How to Make Profit Trading Raw Gold from Africa - Whilst Avoiding Being Scammed
We receive enquiries from buyers in Europe, the Middle East and Asia with approximately the same frequency as we receive offers of product from "sellers" in East and Central Africa. These offers are typically accompanied by video of the product, with the "seller" running his hand through gold nuggets, or else handling Doré-shaped bars. Sometimes the bars are obviously copper. However, more often the nuggets and bars are actually genuine gold.
The Offer
The offers typically range from USD 40,000 to USD 65,000 per kg. However, if wanting to negotiate the already unbelievable price even lower, you can usually get the "seller" to agree to come all the way down to as low as USD 30,000 per kg. The problem with these offers, is that even where the product actually exists, all the offers are fake.
How is it that the "seller" appears to have real product in his possession? There are several reasons why the seller has access to genuine product, however, typically, the product is either not in his possession, and he has simply "hired" supervised access to the product while in a licensed safe-house for long enough to capture a short video, and will compensate the person admitting him access in the event that his scam is successful, or in the case of say, a Congolese mining cooperative, the product is indeed in the scammer's possession, but is already pre-sold to the end-buyer who has co-funded its production. This fact does not, however, prevent the cooperative's delegated representative from "selling" it to a handful of different, gullible buyers worldwide, from the moment it is in his physical possession until the time he is required to release it to the refinery where possession will be taken by the investor-buyer who has owned it even from prior to its having been produced.
The Stories
If you succumb to the temptation to pursue any of these "offers" you'll be drawn into an imaginative series of stories aimed at obtaining anywhere from as little as just USD 200 for the scammer (still enough of a victory as to merit the WhatsApp correspondence and a few days building trust) for a bogus flight from say, Goma to Kampala, that will obviously never actually be taken, to as much as say, USD 18,000 to "release" the product, where a super-polite, gentle, modest-sounding and well-spoken Kenyan / Ugandan / Rwandan / Congolese scammer will convince you that there's just a little, easily surmountable hitch in that the previous buyer reneged on the deal and the product has had to remain in safe-keeping in a bonded safe-house in Kampala for say, the last six weeks, during which time it became apparent that the previous buyer's funds were inextricably tied up with a clearing agent in Kampala, (which is why you should probably use the scammer's own clearing agent if you advance the "deal" - to avoid suffering the same pitfall) and he was unable to complete, but don't worry: they're ready to bring you the product to Dubai or else to have you come and test and collect it in Kampala; all they will need are the mere storage fees that have already been incurred of just USD 2 per kg per day at 45 days for each of the 200 kg in the consignment, totalling just USD 18,000 - a wonderful payday for the scammer, and which probably will only result once you have flown to Kampala and tested the product (which is, of course, already owned by someone else who has absolutely no idea you're looking at it and thinking you can buy it).
The Explanation
And if you ask the "seller" to explain how it is possible that on the one hand they have USD 13 million of product in their possession and yet they can't even afford the safe-keeping release fees of just USD 18,000 they'll probably tell you that the product was mined by a cooperative consisting of 1,200 artisanal miners in say, Bunia, or Shabunda, and that each miner only contributed 170 grammes of product and survives hand-to-mouth, and that the entire community lives in poverty and barely has money for clothes or school fees, and this is why they're actually so desperate to sell - especially as the chairman of the cooperative is now angry with them because the village doesn't understand the delay and is threatening him and claiming he has taken their gold - and all because another buyer let them down.
Again, if you ask them why you can't just send them USD 90 to release a single kg bar of gold to sell and thereby fund the release of the remaining 199 kg, they'll probably tell you that the product entered the country through Ugandan Customs on a T1 in a single batch, meaning that the product cannot be sub-divided and that if the Ugandan Revenue Authorities' Mineral Police discover any of the consignment missing they'll be arrested and imprisoned and the entire consignment will be confiscated.
Basically, any line of enquiry that you formulate will elicit a response that essentially reiterates the notion: "Yes, it's true that we are holding several million USD of product, but we are poor, uneducated people, lost in a world of complicated African bureaucracy, bumbling along as though this is the first time we've ever done this, and frankly, we really need a smart saviour like you to rescue us".
The Buyer's Usual Plan to Gain Advantage
Buyers who don't want to risk sending money to people they haven't met will think they're gaining a rare advantage by flying-in to either Nairobi, Kampala, or if particularly adventurous, Goma, to deal with sellers directly - thinking that few Europeans or Asians will be willing to venture this far. They will usually book just two weeks in a hotel, convinced that their superior intellect and hard-nosed business acumen, or even in some cases "God's favour", will bring to bear a swift solution, and that within ten days at the most they'll have initiated one of the best business models in history: buying 200 kg of gold at USD 42,000 on Monday, and selling it in Dubai at USD 65,000 on Friday, making an easy USD 4.6 million in 5 days.
2 Weeks Becomes 6 Months
However, as the scammers' seemingly credible, convoluted stories evolve, two weeks will turn into 6 months (we've heard of as much as 16 months), while the buyer rents an apartment, and starts acquiring his own licences, convinced his western education, intelligence, organisational discipline, and flair for trade (or yes, "God's favour") will allow him to succeed where everyone else, without exception, has failed.
The buyer will borrow money from clients, friends and business associates in Europe, the Middle East or Asia, explaining the compelling ingenuity of his uniquely opportune business model. Eventually, however, he'll lose everything - typically somewhere between USD 50,000 and USD 3 million, and will have to invent a story about how a corrupt African bureaucracy has appropriated his "product" - because he's either too embarrassed to concede he's been scammed, fearing his reputation and credibility won't survive this, or choosing to believe the lie that the scammers have fabricated for him.
The Most Obvious Question You Should Ask Yourself
With ARGC's ownership having worked the majority of our careers in Africa, having ourselves citizenship of several African countries - including DRC - those would-be USD 100,000-an-hour-earners should thoughtfully and soberly ask themselves the question: if we live and work in the countries where the product is sourced, know exactly where to find it, speak the languages, hold mineral dealer licences in multiple gold-producing countries, and are intimately acquainted with the industry, why do we ourselves bother going through all the hassle of setting up our own small mines to produce our own product? These operations require months of investment and work before any profit is realised. Why do we not simply leverage our network of all those sellers offering us product on a weekly basis at anywhere between USD 30,000 and USD 50,000 and devote all our time to buying and selling?
The answer should be obvious. All of these deals are fake. Not 99% of them. All of them.
Why You Can Be Certain That Any Offer for Finished Raw Gold Product Under 90% of the LBMA Price is a Scam
For those incorrigible optimists who still believe that buying at USD 40,000 - 50,000 on Monday and selling at USD 65,000 on Friday is indeed possible, consider the logical premises of what your chosen belief entails:
You are logically required to believe that there are people in Africa who are on the one hand smart enough to produce high volumes of product and have, say, 200 kg just sitting around and available to purchase, and yet on the other hand they are so disorganised and lacking in initiative that they can't work out how to get themselves or one of their representatives onto a flight to Dubai, long before their product is processed, to meet with a refinery where they'll be offered not less than 97% and often, 99.5% of LBMA (net metal value).
And simply because you are smart enough to work out how to get on a plane to Dubai and negotiate with a refinery to buy from you at 99.5%, it is worth it to these Africans blithely to forego the majority of their profit in your favour.
The Universal Mistake Made by Europeans and Asians When Dealing With Africans - Why They Get Scammed
We see it time and again. It's always the same. The main reason that buyers from Europe and Asia get scammed is because they convince themselves of the intellectual viability of this paradox: that African producers are organised, motivated and disciplined enough to sweat and strive and endure risk, uncertainty and hardship, working at the land for months to obtain their product, and yet somehow they're too uneducated, unmotivated, or undisciplined to spend just a few hours doing some research on the Internet to discover the fact that it's possible for them to export their product to Dubai where they'll get close to USD 65,000 per kg for it.
When asking buyers why they believe this paradox, we have never heard a satisfactory answer. Buyers may have anecdotes that support their theory of the extent of the African producer's ignorance. However, they are generally themselves ignorant of the fact that African scammers have absolutely no problem appearing ignorant, gullible or stupid - provided this charade successfully lures the buyer into the necessary false sense of his organisational superiority as to essentially place an expensive bet that the person he's dealing with is simultaneously reliable enough to have the product, honest enough not to run away with his money, and yet stupid enough not to know how to sell it at full price in Dubai.
Why Good Advice is Initially Ignored
It seems evident that those who get scammed generally ignore all the logic and warnings, deliberately not focusing on the unanswered and unanswerable questions, because they want to enjoy the fantasy for as long as possible and for as long as they can maintain the lifestyle. We understand this, and realise that the majority of those who read this page will probably "need" to ignore our advice for a few months, lose a lot of time and money, and experience enough pain to learn at first hand that everything we're explaining on this page is the reality. Those who haven't yet lost enough time and money or experienced enough pain and embarrassment should probably stop reading at this point and come back to this page again in a few months time, once their losses have successfully converted them from baseless optimists into realists, and only then read the following section.
Note, however, before continuing, that the rationale behind this page is not to deter people speciously from engaging in genuine trades that we allege are not genuine, and to divert prospective traders into working with us, as we simply cannot cater for the demand that already exists for our expertise.
Our motivation is a moral and pragmatic one: a) it is demoralising to watch people being scammed with such predictability and regularity, b) the endemic of scamming reflects poorly on the reputation of an industry that we are very keen to work towards cleaning-up, and on which we rely for our livelihood, and c) where people like us don't act, governments will act, and usually with clumsy, ignorantly misguided and unfair legislation such as the Dodd-Frank Act's Section 1502, that negatively impinges on all our interests and that essentially converts ordinary hard-working miners into black-market traders and smugglers - opening the floodgates of criminality and institutional corruption, and creating unhealthy, foreign government controlled monopolies.
The Solution - How to Really Work in This Industry
Once eventually tired of being scammed or, ideally, successfully discerning that all offers for raw gold under USD 60,000 per kg are fake - without losing any money in the process, if still wanting to operate within this industry, the following is our advice, with the course taken being dependent of the level of investment possible and corresponding appetite for risk.
What needs to borne in mind at the outset, however, is that there is no immediate way to engage in genuinely lucrative raw gold trades. Every solution requires patience, planning, discipline, and a certain level of risk of failure:
01 - Establish and fund a network of government-licensed brokers
Establish and fund a network of government-licensed brokers who will buy from government-licensed trading offices at around 88% of LBMA (the current government-fixed price in several EA countries). If using a licensed mineral dealer to arrange the consolidated purchase and export on their behalf, this would usually equate to their receiving product at an eventual cost of around 92% of LBMA.
02 - Co-invest with an existing artisanal mining cooperative
By cooperating with an existing operation and funding new pits alongside the pits the miners are already mining, the resulting cost per kg will usually equate to around 81% of LBMA. The client will own the product before it is actually produced and pay the balance of the final contractually agreed price minus what they've already injected into operational funds, on conclusion of processing. Obviously, this delays receipt of product by a few months versus buying existing finished product (assuming any genuine deals actually exist), but guarantees supply at known cost and allows for expansion of the operation and volume of product pretty much without limit.
03 - Invest in their own small scale mining operation
If registering as an investor primary mining licences cannot be issued, so they would need a citizen as a reliable nominee / partner / proxy. This production cost would typically be around 63% of LBMA after government tariffs, fees and taxes and business overheads. The local partner would typically take 30% of operational profits, which would mean that the eventual cost per kg to the client would equate to around 74% of LBMA.
04 - Invest in a large scale mining operation
This would typically require government ownership of not less 16%, depending on the jurisdiction. The eventual cost per kg to the operation would ordinarily be around 44% of LBMA, and after the government takes its cut, the cost to the client would therefore equate to around 53% of the LBMA price.
When eventually a client realises the necessity of one of the options we've highlighted above, it may be worth approaching us and detailing your ambitions and proposed level of risk and investment with a view to ascertaining whether it would be in our mutual interest to cooperate on a project.