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Cablegate: All That Glitters Could Be Zinc: Arrests Highlight

VZCZCXRO8553
RR RUEHMA RUEHPA
DE RUEHBP #0199/01 0581217
ZNR UUUUU ZZH
R 271217Z FEB 08
FM AMEMBASSY BAMAKO
TO RUEHC/SECSTATE WASHDC 8791
INFO RUEHZK/ECOWAS COLLECTIVE
RHMFISS/HQ USAFRICOM STUTTGART GE
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 BAMAKO 000199

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD ML
SUBJECT: ALL THAT GLITTERS COULD BE ZINC: ARRESTS HIGHLIGHT
RISKS TO GOLD EXPORTERS IN MALI


1. SUMMARY: Gold has become the centerpiece of the Malian
government's budget, but the recent arrest of gold smugglers
highlights the risky nature of exporting gold. Three foreign
nationals were caught red-handed trying to smuggle what may -
or may not - have been three bags of gold through Customs
with fraudulent gold export documents. It is unclear if the
accused smugglers were also fraud victims, as at least one of
the bags they were attempting to spirit out of Mali was
actually packed with painted bars of zinc. Few arrests have
been made in other cases, but reports of increasingly
creative scams, thefts in transit, and fraud are common.
Exporting gold legally from Mali is fairly straightforward,
but government officials report that the sector is poorly
organized and potential exporters can fall into many traps
along the way from buying the gold until having it shipped.
Mali's failure to crack down on con artists and establish
better control over gold markets could have an impact upon
other sectors as potential investors begin to look for less
risky ventures in other nations.

------------------------------
IMPLICATIONS FOR MALI'S BUDGET
------------------------------

2. Gold production, ranging from industrial level operations
to individuals panning in streams, accounts for the majority
of Malian export earnings. The largest industrial producer,
AngloGold Ashanti, reported over 537,000 troy ounces mined in
2006. Exact figures have not yet been released for 2007, but
rising market prices have offset a reported decrease in
production. Gold plays a critical role in financing the
Malian government. The GOM has a stake in gold companies
operating in Mali ranging from 18-20%, and also receives 6%
in taxes on refined gold plus 35% in corporate taxes.
Finance Ministry Secretary General Sambou Wague said that
although the GOM receives dividends as shareholders, only the
gold companies know the true amount of their profits.

----------------
RECENT GOLD SCAM
----------------

3. At the beginning of February, a Russian, an Azerbaijani
and a Congolese were arrested at the Bamako airport for
attempting to smuggle gold out of Mali. The three were
planning to travel on Air Maroc to Dubai via Casablanca with
three packages totaling 94 kg. Customs agents said that
somehow, Abdoulaye Toure, a private Malian linked to a
nonexistent company called "Afrique Metal SARL," and likely
the agent that sold the foreigners the gold, was able to have
two of the bags removed from the outbound baggage conveyer
after they were checked in. He failed to get a third
package, weighing 31 kg, which was subsequently seized by
Customs and contained zinc made to look like gold bars. When
the three alleged smugglers were interrogated at Customs
about the origin of their packages, the group jointly denied
possession of them. However, a subsequent search in their
hand luggage revealed falsified documents stating that they
had bought from Toure 90 kg of gold that was 93% pure for USD
1,215,000 (at roughly 464 dollars a troy ounce, well below
the world market price) . Meanwhile, the two bags previously
pulled from the conveyer had disappeared. After a lengthy
search, the bags were recovered empty. Mr. Toure's
whereabouts are unknown. The three suspected smugglers are
currently in prison awaiting trial while police continue to
search for Toure.

4. Aside from this case, Customs officials said that they
know of two other cases involving falsified documents in the
last two years. They added that exporters, especially
foreigners, should be very careful when exporting gold out of
Mali. Mamadou Bah, Customs Chief at the Bamako airport, said
suspicions are raised when anyone attempts to export more
than 10 kg of gold. He estimated that anyone selling and/or
attempting to export gold over that amount is often engaged
in some form of fraudulent transaction.

--------------------------------
HOW TO EXPORT GOLD FROM MALI 101
--------------------------------

5. Gold buyers are required to acquire a license from the
National Office for Trade (DNCC in French) or form a
partnership with a Malian that is already licensed. The DNCC
maintains a list of approved gold sellers; while roughly
twenty agents are authorized to export gold from Mali, the
National Director for Trade, Mahamane Toure, estimates that
as few as four of these agents are legitimate. The DNCC
showed an example of fake export documents that used a
letterhead from the "Commerce Exterieur," a nonexistent

BAMAKO 00000199 002 OF 002


entity (note: Post has actually received a similar document).


6. Gold must be in the form of bars, rather than dust or
powder, if it is to be exported from Mali. Buyers must have
their gold weighed and tested for its authenticity by the
Division of Geology and Mines (DNGM in French) who in turn
will provide a certificate of title for the gold. The gold
shipment is then sealed and passes out of the buyers hands at
several steps on the way to the airport for transport. The
exporter must pay 6% in taxes (3% value-added tax and 3% CPS)
to the Ministry of Finance. Finally, the buyer takes the
title for the gold to the Customs division in charge of gold
exports at the Bamako airport to have it approved and
stamped. Since 1990, in an attempt to spur exports, there
are no export taxes.

7. Lassana Guindo, Chief at the DNGM, said the gold selling
process in Mali was poorly organized and suggested that gold
exporting stakeholders should collaborate on improving the
chain of sale process. For example, customs officials
suggested several scenarios for fraud, such as submitting
the required sample (40g) in real gold to the DNGM with the
remainder fake or with a much lower purity. Sealed packages
are shipped in the hold of aircraft, and subject to theft
and/or substitution by corrupt customs officials or airport
employees.

-------
COMMENT
-------

8. As many Malian officials have noted, those looking to
export gold should pay very close attention to who and how
they do business, and the most recent case suggests that some
Malian Customs agents may be involved in this type of
corruption. As the price of gold climbs, it has been no
surprise that the Embassy has received numerous inquiries
from Americans and others interested in entering the gold
trade. The rise in prices will also likely be matched with a
rise in the number of scams, potentially sullying Mali's
reputation in the eyes of international investors in other
sectors far removed from the gold fields.
MCCULLEY

© Scoop Media

 
 
 
 
 
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