Mining Mirror April 2019 | Page 9

Global Ethical mineral sourcing: opportunities and challenges Ethical sourcing of minerals used in electronic equipment has become a hot topic of late, writes Nicolaas C Steenkamp and Breton Scott. About the authors Breton Scott has over two decades of post- qualification experience in the mining and project engineering industry. He has been involved in a variety of activities, ranging from mine operations, project management, mining and rock engineering, mineral asset valuations, due diligences, EPCM contracts, and related feasibility studies. Nicolaas Steenkamp has a decade and a half of post-qualification experience in the geological and geotechnical industry. He has been involved in various activities, including exploration, geochemistry, geological and geotechnical, desktop studies, due diligence, EPCM contracts, and related feasibility studies. Background The DRC suffered an extended period of conflict and unfortunately became infamous for producing conflict minerals and gemstones, leading to the coining of terms such as ‘blood diamonds’ and ‘conflict minerals’. In recent years, the concern has moved from gemstones to critical metals, specifically cobalt, and the use of forced and child labour. Cobalt is considered a critical mineral for all modern electronics, particularly in the rechargeable battery sector. The other minerals produced in the so-called Great Lakes of Africa, namely tin, tungsten, tantalum, and gold, became the focus of social awareness groups. This has motivated several large multinational companies to demand proof that the minerals and materials supplied and used by them in the production of their goods are considered conflict-free. Conflict in the Central African Republic exposed widespread smuggling and links to conflict, and Zimbabwe’s diamonds documented hidden links that have funnelled significant diamond revenues to the partisan army and intelligence services. South American countries such as Peru and Columbia have also been cited as sources of conflict gold. The Southeast Asia region, in turn, is known for conflict gemstone smuggling. Industry requirements Section 1502 of the Dodd-Frank Act addresses conflict minerals by setting requirements for due diligence, reporting, and public disclosure, www.miningmirror.co.za I n recent years, there has been an increase in the requirements of sourcing ore from artisanal and informal small-scale miners. This mostly relates to ensuring that the material was not obtained through child labour or forced mining to fund conflicts. The passing of the Dodd-Frank Act relating to tin, tungsten, tantalite, and gold (3TG) mined in the Great Lakes region of Central Africa, states increased scrutiny by the London Metals Exchange (LME), focusing on tin, cobalt, and potentially, copper, sourced from the Democratic Republic of the Congo (DRC) and hence, broadening of the definition of ‘conflict’ or ‘blood’ diamonds by the Kimberly Process (KP). Goma, the capital of the North Kivu province in eastern DRC — a region known, in the past, to be a hotspot for trading in conflict minerals. and is designed to ensure accountability and discourage companies from doing business in ways that ultimately support exploitation and finance conflict. It affects the DRC and all its neighbours, including Angola, Burundi, Central African Republic, Republic of Congo, Rwanda, South Sudan, Tanzania, and Zambia. All parties that are subject to the Act are required to file a Specialised Disclosure Report (Form SD) and depending on the origin of their conflict minerals or level of determination, issuers may need to submit a Conflict Minerals Report (CMR). This reporting can be a complementary output of a third-party audit process. The Independent Private Sector Audit (IPSA) of CMRs must be conducted in accordance with the requirements of the Generally Accepted Government Auditing Standards (GAGAS) as established by the US Government Accountability Office (GAO). The London Bullion Market Association (LBMA) has issued the LBMA Responsible Gold Programme based on anti-money laundering principles as well as the OECD Due Diligence Guide’s five-step framework for risk-based due diligence. The London Bullion Market’s Responsible Gold Guidance Sourcing Programme is mandatory for all of its accredited refiners. The companies are audited annually under the programme and are required to report publicly. It requires the companies to securely record data on brand, origin, custody, and location on a global platform, with blockchain seen as a possible solution. The new LBMA guidelines now also call for regulation of the safety and environmental factors associated with the sourcing of the gold from small-scale or artisanal sources. The seriousness of enforcing these requirements was demonstrated in May 2018 when Elemetal, previously one of the biggest US refiners, was sentenced on charges linked to illegally mined gold from Peru. The Responsible Jewellery Council (RJC), an international, not-for-profit organisation established to reinforce consumer confidence in the jewellery industry, initiated its Chain- of-Custody (CoC) Standard and supporting documents for the precious metals supply chain. This called for two main requirements: conflict- free as a minimum and responsibly produced at each step of the supply chain. Conflict-free diamonds The KP is a binding agreement that prevents conflict diamonds from entering the mainstream rough-diamond market. The current format of the KP applies to only rough diamonds, allowing stones that are fully or partially cut and polished to fall outside the scope of the initiative. The LME is reviewing its requirements to ensure that no metal traded on the bourse has links to child labour, conflict, or corruption. Copper producers that buy from the DRC will be categorised as higher-risk suppliers, alongside manufacturers of tin and cobalt (the changes, however, have not been made public yet). The designation will mean that copper producers could be removed from the LME’s APRIL 2019 MINING MIRROR [7]