Global
list of deliverable brands unless a third-party
auditor signs off on their sourcing standards.
While there are no LME-listed copper
brands originating from the DRC, smelters
in neighbouring Zambia that import semi-
processed ores, known as concentrates, from
the DRC, may need to carry out audits.
The United Nations Guiding Principles
on Business and Human Rights make it clear
that companies have a responsibility to ensure
that they do not finance conflict or human
rights abuses. Supply chain due diligence is the
internationally accepted way through which
companies can meet this responsibility.
A practical standard has been developed by
the Organisation for Economic Cooperation
and Development, which covers diamonds,
gold, tin, tungsten, and tantalum. The five-step
process can basically be summarised as:
• Establish strong company management
systems;
• Identify and assess risks in the supply
chain;
• Design and implement a strategy to
respond to identified risks;
• Carry out independent third-party
audits of refinery/smelters due diligence
practices; and
• Report annually on supply chain due
diligence.
Independent auditing
As regulatory deadlines approach,
organisations need to ensure that their
conflict minerals due diligence systems are
effective and meet requirements. A review
of due diligence systems to identify any
gaps between organisations’ existing systems
and the recommendations outlined in the
OECD Due Diligence Guidance, or a specific
industry framework, such as the EICC CFSI
Checklist. Impartial audits and certification
ensure consistency, accuracy, and reliability and
demonstrate the highest level of commitment
Associated costs
ITSCI was introduced after the 2010 Dodd-
Frank legislation was drawn up in response
to the global financial crisis and required US
companies to vet their supply chains. The
scheme has provided a way for companies to
continue to use minerals from the designated
countries.
These initiatives, however, come with a price
tag. The current cost associated with a mine
being a member of the scheme is that the costs
range between USD130 and USD180 per
ton, depending on the mineral. Small-scale
or artisanal miners incur about USD3.5 per
kilogram. It is also the main criticisms against
the current system used by the ITSCI: that it
does not review the traceability cost, becoming
an increasing burden to the participants. The
only concern that stops some of the Rwandan
miners from joining other traceability
programmes, for example, is whether or not
the end buyers will recognise those schemes.
The industry has expressed concerns that
the responsible-sourcing efforts could result in
a disconnect in pricing between audited and
unaudited brands. The industry is also keen to
avoid a mass delisting if producers are not able to
complete the reviews before a planned deadline.
www.miningmirror.co.za
The introduction of the concept of the value
stack will have a significant impact on the
industry in the affected countries. The value
stack will distribute the cost for implementing
and operating the system, the lowest cost being
incurred by the primary producers of the ore
and increasing the contribution to higher-end
users that want to ensure that their product is
certified as conflict-free.
Practical applications
The process combines ground visits and spot
checks to ‘assess and verify’ the responsible
practices of counterparties. This can be done by
the independent consultant and substituted by
the use of drone-based monitoring.
Firms will use a platform to tag and trace
minerals and gemstones mined in conflict
areas as it goes through the supply chain as
opposed to manual tracing systems that rely
on paperwork. Unique tags are electronically
generated from various mining sites, which
will act as an online record tracing the minerals
from the source to refinery. The system of
bagging and tagging metals is designed as a
guarantee that the minerals in question are
unconnected with conflict, child labour, or
other human rights abuses.
The system can be supplemented with
technology such as facial recognition and a
database that captures geographical longitudes
and latitudes, and geochemical characteristics,
among other aspects. This type of system,
based on blockchain platforms, generates
an open, distributed ledger that can record
transactions along the value chain. User-
friendliness is another consideration, such as
smartphone applications to record the tag and
trace the minerals or gemstones as it progresses
through the system. Companies can trace
metal even as it is processed into intermediate
products and mixed with other raw materials.
Blockchain
A number of proof-of-concept blockchain
platforms are being developed by the minerals
and mining industry. A global standard
platform still needs to be developed, accepted
by industry, and the use thereof implemented.
The diamond and gold industries are taking
the lead in this regard.
De Beers has developed a blockchain
platform that is intended as a digital certificate,
created by Tracr, for each diamond registered
on the platform and storing its key attributes
and transactions. It will enable retailers to
provide consumers with confidence that the
diamond is natural and conflict-free and has
been tracked across the value chain.
The main advantage touted for the use of
blockchain platforms is that it will change
the current model of incurring traceability
costs, shifting it from miners to the end users.
Provisional surveys and studies conducted
have shown that there is more demand for
traceability higher in the value chain among
users of the minerals and that end consumers
would be willing and able to pay to ensure
that the product is conflict-free. This will
have a major impact on small-scale and
artisanal buyer companies downstream that,
to date, have had to shoulder a larger portion
of the cost with little value added for them.
Purchasing from artisanal miners
There are several models for the purchase of
minerals and gems for artisanal miners. The
two most popular options are: establishing
cooperatives for the artisanal miners that can
sell to the larger companies, or establishing
purchase centres at mines.
The cheapest option is done by organising
artisanal miners into legal business entities,
such as cooperatives, and providing them with
the required training. It is beneficial to cluster
these operations geographically into units of
five to 10 operations and assign an engineer
and a health and safety officer to each cluster.
This is followed by creating a central buying
agency that will legally buy from these miners
and offer them market-related prices.
Incentives related to enlisting artisanal
miners into cooperatives will also facilitate
compliance with regulations. As a case study:
In La Llanada, Colombia, members of the
Coodmilla mining cooperative are paid the
equivalent of USD8 for a gram of guideline-
compliant gold and USD6 for a non-
compliant gram in 2018. With the premium,
they have been able to fund health, nutrition,
and work training programmes.
The second option is to establish a purchase
centre and buy directly from the artisanal
miners. It is a more reliable system, but entails
additional start-up costs. These costs include
the security (both active and passive), the
registration system of the accredited artisanal
miners, testing and weighing equipment,
shipping package material and tags, along
with computers and Internet connection.
Running costs are related mainly to staff and
transport.
Bowline Professional Services offer auditing
and consulting services to meet industry
requirements. Auditing of sourcing ore can
be done to demonstrate compliance with the
OECD’s responsible-sourcing guidelines.
Bowline Professional Services also offer
consulting services to meet industry best
practices and standards to establish provenance
of purchases of ore concentrates or gems from
artisanal or informal small-scale miners.
Consultation services include:
• In-loco inspections and audits of mining
and purchase sites;
• Guidance on passive and active
monitoring of mining activities;
• Trade-offs for identification systems,
including biometric, for registration of
artisanal sellers;
• Scrutiny on selection of security measures
and companies for buyer centres and
stockpiling warehouses;
• Evaluation of active and passive
infrastructure security;
• Selection and training in use of
geochemical testing instruments to
determine grade of ore material or
concentrates and sorting, as well as
determining potential provenance of ore;
• Assistance on selection of applicable
blockchain platform and databases;
• Guidance on monitoring methods, from
stockpile and packing area and along the
transport route to final destination;
• Selection of tamper-proof seals and RF
tags; and
• Periodic audit and monitoring reports.
APRIL 2019 MINING MIRROR [9]