CRITICAL MINERALS SUPPLY CHAIN: ROLE AND IMPACT OF ASM
CRITICAL MINERALS SUPPLY CHAIN: ROLE AND IMPACT OF ASM
PAYNE INSTITUTE COMMENTARY SERIES: COMMENTARY
It is expected that a significant increase in the supply of dozens of so-called “critical minerals” will be needed in the coming decades, for uses ranging from defense to no- and low-carbon energy. Mineral endowment and production capacity have therefore become crucial assets for developing economies. Achieving this supply growth will depend on multiple stakeholders across governments and the private sector. Yet one set of the stakeholders — artisanal and small-scale mining (collectively referred to here as ASM) — tends to be overlooked and may prove to be crucial.
ASM is most widely associated with stigma; it has generally been criticized for its environmental impact, illegal activities, and exploitative nature, including child labor and hazardous working conditions. Yet there is growing acknowledgment of the significance of ASM as both a contributor to global supply of critical minerals and as an economic growth driver in resource rich communities in developing economies.
With that said, ASMs’ contributions to and integration with economies, communities and even mining value chains all remains poorly understood. Several studies have considered the social impact and community relationships of this sector, but data on ASM’s production, workforce size, overall economic impact and the nature of its economic contribution is poor.
The Payne institute is initiating a research study to consider how ASM can be leveraged most effectively to support the complementary ambitions of growing critical minerals supply and promoting social and economic development. The research will address the role ASM-supplied minerals have in current value chains. It will also explore the value of governmental oversight/regulation for practitioners; ASM’s relationships with large-scale mining (LSM) and the community; and industry economics.
ASM INFORMATION GAPS
The challenge of determining ASM’s impact starts with defining it. Organizations including the United Nations, National Institutes of Health, UNICEF, the World Health Organization and individual countries’ mining regulators all define ASM differently, viewing it through one or some of the following lenses: production scale, title holding, sophistication/mechanization, mining philosophy and technical capacity.
Further and related, there is a paucity of (reliable) data, which suggests that the economic contributions of ASM to countries’ GDP are often underestimated. Said differently, the economic significance of ASM is often overlooked, primarily because of its informal nature and the absence of regulatory frameworks. Nevertheless, the World Bank and other institutions estimate that ASM supports the livelihoods of more than 40 million people directly and a minimum of 150 million indirectly. ASM makes significant economic contributions in many countries, as is suggested by estimates of the ASM population in many minerals-rich countries across Latin America, Africa and Asia. See Exhibit 1.
Exhibit 1: Population % dependent on ASM Activity. (Source: ASM inventory-artisanalmining.org)- The oldest data is from 1999, the newest data is from 2024. Last database update: 2025-01-30)
Several initiatives such as the global platform DELVE, developed by the World Bank and the international nonprofit PACT for human development, are trying to address the data gap by fostering collaborative efforts to collect ASM data and offer resources for enhancing mining practices. However, most of these studies tend to focus on gold mining, given ASM’s clear relevance in that metal’s global production.
Considered by mineral, the contribution of ASM to global supply can differ markedly. ASM is thought to comprise more than 20% of global cobalt production, with significant contributions from countries such as the Democratic Republic of Congo (DRC), Zambia and Indonesia. On the other hand, ASM’s contribution to copper is thought to be only 0.5% of global supply. See Exhibit 2.
Exhibit 2. Estimated share of ASM in global production of select minerals
Source: Dorner et al., 2012- POLINARES Working Paper N 19-2012
Note: These figures in the chart above exclude production from ASM miners who are “contracted by “large scale” mining or smelter consortiums”. Nickel and Copper are examples of minerals with skewed production reporting towards formal or LSM mine production due to the existence of “contract mining” with ASM and direct selling of ore to private custom smelters.
GOVERNMENT ENGAGEMENT
While ASM is, often by definition, informal, there is interaction between it and the government or other stakeholders. There are a variety of governmental programs that manage the legal rights (tenure), conduct and regulatory parameters of ASM. Separately but related, relationships between ASM and Large-Scale Mining (LSM) range from symbiotic to hostile. The linkages between these actors lead us to explore current formalization, sustainability and economic integration policies and opportunities, as well as to assess governments’ role in balancing ASM’s economic contributions with environmental protection and social welfare.
Our research will focus on the Global South, given the dependency on ASM activity and the valuable insights the “region” provides on economic resilience, policy challenges, environmental sustainability and social justice. We will focus on Chile, Zambia and Indonesia as they offer very different illustrations of government engagement and relationships in the sector and mine for some of the largest volume critical minerals (including lithium, cobalt, copper, platinum/palladium metals, and nickel).
Chile is characterized by policies and resources linked to the promotion and sustainability of ASM for more than six decades. The country’s institutional framework, represented by ENAMI, a state-owned company, has enabled the ASM sector to access technical support and advice, as well as formal, sustainable and competitive market access. This model has demonstrated efficiency and efficacy, making it a valuable reference for analysis to compare and identify gaps faced by other producer countries’ legal instruments. With that said, we intend to examine the potential for ENAMI and its model to be even more effective.
Zambia’s critical minerals policy promotes and formalizes the small-scale mining sector, particularly through initiatives to encourage local, private sector participation as well as value addition via domestic processing (which should improve artisanal miners’ access to buyers). Examples include a country-wide aero-magnetic mineral mapping project to be conducted by a private exploration company, X-Caulibar, and, in its strategy to ramp up national copper production to three million tonnes per year from the current 800,000, an expected contribution from ASM of 50,000 tonnes. However, currently there is no government direct engagement or oversight in the ASM sector other than the policy pronouncement. Noticeable ASM custom milling/smelting and trading is instead supported by private and NGO efforts — especially with respect to copper and high-grade manganese.
Indonesia has a commodity-specific policy banning export of raw nickel ore and encouraging onshore midstream and downstream beneficiation. The country has also upgraded its processing capabilities and thus can export higher-value nickel goods. Despite the government setting up policies to regulate the ASM sector, unforeseen challenges have emerged. One such challenge is lack of price support for ASM-mined ore sold to smelter operators. The government sets a floor price, but, as competition has risen to sell ore domestically — because it can no longer be exported — smelter operators have offered lower prices; compounding the challenge for ASM operators, in some cases these same smelter owners have ties to LSM nickel mines or own LSM licenses through their subsidiaries.
The Payne study is borne out of a view that ASM can be harnessed. As is suggested by the country examples above, countries’ policies for critical mineral development and export don’t just have significant bearing on their ASM sectors; they also impact ASM’s ability to contribute to country goals. Further, institutional structures supporting ASM appear to be important for ASM to operate with necessary environmental and health safeguards as well as to realize its productive and economic potential. If successful, we will offer recommendations for policy and institutions/governance that provide the “win-win” that helps the social and economic development for ASM communities and, in so doing, optimizes countries’ critical minerals development.
ABOUT THE AUTHORS
Clarkson Kamurai, Payne Institute Critical Minerals Program Manager and Research Associate
Clarkson Kamurai is a Critical Minerals Program Manager and Research Associate for the Payne Institute at the Colorado School of Mines. Clarkson is a mining engineer with over 18 years of mining engineering experience, in which he holds a Master’s degree. He has experience in precious and energy metal development and extraction. Clarkson’s experience in these areas is drawn from numerous mining operations and projects development across much of Sub-Saharan Africa and South America. He is currently enrolled in the Energy and Mineral Economics Division at the Colorado School of Mines and about to start his PhD studies related to critical minerals supply chain, an area he has a deep passion for.
Isabel Guajardo, MS, Mineral and Energy Economics, Colorado School of Mines
Isabel Guajardo is a researcher at the Payne Institute for Public Policy and an MS graduate in Mineral and Energy Economics from the Colorado School of Mines. She holds a Bachelor of Business Administration from the University of Chile and has over nine years of experience in the copper mining industry as a former senior sales operations manager in the Commercial Vice Presidency of CODELCO, Chile.
Grace Akinyi, MS Mining and Energy Economics, Colorado School of Mines
Grace Akinyi is an MSc student in Mining and Energy Economics at the Colorado School of Mines and the founder of Women in Mining Kenya. She has experience in mining, energy, and sustainability, working on innovation and development in the extractives sector.
Brad Handler, Payne Institute Program Director, Energy Finance Lab, and Researcher
Brad Handler is a researcher and heads the Payne Institute’s Energy Finance Lab. He is also the Principal and Founder of Energy Transition Research LLC. He has recently had articles published in the Financial Times, Washington Post, Nasdaq.com, Petroleum Economist, Transition Economist, WorldOil, POWER Magazine, The Conversation and The Hill. Brad is a former Wall Street Equity Research Analyst with 20 years’ experience covering the Oilfield Services & Drilling (OFS) sector at firms including Jefferies and Credit Suisse. He has an M.B.A from the Kellogg School of Management at Northwestern University and a B.A. in Economics from Johns Hopkins University.
Ian Lange, Associate Professor, Mineral & Energy Economics Program, Colorado School of Mines
Ian Lange is the Viola Vestal Coulter Chair of Mineral Economics at the Colorado School of Mines. Additionally, Ian serves as Chair of the U.S. Commodity Futures Trading Commission’s (CFTC) Role of Metals Markets in Transitional Energy Subcommittee. He is a member of the Colorado Governor’s Revenue Estimating Advisory Committee. Previously Ian has served as Senior Economist for Energy at the Council of Economic Advisors for both the Trump and Biden administrations as well as spending time at the U.S. Environmental Protection Agency and the U.S. Department of Energy.
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