A sustainability bond aimed at integrating artisanal miners into formal supply chains will be piloted by a Canada-based advisory firm and a mid-tier Zambian copper miner this year, the firms said.

Artisanal mining provides livelihoods for hundreds of millions globally. In Africa, it often operates informally on or near company-run mines, hitting their profits, spreading pollution and depriving nations of revenue.

The proposed "stakeholder prosperity bond" developed by the advisory firm Veridicor with Zambia's Metalex Commodities, aims to address that, said Rob Karpati, its finance director. 

"Instead of pushing artisanal miners off land, this model professionalises them," he told Reuters.

The instrument links investor returns to predefined social and environmental outcomes for workers, communities and host economies rather than output.

The debut issuance would raise between $100 million and $200 million by year-end to help Metalex Commodities integrate artisanal and small-scale miners through regulated offtake agreements as well as shared infrastructure and equipment investment.

POTENTIAL INVESTORS 
Potential investors include European sustainability bond funds, impact and mining investors, banks and wealthy individuals focused on sustainability, the firms said.   

Zambia, Africa’s second-largest copper producer, hosts tens of thousands of artisanal miners, including around Metalex's northwestern permit. 

"Large mines tend to be the anchor of these [bonds] because it's got to go on someone's balance sheet," said Karpati. 

"They end up gaining financially because they get offtake from it, and the artisanal miners gain financially because it’s a fair price, not some predatory intermediate."

Industrial mines would sit at the centre of each bond structure to support repayment, while sustainability-linked terms would adjust interest rates based on social and environmental performance, Karpati said.

Metalex founder and chief executive Ayo Sopitan said the bond would allow the company to run large programmes integrating artisanal miners into its supply chain.

"We plan to source around 30% of our ore from trained, licensed local miners," he said. "The bond lets us do that at a much larger scale than our balance sheet alone would allow."

The bond is also planned in Democratic Republic of Congo and Ghana.