Serra Pelada: What We Learned from Brazil's Historic Gold Rush
What Was Serra Pelada?
In 1979, the discovery of a 6-gram (0.21 oz) nugget of gold on the banks of the river surrounding the Serra Pelada (“Naked Mountain”) in Para, Brazil, sparked a gold rush that would result in the largest open-air mine in the world. The mine drew in tens of thousands of artisanal miners (‘garimpeiros’) to the region in search of fortune. Almost immediately the mine descended into chaos and became known for its hellish working conditions. Serra Pelada has since become a focal point of mining ethics and a baseline for responsible gold sourcing practices. At its peak, 100,000 miners attended the mine to work on their allotted cubic metres of land. The scale and conditions of Serra Pelada also caught the attention of artists, photographers, journalists and industry players. Today the Serra Pelada case continues to serve as a reminder of the importance of compliance and dedication to ethical practices within the bullion industry.
The Scale and Impact of the Gold Rush
In 1983 Serra Pelada hit its attendance peak, marking perhaps the worst year of operations with regard to safety and working conditions. The infrastructure of the mine took time to develop and even once this infrastructure had established itself, it remained makeshift with the garimpeiros weathering extremely dangerous conditions.
Partly, these dangerous working conditions were due to each miner being allotted a two metre by three metre vertical claim. They were warranted to dig only their claim, often recovering 30 to 60 kilos of soil in preparation to be carried some 400 metres up wooden and rope ladders for sifting. Beyond these horrendous working practices, the mine had developed its own internal economy. However, without true regulation, violent crime and hugely inflated prices became the norm - bottles of water were often priced at the equivalent of $11.25. These conditions prompted the need for a military takeover in the mine’s early years, but this by no means resolved the tortuous conditions.
In 1992, following a series of landslides, the overall structural safety of the mine and working practices indicated the need for the mine’s closure. Whilst some garimpeiros still remain in the outskirts of the area today, the mine was eventually flooded to prevent further gold recovery efforts. However, this came with its own issues, as the water used to flood the mine became heavily polluted with the excess mercury used during the years of unregulated mining. Even today, the environmental effects of the mercury usage can be felt, with nearby towns still having water supplies containing overwhelming amounts of mercury.
Influence on Global Gold and Precious Metals Markets
At a conservative estimate, it is believed that 42 tonnes of gold was taken from Serra Pelada however the true amount is unknown under the assumption that 90 percent of the total weight of gold was likely smuggled out of the area. Estimates of the value have ranged from 500 million dollars to 2.75 billion dollars. Ultimately, the Brazilian government bought all the recovered gold they could at 75 percent of the London Metal Exchange Price of the day.
The mining activities in Serra Pelada swiftly declined organically in the early 1990s due to the cyclical decline of the gold value, however, the artisanal mining of the garimpeiros prompted more industrial and commercial interest in the region and Brazil in its entirety. Their mining of alluvial (secondary) gold, sparked speculation of a further 100 tonnes (approximately) of primary (hard-rock) under the surface, reachable only with heavy-duty machinery. As such, larger industrial mining firms have since taken great interest in the region. Whilst this has injected economic interest into Brazil and other Amazonian countries (those with large deposits of alluvial gold) it has been met with resistance from the garimpeiros, many of whom are fearful of displacement.
More widely, the Serra Pelada case has drawn attention to industry practices, emphasising the importance of ethical sourcing. Sebastião Salgado’s series of photographs of the mine entitled ‘Gold’, acts as a sobering reminder of the consequences of unregulated practices and exposes to consumers the reality of unregulated artisanal mining. Haunting cases such as Serra Pelada prompted the implementation of the London Bullion Market Association (LBMA) Good Delivery List, a go-to list of all accredited refineries that meet the criteria of ethical sourcing and product quality.
Is Serra Pelada Relevant to the LBMA Good Delivery List?
The LBMA Good Delivery list aims to eradicate the exploitative and dangerous practices seen in Serra Pelada and other mines around the world. By detailing all the refineries that meet the “the exacting standards for trading on the global OTC market”, the list allows for refineries to be assessed on their adherence to sourcing standards, including those that focus on working conditions of the mines and their impact on the environment. The LBMA Good Delivery List also defines the purity of the bars produced by a refinery, the physical appearance and the fine ounce weight. As the only globally recognised accreditation for the bullion market, the LBMA Good Delivery list is paramount to upholding the high standards of the modern bullion market.
These standards have been implemented throughout the gold market and are a cornerstone of reliability and quality, allowing for sources to be scrutinised by their consumers. Most of the gold recovered by the miners of Serra Pelada would not have met the standards required by the LBMA Good Delivery List due to the nature in which they were sourced, the environmental impact of the mine, and the quality of the gold. In turn, the list promotes the practice of sourcing high-quality and compliant gold from reputable refineries, rather than the lower quality and non-compliant gold found in Serra Pelada. Despite it being highly unlikely that gold from mines such as Serra Pelada would enter the mainstream bullion market, the LBMA Good Delivery List acts a strong barrier to entry, preventing exploitative mining methods from being encouraged.
Lessons Learnt – Modern Mining Practices
Serra Pelada’s impact on modern mining practices cannot be underestimated. Ultimately, Serra Pelada has drawn a lot of focus on the modern practices of the industry, highlighting the need for responsible mining practices to be endorsed. In principle and according to the World Gold Council’s responsible mining practices, gold must be conflict-free, industry players must ensure transparency at every layer, and must include all-participants in the gold market. These principles, alongside the LBMA Good Delivery List aim to ensure that gold entering the market has not been sourced through similar barbaric working practices to that of Serra Pelada, nor has the same environmental impact. It remains an unfortunate fact that artisanal and exploitative mining practices are still being used today, however, the World Gold Council, the LBMA Good Delivery List and other organisations such as FairMined are ever improving their methods to ending these practices.
Compliance to these standards relies on every component of the market to be vigilant and to aim to meet the high standards of the LBMA Good Delivery List. Whilst artisanal mining still exists and the Para region of Brazil is seeing a resurgence in unregulated mining, the LBMA Good Delivery List ensures that the mainstream bullion market maintains its compliance and support of sustainable practices.
The Legacy of Serra Pelada
There is no doubt that Serra Pelada casts a significant shadow over the bullion industry. In the first exposé of the mine, Sebastião Salgado’s photographs remind us of the importance of compliance and ethics in the gold industry. They show the reality of exploitative practices and showcase the brutal working conditions that artisanal miners around the world have suffered through. In recent years refineries and the LBMA have dedicated themselves to preventing these practices and have built the modern bullion industry on a strong sustainable and ethical foundation.
All metals from Sharps Pixley are ethically sourced from the LBMA Good Delivery List and we are proud to say that we are an accredited Full LBMA Member. If you are interest in investing in gold and silver, we are here to assist. With a rich history dating back to 1796, we are a trusted supplier and work with a global client base for investment, safety deposit box storage, vaulting and gold pensions.
Key Takeaways
• Serra Pelada was a defining moment in gold mining history, illustrating the challenges of artisanal mining.
• The gold rush significantly impacted both local economies and global gold markets in the 1980s.
• Serra Pelada’s legacy has influenced the push for safer, more ethical mining practices.
• The LBMA Good Delivery List emphasises standards that artisanal sources like Serra Pelada historically did not meet, highlighting the need for certified, conflict-free gold.
• Lessons from Serra Pelada are still relevant for today’s gold investors and mining regulations.
Frequently Asked Questions
What Was Serra Pelada, And Why Is It Famous?
Serra Pelada was a massive open-pit gold mine in Brazil that drew tens of thousands of miners in the 1980s, becoming one of the world's most iconic gold rushes.
How Did The Gold Rush Affect The Global Gold Market?
The influx of gold from Serra Pelada increased supply and influenced local and international gold prices, highlighting the impact of artisanal mining on the global market.
What Environmental Impacts Did Serra Pelada Have?
The mining activities led to significant deforestation, soil erosion, and mercury contamination, leaving a lasting environmental footprint.
Does Gold From Serra Pelada Meet LBMA Good Delivery Standards?
Gold from Serra Pelada does not meet LBMA standards due to the lack of verifiable quality and ethical sourcing requirements.
What Are The Main Lessons Learned From The Serra Pelada Gold Rush?
The Serra Pelada experience underscored the need for improved mining safety, regulation, and sustainable practices in the gold industry.