itri supply chain initiative and ‘conflict minerals ... · ‘conflict minerals’ traceability...

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Kay Nimmo, Manager of Sustainability and Regulatory AffairsITRI Ltd, St Albans, AL2 2DD, UK, tel: +44(0)1727 871312kay.nimmo@itri.co.uk, www.itri.co.uk

iPAD conferenceKinsahsa, 25 October 2010

ITRI Supply Chain Initiative and ‘conflict minerals’ traceability

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Progression of Tin Mining

� Ipoh city in Malaysia.. renowned for rich tin deposits since 16th century... vulnerable to attempts from rival chiefs to seize thethrone and gain control of the lucrative tin trade... 1850’s Chinese immigrants mining by the use of waterwheel...1877 steam engine…

� Typical technological and social issues

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Where does tin come from …?

ITRI members ~80% tin productionmines or primary smelterssecondary scrap refiners INDICATION ONLY - NOT TO SCALE

traceability

traceability ?traceability ???

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50% of tin from small scale or artisanal mining

0 20 40 60 80 100

Rest of world

Brazil

DR Congo

Bolivia

Peru

Indonesia

China

2007 mine production, '000t

Big Small

Potential for increased production

� Malaysia has minimal tin mining, but is a major smelter and investor

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Forecast supply and tin price

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1990 1995 2000 2005 2010 2015

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40,000Weeks' supply

Prices

�Weeks’ supply, price in US$/tonne �Forecast

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DRC Potential vs Current Reductions

� DRC tin value 1,061 tpm x US$ 26,500 = US$28m per month� Global large scale tin projects mainly 2 or more years away

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Actions in Tin Supply Chain

miner

solder producer

assembler

retailer

consumer

recycler

concentrate trader

smelter refiner

metal trader

EICC, GeSI

negociants, comptoirs

etc

PHASE 2

PHASE 1

USER AUDITS

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iTSCi Phases and Objectives

� A Phased and Constructive Approach Towards Improved Due Diligence, Governance and Traceability

PHASE 1: LEGITIMACY OF EXPORT – AVAILABLE DATA� Harmonised document requirements on all shipments including written

declarations confirming lack of involvement of illegal armed groups

PHASE 2: TRACEABILITY FROM MINE – NEW CHALLENGE� Developing and implementing a system to ensure mineral traceability from

exporter back to the mine site and develop chain of custody data

PHASE 3: SUSTAINABILITY OF SECTOR – LONGER TERM AIM� Implementing basic social and environmental performance standard

measurement at mine sites and consider improvement plans

� Integrating third party independent audits and checking mechanism

� Priority issue of ‘conflict minerals’ – DRC and Rwanda

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PHASE 1

� Data collection

� Independent confirmation

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PHASE 1: Comptoir Certificate

Implemented from 1 st July 2009

� Requires 8-10 official DRC export docs

And best available information on;� COMPTOIR� DESCRIPTION OF MATERIAL� ORIGIN OF MATERIAL� SUPPLY ROUTE� SUPPLIER� BUYER

� Supply Chain awareness and vigilance improved

� Also required for DRC material via Rwanda

� Smelter auditors statement to ITRI

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PHASE 2

� Field implementation

� Data handling/statistics

� Verification

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PHASE 2: Traceability to Mine Site

MinecertificateReference M1234

NegociantsinformationReference N123

ComptoirsinformationReference C789

NegociantsinformationReference N456

MinecertificateReference M1234

MinecertificateReference M1234

MineinformationReference M123

MinecertificateReference M1234

MinecertificateReference M1234

MinecertificateReference M1234

MineinformationReference M456

export

� Initial pilot trial of Phase 2 started June 2010 at Kalimbi, South Kivu

� Pilot project funding from;– Industry comptoir/smelter levy on cassiterite– Contributions from traders, electronics companies, tinplate sector– Contribution from T.I.C. – Ta association

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At the mine

� Kalimbi, South Kivu• Currently Sn only

� SAESSCAM and miners record; • Date• Time • Tag number • Miner/co-operative• Weight• Price• Negociants/buyer• Destination

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At the negociant

� Nyabibwe, South Kivu

� Negociant and Div. of Mines record; • Date • Time • Mine tag number• Mine name• Weight in• Neg. tag number • Weight out• Sales price• Comptoir/buyer• Transport route

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At the comptoir

� Bukavu, South Kivu

� Comptoir and CEEC record: • Date• Time• Negociant tag

number• Mine name • Weight in • Price• Weight out• Export certificate

number (OFIDA)

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IBM ‘Maximo ’ Database & Reporting

� On-line, traceability, reporting, financial software package links� 10,000 entries = 60% of records so far; future >1 million a year� Critical part of project development

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Verification and Audits

� Independent assessment and audit team (Channel Research)• Set up project to define terms of reference and audit method• Monthly monitoring of indicators

1. System integrity– Are suitable key checks made; weight etc – iTSCi database manager– Is tag and book information accurate – assessment team

2. Collection of field information– From iTSCi staff on site– From assessment team – Possible NGO governance network project co-operation

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PHASE 3

� Site conditions

� Co-operation with BGR-CTC

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Conflict Free Smelter Program (EICC/GeSI)

� Drafting audit specifications with ITRI members and NGO’s– First audits by end 2010

� Following audit, smelter is deemed conflict or non-conflict– Suppliers/component manufacturers required to source from

those smelters– High percentage of the tin market

� Audit requirements depend on source location;Level 3 = if sourced from DRCLevel 2 = if sourced from countries adjoining the DRC, or any other

Level 1 country with no plausible mine productionLevel 1 = if sourced from other known production countries

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The International Dimension ….

�US disclosure from…April 2011 (?)

�OECD agreement Oct 2010... roadtest from Jan 2011

�ICGLR proposed Oct 2010…

�75% of Rwandan minerals by Dec 2010, 100% by April 2011

�DRC… currently under a mining suspension ! No funding ! No tagging ! No expansion !

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US Legislation – timing & impact

� Securities Exchange Commission SEC– Currently considering possible draft ‘rules’– First draft by ‘autumn’ 2010– Final rules by 15th April 2011– Could use OECD guidance as basis for rules

� Possible disclosure by US companies from April 2011– Will NOT buy metal from Africa not under iTSCi scheme f rom

April, probably before

� Comments can be made - Title XV - Miscellaneous Provisions http://www.sec.gov/spotlight/regreformcomments.shtml

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OECD Guidance: supply chains of minerals from conflict affected or high risk areas

� Due diligence Framework document– Supplement on tin, tantalum and tungsten– Supplement on gold (not drafted yet)

• Final draft stage, followed by ‘roadtest’

� Annex I: 5 step framework1. Company management systems

C: Systems of control and transparency through chain of custody, traceability etc

2. Identify and assess riskA: Map risks according to mineral supplement

B: Assess risk against supply chain policy

3. Design and implement risk strategy4. Independent third party audits5. Reporting on due diligence

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OECD Step 1:C1 local mineral exporters

EITI iTSCi phase 2

iTSCiass. team

a) all tax etc payments to government � ��

(phase 1)�

b) other payments made to governmental officials � � �

c) all payments to military or other armed groups � � �

d) ownership of the exporter �? � �

e) the mine of mineral origin � � check

f) quantity, dates and method of extraction � � check

g) locations where consolidated, traded, processed � � check

h) identification of upstream actors � � check

i) transportation routes � � check

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OECD Mitigation

� Annex II : model supply chain policy

• Intolerable risks• Illegal armed groups

• Public or private security forces• Bribery and fraudulent risks• Money laundering• Payments to the Government

Suspension or discontinuation

Measurable mitigation

UNDER WHAT TIMESCALES ?

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CONCLUSION

� Traceability is possible� Traceability and risk management is required� International markets purchase deadline Dec 2010 – April 2011

� iTSCi relevant to tin, tantalum, tungsten– Planning for implementation in Rwanda and Katanga

• Requires significant funding for rapid expansion– Local activity, community involvement– Database development– Full auditing

• Support from other programmes– Capacity building of SAESSCAM and CEEC among others

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Thank you!

Further information can be found on ITRI Sustainability webpageswww.itri.co.uk/information/sustainability/default.asp

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Issues in the tin market

� China: • Local mine production now well below domestic demand, low

grade/high cost mines� Indonesia:

• Small scale production falling, environmental issues� Peru:

• Reserves will be exhausted in 6-7 years� Bolivia:

• Issues with state-funded projects

� Mine projects in the rest of the world are low grade and 3 years or more away from start-up

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Tin prices: back to the 80s!

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Pric

es in

US

$/to

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Nominal Price Real Price

�Real prices expressed in December 2009 US$

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Consumption recovers, supply stretched

World Supply/Demand Balances in Refined Tin('000 tonnes) Forecast

2007 2008 2009 2010e 2011WorldWorld Refined Production 344.9 325.6 323.4 324.5 333.5DLA Sales 7.7 3.7 0.0 0.0 0.0World Refined Consumption 355.6 341.1 300.4 344.5 354.2Global Market Balance -3.0 -11.8 23.0 -20.0 -20.7

Reported stocksLME 12.2 7.8 26.8 12.0 5.0Producers 25.7 35.4 28.0 20.0 12.0Consumer/other 13.7 12.5 11.6 12.0 11.0Total 51.6 55.6 66.4 44.0 28.0

World Stock Ratio(weeks consumption) 7.5 8.5 11.5 6.6 4.1

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Where is tin used …..? (2007)

44.1%

8.8%

16.4%

13.9%

5.5%

2.1%9.2% Solders -

electronic

Solders -industrial

Tinplate

Chemicals

Brass &Bronze

Float glass

Other