By Peter @Newton Bell, 5 December 2016

Private investment opportunity Clean Gold wants to help informal miners in Ecuador -- and accredited investors in Canada -- make more money. 

A rush of companies dedicated to ‘toll milling’ tried to bring modern gold processing equipment to small-scale miners in remote locations in 2014-2015, but they quickly found that it was difficult to convince the miners, who may not be paying taxes, to hand their ore over to strangers. It was almost as if they needed a partner with skill in the soft side of mining to manage relationships in the community. Enter: Clean Gold. 


Clean Gold is a new, private business venture that is currently raising funding to bring modern processing facilities to a small group of artisanal miners in Ecuador. This is a unique company that came out of a 2015 research project on artisanal miners in Ecuador led by SEF Canada, which is a for-profit organization dedicated to supporting community development led by Suzette McFaul, pictured above.  SEF Canada has worked with clients such as Lundin Mining, Rio Tinto, and New Gold.

After SEF Canada finished their research project in Ecuador, another group of miners asked them to take it to the next level with a full fledged business and Clean Gold was born. A group of seven artisanal mining operations have now pledged assets, such as their mining concessions, to a joint venture with Clean Gold. This is the start of a new business model that has the potential to do well by doing good.

Clean Gold faces significant risks, such as the potential for theft, keeping the group of artisanal miners together, and successfully operating the milling operation, but they seem to have the risks well in hand. They have done a great job partnering with academics, various governments, and global institutions like the World Bank to establish their reputation and validate the Clean Gold business model. They have already spent years preparing for this project in Ecuador, developing the relationships in the communities and proving that they can help miners double their recovery rates and sell their gold at spot market prices. 

What's more, Clean Gold has structured their investment to assuage the fears of investors. It looks more like a real-estate syndication structure than a typical gold mining deal. 

The investment is structured as two components: an immediate, lump-sum payment and a long-term stream of payments tied to profits. The lump-sum payment comes from a debenture, which provides investors with repayment of the entire initial investment and a one-time balloon payment of 60% of the investment. Clean Gold expects to repay the entire debenture within 18 months of closing using proceeds from operations, based on a 3 month lead time for equipment delivery and set-up, a 3 month build up to full capacity, and then 12 months operating at capacity. After that, investors will have a free ride with a preferred share, which will provide a share of net income over the life of the project. The preferred share is expected to start paying out around the 24-month mark and may provide a +15% annual return for 5 years or beyond.

If all goes well, a $25,000 investment could return $40,000 in 18 months and $4,000-$5,000 in annual cash flow for the life of the operation.

The business model is simple. Artisanal miners will continue to mine high-grade veins at surface, but then deliver the ore to a processing plant rather than process it themselves. The ore will be assayed and weighed, and the miners will be paid 20% of the estimated value of the ore. The ore is then processed and sold as doré. The company covers processing costs and then splits profits 50-50 with miners. Of the 50% that accrues to the investment company, 15% is paid to investors through the preferred share with clean gold keeping the balance for management costs and their profits.

The project has the potential to benefit all parties involved because there are a lot of opportunities for efficiency gains in the artisanal miners' operation. As Sean Janzer, Business Development Officer, said in our interview here

"At the end of the day, we have to make it more profitable for them to participate in our model. Based off the research we’ve done and what we’re hearing from the artisanal gold council, they’re looking at a 30-40% recovery rate at present. Under their current processes, they’re looking at approximately $3M to $4M revenue total. With our model, we’re providing them with $5.5M+. There’s the first win for them." 

Seven artisanal miners have already committed to the joint venture with Clean Gold. They are currently mining approximately 100 tonnes per day amongst them using rudimentary methods shown in the pictures above.  They are excited to partner with Clean Gold on this project and ready to provide ore immediately.

In the surrounding area of San Salvador, artisanal miners are mining approximately 250 tonnes per day and processing it themselves with dangerous and inefficient techniques. Clean Gold will build processing equipment for only 100 tonnes per day so that the extra amount of artisanal mining in the area provides some breathing room in case any of the seven current partners decide to stop participating in the joint venture.  

Clean Gold is a unique opportunity to capitalize on the huge efficiency gains to be made in processing gold from artisanal miners world with a structure that provides quick payback and a long tail of returns. The team has done the work to mitigate the risks around the community, government, and technical aspects of business. A lot of people want to see this business succeed. My impression from an extensive conversation with Suzette and Sean here, here, and here, is that they are dedicated, driven, and able to make it happen.