The real price of gold

It weighs 1oz. It costs £1,000. And it creates 30 tons of toxic waste

The lust for gold has reached record levels worldwide as India and China have joined developed nations in demanding more jewellery. On the back of this surge, gold prices have reached a 17-year high, and yesterday rose $7.70 (£4.30) to more than $474 per ounce. But the world's remaining gold deposits are microscopic and the environmental costs of extracting them are profound.

A £1,000 wedding ring - equivalent to one ounce of gold - creates up to 30 tons of toxic waste. To produce that single ounce, miners have to quarry hundreds of tons of rock, which are then doused in a liquid cyanide solution to separate the gold. Payal Sampat, the campaign director for Earthworks, the mining watchdog, told The Independent: "Gold mining is arguably the world's dirtiest and most polluting industry."

A growing alliance of conservationists and local communities affected by mining operations is pushing governments, corporations and consumers to consider the real cost of gold. "The industry has not been under public scrutiny and people don't really know where their gold is coming from," Ms Sampat said. "The mining industry could be making changes which could provide consumers with a product which is far more clean."

Writers from Shakespeare to Shelley have lamented the lure of this precious metal, but today's gold fever neither seeks to bolster empires nor underpin currencies. It is fuelled by our desire for jewellery.

Of the gold mined today, a total of 80 per cent is produced to feed the demand for status symbols. Campaigners are trying to dissuade shoppers from buying "dirty gold", which is extracted using cyanide leaching. But they face an uphill struggle. Newly affluent consumers have pushed jewellery sales to a record $38bn this year, according to the World Gold Council.

With the best ore already mined in most developed countries, the industry is turning to the poorest countries in the world. Up to 70 per cent of gold is mined in developing countries such as Peru and the Philippines. Vast tracts of the developing world are being laid to waste, leaving a multibillion-pound toxic time-bomb.

Environment agencies in the US have described disused heavy metal mines as an equivalent to nuclear waste dumps, which must be secured and maintained for the foreseeable future. America's Environmental Protection Agency estimates that the costs associated with the clean-up of metal mines could rise to $58bn, according to The New York Times.

The mining industry argues that it is bringing much needed investment, infrastructure and jobs to the poor. And it is an argument that is backed by the World Bank, which has pushed more than 100 governments into making tax breaks and subsidies to big mining companies.

A flood of complaints, protests and lethal spillages prompted the bank into a two-year moratorium on financing mining in 2001. That resulted in calls for the mining industry to reduce the use of cyanide and stop dumping toxic waste.

However, these calls were dismissed by the industry as impractical and the World Bank is now giving multimillion-pound loans to multinationals. The first loan after the moratorium went to the Canadian company Glamis Gold, for a project in Guatemala that has faced heavy opposition from Mayan Indians.

At the root of the environmental problem is the industry's reliance on old mining technology called "heap-leaching". Leach mining allows miners to coax tiny flecks of gold from low-grade ore. Cyanide is the chemical of choice and more than 90 per cent of the 2,500 tons of annual global gold production is extracted in this way.

In a typical heap-leach operation, huge quantities of rock are crushed and stacked on top of clay and plastic liners to create piles the size of pyramids, which are then drizzled with the cyanide solution for years. As the chemical passes through the rock layers, it teases the gold out of the ore, where it is collected at the bottom and processed further. As little as one ounce of gold can be extracted from 30 tons of low-grade ore.

Cyanide is a toxic chemical - one teaspoon of 2 per cent cyanide solution is enough to kill a human being. This dangerous chemical is used in gold extraction operations from Peru to Ghana. And it has left a toxic legacy in its wake.

The cyanide waste produced from gold mining is stored in reservoirs. Spills from these lakes have made their way into water systems with fatal consequences for the environment, wildlife and local communities.

Just such a leak in Romania in 2000 led to the worst environmental disaster in the region since the meltdown of the nuclear reactor at Chernobyl. Tons of cyanide-laced water broke through a dam and poured into the Tisza and Danube rivers from the Aural gold mine near Baia Mare. The results were devastating; more than 1,000 tons of fish were killed, while plantlife and birds along the river were devastated.

The Tisza disaster has been replicated at mines all over the world. In the five years since the Baia Mare accident, mines owned by international corporations have been responsible for spills in Ghana, Western Australia, Papua New Guinea, China, Honduras and Nicaragua. During that time the UN Environment Programme has been locked in negotiations with the mining industry to produce a self-regulatory code.

Desta Mebratu, a Unep official, admitted that the mining industry's activities presented a serious environmental hazard but said they were working towards lessening this. "We're working with the mining companies to help prevent the occurrence of accidents," he said. But the code, which was finally unveiled this month, has been dismissed by environmental watchdogs as toothless. A review of the voluntary code by Bankwatch and Friends of the Earth Europe said the code was "greenwashing intended to create the appearance that mining companies are addressing environmental issues".

Australia's remote Lake Cowal in New South Wales is the latest battleground between mining multinationals and indigenous peoples. Neville Williams, 61, who represents the Mooka traditional owners council clan of the Wiradjuri nation, says the fight is essential, although he knows the odds are stacked against them as the mining companies enjoy government backing.

"We have no resources but we are taking the fight for all the peoples because of the prospect of cyanide poisoning."

Additional reporting by Andrew Wragg