Peru proposes state-owned bank buys gold from artisanal miners

LIMA, Sept 7 (Reuters) - The government of Peru wants a state-owned bank to buy gold from artisanal miners in order to replace a lucrative but shady informal market, Finance Minister Alfredo Thorne said on Wednesday.

Thorne said the miners would receive a better price for their gold and would not have to pay the value added tax rate, giving them incentives to register with the government and comply with environment and labor laws.

President Pedro Pablo Kuczynski, a former investment banker who took office on July 28, had previously proposed establishing a “mining bank” to buy the gold. Kuczynski said the bank could be controlled in part by private shareholders.

But the government now thinks it would be more appropriate for a new fund in the state-owned Banco de la Nacion or Corporacion Financiera de Desarrollo SA (Cofide) to buy the gold before it is exported, Thorne said.

“In this way we’ll be able to formalize a large part of artisanal miners that today make up almost 50 percent of the gold production in our country,” Thorne said in broadcast comments to journalists after a presentation in Congress.

Previous government officials have given more conservative estimates for how much of Peru’s gold is produced by small-scale miners, who use dredges in the Amazon jungle and carve out tunnels in the ice in the Andes mountains to find the metal.

Data from the energy and mines ministry showed that artisanal miners produced about 13 tonnes of gold, or about 17 percent of national output, in the first half of 2016.

But Peru exports more gold than it officially produces every year, an indication that ore from illegal mines makes its way into the legal supply chain. Peru was the world’s sixth biggest gold producer in 2015, according to the energy and mines ministry.

The previous government of Ollanta Humala estimated that illegal miners destroyed more than 50,000 hectares (123,552 acres) of rainforest and dumped at least 3,000 tonnes of mercury into the Amazon. Officials have also said that illegal mines are also hotbeds for child labor and human trafficking.

A crackdown on illegal mining during Humala’s term prompted traders to smuggle gold ore to neighboring Bolivia for export. (Reporting By Mitra Taj; editing by Grant McCool)