By Peter Hobson
LONDON (Reuters) - The London Bullion Market Association (LBMA) said on Friday it would investigate allegations in an Australian newspaper that the Perth Mint processed gold from small-scale gold miners in Papua New Guinea who used child labour and toxic mercury.
The mint, owned by the government of Western Australia, is one of the world's largest gold refiners and is accredited by the LBMA.
The LBMA's guidelines are meant to ensure that refiners do not process gold whose production or trade contributes to human rights abuses, conflict, crime or environmental degradation.
If the mint is found to have violated the guidelines it could have its accreditation removed. Major banks who dominate gold trading tend to work only with LBMA-accredited refiners.
The mint said in an email following the report in the Australian Financial Review that it is confident it complied with all regulatory requirements and the LBMA's guidelines.
"We take environmental, social and governance (ESG) reporting very seriously and are vigilant in our assessments of the companies from which we source gold and other metals for processing," it said.
A spokeswoman for the mint did not immediately respond to a request for further comment outside of work hours.
The LBMA said in a statement it had begun an 11-step incident review process.
"The process is being followed to ensure a thorough and fair review, and involves follow up with the auditor, refiner, and any other relevant stakeholder, before determining the relevant next steps," it said.