KAMPALA, Feb 21 (Reuters) - Uganda's first gold refinery, which opened on Monday, will use raw gold from conflict-ridden South Sudan and Eastern Congo, its owner Africa Gold Refinery said, dismissing activists' concerns that such a move could fuel violence in the region.
The refinery, which is in Entebbe, south of the capital Kampala, will process raw gold from the region as Uganda has only small mines and no commercial mine.
Rights activists, however, are concerned about the use of gold from conflict areas such as the volatile mineral-rich east of the Democratic Republic of Congo and South Sudan, mired in civil war.
"Gold which is used to finance conflict might be finding its way into supply chains," said George Boden, an activist at London-based rights group Global Witness.
A U.S. law passed in 2010, the Dodd-Frank Act, requires companies to disclose whether their products contain minerals from conflict-ridden parts of Africa. The law aims to hinder armed groups from using minerals to finance conflicts.
"It's a very high compliance refinery. We do due diligence for every customer who comes in," Alain Goetz, the chief executive officer of Africa Gold Refinery (AGR), told Reuters.
Goetz is AGR's majority shareholder and he also owns a stake in Belgian gold refiner Tony Goetz NV.
He said AGR would carefully select its customers, comply with the law and label its gold accordingly.
"Of course we want to sell to American companies, we will sell to American companies. With the compliance and the third party auditing, we'll comply with all the regulations ... including labelling," Goetz said.
Uganda has been keen to attract investors to its mining sector after government surveys established the existence of minerals including gold, base metals, uranium, rare earths, iron, titanium, vermiculite, diamond in various locations.
The factory has an initial output capacity of 300 kilogrammes of pure gold per week, and the ability to increase that to 500 kilograms eventually. Goetz said the gold will be used for coins and jewellery.
Between mid-2009 and mid-2015, Uganda's annual gold exports fluctuated between near zero to just under $40 million, according to central bank data.
Exports rocketed to $204 million in the last financial year, ended in July 2016. Boden said the sudden jump could be due in part to gold smuggled from neighbouring countries and being exported from Uganda. (Editing by Katharine Houreld and Susan Fenton)