In many physical gold flows out of African countries and Latin America, the trader funds the producer. Cash is advanced for mining, local refining, logistics, export documentation, and initial taxes. The trader then lifts the metal and sells it into refineries or bullion buyers in hubs such as Dubai, Europe, or Asia. Margins are thin and volumes are high. A typical trader might aim for a few percent gross margin per 50 kilogram parcel of 20–22 karat doré, or slightly better on 23 karat Australian nugget shipments. One mistake on price, timing, or counterparty wipes that out quickly.
When a trader advances money to a producer in West Africa, the Andes, or regional Australia, that trader is taking geological risk, operational risk, price risk, and political risk before any metal reaches a vault. The producer needs cash to keep the mine or cooperative running. The trader needs secured access to production and an exit route through a refinery or offtaker. Nobody serious finances that on promises alone.
In practice, a trader might:
With margins that tight, any irrational structure on collateral, timing, or fees kills the economics. That is why banks and financiers insist on proper collateral and first loss capital from the trader before standing behind letters of credit or trade lines.
In many African and Latam flows, gold is produced and refined locally to export standard, then moved under a Collateral Management Agreement (CMA) into a recognised vault or free trade zone. The CMA is a three-party agreement between the financier, the trader, and a collateral manager. The collateral manager controls access to the metal and issues receipts the financier can rely on.
Typical patterns include:
Crucially, the financier only treats gold as collateral once title has passed into a controlled storage arrangement. Before that, the metal belongs to the producer or refinery. The trader cannot use that future metal as collateral for the letter of credit that pays the producer, because the bank needs recourse to assets the trader actually owns or controls.
For producer-funded flows, traders often ask banks to issue DLCs or SBLCs and assume the bank is effectively “funding the trade.” That is a misread. When a bank issues a letter of credit in favour of a refinery or producer, it takes direct payment risk. Once compliant documents are presented, the bank must pay, whether or not the trader has managed to move the parcel on or hedge it properly.
The bank therefore demands hard support from the trader:
Unpurchased gold at the mine gate in Ghana, a coop in Peru, or a yard in regional Australia cannot be collateral for the LC that pays for it. Until title transfers and the metal is under a recognised CMA or vault arrangement, it is not the trader’s asset. The bank cannot rely on it and will look instead at the trader’s capital and guarantees.
Many producer-funded traders do not have enough free cash to post margin on every 50 kilogram shipment. The obvious alternative is to slow growth. The other is to bring in a third-party collateral provider that posts margin and takes first loss exposure in exchange for a share of the economics and strong security.
Structures often look like this:
To keep this enforceable across borders, the LC, CMA, and assignment of receivables are often governed by English or Swiss law, even if the mine is in Africa, the doré is flown through Dubai, and the final buyer is in Asia.
In gold flows from origin countries in Africa and Latam into global hubs, financiers care less about marketing narratives and more about jurisdiction. They will ask:
English, Swiss, Singaporean, and UAE law are frequent anchors for the security documents, even when the ore body sits in a frontier jurisdiction. The trader’s margin and first loss capital are then locked into structures that can be enforced under those laws.
If you are funding producers in Africa or Latam and turning 50 kilogram parcels through Dubai, Europe, or Asia, the real constraint is rarely deal flow. It is margin and first loss capital. Without that, banks will not open LC lines and serious collateral providers will stay away, no matter how promising the origin story sounds.
What you need is a clear picture of your trade cycles, your gross margins per shipment, your worst-case loss per parcel, and a structure where investor or third-party capital sits in front of bank risk in a way that regulators and lawyers can live with. That starts with underwriting the actual deals, not just the idea of “gold from Africa/Latam.”
If you have real producer contracts in Africa or Latam, repeat 50 kilogram shipments, and committed offtakers, we help design structures to raise the margin and first loss capital you need for letters of credit and CMAs, subject to full underwriting of your deals and counterparties.
We review your contracts, logistics, and projected margins, then work with regulated partners and collateral providers to see whether your flows can support external capital without destroying your economics.
Contact Us To Review Your Gold ProgramWe act as arranger and advisor through regulated partners. We are not a bank and we do not hold client funds. All services are subject to KYC, AML, and sanctions screening. Structures and examples in this article are illustrative and must be tailored to specific mines, refineries, counterparties, and jurisdictions, with independent legal and tax advice in each case.
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