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Conflict Free Minerals

Supply Chain Workshop 11

Hong Kong

May 8 &9, 2013

Photo by Jay Celorie

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Conflict Free Minerals

Supply Chain Workshop 11

Welcome

Rob Lederer,

EICC Executive Director

May 8-9, 2013

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EICC® Members (As of Feb. 7, 2013)

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Agenda, Day 1

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13:15-14:00

Conflict-Free Minerals Chain of Custody: From the Great Lakes

Region to Product

14:00-14:45 Regulatory Update (North America and European Union)

14:45-15:15 Break (foyer outside Picasso)

15:15-16:45

Update on Implementation in the GLR: Current Status, Next Steps,

and Key Challenges

16:45-17:15

Compliance and Reporting Tools for Smelters and Downstream

Companies

17:15-17:50 Panel: CFS – Smelter Perspectives

17:45-18:00 Closing Remarks and Adjourn to Reception

18:00-20:00 Reception, sponsored by KPMG

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Ground Rules • Chatham House Rule: Participants are free to use the

information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.

• No audio or video recording

• Respectful participation

• Focus on issues, not individuals or organizations

• Listen respectfully (limit side conversation)

• Speak clearly

• Introduce yourself before speaking

• Mobile phones off or silent

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Antitrust Guidelines Meetings and programs should be conducted so as to eliminate

questions regarding antitrust compliance.

Under no circumstances shall the meetings of this group be used

as a means for competing companies to reach any understanding,

expressed or implied, which tends to restrict competition, or in any

way to impair the ability of members to exercise independent

business judgment regarding matters effecting competition.

These guidelines apply not only to discussions during a formal

meeting, but to all informal discussions as well.

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Antitrust Guidelines

Meeting participants should not discuss (or

exchange information regarding) any of the

following topics with their competitors:

• Prices

• Quantity

• Customers

• Sales

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“No Suitcasing” Policy for Vendors

Beginning with this workshop, EICC and GeSI will not

allow solicitation from non-sponsoring companies.

All EICC and GeSI members and other attendees are

asked to report solicitation; any companies found not to

honor this policy will not be permitted to attend EICC and

GeSI workshops for one year.

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would like to thank our Workshop XI Sponsors:

and

Conflict Free Minerals Supply Chain Workshop 11

Welcome

Hong Kong

Jay Celorie, Hewlett-Packard, GeSI & EICC

Bob Leet, Intel, EICC

May 8-9, 2013

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Extractives WG becomes the CFSI

Conflict Free Sourcing Initiative (CFSI) (Announced April 30th)

EICC and GeSI are pleased to announce the transition of its

Extractives WG name to become the CFSI

• Includes existing efforts: Conflict Free Smelter Program,

Reporting Template, In-region Sourcing, Education,

Industry-leading Practices Development, Distinguishing

multi-industry supporters

• Non-profit tax exempt status support (via EICC & GeSI)

• Directly incorporating NGO/Civil Society participation [future]

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EICC® Members (As of Feb. 7, 2013)

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GeSI Members (as of Jan 2013)

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CFSI Partners ( As of April 20, 2013 )

Partner Industry Associations

Non-Member Partner Companies

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CFSI Commitment

The CFSI is committed to improving conditions in its supply chain and mining activities that fuel conflict are unacceptable.

In order to enable participating companies to source conflict-free minerals, we are taking action by:

• Implementing Conflict-Free Smelter and Due Diligence Programs

• Supporting in-region sourcing schemes to enable future legitimate trade from DRC and surrounding countries

• Supporting OECD due diligence guidance and pilot

• Engaging with stakeholders for collaboration and efficiency

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Upstream

Smelters /

Refiners

Downstream

Conflict Free Smelter

(CFS) Program

Raw Materials

Finished Products

CFSI Supply Chain Strategy

Why Here?

1) Conversion

2) Small Numbers

(<500)

RCOI \ Due Diligence

In-Region Sourcing

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Governance Changes for the CFSI

• The initiative is undergoing continued

improvement

• Name change to something more representative

• Definition of future structure (upstream / downstream /

NGO)

• Definition of future revenue generation (membership,

recognition-based, royalties)

• Program improvements (CFS, Due Diligence, Practices)

• Overall development and implementation will

continue in 2013 and continue into 2014

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Options for CFSI Participation

EICC or GeSI Membership

• Full Membership provides access to all WGs ( http://www.eicc.info/Membership_Application.shtml ) ( http://www.gesi.org/Membership/tabid/59/Default.aspx )

CFSI Partner Company Participation ( http://www.eicc.info/documents/ExternalWGMembers-Companies.pdf )

• $5K fee annually

• Voting rights

• CFSI Work Group (WG) and sub-WG activities participation and information

CFSI Partner Association Participation ( http://www.eicc.info/documents/ExternalWGMembers-Organizations.pdf )

• $20K fee annually

• Voting rights (one vote for organization)

• Up to two participants per CFSI Workgroup or sub-WG responsible for disseminating all information (staff or constituent members welcome)

White Paper on Extractives WG (CFSI WG) available (www.conflictfreesmelter.org)

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In-Region Schemes

Conflict Free Smelter Program (CFS)

Company Assurance

Finished

Product

MINE SMELTER/REFINERY OEMS

CFSI Conflict-Free Sourcing Approach

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Conflict Free Minerals

Supply Chain Workshop XI

Workshop

Sponsors:

5/8/2013

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Conflict-Free Minerals Chain of Custody: From the Great Lakes Region to Product

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22 www.rcsglobal.com

Conflict-Free Minerals

Chain of Custody:

From the Great Lakes

Region to Product

Harrison Mitchell

Director

www.rcsglobal.com

May 2013

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23 www.rcsglobal.com

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Understanding conflict minerals due diligence

INTRODUCTION

This presentation covers:

• Background to conflict in DRCongo and conflict minerals

• Description of the conflict mineral supply chain

• The US SEC rule and how it affects the mid and upstream

• Assurance processes and schemes and how they align

• Issues and questions

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THE DRC AND THE SUPPLY CHAIN

What is the issue?

• Democratic Republic of the Congo is a huge country in central Africa the size of Western Europe

• Borders with 9 other countries • Conflict for the past 20 years, one of

the worst wars since WWII • Currently most parts are at peace,

but localised conflict endures in the Eastern DRC

• US introduced a law via the Securities and Exchange Commission that affects the sourcing of 3Ts and gold material from the DRC and 9 surrounding countries

• EU rule possible

www.rcsglobal.com

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THE DRC AND THE SUPPLY CHAIN

What are Conflict Minerals?

• Tin, tantalum, tungsten and gold and corresponding ores (SEC)

• These minerals and other commodities were/are used to fund illegally armed groups

• Conflict minerals regulations in the US require SEC listed companies to conduct due diligence on their supply chains

• In reality – this means due diligence requests will be pushed down the supply chain – changes are already occurring in the supply chain and are here to stay

• A number of initiatives to assure conflict free material is currently in operation up and down the supply chain

www.rcsglobal.com

Cassiterite (tin) is weighed, guarded by soldiers

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UPSTREAM MINERS TO TRADERS TO SMELTERS

www.rcsglobal.com

The DRC + 9 Supply Chain for 3Ts • >5% of tin, 15-20% of tantalum, >5% of

wolfram. Gold? • However, the region an increasingly

important source of minerals both strategically in terms of world market sourcing and in volume

• Generally minerals move from the DRC or other producing states through neighbouring countries such as Rwanda and Uganda to the ports of Kenya and Tanzania. Sometimes material goes via land to South Africa

• International traders purchase the material from origin or transit countries

• Generally the material is sold to smelters in Asia who sell on to manufacturers

Gold follows a different supply chain

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SUPPLY CHAIN AT A GLANCE

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Miners

Exporters

Int. Traders

Smelters

Refiners

Manufacturers

Component

Manufacturers

Brands

Supply Chain Due

Diligence

Upstream

Midstream

Downstream

Due Diligence

Certification & Assurance schemes

CFS program

SEC Audit

Due diligence should be appropriate according to your position in the supply chain

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SUPPLY CHAIN STANDARDS

www.rcsglobal.com

Miners

Exporters

Int. Traders

Smelters

Refiners

Manufacturers

Component

Manufacturers

Brands

Upstream Certification and Assurance schemes • ITSCI • CFTI • BGR • ICGLR RCM • Solutions for Hope • World Gold Council

(gold) • Others forthcoming Midstream = few • The Conflict Free

Sourcing Program • The LBMA (gold) • The RJC (gold) Downstream SEC requirements • RJC • IPC in US • Audits standards

forthcoming

International Standard = OECD DD Guidance

Upstream

Midstream

Downstream

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SUPPLY CHAIN STANDARDS

www.rcsglobal.com

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HOW SYSTEMS ALIGN

www.rcsglobal.com

Mine Site Chain of Custody Refiner / Smelter Tier 2 and beyond Tier 1 Issuer / Manufacturer

Ensures site is secure

AUDIT Traceability

scheme AUDIT

CFS smelter DD

ensures upstream is

secure

AUDIT

Due Diligence reporting through supply chain

AUDIT SEC Audit

on suppliers

AUDIT

US Law: SEC Due Diligence (in theory)

SEC issuer requirements (in practice)

CFS Smelter requirements (in practice)

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KEY ISSUES

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Issues

• The integrated supply chain from mine to smelter works, but it is in the process of being set up. Downstream assurance and certification does not cover all of the material from the DRC and 9 surrounding countries

• Un-certified material from DRC is still being sold as a discount to Chinese buyers

• CFS program is very good on tantalum, tin and tungsten smelters are slow to join. Yet CFS is key to downstream due diligence approaches!

• Downstream is slow to start due diligence, not coordinated, audit process not yet defined = lots of uncoordinated requests for information in mid part of supply chain

• Lack of guidance in manufacturer segment from brand to smelter –

manufacturers tend to approach this as environmental diligence – but DD has more emphasis on both activity of DD and ensuring source of material is free from conflict and human rights abuses

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HOW DOES DUE DILIGENCE FIT IN WITH ENVIRONMENTAL REGULATIONS

LIKE ROHS2, REACH, AND WEEE?

RoHS2

Bans the use of

certain dangerous

chemicals in

electronic

appliances (see

REACh)

REACh

Identification and

labeling of

potentially armful

chemicals,

dissemination of

standardized

information

⚔ Conflict Minerals

Due Diligence

Ensures that no

minerals used found

the illegal activities

of armed groups in

the DRC

WEEE

Ensures companies

selling electronic

appliances recycle

them

• Except REACh, are all forms of due diligence BUT have different aims and different geographies of

implementation

• Conflict Minerals Due Diligence is an active process of due diligence. The emphasis is on conducting

due diligence in your area of influence (OECD)

• We advise:

• Understand your position in the supply chain, and the legal or customer pressures that will

influence you

• Devise policy and approach appropriate to your position

• Use industry tools

www.rcsglobal.com

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OUR CLIENTS

www.rcsglobal.com

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harrison@rcsglobal.com

www.rcsglobal.com

Conflict-Free

Minerals Chain

of Custody:

From the Great

Lakes Region

to Product

www.rcsglobal.com

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Conflict Free Minerals

Supply Chain Workshop XI

Workshop

Sponsors:

5/8/2013

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PAGE 37

North America and European Union Regulatory Update

Conflict Minerals Regulatory Update

EICC and GeSI Conflict Free Minerals Supply Chain Workshop

May 8, 2013

Lauren Hopkins

Beveridge & Diamond, P.C.

415-262-4013 – lhopkins@bdlaw.com

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Background: Dodd-Frank Law

• Conflict minerals provision (section 1502) included in massive U.S. financial reform law: Dodd-Frank Wall Street Reform and Consumer Protection Act (enacted July 2010)

• Mandates public disclosure by certain companies if

– “conflict minerals” (or metals derived from them)

– are “necessary to the functionality or production of”

– a product that they “manufacture” or (in certain cases) that they “contract to manufacture”

• Disclosure, not restriction: transparency in supply chain will drive conflict-free sourcing initiatives, i.e., “name and shame”

• Applies directly to companies that report to SEC and indirectly to their suppliers: ripple effect through supply chain

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Background: SEC Rulemaking

• SEC issued proposed rule in December 2010

• April 2011 statutory deadline for final rule

• Significant stakeholder engagement

– Extended public comment period

– SEC Roundtable

• Finalized with a 3-2 vote on August 22, 2012

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Minerals At Issue

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Cassiterite (Tin)

Columbite-Tantalite (Tantalum)

Wolframite (Tungsten)

Gold

• Tin cans

• Solder

• High performance

paint

• Electronics

• Airbags

• Jet Engines

• Drill bits & tools

• Electronics

• Semiconductors

• Jewelry

• Drill bits

• Metalworking tools

• Electrodes

• Welding applications

Rule does not apply

Conduct Reasonable Country of Origin Inquiry (RCOI)

File a Form SD w/ description of RCOI

Exercise due diligence (e.g., OECD, CFS)

Are minerals scrap or recycled?

Are minerals scrap/recycled or not from Covered

Countries?

Conflict Minerals Report (CMR) w/ Form SD

CMR w/ independent private sector audit

CMR w/ list of “DRC Conflict Undeterminable” products

File a Form SD w/ description of due

diligence measures

Issuer manufactures or contracts to

manufacture?

Did minerals finance or benefit militias?

<2 yrs after effectiveness of Rule?

Issuer files reports with

the SEC?

NO NO NO

NO

NO

NO

NO

NO or UNKNOWN NO

YES

YES

YES

YES

YES

YES YES YES

Conflict minerals outside supply chain before

1/31/13?

Conflict minerals “necessary to functionality or

production”?

YES

Minerals from Covered Countries?

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Rule Overview: Basic Three-Step Process

1. Determine applicability

2. Potentially: Conduct “reasonable

country of origin inquiry”

3. Potentially: Exercise due diligence on

supply chain and file an audited Conflict

Minerals Report

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Any issuer that files reports with SEC under Exchange Act sections 13(a) or 15(d)

• Includes:

• U.S. Companies that issue stock

• Foreign private issuers that file Form-20F or 40F

• Regardless of size

• Excludes:

• Foreign private issuers of unsponsored ADRs

Conflict minerals are necessary to the functionality or

production of a product the issuer manufactures

or “contracts to manufacture”

Step 1: Applicability

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AND

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1. Determine applicability

2. Conduct “reasonable country

of origin inquiry”

3. Potentially: Exercise due diligence on

supply chain and file an audited Conflict

Minerals Report

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Step 2: Reasonable Country of Origin Inquiry (RCOI)

Designed to evaluate whether minerals in a company’s supply chain originated from:

• Recycled /scrap sources; or

• Outside Covered Countries.

Determines whether Step 3 due diligence

is necessary

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Step 2: The Disclosure

File Form SD to describe RCOI

and results; and

Post Form SD disclosure on

website

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Even if the issuer is not required to move on to Step 3, the issuer still must:

1. Determine applicability

2. Conduct “reasonable

country of origin inquiry”

3. Exercise due diligence on supply

chain and file an audited Conflict Minerals Report

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Step 3: The Conflict Minerals Report

Not all companies that advance to Step 3 must file a Conflict Minerals Report

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Like RCOI, if due diligence shows conflict minerals came from recycled/scrap

materials or outside the Covered Countries, then no Conflict Minerals

Report is necessary

Company would then file Form SD with a description of due diligence and results

No CMR

No Audit

FAQ and Key Ambiguities

• Definition of product

• Contract to manufacture

• Catalysts

• Extent of due diligence required

• Applicability to non-US companies

• Timing

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Critical Tools

• Your existing supply chain management practices • Industry reporting tools

– EICC-GeSI reporting template – Conflict Free Smelter program – AIAG – IPC

• Reports on OECD guidance pilot – Practical feedback from on-the-ground

implementation – Examples of supplier engagement

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Litigation

• U.S. Chamber of Commerce, Business Roundtable, and National Association of Manufacturers petitioned the D.C. Circuit for judicial review of the final rule

• Petitioners take issue with the SEC’s: – economic analysis; – failure to include a de minimis exception; – inclusion of non-manufacturers that "contract to manufacture"; – interpretation of the statutory phrase "did originate [in a

covered country]" to mean "reason to believe . . . may have originated [in a covered country]";

– structure of the transition period; and – compelled speech in violation of the First Amendment

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Litigation, cont’d

• The SEC countered

– The economic analysis is robust

– The final rule is reasonable, given the statutory mandate from Congress

• Intervenor and amici also filed briefs

– Amnesty International

– Global Witness

– American Coatings Association

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Litigation, cont’d

• Rule is still in effect pending judicial review • Court granted Petitioners’ motion to expedite review

– Briefing is complete – Oral arguments were scheduled for May 15 – Final decision was expected as early as July 2013

• BUT on April 29, 2013, Court issued order canceling oral argument, suggesting it would dismiss for lack of jurisdiction – Petitioners filed unopposed motion 4/30 seeking transfer to U.S.

District Court for District of Columbia (lower court) to avoid delay – D.C. Circuit granted motion 5/3; case and file now transferred to

District Court

• Result: massive delays overall and near certainty of appeal • Petitioners may seek SEC or judicial stay of the rule

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Other Developments

• EU – The European Commission opened a public consultation to inform

recommendations on the nature of a potential EU due diligence initiative

• Canada – Legislation pending before the Parliament of Canada that would

impose reporting requirements similar to those in the US on Canadian companies

• US States – California and Maryland have enacted statutes that bar any company

that does not fulfill its Dodd-Frank obligations from state contracting – Similar legislation is pending in Massachusetts and Connecticut

• Private Procurement – Some universities and municipalities considering Dodd-Frank

compliance in purchasing

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Parting Thoughts

• In the U.S., most companies are invested in compliance and can be expected to continue efforts to better understand supply chain even if SEC rule is struck down or stayed

• Watch for other legal measures on conflict minerals outside the U.S.

• Differences among political goals and regulatory infrastructures will likely prevent complete alignment of regulatory schemes and reporting formats

• OECD remains an important forum for policy and technical coordination

• EICC GeSI tools will remain touchstones of due diligence

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For Additional Information: Lauren Hopkins, Beveridge & Diamond, P.C.

lhopkins@bdlaw.com Paul Hagen, Beveridge & Diamond, P.C.

phagen@bdlaw.com Rick Goss, Information Technology Industry Council

rgoss@itic.org

PAGE 58

EU Regulatory Update Petros Sourmelis DG Trade, European Commission

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Conflict Free Minerals

Supply Chain Workshop XI

Workshop

Sponsors:

PAGE 60

Update on Implementation in the Great Lakes Region: Current Status, Next Steps, and Key Challenges

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MINERAL TRANSPARENCY INITIATIVES IN RWANDA

ICGLR/RCM & iTSCi Scheme

by Dr BIRYABAREMA Michael

Deputy Director General

Rwanda Natural Resources Authority

Geology and Mines Department

RNRA/GMD

REPUBLIC OF RWANDA

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Overview

1) Importance of the mining sector in Rwanda

2) Implementation Status of the International

Conference on the Great Lakes Region /Regional

Certification Mechanism for Mineral (ICGLR/RCM)

3) Transparency in ITRI Tin Supply Chain Initiative

(iTSCi Scheme)

IMPORTANCE OF THE MINING SECTOR IN

RWANDA

• Recent privatization of the mining sector from a public company

started in 2006;

• The industry is becoming vibrant and currently has more than

two hundred and fifty companies and cooperatives (mining,

exploring and prospecting). Mining is taking place at 547 mine

sites (verified by ITRI);

• Currently, the Sector employs at least 20,000 people, excluding

people working in quarries;

• Since 1999 the industry is growing at an average rate of more

than 10% per year as indicated in the graph below (in terms of

revenue and volume);

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Sector Growth

Year

Export earning

s (Million

s of US$)

Exports in Volume (Tons)

1999 6.9 943 2000 12.6 1,012 2001 42.6 2,102 2002 15.9 2,083 2003 11.1 2,599 2004 29.3 5,082 2005 37.3 6,465 2006 37.0 6,187 2007 70.6 8,283 2008 94.0 7,364 2009 54.6 7,960 2010 71.0 8,406 2011 158.0 9,697 2012 136.3 7588

0

2000

4000

6000

8000

10000

12000

1997 2002 2007 2012

EX

PO

RT

ED

VO

LU

ME

( T

ON

S)

Year

VOLUME OF EXPORTS, 1999 TO 2012

VOLUME ( TONS )

Linear (VOLUME ( TONS ))

0

50

100

150

200

1997 2002 2007 2012

EX

PO

RT

EA

RN

ING

S (

MIL

LIO

NS

OF

US

D )

YEAR

EXPORT EARNINGS FROM 1999 TO

2012

VALUE ( MILLIONS OF

USD )

Linear (VALUE (

MILLIONS OF USD ))

7 May 2013

7 YGP (2010 – 2017) targets for the Mining Sector

o Setting up an enabling legal environment for increased investments in the

Mining Sector; new policy, new mining law, a number of regulations etc;

o Knowledge of national mineral potential through continuation of exploration activities in minerals like, Gold, Nickel, Copper, Platinum, Cassiterite, Wolfram, Coltan, etc.; In 2012, public exploration cost two million Euros in addition to the work done by the private sector. At least another two million Euros is planned to be spent in 2013/2014 for mineral exploration funded by the government. The current public exploration program is contracted to BEAK Consultants from Germany.

o Mineral production levels are planned to triple to USD 400 million by 2017;

o There are planned value addition projects, like tin smelting; the sector is being

boosted become the second main foreign exchange earners for the country,

next to tourism and ahead of traditional coffee and tea;

IMPORTANCE OF THE MINING

SECTOR IN RWANDA

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• Adoption of a Ministerial Regulations

No 002//2012/MINIRENA of

28/03/2012 Implementing ICGLR/RCM;

• Recent appointment of a new Minister

in Charge of Mining (Feb 2013);

Honorable Evode Imena;

• Completion of a comprehensive mine

site Inspection Manual;

• Awareness campaign on the legislation

of ICGLR/RCM for minerals to all stake

holdres;

• Extensive mine site inspections

through out the country is being done;

IMPLEMENTATION STATUS OF

ICGLR/RCM

Newly Appointed Rwanda Minister in Charge

of Mining with ITRI delegates from London

Kigali, April 2013

Add picture here of mine

site inspections in

• The ICGLR Audit Committee is in place since December 2012;

• Final daft documents to apply for an ICGLR Mineral Export

Certificate, are available;

• A final template of the ICGLR Export Certificate is available

with necessary security features to assure smelters and their

clients of the credibility of minerals from the Great Lakes

Region;

IMPLEMENTATION STATUS OF

ICGLR/RCM

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• Finalization of a database to be used in

sharing mining information between GoR

and ICGLR Secretariat;

• An MoU has been signed between Rwanda

Bureau of Standards (RBS) and Rwanda

Natural Resources Authority to

operationalize the ICLGR Mineral Certification

Office;

• Recruitment & training of Staff for ICGLR

Certification Office is complete;

• Completion of the audit of Chain of Custody

(iTSCi Scheme) by ICGLR independent

Auditor: draft report available;

IMPLEMENTATION STATUS OF

ICGLR/RCM

TRANSPARENCY IN iTSCi SCHEME

• The iTSCi Scheme is jointly managed by GoR and

iTSCi/ITRI; the later has pamanent staff in Rwanda

currently being expanded;

• All minerals from Rwanda are traced from mine site to

smelters under iTSCi Scheme :100% of exports are

tagged;

• 95 GoR agents manage the tagging system at 547

mine sites with frequent supervision of iTSCi staff;

plans are under way to increase the number to 200;

• Incidents are reported in case of any suspected

anomalies in the supply chain; these jointly

investigated by the GoR (GMD) and the iTSCi

representatives;

• Channel Research (Independent auditors) evaluate

the chain of custody twice a year;

• The use of PDA is being tested for better accuracy and

timely delivery of data to the data bases;

Proposed PDA to be used in

mineral tagging_ April 2013

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• A Mineral Sampling Campaign to be jointly

conducted by iTSCi/ITRI and GoR will soon be

underway in mid May 2013;

• A Steering Committee to manage traceability

incidents composed of representatives of

GoR, Civil Society, industry and iTSCi/ITRI has

been inaugurated;

• Regular trainings of GoR agents and the

industry on the implementation of mineral

certification schemes; usually jointly

organized by iTSCi and the Geology and

Mines Department;

• Annual review of baseline studies of each

mine site to know the production capacity of

each mine; run by iTSCi;

TRANSPARENCY IN iTSCi SCHEME

POTENTIAL HARMONIZATION

OF DUE DILIGENCE INITIATIVES

All stakeholders (iTSCi/ITRI & ICGLR/RCM) should

• Consider exploring the potential for harmonization of audits; looking

into the feasibility of progressive alignment i.e. Possible joint audits for

Channel Research and ICGLR independent auditors;

This would reduce audit fatigue on mining operators in Rwanda

and also reduce the implementation costs of iTSCi Scheme and

ICGLR/RCM;

The upstream partners are being overwhelmed by the many requirements from downstream partners, and auditors and “regulators”; There is need to share responsibility like costs.

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MURAKOZE

Thank you

©

ITRI Tin Supply Chain Initiative (iTSCi): contributing to minerals traceability and due

diligence in Central Africa

Andrew Cooper, Materials Stewardship Manager, ITRI

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©

iTSCi Objectives

Ensure continued access to central African markets

Provide information for end user audits (CFS of EICC/GeSI)

Allow companies to comply with US law (SEC)

Traceability from mine to smelter meeting international requirements (OECD,UN)

©

Elements of the iTSCi scheme

Chain of custody data

– Document collection

– Tagging system

– Data management

Risk assessment and recommendations

– On the ground information

– Community involvement

– Information from other sources such as EITI

Independent verification

– On chain of custody

– On risk assessment and mitigation

– Link with Conflict Free Smelter audit of end users

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©

Regional importance

Economic growth

Mining can support regional growth and development

Trading

Backbone for trading other goods and services

Livelihoods

400,000 miners with 2 million dependents

©

What are the challenges?

Informal mining sector

Weak traceability and transparency

Strict end user requirements

US ‘Conflict minerals’ Law

Capacity building

Complex social and political

environments

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©

Progress

>200 mine sites covered in Katanga

>500 mine sites covered in Rwanda

22,900 tonnes recorded mine

production

New start up in South Kivu

(CFTI)

New start up in Maniema (56

sites)

109 member companies in 20

countries

©

Background: Key Dates

• Q4 2008 - UN report recommending due diligence

• Q1 2009 - ITRI action plan and working group for DRC formed

• Q4 2009 - UN report is followed by company withdrawals

• Q2 2010 - iTSCi phase 2 traceability pilot in South Kivu begins

• Q3 2010 - US conflict minerals law (July) DRC mining suspension (Sept)

• Q4 2010 - OECD Guidance published, supported by UN report

• Q1 2011 - iTSCi in Rwanda (Jan 2011) then Katanga, DRC (March 2011)

• Q2 2011 - EICC/GeSI deadline for traceable purchases from Africa

• Q4 2012 – ITSCi in South Kivu (Oct 2012) Then Maniema (Dec 2012)

• Q3 2012 - SEC rules published

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©

A responsible upstream supply chain

iTSCi Programme key reference is the OECD Annex II:

• No! serious HR abuses by any actor

• No! Direct or indirect support to non-state armed groups

• Managed formal security forces

• Managed bribery and fraud

• Encouraging transparency of payments

iTSCi is not only “bag’n’tag”

iTSCi is:

• Practical application of OECD guidance

• On the ground, at local level

• Through multi-partners, with joint responsibilities

©

iTSCi and OECD upstream due

diligence

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©

iTSCi Membership Programme

Upstream

• Co-operatives & Exporters

• Traders

• Processors/Smelters

Downstream

• Electronics manufacturers

• Requiring information on their upstream supply chain

Structured management

• Governance committee

• Advisory panel

• Programme operators

• Independent evaluator and auditor

• Ombudsman and secretariat

©

Selecting conflict-free mines

BASELINE REPORTS: mine location, owners, operators, production, civil society, trade routes, taxes and security

OTHER INFORMATION: Government validation reports, UN, civil society et c. Approved to RECEIVE TAGS

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©

Recording the mineral trade

• Date

• Time

• Mine name

• Mine location

• Tag number

• Miner / cooperative

• Weight

• Price

• Transport route

• Transport method

• Security

• Staff present

• Date

• Time

• Processor name

• Mine tag n˚

• Processor tag n˚

• Weight in

• Weight out

• Price

• Transport route

• Transport method

• Security

• Staff present

• Date

• Time

• Exporter name

• Processor tag n˚

• Supplier

• Weight in

• Weight out

• Export n˚

• Price

• Transport route

• Transport method

• Security

• Staff present

MINE PROCESSOR EXPORTER

©

On the ground activities & data availability

Data availability and data quality is closely linked with:

• Capacity building & training

• Planning

• Communication

• Monitoring

• Cooperation from all stakeholders

Continual improvements in the above will minimise:

• Missing data

• Data transfer delays

• Data inaccuracies

• Analysis disruptions

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©

Online Asset tracking database

©

Data analysis

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©

Enhanced data capture

Pilot study underway to enhance data collection using handheld PDA’s.

• Real time data transfer using existing mobile networks.

• Improved data quality

• Straight forward and easy to use

• Custom built mobile software application

• Field trials running from April 2013 to July 2013 in Rwanda

©

PDA Pilot Rwanda

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©

PDA Pilot Rwanda

©

PDA Pilot Rwanda

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©

PDA Pilot Rwanda

©

PDA Pilot Rwanda (training workshop)

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©

PDA Pilot Rwanda

©

Monitoring and risk assessment

INCIDENT REPORTS: Reports from field staff, or any other source. Record of plan and actions until closed/resolved.

PROJECT COMMITTES: local stakeholders, or project Governance committee, to determine, agree and implement actions

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©

Independent auditing

COMPANY AUDITS: Pre-audit on application for iTSCi membership. Regular audit visit and recommendations every 6 months.

GOVERNANCE ASSESSMENTS: 6 month visits to evaluate general implementation and make recommendations

©

Why the system works

Simple Visible

Designed to fit in with existing

practices

Sophisticated & secure data

management

Independent risk assessment &

auditing

Widespread acceptance

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©

THANK YOU

Further information can be found on the ITRI Sustainability webpages by visiting

www.itri.co.uk

Or by contacting the staff involved:

andrew.cooper@itri.co.uk

kay.nimmo@itri.co.uk

Update CTC Project (Certified Trading Chains)

Hongkong, 08 May 2013 | Naeher, U. Barume, B, Schuette, P., BGR

5/8/2013

55

BGR Support to Mineral Certification in the GLR

Rwanda

CTC mineral certification

pilot project

2008-2011

DRC Rwanda Burundi

AFP

RCM

DR Congo

BGR module:

National certification system

for the 3T minerals and gold

2009-2013 (phase 1)

ICGLR

BGR module:

Support to the Regional

Certification System

2011-2015

Developments 2008-2013

1. CTC Pilot Project in Rwanda (2008-2010)

- Implementation in 5 Mines, 3 certified as of 2011;

2. Development of Certification System in DRC (2009-2013):

- Two Manuals produced (3T & Au), included in DRC Legislation since June 2011 per

Ministerial Decree;

3. Implementation in Pilot sites:

- First Baseline Audit completed in September 2011, two more in February 2012

4. Institutional Capacity Building:

- ongoing; Seminars on certification, traceability & legislation, Mines Safety

5. Stakeholder Dialogue:

- Harmonization WS in Kinshasa, Cooperation with EITI,

Certification - DR Congo

5/8/2013

56

The CTC Standards for Mine Sites traceability,

transparency

labor &

working

conditions

security community

development environment

mineral origin

fiscal obligations,

revenue

transparency

corruption

salary

child labor

workers

organization

protective &

production

means

health &

safety

training

risk assessment

capacity dialogue

local business

integrated

support

free, prior

informed

consent

gender

impact

waste disposal

rehabilitation

5 p

rincip

les

21 s

tandard

s

level descriptors

(compliance levels)

0 – 4 for each

standard

65% for ASM.

75% for ISM.

EITI

Legal Title

Pilot Mines (as of 04.2013)

Lulingu

Luntukulu

Bibatama

Kalimbi

Mayi Baridi

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57

3rd Party Auditor/ Audit Team

Mine Owners/ Cooperatives/ FEC

2 observers from COCERTI (Kinshasa)

1-2 observers Civil Society 2 observers BGR

1 ou 2 observers from MONUSCO, CAMI)

2 SAESSCAM

1 ou 2 observers from Provincial Mining Division

CTC Audit Teams, DRC

Important: Multistakeholder approach, credibility, access to information, plausibility checks of available information (whistle-blowing ICGLR-GIZ)

CTC Audits in DRC

Location Baseline Compliance

Nyabibwe, S-Kivu September 2011 February 2013

Mayi Baridi, Katanga February 2012 January 2013

Bibatama MHI, N-Kivu February 2012 Planned for November

2012, postponed due to

M23 and insecurity in N-

Kivu

Lulingu, S-Kivu Octobre 2012 ?

Luntukulu, S-Kivu Octobre 2012 ?

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Next Steps:

Location Baseline Compliance

Bibatama MHI, N-Kivu February 2012 Q3 2013

Lulingu, S-Kivu October 2012 Q3 2013

Luntukulu, S-Kivu October 2012 Q3 2013

Audits in already selected sites in South and North Kivu, plus sites in

Maniema and Katanga;

Audits to be extended to Au producing sites in P.Orientale, Maniema,

N.Kivu, S.Kivu & Katanga

Training and accreditation of Auditors, capacity building of COCERTI.

ICGLR and CEEC

Next Steps:

2nd Project Phase (07.2013 – 12.2016):

Broadening of CTC implementation to cover 80% of production based on

Pareto Analysis, scaling up;

Widening the scope to other minerals (Cu, Co, Dia, Pb, Zn…..)?;

Adressing issues beyond conflict, like CSR, Gender, Environment,

Children);

Examining and using synergies with other initiatives where possible like

SFH, PAC, IDAK/GIZ, DDI

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Challenges:

Security Situation: Dynamic in GLR;

Infrastructure and access;

Legal situation, title issues, formalisation;

Securisation of financing of CTC audits, sustainability;

Communication and dissemination;

Harmonisation of main schemes and initiatives (checklist, audits) in the

region;

Lessons learned:

Donor coordination a must to avoid duplication and share resources;

Political will has to be there;

Ownership and Partner involvement a must;

Mulitstakeholderapproach including CS, Ind and Govt;

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60

Mineral / Metal Supply Chain Initiatives

Thank You

5/8/2013

61

121

Conflict Free Minerals

Supply Chain Workshop XI

Workshop

Sponsors:

PAGE 122

Compliance and Reporting Tools for Smelters and Downstream Companies

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62

Conflict Free Sourcing Initiative (CFSI)

Program Update [Workshop 11, Hong Kong]

Bob Leet

Intel, EICC, CFSI Lead

John Plyler

Blackberry, EICC & GeSI, CFSI Workgroup

08 May 2013

123

Agenda

• Conflict-Free Smelter Program (CFS)

• Company Assurance

• Due Diligence Practices

• Summary

124

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63

125

In-Region Programs

Conflict-Free Smelter Program (CFS)

Company Assurance

Finished

Product

MINE SMELTER/REFINERY OEMS

CFSI Conflict-Free Sourcing Approach

Conflict-Free Smelter (CFS) Program

The CFSI has spearheaded the development of a multi-stakeholder assessment process to determine if smelters/refiners are sourcing conflict-free minerals.

• Why: Provide a mechanism that enables and encourages responsible sourcing of tantalum, tin, gold, tungsten

• Schedule: Addressing each metal separately, but concurrently

– Tantalum, tin and gold smelter/refiner assessments are underway; tungsten smelter assessments are expected to begin in 2013.

• Results: A list of smelters/refiners who are compliant with the CFS assessment protocol is posted on the CFS website.

– http://www.conflictfreesmelter.org

** Companies make their own sourcing decisions. **

126

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64

Upstream

Smelters /

Refiners

Downstream

Conflict-Free Smelter

(CFS) Program

Raw Materials

Finished Products

Supply Chain Focal Point –

Smelters/Refiners

127

Why Here?

Conversion of distinguishable starting material

into an indistinguishable product

Small Numbers – tantalum, tin, tungsten and

gold smelter/refiners total less than 500

companies globally

CFS Audit Focus

128

Company Mass Balance

- Includes all inventory

- Includes all facilities

Ore / Concentrate

Recycled / Scrap

Toll Customer

Finished Products

Toll Supplier

Conflict

Free

Policy

Intermediates

Unfinished Products

Company Program Validation

- Conflict Free Policy

- Conflict Free Sourcing Systems

Sourcing Processes Validation

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65

Audit Protocol Improvements

• 3Ts harmonized protocol released 22 Dec 2012, effective 28 Feb 2013 – Improved Level 3 Country requirements

– Separation of Audit Procedure and Protocol content

– Improvements from stakeholders

– Translation to several key smelter languages

• Further improvement underway (May 2013 release) – Addressing further tin industry concerns (definition, ASM,

secondary materials, slags)

– Improving standardization, readability and clarity

– Recognition of U.S. SEC Rule grandfathering allowances

129

CFS Online Program Indicators

130

http://www.conflictfreesmelter.org/CFSindicators.htm

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66

CFS Program Indicators Changing

• Plan: – Indicator reduction:

1. Number of smelter/refiner companies currently active in the CFS process (active = signed agreements, audit on track)

2. Number of companies with compliant smelters/refiners

– Qualitative program status is provided to stakeholders on a monthly basis (company names not included)

• Reasoning: – Previous indicators allow tracking in and out of corrective

action status when Compliant and Active lists compared

– Previous indicators provide no pre-audit details on specific company and thus no means for smelter engagement

131

Audit Program Improvements

• Further work being undertaken to ensure CFS

Program compliance with ISO Standards

– ISO 19011 and ISO/IEC 17021

• Auditor accreditation program being developed

– Will allow other audit firms to become qualified

– Will allow smelters/refiners to become educated to

content auditors are trained on

132

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133

In-Region Programs

Conflict-Free Smelter Program (CFS)

Company Assurance

Finished

Product

MINE SMELTER/REFINERY OEMS

CFSI Conflict-Free Sourcing Approach

Company Assurance

Development, integration and maintenance of tools

and processes which support a down-

stream company’s management

system and risk assessment activities: – Policy language included in the EICC Code of

Conduct (http://www.eicc.info/eicc_code.shtml )

– Created; maintaining a tool to collect information

about a supplier’s due diligence processes and

sourcing: Conflict Minerals Reporting Template

– Establishing resources and processes to support

data collection and analysis

134

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68

Conflict Minerals Reporting Template Flow

135

Smelter Smelter Smelters

Sub-

Suppliers Sub-

Suppliers Sub-

Suppliers

Template

User Direct

Suppliers Direct

Suppliers Direct

Suppliers

1. Sends request to direct suppliers

2. Sends request to sub-suppliers

3. Cascades through supply chain until smelters identified. Sub-suppliers return template to suppliers. Direct

Suppliers Direct

Suppliers Direct

Suppliers

Original

User

Customer

4. Direct suppliers return aggregated roll up template

5. User returns final aggregated roll up template

Company Assurance Program Updates

• Conflict Minerals Reporting Template & Dashboard – Revision 2.02 released March 2013

– MRPRO Dashboard (free) improved to accept all 2.xx versions as well us upgrade Rev.1 templates (available here)

– Supporting Solution Providers creating database versions

– Reporting template and dashboard tool available at http://www.conflictfreesmelter.org

– Considering a quarterly update schedule; primary purpose is revision of the Standard Smelter List; next major release contingent on IPC Standard

• Online training for Extractives WG members in process

136

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69

Release 2.02 Noteworthy

Improvements

• Addition of Italian translation (ninth language in

addition to (English, Mandarin, Japanese,

Korean, German, Spanish, Portuguese, French)

• Simplification of “terms of use” language

• Additions / edits to the “Standard Smelter List”

• Addition of “Smelter ID”

• Added more rows for reporting smelters (2500)

137

IPC1755 Standard

• EICC and GeSI collaborating with the IPC

(www.ipc.org, “Association Connecting

Electronics Industries”) with the objective to:

– Develop a standard for exchange of data related to

conflict minerals used in manufactured products to

facilitate efficient data exchange across companies,

supply chain levels, and industries

• Not an actual data collection tool – but a set of due diligence

information requirements and “instructions” to allow different

tools to communicate

• IPC facilitating an open ANSI standard process

138

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70

IPC Progress and Next Steps

• Work began in November 2012 and continues:

– Committee last met on Feb 21 to resolve comments

received on the Final draft for Industry Review; post

meeting briefings held

– Revising schema; text according to committee decisions

– Circulate Proposed Standard for Ballot in July - August

– Publish final standard in Fall 2013

• Open to engagement by Individual Companies

and Trade organizations

– Contact Fern Abrams: FernAbrams@ipc.org

139

CFSI Due Diligence Practices

• Due Diligences Practices WG kicked off in 2013

• Developing a white paper that provides practical

steps for downstream companies to:

– Interpret the OECD DDG

– Link to SEC reporting obligations (how to..)

– Incorporate use of CFSI tools and programs

• Socializing white paper across industries

(beyond CFSI) by June 2013

• Engaging with auditors by July 2013

140

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71

Summary

• The CFS Program is a voluntary initiative in which an

independent third party audits smelter and refiner

procurement and tolling activities and determines if the

smelter or refiner demonstrates that all the minerals they

processed originated from conflict-free sources.

• Company assurance activities are focused on improving

company capabilities to validate responsible sourcing of

materials by creating common tools and processes

• More details about the CFS Program or Reporting

Template:

– CFS Website: http://www.conflictfreesmelter.org

141

142

Conflict Free Minerals

Supply Chain Workshop XI

Workshop

Sponsors:

5/8/2013

72

PAGE 143

Conflict Free Smelter Program: Smelter Perspectives Raveentiran Krishnan, Malaysia Smelting Corporation

Jean-Paul Meutcheho, Global Advanced Metals

Chen Wu, Ningxia

Xiang Yun Zheng, F&X

JOURNEY TO

CFS STATUS.

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73

CFS – FROM THE

PERSPECTIVE OF A

CUSTOM SMELTER. EICC-GeSI landed on our shores early 2010

Engaged EICC/ITRI during the development of tin protocol

Mining ban in DRC in Sept 2010.

iTSCi program stalled

Mining ban lifted in early 2011 and there was rush to move untagged material before 1st April.

1th April 2011- a small step for iTSCi but a giant blow for rebels/groups benefitting from tin mineral trade

CFS audit preparation

CFS audit – very exhaustive. Need to harmonize objective with Frank Dodd Act/SEC rules, pragmatic and to sight bigger picture, based on best effort

CFS compliant status – endorsement by EICC

What next?? Don’t miss the keynote address tomorrow!

ON THE

GROUND

ASSESSMEN

T

5/8/2013

74

WEIGHING

CASSITERITE

RECEIVED

FROM

NEGOCIANT

COLLECTING TAGS

FOR ONWARD

SHIPMENT TO SMELTER

5/8/2013

75

RESTING PLACE FOR

TAGS RECEIVED AT THE

SMELTER

AUDIT IN PROGRESS –

SIFTING THRU PILES OF

DOCUMENTS

ISO

9001

(199

4)

5/8/2013

76

THANKYOU

SEE YOU AGAIN

TOMORROW

By F&X Electro-Materials Limited

5/8/2013

77

F&X Electro-Materials Limited was

established in 1999,a private owned

small tantalum-niobium smelter

producing from minerals to K-salt and

niobium oxide, tantalum powder,

sintered bar and wire. It has been

supplying tantalum powder and bar,

wire and Nb2O5 to our customers,

such as capacitor-makers and alloy-

producers both domestically and

world-wide for a while.

As you might know that F&X has been one of “CFS” since middle of 2011. I would like to have a brief review of history.

F&X first participated in the “CFS” program by joining the “Conflict Minerals Audit” program organized by EICC/GeSi in early 2010.

In about 2009, we started to learn from our customers, newspapers, other media, a lot of reports on conflict materials from the DRC. Reports made by UN Experts, OECD , NGOs and others, made us realize we had to start to pay attention to the conflict minerals issue.

5/8/2013

78

In early 2010, EICC/GeSi

introduced to us Conflict Minerals

Audit Program then we arranged

EICC/GeSi visits to plant and met

with them. We had our team set

up to focus on minerals

purchasing. We set up time scales

to complete certain targets set up

in schedule by EICC/GeSi.

We did accomplish in short time the

following:

1. Company purchasing group set up.

2. Our personnel training course.

3. Issued company policy.(see attached

earliest copy of company policy.)

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79

4. Sent letter to our suppliers,(see attached

copy)and communicating with major suppliers on

minerals in regards to conflict minerals issue

Mainly, about followings:

4.1 Stopping purchase from DRC completely.

4.2 Modified purchase contracts terms in line

with our policy, requesting “Certificate of Origin

of mine and country”,” No Certificates ,No deal”.

4.3 Sent letters to minerals suppliers, traders,

requesting documents of Certificates of Origin for

materials bought in 2009.

5. Visiting suppliers, mines in the world particularly, I went

myself or with my people , a few times to 8 countries in

Africa and South America from 2010 through 2013. (see

attached some pictures in mine visit.)

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80

6. F&X Participated “SOLUTION FOR HOPE” launched by,

Motorola Solutions, AVX, both EICC and GeSI members to work

in DRC, 2011.

Working together with ITRI/ITSCI, we successfully sponsored

“Solution for Hope” and supported “Bag and Tag”.

7. F&X was audited by a third-

party auditor organized by EICC/

GeSi and passed the audit for

the first time, becoming one of

the compliant“CFS” tantalum

smelters.(see attached picture

of Certificate of “CFS”) in year

2011,2012,2013.

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81

8.We have modified our company policy

timely to be in line with UN,OECD due

diligence guidance, latest one as shown

here.(see attached latest copy of company

policy)

We will continue to work closely with

EICC/GeSi and TIC on the conflict minerals

issue, try our best to maintain our “CFS”

status, and try to be a contributive,

responsible, member of tantalum industry

and reliable supplier to our customers.

THANKS!

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82

Agenda, Day 2: Academy Ballroom

163

8:00-

9:00 Registration, Coffee, Sponsor Open House (foyer outside Academy)

9:15-9:45 Keynote Address

9:45-10:30 Gold Update and Conflict Free Gold Standard

10:30-11:15 Other Activities to Support Responsible Sourcing

11:15-11:30 Introduction to Breakout Sessions

11:30-13:00 Lunch, sponsored by F&X (foyer outside Picasso)

13:00-16:00

Concurrent Breakout Sessions: In-region, Smelter, and Downstream

Systems and Tools 16:00-16:30 Break

16:30-17:15 Breakout Session Themes and Report-back

17:15-

17:30 Summary and Concluding Remarks, and Adjourn

164

would like to thank our Workshop XI Sponsors:

and