FAIRALLOY – Transforming the Gold Industry: Ethical Sourcing and Empowering Jewelers Globally

May 29, 2024

Q&A with Andres Castellanos of FAIRALLOY

Andres Castellanos Over 20 Years of Expertise in Fairmined-Certified Gold Products for Jewelers and Electroplating Companies

Passionate about Ethical Gold Sourcing and Empowering Jewelers and gold platers Worldwide

With more than 20 years immersed in the gold industry, my expertise lies in facilitating the procurement of Fairmined-certified gold products for electroplating companies, jewelry manufacturers, and independent jewelers.

I’m dedicated to securing fair conditions for miners while providing top-tier products to valued clients worldwide. Our satisfied clientele spans across the UK, USA, Canada, Europe, Hong Kong, Singapore, and South Africa.

Being directly involved in manufacturing, I find immense satisfaction in driving positive transformations within both the Colombian and international gold markets. Through close collaboration with governmental entities in Colombia over the past four administrations, I’ve been actively engaged in implementing strategies to formalize and legitimize the gold trade, while also addressing regulatory barriers that impact the Colombian jewelry sector.

My knowledge transcends manufacturing, encompassing a profound comprehension of leading due diligence standards within the gold sector. I’m driven by a passion for debunking the facades surrounding traceability in the gold supply chain and shedding light on its complete absence

About FAIRALLOY

In the realm of transparency and technology, Fairalloy company stands as a pioneer in the gold sector. Specifically, Fairalloy takes pride in being the forefront entity when it comes to these two crucial elements. Our distinction lies in having developed the world’s first and only traceable Gold Potassium Cyanide (GPC). This chemical compound holds significant importance in the gold plating industry, particularly in the realms of jewelry, numismatics, and electronics.

The gold utilized in the production of this chemical compound is Farimined certified, sourced from the Iquira and Chede Mines. Fairalloy adhere strictly to the Fairmined standard, subjecting our entire supply chain— including the mine, refiners, plater, jewelry, numismatic, and technology companies to periodic third-party audits. The emphasis on transparency is paramount, and the Fairmined standard plays a pivotal role in ensuring accountability.

Andres Castellanos Fairalloy Q&A

1. Why do you think the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas has failed to address the issues in the recycled gold supply chain?

First of all, consider its name this guidance was initially designed for minerals. On page 12, it clearly states that recycled gold is omitted from this guidance. Multiple experts from the mining industry and their supply chains contributed to forming these guidelines, which were intended specifically for minerals.

There were no representatives from pawn shops or cash-for-gold associations, as the initial scope never included recycled gold.

2. Why do we often hear that the main gold refineries in Europe adhere strictly to the OECD Due Diligence Guidance? Is this adherence not sufficient?

OECD guidelines are just that—guidelines. Created over a decade ago, they marked a significant step forward in due diligence for a sector previously lacking any form of control.

These guidelines are fairly robust for due diligence within the scope of mined material, providing a solid framework for identifying risks throughout the mined gold supply chain. However, the problem arises when they attempt to adapt a standard initially tailored for a primary product, like mined gold, to a secondary product, like used jewelry.

It’s like trying to fit a square peg into a round hole—it just doesn’t fit. The supply chains and participants for these items are so different that it’s impossible to adequately adapt the existing guidelines. New guidelines need to be created from scratch for recycled gold, with active participation from the relevant stakeholders, such as pawn shops and cash for gold representatives.

3. So, are there no effective due diligence guidelines for recycled gold?

No, the existing guidelines, such as those from the LBMA, RMI, and RJC, all originate from the OECD guidelines, which, as I explained earlier, are not well-suited for recycled gold.

4. Where can we find reliable data on the gold market?

The LBMA publishes its Responsible Sourcing Report annually (2023 report) to enhance transparency. Although there is a two-year delay in disclosure, the report provides comprehensive information about the country of origin and the type of gold processed by their refineries, whether it is mined or recycled.

According to my observations, LBMA refineries process about 57% recycled gold, and in Switzerland, this figure is almost in the high 60s.

5. Do the Responsible mineral initiative (RMI) or Responsible jewelry council (RJC)also report this data?

It’s surprising that these institutions lack information about the quantity and sources of gold their members utilize, whether mined or recycled. Despite this, they continue to develop frameworks for responsible sourcing without actionable data.

6. What types of gold do members of the Responsible mineral initiative (RMI) or the Responsible jewelry council (RJC) typically source?

Given the absence of this crucial data within these institutions, relying on the assertions of their members, it’s noteworthy that a significant portion confidently assert 100% recycled gold in their supply chains.

Companies like Pandora, Prada, Apple, Dell, and many others fall within this category. If I were to estimate, I would speculate that the adoption of recycled gold within the RMI and RJC is nearing 90%.

7. Could the claims of using 100% recycled gold by companies like Pandora, Prada, Apple, and Dell be considered greenwashing?

In my view, they might unknowingly engage in greenwashing, perhaps misled by gold refineries. I doubt any of these companies would willingly disclose the pawn shops where their recycled gold originates.

One of the major misconceptions perpetuated by recycled gold refineries is that they are the primary source, implying they buy gold directly from scrap collectors—a euphemism for pawn shops or cash-for-gold schemes.

Yet, none of the major recycled gold refineries openly acknowledge this reliance on pawn shops and cash for gold schemes.

8. What factors contribute to the intense debate surrounding the label ‘recycled gold?

In the gold sector, there’s a pervasive narrative that frequently employs and exploits the term “recycled.” This term carries a forgiving connotation, seemingly absolving any concerns about gold origin.

However, the logic is straightforward: recycled gold cannot be traced back to the mine, and it’s incredibly challenging to trace it back to the individual seller who pawned or sold their used jewelry to a pawn shop or cash-for-gold scheme. If traceability is lacking, all claims associated with the product are inherently false, plain and simple.

9. Do you anticipate any changes to this definition in the future?

There are currently three key forums where technical discussions are underway: ISO, RJC, and LBMA. Interestingly, RJC and LBMA tend to align with decisions made within ISO. What’s notable is that many of the same participants who initially shaped the narrative around recycled gold are now advocating for similar agendas across these three platforms.

While there was once a genuine intent for leadership and change within RJC, it appears to have been stifled by new leadership. Essentially, these three forums serve as the primary arenas for technical discourse.

However, I’m skeptical about the potential for significant change to emerge from these institutions. They seem to simultaneously act as both judges and victims, possessing the authority to establish standards and definitions. Nonetheless, history has shown that deceiving the public rarely ends well.

10. Could the ISO be expected to adopt a framework that could inadvertently legitimize practices such as greenwashing and gold laundering?

Another important point to consider is that the ISO primarily acts as a platform for industry players to develop their own standards. If gold refineries wish to establish a standard, they have the freedom to do so within the ISO framework.

However, there’s a misconception that ISO technical committees are formed by independent and impartial participants; this is often not the case. In some countries, the process of creating a technical group can be costly, with fees reaching up to $10,000 per year, thereby excluding many small or medium-sized participants from the discussions.

The gold refining industry operates essentially as an oligopoly, characterized by high volumes and razor-thin profit margins of around 1%. Given their financial resources, major players can easily establish technical groups in various regions and actively participate in these “technical” discussions.

Furthermore, since final decisions are based on the votes of participating countries, those with a significant presence in the industry wield substantial influence and often dominate the outcome.

11. What are the reasons behind the controversies surrounding the labeling of gold as waste?

It’s surreal to find myself, as an adult, immersed in technical debates arguing against the classification of gold as waste. From a logical standpoint, the laws of the EU, UK, USA, and China have clearly outlined what constitutes waste: objects that have reached the end of their life cycle, discarded, and commonly found in landfills.

However, the challenge with gold lies in the fact that nobody throws their gold jewelry in the trash or discovers used jewelry in a landfill.

There’s a significant economic and marketing advantage to labeling gold as waste. By doing so, a company can instantly wipe out the entire carbon footprint associated with gold production.

Moreover, they can tout their gold products as carbon-neutral and eco-friendly, boasting impressive environmental credentials, all achieved simply by leveraging technical definitions.

12. How do you think the gold market will evolve in the future?

It’s challenging to foresee, but one thing is clear: we’re amidst a period of significant change, witnessing the breakdown of old narratives. With the free flow of information, we now have access to vast amounts of data, allowing us to form our own conclusions.

The once secretive and opaque gold industry is becoming more transparent, addressing previously avoided topics. Any pushback against transparency will face fierce opposition, and false narratives will eventually unravel—people have little tolerance for deceit.