What if we just left gold in the ground?

Nova Scotia is experiencing a fourth gold rush, this one far more disruptive and destructive than the underground gold mining of centuries past.

While the ore is no longer processed using mercury, and arsenic-laden tailings are no longer simply dumped into streams and the landscape as they were from historic mines in the province, the rich underground veins are now mostly mined out, and today’s gold mining involves giant open pits to get at miniscule amounts of gold in vast amounts of rock. Open pit gold mines produce staggering amounts of waste rock and tailings that will need to be monitored in perpetuity.

The non-profit organization Earthworks describes gold mining as “one of the most destructive industries on earth.”

Atlantic Mining NS, a subsidiary of Australia’s St Barbara Ltd that operates in Nova Scotia as Atlantic Gold, has been producing gold at one large open pit gold mine in Moose River in the Halifax Regional Municipality since 2017, and has plans to open another three along the Eastern Shore. Several other mining and exploration companies, including Anaconda Mining, Aurelius Minerals, Meguma Gold, and Northern Shield Resources, are also either proposing new gold mines or exploring for gold deposits that they could eventually mine (or sell to bigger companies that will), and promoting their gold properties to the world at the annual Prospectors and Developers Association of Canada (PDAC) conference.

Gold exploration and mining companies — and their supporters in the Mining Association of Nova Scotia (MANS), and also in the Nova Scotia Department of Natural Resources and Renewables (DNRR) that finances gold exploration and development in the province — would have the public believe that modern mining is sophisticated, well regulated, and environmentally responsible.

However, just last week, St Barbara’s subsidiary Atlantic Mining NS, which owns the Moose River mine and operates in Nova Scotia as Atlantic Gold, pled guilty to federal and provincial environmental charges.

Reporting on the case for the Halifax Examiner, Jennifer Henderson wrote that Federal Crown prosecutor Marian Fortune-Stone recounted at least seven incidents between September 2018 and April 2020 where Atlantic Mining NS failed to to comply with federal Metal and Diamond Mining Effluent regulations, and:

“There was certainly reckless disregard for the federal regulations,” noted Fortune-Stone. She said the company knew the rules, had regular contact with an Environment Canada officer, and knew by June 2019 it was being investigated for failing to sample effluent from the runoff. Still, nearly a year later, on April 27 and 28, 2020, the company once again failed to notify the feds.

For many, this raises a lot of questions about whether Nova Scotia — indeed Canada, or any other jurisdiction — should even be permitting new gold mines in a time of climate crisis and the unprecedented decline of nature, with alarming rates of biodiversity loss and species extinctions. Gold is not on the Canadian government’s list of critical minerals for a low-carbon economy.

In February 2021, the global commodities media organization Kitco reported that Warren Buffett, one of the world’s wealthiest and most influential investors, was exiting gold entirely. Drawing on a speech Buffett made at Harvard University in 1998, Kitco reporter Anna Golubova quotes him as saying that gold:

… gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

This quote got Dirk Baur thinking about alternatives to gold mining. Baur is a professor of finance at the University of Western Australia in Perth, Australia, who last year together with co-authors Allan Trench and Sam Ulrich, published a paper called “Green Gold” that looked at a whole new approach to gold, and gold investing.

The Examiner spoke with Baur by phone. The interview has been edited for length and clarity.

Halifax Examiner (HE): Like many places around the world, Nova Scotia is also experiencing a  gold rush, the fourth in the province. There is already one open pit gold mine owned by Australia’s St Barbara, which has three more such gold mines proposed for the province’s Eastern Shore. And there are other companies lining up as well. Much of the province is under exploration for gold. Do these modern open pit mines with low gold concentrations make sense in your view, economically and ecologically?

Dirk Baur (DB) There are alternatives to this. Many, many years ago, there was no alternative, but today, with sophisticated financial markets and even crypto currencies, we can tokenize or securitize what is in the ground and sell that to investors. And because of that, there’s less need to actually mine the gold. The mining really only makes sense for people who like to look at gold, and jewelry and stuff. But a lot of the gold that is mined ultimately ends up in vaults underground often. So it’s a little bit perverse to dig it out and then you put it right back into the ground, which is something that Warren Buffett said many years ago. If you leave it in the ground, then the externalities — the bad things that are associated with it for the environment — can be mitigated, reduced, eliminated. And that’s something that I think makes sense to consider.

HE: Is it because we are in a climate crisis and facing ecosystem collapse and biodiversity loss around the world that you’re looking at this new approach to gold as an investment?

DB: It’s because I did a lot of research on gold, and came across the Warren Buffett quote, and also the idea that if you dig gold out of the earth and then put it back underground, it doesn’t make too much sense. And there’s this added thing that people claim they care more about the environment today than they did in the past, and that they care about climate change and about ESG, these environmental, social and governance ingredients. I’m sometimes skeptical. There are a lot of people that claim that they care about this, but sometimes it’s not so clear how much they really care about it.

HE: Can you tell me what you proposed in your paper last year, “Green gold”?

DB: I proposed that investors can invest in exploration companies, in publicly listed companies that just explore and check how much gold is in a certain location, but do not mine it. The idea was that investors invest in these companies, but under the assumption that this will never be mined. What happens often is that exploration companies look for gold, and once they’ve found it, they’re bought up by gold-mining producers, and miners then actually mine the gold.

So our idea was that investors just focus on these exploration companies and do not invest in the miners, so that they just explore for gold, which has a small impact compared to the actual mining.

The underlying idea is that in a better world, we would securitize or tokenize the gold in the ground and then sell that to investors, similar to an exchange credit fund where companies hold gold and then sell shares of the gold that they hold in vaults to investors … And so there is a big benefit to the environment if all investors did that. It’s not so clear what would happen to the gold price, but it’s clear that would be good for the environment.

HE: So would it operate a little bit like carbon credits for carbon stored in forests, where you actually invest in keeping healthy forests in place?

DB: That is one analogy. But in this case, you leave the gold in the ground and don’t get a credit, but you get an implicit credit by not mining it, which would involve carbon emissions. And of course, also in most cases, [it would also reduce] waste, which is not good for the environment, plus [prevent] the disturbance of the land. So investors don’t get an explicit credit, but an implicit credit because this minimizes all the [negative] externalities that are associated with gold mining.

HE: Do we actually need to mine any more gold?

DB: Good question. So when you mine it, then there’s more gold available, and then that can help to keep the price where it is, or make sure that the price doesn’t go up a lot. If we stop mining it, and if we also didn’t do what I’m suggesting, if the demand continues to go up steadily as it did in the past, then the price of gold would go up. It’s not clear by how much, but the price wouldn’t double or triple. And so it’s unlikely that would have any adverse effects on technology companies that need a little bit of gold. So my answer would be that we actually don’t really need to mine [more gold]. I mean, we could easily survive and thrive also without the [gold] mining, at least on a global scale.

Some people would then say, “But mining creates a lot of jobs in this area. So if we stop mining, then we don’t create jobs there.” But of course, these jobs are not forever. And there are also all the externalities. The land is destroyed, and so on.

HE: What was the reaction to your paper?

DB: Perth is a mining city, so we pitched it to a couple of gold miners. Not surprisingly, they didn’t like it very much because essentially, I am telling them they should stop doing the mining or do less of it, and only explore and then sell what is in the ground. So they didn’t like it.

I also talked to organizations that represent gold miners, and they also said that we didn’t really fully explore the benefits of mining, the creation of jobs and in some countries, the miners build schools. And then there are taxes, or through the royalties the government gets money and they can build infrastructure.

But it’s not true [what they say]; we do acknowledge that. We would just say that it’s not clear that these benefits are bigger than and outweigh the negative effects of gold mining.

HE: Did you get any positive reaction to your paper?

DB: There was a lot of interest from journalists, and also people in the crypto space that think of tokenizing in-ground gold and then selling it. There is a company in the U.S. that’s planning to do that. And of course, everyone who’s working on green finance or climate change, they like it and that’s not surprising.

I didn’t really get a big response yet from Indigenous Australian people, but I was hoping for it because I think there’s a big benefit to them as well. There are big miners that destroy important cultural places with their mines. And clearly, our proposal would stop that and also give them [Indigenous Australian people] a very positive role, not just a role to block mining, but they could say, “You give us compensation and you can then sell [the investment in the in-ground gold]. We will be the custodians of the land and of the ‘vault,’ essentially. And you don’t have to destroy our land and our cultural heritage.”

HE: I have heard gold mining described as a basically an industry that produces massive amounts of waste, which has a valuable byproduct. What are your thoughts on that?

DB: That’s an extreme way to put it, but it’s clear that they [gold mines] produce a lot of waste. I’m not sure what I would call gold a “by-product,” but gold mines do produce tonnes of rock waste and then in terms of weight, they only get a very small amount of gold. So I would I would agree with that.

The problem is that it’s also different in different countries. For example, what I heard from Papua New Guinea where it rains a lot, when they mine for gold, they cannot store the waste, or these tailings, safely above ground. So the alternative is that they dump it in the ocean, deep, deep down. But it’s still the ocean where they dump the waste … Of course, this is not allowed here in Australia, and I guess it wouldn’t be allowed in the U.S. or in Canada. But you can do this in certain countries. And that’s also a concern I have. If you think globally, who would want to have toxic stuff dumped into the ocean?

HE: St Barbara Ltd that’s mining here in Nova Scotia also has a mine in Simberi, Papua New Guinea, and that’s what they do. They have a deep sea tailings pipeline, which failed last year. They’ve repaired it so they can start dumping tailings back into the deep sea.

DB: It’s amazing that this this can happen today. It’s not so clear that investors have really addressed the issue with gold miners. If there was pressure from all investors, then I’m sure St Barbara would stop it immediately. Investors have a lot of power, and financial markets can be very powerful. If there was a consensus that certain things shouldn’t be allowed and certain companies shouldn’t do something, and all investors start to sell the shares, companies would change immediately.

The positive thing is that there is real potential for things to change really quickly if investors and big institutional investors, such as BlackRock, really do what they what they claim they do. [Often] they just say, “It’s important to acknowledge these things, that climate change is an investment risk, blah blah blah.” And they say, “No, we don’t want to sell the stock, we want to talk. We think that it’s much better to talk to the management, and convince them that they shouldn’t do this and ask them to please stop.” But if they would really act by selling, that would really change something. They [the gold mining companies] would probably stop doing these things immediately if BlackRock said, “We’ll sell all the shares within a month.”

HE: Governments, and often the gold mining proponents here and across Canada and even around the world, are touting all mining is important for the green transition, and they lump gold in with that. But, in Canada, the federal government has come up with a list of critical minerals for the transition to a green economy, and gold is not on that list. So is gold one form of mining that could actually be stopped?

DB: Yes, I think so. I guess it’s that clear. I’m not a politician. I mean, if we could, I think we should stop mining coal today or as soon as possible, and the same with oil and gas. A lot of countries really need these, so we cannot do this immediately … But gold? That’s different.

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