coca and cocaine.

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