Gold (3 page)

In the exchange of fire, Wood said, he screamed at his party to get out. They fled back along the tunnel. Behind them, at least four intruders lay dead and two were wounded. One account said that thirteen miners might have died in the gunfire. Wood and the others were each charged with four counts of murder and five of attempted murder. In a two-week trial, the prosecution tried to prove that the Aurora team had entered the mine intending to evict the zama-zamas, and that Wood had gone into the confrontation guns blazing. This theory failed to convince the judge. He accepted that Wood was the only one in his party to fire, that he had fired between seven and thirty rounds, and that he had fired in self-defense. No one knows how many illegal miners were underground that day, but when police raided the Aurora mine four months later they arrested more than 200. At an earlier raid at a gold mine in Free State province, illegal miners attacked the police with stones. That day the police killed one and arrested 426.

On the day Bad Brad and I drove out to the Aurora mine, two dejected guards watched the gate. Ten feet from their post, the chain link fence lay on the ground where someone had driven through it. The brick buildings were a shambles of broken windows and missing doors and holes through the walls. A bedraggled population haunted
the rows of roofless miners' hostels. The roofs had been stolen. Men trenched for gold in plain sight. They collected the dirt in wheelbarrows and took it to a central location to pan it in a sluice, recovering whatever residue of gold there was. A battered yellow Dodge packed with young men tore past as we drove out. Wood said they were runners, picking up the gold concentrate. A few miles away, we climbed a bank and looked down into the pit. In broad daylight, a gang was stealing ore.

The pit was the gateway to the zone of high-grade ore beneath, and a collection point for the people stealing it. Beneath the pit floor were the Aurora tunnels. We watched as miners crawled from a hole. Bags of ore lay in a row, and porters staggered up a track to a row of vans.

I
N
S
OUTH
A
FRICA THE THEFT
of ore from gold mines is a legendary enterprise. Thieves steal about a billion dollars a year worth of ore, or maybe twice as much. The distance between these estimates shows how little grasp authorities have of the problem. Gold mine theft is a staple topic in South Africa, and many people think the police connive at it. A few days after my visit to Springs, I boarded the high-speed intercity Gautrain at the Rosebank station in Johannesburg, and went swooshing off to Pretoria, the administrative capital of South Africa, to meet a policeman who'd agreed to talk about gold mine crime and its connection to the powerful.

At suburban Hatfield, a police van picked me up for the ten-minute drive to a sprawling, fenced campus of single-story brick buildings—the headquarters of the Hawks, the elite unit of the South African police. We drove past the guardhouse and through the complex
and pulled up at a little bungalow that stood apart. It had a two-car garage and a pair of identical white Volkswagen GTIs gleaming in the driveway. With its flagstone path and crew-cut hedge it might have been a starter house in Palo Alto. We went inside and sat down in a little boardroom. The winter sun poured through slatted blinds.

Colonel McIntosh Polela, the official spokesman for the Hawks, was a trim, stylish figure. He wore a gray-striped shirt with the two top buttons open. His trousers had a knife-edge crease and his shoes glowed with a high polish. His head was shaved. A TV reporter before he joined the Hawks as their public face, he maintained a grave demeanor. He opened a thick hardcover diary whose pages were crowded to the edges in a dense, neat handwriting. Reading from these notes, he reviewed the epidemic of violence and larceny that is illegal mining in South Africa.

Driven by the high gold price and the desperation of the poor, illegal miners had overrun abandoned gold mines and vacant parts of working mines, and produced a flow of illicit gold. For South Africa the problem was not only theft, but social disruption. Many of the illegal miners, Polela said, were also illegal immigrants. They came from Zimbabwe, Lesotho, Mozambique, Malawi, and Namibia. Their presence stirred up anger in the South African poor, themselves in a condition of permanent want. Vigilantes took bloody measures against the migrants.

Polela said that another problem facing police was that they could not pursue illegal miners underground. Not only did they have no training to work in mines, but police insurers would not cover them if they did. “In the shooting at Aurora,” Polela said, “if it had been policemen who'd been shot, they'd not have been covered.” Because police could not pursue criminals underground except at a risk borne entirely by the officers themselves, illegal miners had been able
to create no-go areas both below and above ground, enforced by violence. Nor was it a question of forty or fifty miners, as at Aurora. At Welkom, in Free State province, more than 1,500 illegal gold miners were working on the surface and 270 underground. “In a functioning mine,” Polela said, “they create their own pockets, sometimes with the help of legal miners.”

They had been doing so for decades, robbing the mines from within.
A 2001 monograph produced for the mining industry by South Africa's Institute for Security Studies, said that well-provisioned groups of up to twenty-five miners at a time infiltrated mines by bribing the security. The groups did their own blasting underground with stolen explosives. They built small refineries, establishing themselves in vacant tunnels. They had detailed maps of the mines, and could navigate the underground maze with confidence.

Illegal miners sometimes threatened and even attacked mine inspectors who discovered them. In the echoey tunnels, thieves could easily hear the approach of mine security teams, and be ready to ambush them. This made the security teams nervous about going down. They could not know how many illegals they would meet. Gold diggers often entered the underground from one mine and moved through tunnels that connected to a second or third mine. The gold-bearing material that they mined was stored in disused shafts and then retrieved over a period of time, the paper said, “often in collusion with runners who are employed in the mine. It is then transported to one of the more than 170 smelting houses [operated inside the miners' hostels] and elsewhere in the Free State goldfields.”

The writer concluded that syndicates of thieves, miners, and smugglers were stealing thirty-five tons of gold a year. At a mean price
of $350 an ounce for the years he studied, 1994–1998, $400 million worth of stolen gold was flowing out of the country every year.

Legal miners made good money by colluding with the thieves. According to one newspaper report, a smuggled 48-cent loaf of bread could fetch $12 underground. And there were others earning money from the zama-zamas too. “They [the miners] have contacts with the police,” Colonel Polela told me. “We have to admit that people who should be fighting the illegal mining are in fact participating in it.”

With this assertion, Polela voiced a common belief of South Africans—that corruption infects the government. The police were helping to rob the mines, and behind the police, the forces that controlled them. Polela saw a nexus of the rich and powerful, of politicians and of criminals, jointly preying on the mines. The stolen gold passed through the hands of organized crime syndicates in South Africa to clients in the Persian Gulf, India, and Russia, where the gold was laundered through sham companies and sold into the legitimate bullion trade. According to Polela the theft from mines was threatening the stability of South Africa by crushing investor confidence. Mining security costs had “skyrocketed,” he said, creating a situation so harmful to the interests of gold mining companies that South Africa was looking to the United Nations for help in fighting the international trade in stolen gold.

But which South Africa sought this help? Not the robbers. Polela was not the only expert to suspect the involvement of those he called “big players in South African society.” Peter Gastrow, who wrote the 2001 study for the industry, reached the same conclusion: that an untouchable elite was behind the theft of gold.

When I met him in New York City in 2012, Gastrow, a South African lawyer, was a senior fellow at the International Peace Institute, and its program director. His focus was transnational crime. He
had been Cape Town director of the Institute for Security Studies, a government prosecutor in South Africa, and an expert in organized crime. “My impression,” he told me, “is that [the pursuit of gold thieves in South Africa] has become far more politically restricted. Imagine you are an ordinary cop. These are powerful people involved. It's an intimidating environment, not just because of the scoundrels, but in addition there are these very powerful people.”

Gastrow said he thought he had detected only “the tip of the iceberg” in his investigations. “I had the impression that I was scratching the surface. Mining houses felt the same way. I left my job there feeling that [theft from mines] was going to be a huge industry in the future. Powerful people were involved. I spoke to mining houses, and they were seriously worried.”

They had good reason to be.
At the Barberton mine in Mpumalanga province, for example, there were once as many people stealing gold inside the mine as there were legal miners working for the owner. To break this stranglehold, Pan African Resources, the owner, increased its security budget 237 percent in one year, to half a million dollars a month. A helicopter flew continuous patrol. In 2010 the police arrested the heads of six of the seven syndicates believed to have been robbing Barberton, and the company declared victory over the thieves. It was a doubtful claim. Even policemen specializing in gold theft, Gastrow had reported, could not agree on the number of syndicates plundering the mines.

One could reach one of two conclusions about at least some of the police: either that they knew exactly how much gold was being stolen because they were helping steal it, or that they didn't know how much gold was being stolen
even though
they were helping steal it. I tick the second postulate. The truth is, nobody knows, except that it's a lot.

Willie Jacobz, a senior vice-president at Gold Fields, one of South Africa's biggest miners, told me that the industry was losing around 10 percent of its ore to thieves. Let's put this another way.
At just one of its mines, South Deep, Gold Fields produced 273,000 ounces in 2011. At a conservative mean price of $1,600, that would be $436,800,000 worth of gold. By Jacobz's estimate, then, thieves were taking more than $43 million of his company's money out from under their noses. This said a lot about how crazy the gold price was.
How many companies can see their profits rise 27 percent in a single quarter, as Gold Fields did in the fourth quarter of 2011, while having 10 percent scooped straight out of revenue? But hang on—it gets even more fantastic. A mining company director with intimate knowledge of the South African gold scene told me off the record that the theft was likely higher—in fact,
twice as high.
A security consultant hired by his board had reported that they were losing as much as 20 percent from one of their most advanced gold mines. By this math, more than $80 million worth of ore could be hijacked out of a mine like South Deep in a year.

I asked several mining-stock analysts if they had a clear picture of the theft. They told me that the miners do not state such losses openly, but give “post-theft” data to the analysts. Nevertheless, that the theft “is bigger now than ever before in the country's history is a given,” said Leon Esterhuizen, head of the London-based mines and metals unit at CIBC bank, and a veteran analyst of South African gold mines. Esterhuizen saw an industry robbed at will by “rich criminal masterminds sitting back and offering key people amounts of money several times their salaries to just ‘look the other way.' ” Like Polela and Gastrow, he believed the thieves had “deep connections within the police force and politics.”

In South Africa, a kleptocracy was feeding at a golden trough.
Gold had helped build the country and now was helping to corrupt it. A metal had seduced a state.

G
OLD BOOSTERS LIKE TO SAY
that men have always thought that gold was valuable: that its value derives from universal certitude. But we don't know what people always thought. The first gold miners were preliterate and left no record of their thoughts. It's fair to suppose they liked gold, because they kept it.

I have a little catalogue called
Thracian Treasures
, from the Varna Museum in Bulgaria. In the ancient world, Thrace was renowned for its gold mines. Some of the objects pictured in the catalogue are 6,000 years old. They form the earliest treasure of gold artifacts in the world, discovered by accident in 1972 when a backhoe operator uncovered a late Neolithic tomb at Varna on the Black Sea, unearthing bracelets and beads; a solid-gold nail with a mangled shaft; a tiny breastplate, four inches square; a delicate, paper-thin spiral tape, like a golden ribbon. The tape weighed a tenth of an ounce. What can it possibly have been good for but delight?

The Thracian objects had no practical use. They were only pretty. We can imagine what attracted those who made them—the brightness of the metal, the ease of shaping it, its resistance to corrosion. In a mortal world, it was eternally bright and beautiful.
Today our asset menu is immeasurably longer than the Thracians' was, yet gold is still high on it, locked into place by a revolutionary act in Lydia in Asia Minor in 635 BC—the invention of gold money.

Lydian coinage spread through the whole Mediterranean world. The effect on the place of gold in public life was profound. For states, gold became a necessity.
Yet by the fourteenth century, 2,000 years
later, the entire world supply would have fit into a six-foot cube. Countries were famished for gold; in Europe, mints were closing. The financial historian Peter Bernstein called this period “the sacred thirst” for gold. It was a thirst that powered the first gold rush—a murderous, cruel, intoxicating, brutal adventure that swallowed an entire civilization and spat it out as coins.