14th conflict-free sourcing initiative workshop, day 2

The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

Conflict Free Minerals

Supply Chain Workshop 14Day 2: September 30, 2014

Morning Breakout Sessions on Supplier Data


Continuous

Improvement in

Supply Chain

Management

Systems and

AccountabilityCFSI tools, developing strong company management systems, ensuring reliable and quality supplier data, and continuous improvement in supply chain accountability


Leah Butler

CFSI Audit Program Manager

September 30, 2014

CFSI Tools and Data

AGENDA

The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 5

Program Overview

Beginning to End Process

Tools and Data

2015 Improvements

Upstream Companies

Smelters /Refiners

Downstream Companies

Conflict Free Smelter

Program

Raw Materials

Finished Products

ACHIEVING A CONFLICT-FREE SUPPLY CHAIN

6

LEGITIMATE?

Research Outreach Validate Report Revise

PROCESS OVERVIEW

The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 7

SMELTER?

ACTIVE?

CONFLICT-FREE?

CFSI Compliant!

TOOLS


Audit Program

Smelter Information Exchange

Smelter Identification Questionnaire

Conflict Minerals Reporting Template (CMRT)

Company research Audit reports Cross-recognized program input:

LBMA Good Delivery and RJC Chain of Custody

External smelter lists: DOC, SGE, ICDX, etc.

Audit Program

Smelter Information

Exchange



DATA INPUTS


Audit Program

Smelter Information

Exchange



DATA OUTPUTS


RCOI data Active and Compliant Lists Standard Smelter List Smelter records Internal management systems and

strategic planning Smelter correspondence Member reports

MASTER SMELTER DATABASE

SMELTER RECORD

Website

RCOI

Standard smelter list

Member reports

Automated messages



Smelter

Research

Confirmation

Risk Analysis

Outreach

Program inscription

Audit scheduling

Compliance determinations

Corrective Actions

Documentation and Reporting

Re-Audits

END-TO-END SOLUTION

BENEFITS

• Provide platform for collaborative, efficient, and effective research and outreach

• Hold all documentation around legitimacy, risk assignment, and audit cycle frequency

• Enable a faster and smoother communication stream with as smelters move through the program

• Support the Audit Review Committee /Corrective Action tracking

• Track smelters’ information over multiple years

• Generate the volume and quality of reports that various internal and external audiences require from CFSI


WE HAVE A LOT TO LOOK FORWARD TO…

Leah Butler

CFSI Audit Program Manager

[email protected]

Tara Holeman

CFSI Audit Program Director

[email protected]

THANK YOU!The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 14

CFSI Data Management Member Company Case Study

Meredith Haamen, Environmental Regulatory Spec, Sr. Eric Lloyd, Systems Analyst, Sr. Staff

16

About

1Smelter Landscape

2CFSI

Process

3Case Study

4Moving Forward

5

Agenda

17

Qualcomm engaged in Conflict MineralsSupporting best practices since 2010

2014

iTSCiMember

on-the-ground sourcing initiatives

RSNResponsible Sourcing Network

Active participant

EICCFull member

Board position

EICC conference

EICCActive member

EICC conference

CFSIMultiple on-site smelter visits

CFSIWeekly sub-work groups

2010

PPAfor responsible sourcing

Supporter

2011 2012 2013

BSR Human Rights working group

PACT activities

18

Smelter LandscapeData Overload

IPC 1755

CFSI Website

Country of Origin

EICC SharePoint

Active Smelters

Conflict Free Smelters

Standard Smelters

TI-CMC

LBMA, RJC, WGC

USGS, GAO, OECD

Independent Research

Dept of Commerce Smelter List

3rd Party Vendors

iTSCi

Responsible Sourcing Network

Enough Project

Free the Slaves

Fair Phone

Solutions for Hope

International Trade Administration EICC

Dubai Multi Commodities Centre

19

Company

Outreach to

suppliers to

gather info

CFSI

New smelter

identification

process

CFSI

Outreach to

smelter to

seek

participation

CFSI + Public

Smelter vetted as legitimate

Using CFSI Process and Tools

Conflict minerals reporting template

XLSX

Smelter info questionnaire

XLSX

SET communications tracker

XLSX

Standard smelter list

XLSX

Conflict free smelter list

HTML

+

PDF

CFSI + Public

Smelter

identified as

conflict free +

RCOI

Smelter Management

A lot of information, from many sources, in different forms—not connected to the central entity, the smelter

20

Drivers, business requirements− Track outgoing and incoming supplier

communication− Traceable records of smelter trending and updates− Check and improve incoming data quality− Automated record of CMRTs approvals

Challenges, data considerations− Difficult to manage data with multiple sources

(Website; SharePoint)− Manual work to connected multiple data formats

(.xlsx; PDF; HTML)− Data at risk of differing depending on source

Solution, connected system− Custom built management system to meet

business requirements− Integrated all existing CFSI tools and data sources

(CFSI, QC, Other)− Report building for historical and current reporting

Need for Qualcomm Management SystemCFSI Tool Integration

Single source

combining all data

Reporting capabilities

Error checking

System compatible

Ease of use

Highlights

21

Managemaster smelter data

View CMRT file history

Review CMRT smelter lists

View CMRT declarations

CMRT

Date, status, BU, Year / Cycle

Check smelter errors

Automatic& manual CMRT upload

CMRT approval workflow

Qualcomm’s Management SystemCMRT & Smelter Management

22

CMRT Smelter ListIdentifies valid smelters

Qualcomm’s Management System OutputSmelter Error Review

23

CMRT Smelter ListReview and approve / reject error details


24

CMRT Smelter ListUpload and error stats


25

Lessons Learned

Moving forwardCollaboration, consolidation

connected, central data

source

Master

Smelter

Data

1

CFSI

A solid foundation

Consensus with industry partners

Dashboard & reporting

tools

process

Data traceability

Secure data download

3rd party system integration

26

For more information on Qualcomm, visit us at: www.qualcomm.com & www.qualcomm.com/blog

Qualcomm is a trademark of Qualcomm Incorporated, registered in the United States and other countries. Other products and brand names may be trademarks or registered trademarks of their respective owners

Thank youFollow us on:

AIAG Smelter Engagement Team

Cross-Industry CollaborationContinuous Improvement in Supply Chain

Management Systems and Accountability

Agenda

• AIAG Overview

• Due Diligence Framework

• Smelter or Refiner (SOR) Engagement Process

• SOR Engagement Teams

• Measuring Success

• Next Steps

28

Globally recognized trade association founded in 1982

• Unique open/neutral forum to collaborate on industry issues

• OEM’s, Suppliers of all sizes, Service Providers, Government &

Academia

• 1,000+ Member companies & growing

• 35+ full-time staff

• Sr. Purchasing Executives ‘on loan’ from Chrysler, Ford and

GM

• Over 900 Industry ‘volunteers’ providing subject matter

expertise at any point in time

• Over 60 active projects and committees

AIAG: at-a-glance

29

AIAG Board Companies

Caterpillar

Chrysler

Dana

Delphi

Denso

Eaton

Federal Mogul

Ford

Freudenberg-NOK

General Motors

Honda

IBM

Infor

JCI

Magna

Nissan

Robert Bosch LLC

Specialty Products

Toyota

TRW Automotive

30

http://upload.wikimedia.org/wikipedia/en/6/63/Magna_logo.svg

http://upload.wikimedia.org/wikipedia/en/6/63/Magna_logo.svg

http://www.epslogos.net/Selected/B/Bosch__938.eps

http://www.epslogos.net/Selected/B/Bosch__938.eps

Establish

Strong

Company

Management

Systems

Identify And

Assess Risk

In The Supply

Chain

Design And

Implement A

Strategy To

Respond To

Identified

Risks

Carry Out

Independent

Third-party

Audit Of

Smelter or

Refiner (SOR)

Due Diligence

Report Out On

Supply Chain

Due Diligence

Due Diligence Framework

Prescribes Role of Filing Companies

Organization for Economic Cooperation and Development (OECD)

Due Diligence Guidance for Responsible Supply Chains of Minerals

From Conflict-Affected High-Risk Areas

1 2 3 4 5

SEC Final Rule for Conflict Minerals

3TG (Tin, Tungsten, Tantalum, Gold)

31

SOR Validation Process Flow

CFSI Members

Gain access to

CFSI Smelter Data

Participate in

various work

groups

Pay Membership

Fee

Smelter

Identification

Team

Experts make

final

determination of

true smelters

Pre-Audit Visit

Team

Explain CFSI

program, audit

expectations

and benefits

e.g. Apple,

Intel: > 35

international

visits/year

3rd Party

Auditor

Conduct site

audit, create

audit report

for review by

CFSI Audit

Review

Committee

(ARC)

CFSI - 25 Companies

AIAG - 10 Companies

~ 5-8

Companies

3rd Party Audit Post-Audit212 Companies

7 Industries

CFSI Staff &~ 5

Companies

Smelter

Engagement Team

(SET)

Research –

determine if

companies are true

smelters

Outreach –

mail/call/email true

smelters to

encourage audit

participation

Follow-up

Team

Arrange

recertification

audits

32

SOR Engagement – Research and

Outreach

• Two main areas of focus:

RESEARCH OUTREACH

• Letters,

calls,

visits

• Online research,

SOR list reviews

Summary of SORs based on CFSI Data (as of August 2014)

Strive for all green

33

AIAG Smelter Engagement Team

AIAG SET Goals:

• 5 SORs/week Research

• 1 SOR/week Outreach

In one year…

• 2,000 SORs validated

• 40 SORs contacted

TEN

COMPANIES

34

Metrics

SOR Data

Alleged SORs

Known SORs

Compliant or ActiveSORs

145

91

80

25

50

75

100

125

150

Weeks 1 - 3

AIAG SET Research Metrics

Alleged SORsAssigned forResearch

Alleged SORsDispositioned

Number ChangedDispositions

AIAG SET Contacted 22 SORsStrive for all green

35

Vision and Next Steps

• Complete integration of AIAG SET into CFSI SET

• Pre-Audit SOR Visits

• Asia Pacific Resource Engagement

36

Questions?

Thank you for your participation today.

For questions contact Alessandra Carreon ([email protected]) or

Tanya Bolden ([email protected])

37

mailto:[email protected]



Options for

Supply Chain

Data

Management

Overview of supply chain data management software and services

www.sourceintelligence.com

Conflict Minerals:

Supply Chain

Data Management

1. Internal Tool and Management

2. Third-party System

3. Do Nothing

Options for Supply Chain Data

GO IT ALONE

Internal Tool and Management

The Good• Suppliers know you

• You know your suppliers

• No middleman between suppliers and you

• Complete control

The Bad• Tracking supplier responses

• Review and follow up

• Analysis

• Disparate data centers

The Ugly• Departmental hot potato – passing the buck

OUTSOURCE IT

Third Party System

The Good• Cost

• Additional (wo)man power

• Data aggregation and analysis

• Due diligence efforts

The Bad• Supplier distrust

• IP concerns

• Confusion over software needs

The Ugly• Herding the departmental cats

Do Nothing

Every successful program will need. . .

What Needs to be Done

• Good data – where it all starts

• Stakeholder buy-in

• Regulatory understanding

• Supplier engagement, not just management

• Data management expertise

• CMRT issue identification & assessment

• Smelter sourcing practices and locations

Supplier has

smelter listed

for unused

metal

No known

smelter listed

for used metal

Indication of

covered country

sourcing

No known DRC

sourcing

smelter listed

Supplier has

incomplete

information

Unknown

smelters exist in

supply chain

Supplier has not

provided all

available info

Non-recyclers

provided as

recyclers

Platform: Supplier Side

Make it easy, give options


Make sure its up to date


Start Validation Early

Platform: Customer Side

Get clear, concise analysis

Questions?

© 2013 MetricStream, Inc. All Rights Reserved.

MetricStream Conflict Minerals Solution


Supplier Governance – A Changing Landscape

• Expanding role of suppliers

• Lack of visibility across multi-tier supply

chains

• Stringent and growing compliance

requirements

o FDA, RoHS, GPSD, CPSIA, FAA,

Conflict Minerals reporting, EU Toy

Directive, EPA,REACH, California

Proposition 65, FPLA, Trade

Compliance requirements etc.

• Multiple assurance functions in an

organization interacting with supplier

information

• Need to manage customer and

regulator inquiries (mapping

customers/suppliers and products)

Organizations need to ensure compliance

across the supply chain

International Laws

National Laws

Regional Laws

ConsumersSocial and

EnvironmentRegulators

Risk

Assessment

Supply Chain

Audits

Compliance

Monitoring

Organization

Quality Policies Remediation


Sustainable Supplier Governance with MetricStream


Supplier

Social

Compliance

Consolidated Supplier Assessment Report

• Effective Reporting and Automated Dashboard

• – Overall Supplier Compliance Dashboards

• Regulatory Reporting

Federal and State Level Compliance Assessment

REACH & RoHS

Compliance Assessment

Conflict

Minerals

Compliance

Survey

Streamline Supplier Assessments

• Simplify assessment management

through reusable survey templates and

formats

• Streamline and standardize the supplier

assessment process across the global

enterprise

• Integrate all supplier assessments,

findings, and issues in a common

framework for complete transparency

and accountability

• Strength survey coordination by

providing a single point of reference to

communicate with suppliers

• Survey data analysis, trending, and

correlation with past data for effective

management consumption Effective Reporting and Automated

Dashboard

– Overall Supplier Compliance

Dashboards

- Regulatory Reporting


Streamline Supplier Assessment Results

Manage

Supplier

Compliance

for multiple

regulations


Derive Risk Intelligence from Supply Chain Information

Supply Chain

GRC

Processes

Selection & On-

Boarding

Supplier Risk

Intelligence

Policy Surveys

Audits Risk Assessments

Sub-Contracting

Control Assessments

Social Compliance

Issue Management

Heat MapsRisk MetricsKRIs, KPIs

Internal &

External Data

External FeedsSupply Chain

Solutions

Sourcing &

Procurement

Solutions

Spend Management

Solutions


Adopt an Integrated Solution Approach for Conflict Minerals

• Manage Supplier, Product / Component, Smelter information and mapping

• Pre-Built Industry Standard Survey Templates (EICC)

• Schedule Conflict Minerals Surveys

– Suppliers Org Level OR Part level

• Survey Execution, Response Review and Approval

• Issue & Remediation

• Analysis, Reports & Dashboards

• Source and Chain of Custody Due-Diligence, Audit Mgt, Policy Mgt *

Conflict Minerals Software Conflict Minerals Services

• Planning and System Implementation

• Survey Distribution & Follow-up

• Collection of Supplier Responses

• Automate and to manage the entire Customer Inquiry and Response cycle *

• Notifications and Escalations

• Training – CM Program managers, Suppliers

• Technical support for suppliers (FAQs, Online Support/Phone Support)

• Execution of Due-diligence procedures *

* As Required


Easing Year 2 Conflict Minerals Compliance

Simplified supplier surveys management

• Data Upload Templates to Enhance Adoption

• Adapters to pull information from database

• Pre-built EICC v3.0x Questionnaire

• Services to manage surveys

Easy Smelter Information Tracking

• Periodic Smelter data Refresh as released by CFSI

Effective Reporting• Extensive database of pre-defined reports and dashboards

• User based filtering of reports for a specific reporting period

Improve Data Quality • Validations for Spreadsheet Response

Efficient Tracking of Supplier Response

• “Red flag” supplier responses

Cumbersome Data Gathering

Inaccessible Supplier Base

Mismanaged responses from

suppliersPoor Data quality

Inefficient StrategyLack of internal

resources

Key Issues

Faced

MetricStream

Capabilities


• Built in latest version of

EICC Templates

• Easily modify the

templates

• Assign risk scoring

criteria for questions

• Supplier communication

• Schedule annually as

well as ad-hoc for new

suppliers with defined

due-dates for surveys

• Track Survey Results

• Review & Approve

surveys


Vendor Risk Summary Report with Risk

Scoring/Rating and Trending across

suppliers/products, regions, locations, tier,

dates.


Track Product Component Conflict List

Drill down to the details

of product component,

supplier and smelter

information


Customer Adoption of MetricStream Platform

Merchandise division of Multi-national Mass media & Entertainment Company• Supplier Audit Management, Monitor Licensees and Vendors to ensure review of the CAP

with the Facility• Implementation of a corrective action plan and prompt remedy to any compliance

violations identified in the Audit• Vendor/Licensee qualification, annual re-qualification, contract management, maintain

registration information and third party audits

One of the Largest Computer hardware and consumer electronics company• Conflict Minerals Compliance Solution for 100,000 suppliers• Supplier, Product , Social Compliance Assessments and Audits for supplier base• Corporate Social Responsibility & Sustainability Performance Management

Leading retailer and distributor of construction and maintenance products• More than 50,000 suppliers• Vendor Information Management, on-boarding, evaluation, RFQ, auditing, selection, Conflict Minerals Compliance Management • Central repository for supplier governance, performance management

Specialty retail and wholesaler of outdoor equipment• End-to-End solution including conflict minerals compliance management software and

synergistic supplier management services • Development and implementation of conflict minerals compliance strategy , supplier

surveys and support through online help and training services


• Over 1,500 employees • Over 400 enterprise customers• Headquarters in Palo Alto, CA with offices worldwide

About MetricStream

Integrated Governance, Risk and Compliance (GRC) and Quality for Better Business Performance and Risk IntelligenceVision

Solutions and Services

• Supplier Governance• Conflict Minerals • Compliance Management• Audit Management • Compliance Management

Partners

Differentiators

• Combined software and content - pre-packaged EICC GESI approved smelters information

• Business led implementations, minimizes dependence on IT• Breadth of Solutions – Single Vendor for all GRC needs• Cross-industry Best Practices and Domain Knowledge• ComplianceOnline.com and GRCIntelligence.com

Organization

• Third Party Risk Management• IT-GRC• EHS & Sustainability• Policy & Document Management• Content and Training

Thank You

Keri Dawson

VP Industry Solutions and Advisory Services

MetricStream

+1 480 241 1815

[email protected]


SupplierSoft Confidential 66

6767

About SupplierSoft

Platform for all Supplier Interactions

“Best Conflict Minerals System”

Top 10 Vendors to Watch

Salesforce.com Innovation Showcase

Conflict Minerals Challenges

68

Suppliers In Scope

Right Contact

Who to Ask CMRT?

69

How to ask for CMRT?



70

What to do with CMRT?


71

What to do with Smelters?

Do I have 3000 Smelters?

Are they a smelter?

Where do they source from?

High risk smelter?


72

What Metrics to Track?

Slice and dice your data


73

Audit trail?

Across Email Boxes

Across File Folders


74

Outsource Smelter DD cheaply to CFSI!

Option to In-House?

Software best-in-class?

Supplier Management Challenges

75

Dear Supplier,

Can you fill this out too?

RoHS/REACH/CSR/Quality…

Relationship Management Platform

408-690-8575

76

[email protected]


Day 2: September 30, 2014

Morning Breakout Sessions on Progress and Developments in the Great Lakes Region, Parts 1 and 2


Supply Chain Workshop 14


Progress and

Developments

in the Great

Lakes Region,

part 1Impacts in the Great Lakes region resulting from first year of SEC reporting, recent developments, and forecast of milestones and challenges in the coming year

Progress and Developments in the Great

Lakes Region

Pact on Security, Stability and Development (Nairobi, 15 December 2006

Protocol against the Illegal Exploitation of Natural Resources

Regional Initiative on Natural Resources (Lusaka, 15 December 2010)

Six tools

The Six Tools

Regional Certification Mechanism

2. Regional Mineral Tracking via an ICGLR database

3. Third Party Audits

4. Independent Mineral Chain

Auditor

1. ICGLR Mineral Tracking and Certification Scheme:i. Mine Site Inspection and Validation

ii. Chain of Custody Tracking System

iii. Export Mineral Certification

2. Regional Mineral Tracking via an ICGLR database

3 categories of data: Mine site data Chain of custody (traceability) data Mineral exporters data

Solely dependent on national databases ICGLR’s role: constantly update the status of Mine sites and

exporters as mine site inspection results and third party audit and mineral chain auditor reports are received

Monthly (if not possible, quarterly) data transmission by member states

AFP: a combination of analytical techniques allowing the identification of source-characteristic geochemical, mineralogical, and geo-chronological features of mineral concentrates

3. Third Party Audits

Managed by the Tripartite Audit Committee of ICGLR 3 major roles of the ICGLR Audit Committee:

Accreditation of third party auditors Review of third party audit reports Setting up or review of third party audit standards and procedures

Third party audits focus on mineral exporters running from the exporter all the way back up the mineral chain to the mine site

Third party audits are valid for one year maximum; Recent developments

4. Independent Mineral Chain Auditor (IMCA)

The IMCA plays a role of an ombudsman and “special investigator” within the RCM scheme.

The role of the IMCA: Evaluate member state chain of custody systems;

Conduct independent investigations;

Undertake ongoing risk assessments

Will make information (through the ICGLR secretariat) contained in reports fully accessible via website (except for information which is likely to put informants at risk);

Recent developments

Exposé :Du secteur minier criminalisé au secteur minier

porteur de croissance et moteur du développement durable à l’Est de la RDC : état

des lieux, défis et perspectives.

Par Joseph IKOLI YOMBO, Directeur de Cabinet Adjoint du Ministre des

Mines/RDCSan Francisco/USA, les 29 et 30 septembre

2014.

Mesdames,Messieurs,

Du haut de cette tribune, je remercie les organisateurs pour m’avoir invité et accepté que je prenne la parole, au nom du Ministère des Mines de la RDC.

La délégation que je conduis est composée du Directeur Général Adjoint du CEEC et Coordonnateur de la Commission Nationale de Lutte contre la Fraude Minière, Monsieur Pascal NYEMBO MUYUMBA, des experts du CEEC ainsi que des partenaires techniques et financiers, et des membres de la Société civile qui nous aident dans l’établissement des chaînes d’approvisionnement en minerais libres de conflits.

Mon exposé a pour thème, je cite : « Du secteur minier criminalisé au secteur minier porteur de croissance et moteur du développement durable à l’Est de la RDC : état des lieux, défis et perspectives » et s’articule autour de trois points, à savoir :

• Contexte et justification ;• Les efforts significatifs enregistrés pour établir des

chaines d’approvisionnements responsables des minerais ;

• Des actions de lutte contre la criminalité dans le secteur minier de l’Est de la RDC; et

• Perspectives et conclusion.

CONTEXTE ET JUSTIFICATIONIl n’est un secret pour personne que les provinces de l’Est de la RDC, riches en minerais des 3T et de l’or ont connu, durant plus de deux décennies, une situation d’insécurité généralisée due aux (1) guerres interethniques, (2) guerres d’agression et d’occupation dictées par le souci d’exploiter illégalement des ressources naturelles de la RDC par des groupes armées non étatiques tant nationaux qu’étrangers avec comme conséquence la commission des actes criminels notamment les viols des femmes, les violences sexuelles, le déplacement massif des populations, les violations des droits humains, les exactions de tout genre, les meurtres et les assassinats, etc. Cette situation, faudrait-il le rappeler, a eu des conséquences néfastes dans le secteur des Mines et dans la vie générale des populations vivant dans ces zones.

A ce sujet, s’agissant particulièrement du secteur minier, les experts l’avaient qualifié, « d’un secteur criminalisé et les minerais extraits et commercialisés en provenance de cette zone », comme étant des « minerais de conflit ou de sang », d’où l’embargo décrété de facto par les fonderies et les consommateurs finaux des minerais des filières aurifère et stannifère. Ces minerais n’avaient donc plus accès sur le marché international. Il fallait, pour la RDC, relever ce défi pour permettre l’exportation et l’acceptation de ces minerais sur le marché international.• Les efforts ont été entrepris par le Gouvernement de la

RDC et ses partenaires pour décriminaliser le secteur minier de l’Est de notre pays

Quels sont ces efforts ?

II. LES EFFORTS SIGNIFICATIFS ENREGISTRESFace aux exigences de la loi Dodd-Frank et à celles des fonderies et des consommateurs finaux que vous êtes, des actions ci-après ont été entreprises depuis 2011.

Il s’agit de :

2.1 La mise en œuvre d’un processus de qualification et de validation des sites miniers des filières stannifères et aurifères.

A date du 22/09/2014, 125 sites miniers sont certifiés par voie d’Arrêté du Ministre des Mines et répartis comme suit :• 91 sites miniers qualifiés et validés « vert » ;• 16 sites miniers qualifiés et validés « jaune » ;• 16 sites miniers qualifiés et validés « Rouges ».

Ces chiffres pourront être remis à la hausse dans la mesure où au cours de ce mois de septembre, deux missions de qualification et de validation des sites miniers viennent de se réaliser dans les provinces du Katanga et du Sud-Kivu. A ce sujet, 10 sites miniers ont été qualifiés au Katanga et huit sites miniers au Sud-Kivu.

Ce processus se poursuivra avec le concours de nos partenaires techniques et financiers. A cet effet, un projet d’Arrêté Ministériel de certification a été soumis à la signature du Ministre des Mines.

2.2 La mise en place d’un système de traçabilité « ITSCI » de l’ITRI

Ce système couvre aujourd’hui 77 sites miniers qualifiés « vert » pour les 3Ts à travers quatre provinces (Katanga, Maniema, Nord-Kivu et au Sud-Kivu).Toutefois, 228 sites miniers sont déjà dans le système ITSCI et répondent aux critères exigés par l’OCDE et la CIRGL. Mais hélas, le système ITSCI ne couvre pas tous les sites miniers. Il faudrait donc des efforts supplémentaires.

2.3 La mise en œuvre du processus de certification des minerais et des sites miniers

1) Depuis le 20 janvier 2014, la RDC a mis en circulation son certificat CIRGL en vue de répondre aux exigences du Mécanisme Régional de certification de la CIRGL. Depuis cette date, le CEEC a émis jusqu’à la date du 16/09/2014 924 certificats CIRGL/RDC

Dans ce registre, il y a lieu de signaler que plusieurs missions d’audits de certification des sites miniers ont été effectuées par les experts du Groupe de certification BGR et les auditeurs indépendants.

2.4 L’appropriation des directives du Guide de l’OCDE sur le devoir de diligence

Il a été rendu obligatoire l’exercice du devoir de diligence de l’OCDE et de l’ONU par tous les Acteurs du secteur minier des 3T et de l’or, suivant une Note-circulaire du Ministre des Mines.A cet effet, je vous informe que le Ministre des Mines a signé une feuille de route pour mettre en œuvre le Guide de l’OCDE sur le devoir de diligence avec le Secrétariat de l’OCDE depuis le mois de Mars 2014.Dans le cadre de l’exécution de cette feuille de route, les ateliers de formation sont organisés avec le concours de ce Secrétariat pour renforcer l’appropriation de ce Guide par tous les Acteurs de la RDC.

C’est ici l’occasion d’adresser un appel solennel à vous tous ici présents de répondre à l’invitation vous adressée par les Secrétariats de l’OCDE, de la CIRGL et de la Coordination du Groupe d’Experts de l’ONU sur la RDC de prendre part aux travaux du 8ème Forum CIRGL –OCDE –GE/NU qui se tiendra à Kinshasa, capitale de la République Démocratique du Congo, du 03 au 05 novembre 2014.

Je profite de cette occasion pour vous informer qu’à la fin de cette année, toutes les entreprises minières et les Services publics seront instruits de transmettre un rapport d’exercice du devoir de diligence tel que l’exigent le Guide de l’OCDE et règles édictées par la SEC.

La RDC sera également intéressée de suivre les rapports élaborés par les fonderies et les entreprises des secteurs électroniques, automobiles et aéronautiques conformément aux directives de la Security Exchange Commission des USA.

Tels sont quelques efforts qui nous ont permis d’établir des chaînes d’approvisionnement responsables en minerais libres de conflit.

III. DES ACTIONS DE LUTTE CONTRE LA CRIMINALITE DANS LE SECTEUR MINIER DE L’EST DE LA RDC

La criminalité dans le secteur minier a été et demeure l’œuvre des groupes armés non étatiques et malheureusement de quelques éléments incontrôlés des FARDC et de la PNC.

A cet effet, sous le leadership du Président de la République avec le concours du Gouvernement de la République sous la direction de son Excellence Monsieur le Premier Ministre, plusieurs mesures et/ou actions ont été menées:

1. La restauration de la paix : Mettre fin aux conflits récurrents à l’Est de la RDC

Les FARDC, avec le concours de la Brigade de la MONUSCO, ont anéanti le M23, le groupe armé non étatique le plus important, le M23 et continuent à traquer les autres forces négatives afin de ramener la paix dans les provinces de l’Est. La paix, est le facteur le plus important pour mettre fin à la criminalité dans le secteur minier.

2. La restauration de la crédibilité de l’Armée Nationale• La réforme des FARDC, de la Police Nationale congolaise et des

Services de Sécurité a été amorcée : 29 ordonnances ont été promulguées par Son Excellence Monsieur le Président de la République pour matérialiser cette réforme afin de rendre notre Armée plus performante, plus crédible et respectueuse des droits humains.

• Un code de bonne conduite est en train d’être élaboré pour réguler le comportement des troupes en responsabilisant les commandants des Unités dans la lutte contre les viols et les violences sexuelles, ainsi que dans le respect des droits humains par la proportion de signature des Actes d’engagement.

• Les militaires ayant été reconnus coupables des actes criminels ont été condamnés dans les provinces du Nord-Kivu et du Sud-Kivu.

• Pour renforcer le suivi à son niveau, Son Excellence Monsieur le Président de la République a nommé, au titre de Représentante personnelle chargée de lutte contre les violences sexuelles et le recrutement d’enfant –soldat.

• Il a été rappelé aux Autorités politico-administrative, militaires et de sécurité de ne plus s’immiscer dans les activités minières par lettre datée du 16 juillet 2014 de Son Excellence Monsieur le Premier Ministre, Chef du Gouvernement des Mines. Celle-ci a été répercutée par lettre du Vice Premier Ministre, Ministre de la Défense Nationale aux FARDC et à la Police Nationale Congolaise, ainsi qu’aux services de sécurité.

• plusieurs sites miniers ont été démilitarisés ;

• Le processus d’éloignement des unités combattantes des FARDC autour des sites miniers libérés, ainsi que leur remplacement par les éléments de la Police des Mines ;

• La formation des éléments des FARDC et de la Police Nationale aux exigences du Guide de l’OCDE sur le devoir de diligence, particulièrement celles contenues dans l’annexe II du Guide ces mesures non exhaustives que nous venons d’énumérer ont permis de passer d’un secteur minier criminalisé au secteur minier, porteur de croissance et moteur de développement durable.

IV. SECTEUR MINIER, PORTEUR DE CROISSANCE ET MOTEUR DU DEVELOPPEMENT DURABLE

Avec la paix retrouvée dans l’Est de la RDC, le secteur minier reprend son rôle de moteur du développement durable ;

• La production et les exportations minières ont repris dans les provinces du Maniema, du Katanga, du Nord-Kivu et du Sud-Kivu, et donc les caisses du Trésor Public et des provinces sont renflouées avec comme conséquence la création d’emplois, la distribution des richesses et la réalisation des projets de développement.

• Aujourd’hui, tous les opérateurs miniers ont accepté de contribuer à un « basket fund » pour le développement durable de ces provinces de l’Est de la RDC. C’est un fond de développement.

Le Ministère des Mines souhaite que les fonderies et les consommateurs finaux utilisateurs des minerais puissent contribuer également à la constitution de « ce fonds » pour financer des projets communautaires en vue d’améliorer les conditions des populations affectées par les projets miniers

Dans ce cadre, le Ministère des Mines lance un appel aux fonderies et à tous les utilisateurs finaux de participer au financement de l’initiative « CFTI » au Sud-Kivu et « Solution for Hope » au Katanga en vue de leur extension dans les autres provinces. Ces initiatives doivent continuer et s’étendre. D’autres initiatives sont les bienvenus.

V. PERSPECTIVES ET CONCLUSION

Le Ministère des Mines est déterminé à augmenter la production des minerais libres de conflits avec le concours de tous.

Afin que le secteur minier puisse être réellement porteur de croissance et moteur de développement durable, le Ministère des Mines est déterminé à augmenter la part du secteur minier au Budget de l’Etat et sa contribution au PIB de notre pays.

Avant de clore mon pays, le Ministre des Mines invite les fonderies à s’implanter en RDC. Nous avons besoin des fonderies d’étain, des raffineries d’or, bref toute industrie minière de transformation dans les secteurs des 3T et de l’or. Enfin, je formule le vœu le plus ardent de vous revoir tous à Kinshasa, du 03 au 05 novembre 2014 à l’occasion du 8ème Forum OCDE –CIRGL –GE/NU.

Je vous remercie.

Republic of Rwanda

Due Diligence on Conflict Minerals

Certification & Traceability

Mr. Venant NSANZIMFURA & Dr. Michael BIRYABAREMA

Rwanda Natural Resources Authority/Geology & Mines Department

14th CFSI Workshop, BURLINGAME,CA, 29-30 September 2014

The Rwandan Mining Sector

Rwanda (with its neighbors) forms part of African “Kibara” metal province mineralized in tin, tungsten & tantalum ores (3Ts) Continuous 3T mining since the 1930s

Intermittently operated two tin smelters

More than 230 mining companies and cooperatives currently active in Rwanda

Mining of 3Ts is important for national development Mining fastest-growing sector in Rwanda,

employing 35,000 people

Mineral exports important for national trade balance

Rwanda falls under the Dodd-Frank Act countries with due diligence requirements for 3TG sourcing

www.deloitte.com

The Rwandan Mining Sector

Development of Rwandan mineral exports vs.

traditional export products

The Regional Certification Mechanism

The RCM forms part of the ICGLR Regional

Initiative on Natural Resources

The RCM aims for OECD Due Diligence compliance

Includes shared implementation responsibilities by

national authorities & independent regional bodies

National authorities: Mine Inspections, Mineral

Traceability, Export Certification

MINIRENA regulation no 02/2012 of 28/03/2012

Regional ICGLR bodies: Audit Committee (3rd party

auditing), Independent Mineral Chain Auditor (IMCA),

Conference Secretariat, RINR Steering Committee

Mine

Inspections

Export controls

Issue ICGLR

certificate

No certificate –

no export

Implementation by national authorities –

control through independent audits

Regional Certification Mechanism - Principle

106

Traceability

RCM Mine Inspections

Preparation

An ICGLR-compliant inspection template was developed in 2012

together with BGR

Pilot inspections and training took place in 2012

A dedicated GMD inspection unit was created

Implementation

Objective: Progressively roll out annual inspections of all mines

Inspections implemented since 2013 by 6 dedicated inspectors

58 mine sites have been inspected and were found compliant with

ICGLR standards (green or yellow-flagged); database shared with

ICGLR Secretariat

More than just due diligence: safe working conditions &

environment

Examples from mine inspections

Before: unregulated digging

underground

After: professional tunnel with

adequate supports

Before: hand panning for

mineral pre-concentration

After: semi-mechanization

optimizes processing

Examples from mine inspections

Mineral Traceability

Mineral traceability started in March 2011;

100% of Rwandan 3T mineral exports are tagged from mines sites to export level;

GoR passed a mineral anti smuggling ministerial Regulations (MINIFOM, March 2011);

A dedicated Traceability Office was established; team of 131 field agents are deployed to continuously perform bagging & tagging and monitor mineral production;

Analytical Fingerprint (AFP) reference sampling for majority of Rwandan mine sites performed by GMD and BGR

Exports and ICGLR Certificates

Certification Unit created in 2013 through MOU between RNRA and RBS; now fully operational

Procedures developed in line with ICGLR standards

Professional certificate design with full set of adequate security features

ICGLR certificates are issued for single export containers certifying that due diligence has been performed for this container More than a certificate of origin:

certifies the whole RCM process

24 certificates issued since November 5, 2013

Exports and ICGLR Certificates

Certification Procedure

Performed by dedicated full-time staff upon application by exporter – due diligence assurance for mineral buyers!

Verification of… full traceability documentation for the

shipment

tax conformance and stock reconciliation

mine site status (not for red mines!)

Subject to independent auditthrough ICGLR (to be established)

Smelters should documentreception of certificate and facilitate reporting

Challenges & Lessons Learnt

Rwanda welcomes and encourages in-region sourcing by downstream clients through CFSP (including through in-region smelters)

Need for improved integration of RCM procedures directly into the CFSP requirements

currently, CFSP protocols exclusively rely on iTSCifor assurance on upstream sourcing, but Member States have selected the RCM as the base for national due diligence legislation

Need for CFSI to engage Member State & ICGLR in joint discussions

Challenge: RCM still in learning process – practical implementation not yet fully compliant with theoretical framework… but Rwanda expects the RCM to develop into a full upstream supply chain solution

Lack of adequate advocacy on upstream due diligence implementation for downstream industries and end users

Young 2014

Challenges & Lessons Learnt

No level playing field on due diligence implementation in

the region

Traceability (iTSCi) should provide regionally harmonized

implementation costs & apply same standards for all Member

States (high costs)

e.g., mineral traceability resolution in Rwanda much higher than other

ICGLR MS

Challenges

Some decisions (on our minerals) are being taken without

consulting the regional stakeholders and partners (eg. ICGLR

member states);

Despite the ITRI/iTSCi and RCM schemes, some Major

European and US companies which usually sourced minerals

from the region stop or create an ambiguity towards other

smelters and investors to not continuously buying/ investing in

the region by saying that minerals are not compliant.

Lack of IMCA and independent 3rd party audit by ICGLR

The CFSI delays to issue smelting certificate to Rwandan

Smelter (KARURUMA Smelting Plant) which affects the

innovation processes in Rwandan mining sector

Some Questions need solutions

How do CFSP value RCM? And what is its importance to you?

How US SEC considers ICGLR/RCM certification into their

policies?

What are the requirements for Rwanda to become a member

of CFSI/ CFSP?

What do smelters need to know about the ICGLR certificate?

Does the certificate give them what they need for SEC

reporting?

What are their priorities?

What are the challenges / gaps?

How do we best communicate with smelters? (CFSP)

How do we improve practices on-the-ground integration

among due diligence schemes?

MESSAGE

Rwanda is not interested in all kind of conflicts

Rwanda needs CFSI/CFSP certificate in order to add value to

our minerals as it is in our mining policies and EDPRS;

Rwanda is putting in place a very good system to improve

mining sector not only through the said schemes but also

according to National requirements.

MURAKOZE

-

THANK YOU!

Mr. Venant NSANZIMFURA

Coordinator of Rwanda-ICGLR Mineral Export

Certification Unit /RNRA

[email protected]

Mineral Traceability in Burundi

-

San Francisco,29-30 September 2014

By Evélio MUSHIMANTWARI

Email:[email protected]

Ministry of Energy and Mines

Web: www.burundi-gov.bi

E-mail: [email protected]

//upload.wikimedia.org/wikipedia/commons/f/fd/Coat_of_arms_of_Burundi.svg






San Francisco, september 2014, Burundi Presentation

I. INTRODUCTION

II. HARMONIZE NATIONAL LEGISLATION ON THE EXPLOITATION OF MINERALS.

III. MINERALS IN THE BURUNDIAN ECONOMY

IV. ARTISANAL MINING

V. MINERAL TRACEABILITY / DUE DILIGENCE IN BURUNDI

VI. CHALLENGES OF TRACEABILITY IN BURUNDI

VII. CONCLUSIONS



I. INTRODUCTION


Entity: Republic of Burundi

Area: 27,834 Km2

Population: 8.5 millions

Capital City: Bujumbura

• Agriculture is mainly the base of Burundian economy.

• The country also produces gold, wolframite, coltan & cassiterite

• Exploration for nickel, phosphates, REE, vanadium



The Republic of Burundi is located in East Africa and is bounded to the North by the Republic of Rwanda, on the East by the United Republic of Tanzania, and to the West by the Democratic Republic of Congo. Burundi covers is located between 20 ° 20' and 4 °27' South latitude and between 28 ° 50' and 30 ° 53' East longitude. It is close to the equator. It lies astride the 30th Meridian.





• Burundi is an eastern

neighbor to DRC

• Burundi produces

“conflict minerals”

• Burundi falls under the

Dodd-Frank Act due

diligence reporting

BGR 2011



II. HARMONIZE NATIONAL LEGISLATION ON THE EXPLOITATION OF MINERALS.

This instrument is intended to revise and harmonise national legislation concerning mining ores. It is recommended that Member States domesticate the provisions of the national protocol of the ICGLR on the fight against the illegal exploitation of the natural resources within their legal framework, and harmonize national laws. Completed and ongoing steps:

the new code mining 15 October 2013.

The policy and mining strategy,

the texts of the mining code pending applications.




The Code Mines and its implementing rules encourageprospective investors to come and invest in this area.At the same time, the Government of Burundiintention to draw on the experience of other countriesthat have made the mining sector a springboard fordevelopment.





0

50

100

150

200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Burundi Major Export Values [Mio USD]

Tea (Comtrade)

Coffee (Comtrade)

Total 3T

Gold

IIi. MINERALS IN THE BURUNDIAN ECONOMY

• Burundi is a

developing

country with

negative trade

balance

• National exports

are very

important for

development

• Major exports:

Coffee & Gold

• 3T minerals also

contributed

increasingly




0

100

200

300

400

500

600

700

800

900

1,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Burundi Mineral Export Tonnages [t]

Cassiterite

Wolframite

Coltan

II. MINERALS IN THE BURUNDIAN ECONOMY (Cont.)

• Wolframite most

important for

tonnage

• Coltan most

important for

export value

• Mineral exports

plunged in 2013:

quasi-embargo

• Creates risk for

smuggling of

Burundian

minerals into

neighboring

countries

Civil war Production recovers



Whereas the exploitation of minerals by processes craft without that this operation is preceded by the highlighting of a deposit.In Burundi artisanal mining is important for jobs and sustaining livelihoods.

Government of Burundi undertakes efforts to develop artisanal mineral sector & support due diligence:

Formalization - formation of cooperatives (already registered: 11 for gold, 22 for 3Ts)

CFSI_Brussels. Burundi Presentation, March 2014

Iv. ARTISANAL MINING



Implementation process of EITI

Cadastre system in development

Commitment to ICGLR Regional Certification Mechanism: performed 5 mine inspections in 2013

Challenge: (lack of) mineral traceability




Evolution of the number of associations/cooperatives and counters: gold and 3T

Année

Nbre

Asso.3T

Nbre

Asso.Or

Nbre

Compt.3T

Nbre

CompT.Or

Total Nbre

Assoc.

Total Nbre

comptoirs

2009 13 3 9 2 16 11

2010 16 5 9 7 21 16

2011 26 7 12 6 33 18

2012 35 10 17 8 45 25

2013 41 23 19 18 64 37




Evolution of the exported quantities reported in KgQuantité exportée en kg

Année Or Wolframite Coltan Cassitérite

2008 2.170,2 96.384 116.586 560.136

2009 971,113 14.400 24.423 23.4340

2010 309,79101 336.723,1 67.365,4 28.700

2011 1.051,9267 505.114,7 158.781,7 51.844,2

2012 2.146,85948 564.769,6 258.578,1 116.720,2

2013 2058,35933 69459,4 5767,2 -




Evolution of the exports from the EMA income

2008 752 170 000

2009 476 747 716

2010 496 877 342

2011 1 294 207 728

2012 1 754 682 220

2013 1 478 145 222




Government engaged in discussions with 3T traceability providers since 2011 (on-going)

Private sector committed to contribute

OECD: it is a private sector responsibility to establish traceability as part of due diligence efforts


V. MINERALS TRACEABILITY IN BURUNDI




102.6

9.6

4.41.2

Burundi Mineral Export Value 2012 [Mio USD]

Gold

Coltan

Wolframite

Cassiterite

• Gold generates

more value than

3Ts in Burundi

• Why are due

diligence

schemes not

developed to

include gold?

• Create demand

through

responsible

engagement



Currently, the process of traceability in Burundi is areality because the Directorate General of geology andMines whenever sends executives field to follow thisprocess. We guarantee that the ores of Burundi arewell plotted from the site until the counter prior toexport. We ask the industries of transformations tohave the confidence of the origin minerals of economicinterest from Burundi and enhance its value.




Burundi is sufficiently watered and has an abundant hydrography and rainfall are observed nine months out of twelve that includes a year and also has an ecosystem favouring tourism and the business climate. The climate is very pleasant with an annual average temperature of 25 ° C in the plain of Imbo West and 15 ° C for the rest of the country and the Sun is 12 hours per day. Be welcome to invest in Burundi




VI. CHALLENGES OF TRACEABILITY IN BURUNDI

The cost of traceability of the 3T very high relative to production, not sustainable; Differences in the prices of ores practised in neighbouring countries; Necessity of the market for ores in stock because of the embargo of export in 2012: documenting respective stocks and their chain of custody; The cost of the printing of the ICGLR certificate;




For other traceability providers, costs are too high to be borne by private sector alone.

Even with traceability in place, no guarantee for offtake from smelters/downstream (disengagement is cheaper)!

Comparison of quoted price for 3T traceability in Burundi and known costs from Rwanda:

For wolframite, traceability costs per unit (ton) would

be 10 times higher in Burundi

Not sustainable for private sector




VII. CONCLUSIONSArtisanal mining in Burundi gradually develop in a context of good governance, legality and respect for all partners. This activity reinforces its contribution to offer in decent work, to local development, the fight against poverty and social peace.





Evélio MUSHIMANTWARI

Advisor in charge of Geology and Mines

In the Ministry of Energy and Mines

Burundi

Contact: Phone: (+257) 77890386

E-mail: [email protected]




Progress and

Developments

in the Great

Lakes Region,

part 2

Responsible Minerals Progress in

Central Africa—can we get to a “tipping point?”

**At the request of the presenter, these slides are not being distributed.

Please contact presenter for copy or further information.**

Presented by Eileen Kane, US Department of State

Prepared by Dr. Richard B. Robinson, Extractive Industries Technical Adviser, USAID DRC Kinshasa

14th EICC CFSI Workshop Sept – Oct 2014

Cultivating Security Through Social and Economic Sustainability

Company Profile

• KEMET Laboratories

founded by Union Carbide

in 1919

• Headquartered in

Simpsonville, South

Carolina since 1963

• 98% of possible dielectric

solutions.

• 32,000,000,000

Capacitors shipped

in FY13

• 9,732 employees worldwide

– USA 647

– Asia 2,231

– Mexico 5,075

– Europe 1,779

• Global Sales Force “Easy-

To-Buy-From”

1994

• Threats to Human Security (UN HD Report*)

1. Economic Security

2. Food Security

3. Health Security

4. Environment Security

5. Personal Security

6. Community Security

7. Political Security

• On the ground…..

• The Congo was known to the world as Zaire.

• One month after the report as many as 800,000 were killed in Rwanda in 100 days.

• Conflict spilled over into the Congo.

• No conflict-free certified mines.

• No traceability schemes.

• No validated conflict-free smelters.

• No due diligence guidance for responsible mineral sourcing.

*United Nations Human Development Report 1994 – Oxford University Press

What’s Changed?....A lot!

Not Perfect but Progress

• Continuous demand for materials abundantly available in the region.

• Global focus on responsible sourcing.

• Industry leaders demand “conflict-free” materials.

• OECD Due Diligence Guidance

• EICC CFSI and CFSP (>160 validated or active smelters)

• Regulation/Government involvement

• Traceability schemes

• Independent mine certifications

• ICGLR

• Improving security in the region raises hope.

Framework and foundation

Closed-Pipe Model

• Developments provided a framework for changing the supply chain model.

• Initiatives sought to shorten and better control mine ---> to smelter.

• All participating in PPA independent assessment of closed-pipe model!

Solutions for Hope (Motorola and AVX)

Conflict Free Tin Initiative (Mulit-Stakeholder/Netherlands)

KEMET Partnership for Social and Economic Sustainability

Opportunity and InitiativeKEMET’s Closed Pipe Vertical Integration

K-SaltTa

Powder

Ta

Capacit

or

Electron

ic

DevicesTa Ore

Giving Back – Cultivating Security

Kisengo Foundation

Kisengo Foundation

Summary of Actions

HEALTH: New Hospital

“Doctor training” visits

Basic equipment

962 patients served

EDUCATION: New School

Teachers

Basic equipment

1,878 students

INFRASTRUCTURE

Fresh water wells

Chlorination equipment

Solar powered street lights

Bridge & Road construction and repair

Kisengo Foundation The Hospital

OldNew

Kisengo Foundation Solar Lighting and Wells

Kisengo Foundation The Old School

Kisengo Foundation The New School

EconomicsMining and Traceability

Reality!

The Math Must Work

• I was recently asked…. what would make KEMET quit sourcing

from the region?

1. The ore cost rises above global market price.

2. Unable to source “conflict-free”

Thank You!


Day 2: September 30, 2014 – Afternoon


Supply Chain Workshop 14


Keynote:

Jason Stearns

Between Cassandra and Polyanna:

Responsible supply chains in the Congo

Due diligence in the private

sector

• From finance to food,

from toys to cars,

private sector is very

used to due diligence

as a way of mitigating

risk and complying

with laws

Cost of Doing Business

• In 2009, McDonalds

reported that 98% of their

fish came from fisheries

with “favorable

sustainability ratings” and

97% of their

slaughterhouses were

audited and 99% passed

• Just as with fraud and

corruption, this is a cost of

doing business

1502 and the Congo:

Appropriate diagnosis?

• Conflict in the Congo

was not just caused by

minerals!

• Erosion of impartial,

strong state

• Regional feuds

• Local struggles for land

and power

1502 and the Congo:

Appropriate treatment?

• Supply chains in the eastern Congo extremely messy

• Why “conflict free”––instead of focus on process and risk mitigation?

• Asking for conflict free without bagging & tagging, auditing: embargo

And yet…

• Minerals had become

core of conflict

economy:

• 89% of exports of North

Kivu

• Biggest funding of AGs

• Rwanda-Congo battle

also over minerals

• FARDC racketeering also

over minerals

In an ideal world

Governing through the market

• Despite

• 19,000 peacekeepers

• Supplying 35-50% of budget

• Donors largely unsuccessful

a promoting state reform

through aid

• Market incentives could do

a better job at providing

incentives than aid

55%

45%

DRC Budget

Domestic revenues

Donor revenues

After 4/1 years?

• Miners lost jobs

• But fewer than suggested

• Many went into gold, employs 4x than 3T

• Much due to perception, not law

• Armed groups declined

• But not because of Dodd-Frank

• Only a handful of 500+ mines in NK and SK bagged and tagged

• Main progress on process:

• Congolese legislation

incorporating OECD

• Public Private Alliance

• DRC gov validated 91

“green”

• Fraud commission

• More ownership displayed

by Congo government than

in almost any reform

process

Main challenges

• Amount of minerals bagged

and tagged in Kivus tiny

• Audits and CMRs are

becoming box-ticking

exercises

• Don’t rely on receipts

• Don’t just look for guns in

mines

• In many cases, no OECD

audits at all

Main challenges

• Gold almost completely

uncharted

• Only ITRI doing bagging &

tagging

• Can 1502 affect violent

logic of patronage?

• Seninga & Cooperama

• Can 1502 affect DRC-

Rwanda relations?

Way forward

• Ultimate goal should not just be bagging and tagging all 800+ mines in eastern Congo

• Lower standard from conflict-free certainty to risk mitigation

• More emphasis on scrutiny, spot-checks, and audits

• Tackle impunity for racketeering

Aksanti, Melesi mingi, merci!

[email protected]


Getting a

Successful

Independent

Private Sector

Audit (IPSA)

Approaches to Managing an IPSA for a Conflict Minerals Report

IPSA Panel Agenda

Session Introduction

Informal Audience Poll and IPSA Overview

Panelist Statements including (10 minutes each topic)– (Lawrence) What an IPSA is and what it is not? A Practitioner’s Perspective

– (Bryan) IPSA, An Issuer’s Viewpoint: Intel’s observations after completing an IPSA in 2014

– (Doug) IPSA, An Auditor’s Viewpoint: Auditor’s observations after completing an IPSA in 2014

– (Ilya) Deloitte’s Observations of Year 1 and being IPSA ready for 2015 & beyond

Q&A Session

But first, a quick attendee poll . . .

1. For the 2014 SEC CM Filing year,• Who filed a CM disclosure with the SEC this year?• Who participated in an IPSA this year?

2. For the 2015 SEC CM Filing year,• Who anticipates filing a CM disclosure with the SEC next

year?• Who anticipates participating in an IPSA next year?

3. If your company doesn’t plan to conduct an IPSA in 2015, are you planning to do a “mock IPSA” to prepare for the 2016 report?

COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC

Suppliers

Tier1Tier2andbeyond

Refiner/SmelterChainofCustodyMineSite Issuer/Manufacturer

SEC

CFSProgram

OECDDD

LBMA

RJC

WGC

iTSCi

ICGLR

BGR

U.S.Regulation

SubjecttoInterpretation

IndustryInitiative

LocalLaw.Guidance.

Reference.

Audit

CTCValidation

RegionalCertification

Rwanda

CFTI/SfH/PSES

E-Tagging

TinSupplyChainRiskMitigation

Industry-ledClosedPipeSupplyChainTinSupplyChains

DownstreamGuidanceUpstreamGuidance

EICC/GeSI

DataGatheringTemplate

IPC

ConflictfreeGoldStandard

GoodDeliveryList

ChainofCustodyStandardGold

3T

ConflictMinerals

DueDiligenceGuidance

3T+Gold

What is an IPSA?

Simply put, an Independent Private Sector Audit (IPSA) is an audit conducted by an independent 3rd party of the assertions made in an Issuer’s Conflict Minerals Report which is filed with the SEC.• The Issuer must make two assertions, at minimum, within their Conflict

Minerals Report.

• The Auditor must audit the two required assertions then express an opinion or conclusion.

IPSA Audit Objectives (as defined by the SEC’s

Final Rule)

Express an opinion or conclusion whether:

1. the design of the issuer’s due diligence framework, as set forth in the Conflict Minerals Report, with respect to the period covered by the report, is in conformity with, in all material respects, the criteria set forth in the nationally or internationally recognized due diligence framework, and

2. whether the issuer’s description of the due diligence measures it performed as set forth in the Conflict Minerals Report, with respect to the period covered by the report, is consistent with the due diligence process that the issuer undertook.

May be done by CPA or non-CPA auditor (CIA, CRMA, CPEA)

Using attestation (CPA) or performance (non-CPA) standards of the GAO’s Generally Accepted Government Auditing Standards (aka “GAGAS” or “yellow book”)

When is an IPSA required? (SEC Fact Sheet* modified

July 29, 2014)

DRC Conflict Free — If a company determines that its products are “DRC conflict free” . . . then the company must undertake the following audit and certification requirements:

• Obtain an independent private sector audit of its Conflict Minerals Report• Certify that it obtained such an audit.• Include the audit report as part of the Conflict Minerals Report.• Identify the auditor.

Not Been Found to Be “DRC Conflict Free” — If a company’s products have not been found to be “DRC conflict free,” then the company in addition to the audit and certification requirements . . .

For those products that are “DRC conflict undeterminable,” the company is not required to obtain an independent private sector audit of the Conflict Minerals Report regarding the conflict minerals in those products.

*http://www.sec.gov/News/Article/Detail/Article/1365171562058#.VCXJ26Pn-Uk

http://www.sec.gov/News/Article/Detail/Article/1365171562058#.VCXJ26Pn-Uk

ELM SUSTAINABILITY PARTNERS LLC

Lawrence M. Heim, CPEA

September 30, 2014

14th Conflict Free Sourcing Initiative Workshop

Burlingame, CA

An ELM GROUP Company

Audit clarification

Performance audit guidance

Writing CMRs for cost effective

Independent Private Sector Audits (IPSAs)


Auditor opinion/conclusion on whether the design of the due diligence is “in conformity with,

in all material respects” OECD (for now), and

company did what the CMR states was done

for due diligence measures

Limited to sections of the CMR describing

the due diligence design and measures

undertaken


April 7, 2014 FAQs Questions 13 – 21

All but one (#16) relate to IPSA

#13: Non-CPAs may conduct IPSA

#14: No IPSA required if any product is

undeterminable

#15: IPSA required for “DRC Conflict Free”

#17: IPSA does not address completeness or

reasonableness of due diligence performed


SEC April 7, 2014 FAQs Questions 13 – 21

(cont’d)

#18: IPSA does not include RCOI

#19: IPSA does not include Form SD

#20: IPSA may include due diligence measures

undertaken after the reporting year

#21: Full description of due diligence design not

required



You have choices when it comes

to your IPSA…

Performance Audit (CPA not required)

may be used for IPSAs

50% of CY2013 IPSAs were Performance

Audits

Auditor guidance published March 2014

Same level of assurance Attestations,

different report contents

Who you want to perform the audit and

how much you want to payCOPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC

IPSA audit effort, cost directly reflect due

diligence definition and description in

CMR

“Novel” will require more effort and cost

RCOI description within due diligence

Numerical metrics

Inclusion of third party providers

Precise wording needed



Yes 40%

No 38%

NA - No CMR

21%

Not Stated 1%

Are RCOI Steps Described as Part of Due Diligence Measures?

IPSA: An Issuer’s ViewpointIntel’s observations after completing an IPSA in

2014

Bryan Fiereck, Intel

IPSA is what you would expect

1. Issuer makes assertions.

2. Auditor assesses whether assertions are auditable.

3. Auditor determines sampling plan needed to verify each assertion.

4. Auditee presents evidence – sampling error rates apply.

5. Auditor expresses opinion or conclusion of the assertion.

IPSA is what you would expect (continued)Demonstrate program conforms with stated due diligence framework.Map your program components to each relevant framework section.

Ideally, implement a Standard Operating Procedure (SOP).

Demonstrate DD measures performed are consistent with DD process undertook.

Descriptions must be auditable and you must show your work.

Best to document the assertions early so you collect the right information.

Document everything and be prepared to provide copies to the auditor. If you cannot produce the written evidence, it didn’t happen.

Intel’s observationsIssuer essentially controls the audit scope.

– Cost is dependent on scope; $50-125K USD– Total audit engagement (start to finish) was ~6 weeks– Auditor was on-site for 2 days– Expect the successive audits to be easier than initial engagement

Auditor independence concerns appears to limit available auditor population.

Standardized audit report reduces confidentiality concerns as a “Report of Independent Accountants” which expresses their opinion on the filers conformance to the two different audit objective. Also clarifies non-audit activities.

Intel’s observations (continued)Advantages:

– Audit forces program’s documentation– IPSA preparation result in further program clarity which positively impacts

disclosure which results in better communication to stakeholders.

Disadvantages:– Auditor experience may vary – consultants may initially have more

expertise/knowledge than assurance auditors– Auditability requirements result in some non-ideal language. Assertion edits

may be necessary.

Summary: Start preparing now. Well organized documentation is key.If it doesn’t make sense to you, it won’t make sense to an auditor.

©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC

Ensuring a Successful IPSA:

An Auditor’s Perspective

Prepared for

Conflict Free Sourcing Initiative Workshop

September 30, 2014

Prepared by Douglas Hileman, CRMA, CPEA


Agenda

1) IPSAs: Background &

Year One

2) Other Audits

3) Ensuring a Successful

IPSA

4) Closing Comments

5) Contact Info &

Resources

205


DHC Disclaimer

This information has been prepared by

Douglas Hileman Consulting LLC

(“DHC”) for general information

purposes. It does not constitute

consulting services or advice.

DHC makes no representation or

warranty (express or implied) with

regard to its accuracy, completeness or

timeliness. Transmission, receipt, or

acceptance of this information does not

create a relationship with DHC.

Parties seeking advice should consult

with counsel, consultants, or other

suitable resources familiar with their

particular circumstances.

© 2014 Douglas Hileman

Consulting LLC206


1. IPSAs & Year One:

IPSA Auditor PerspectivesTwo objectives: Express an opinion or conclusion whether:

1. the design of the issuer’s due diligence framework, as set forth in

the Conflict Minerals Report, with respect to the period covered

by the report, is in conformity with, in all material respects, the

criteria set forth in the nationally or internationally recognized due

diligence framework, and

2. whether the issuer’s description of the due diligence measures it

performed as set forth in the Conflict Minerals Report, with

respect to the period covered by the report, is consistent with the

due diligence process that the issuer undertook.

May be done by CPA or other auditor (CIA, CRMA, CPEA)

Using attest (CPA) or performance (non-CPA) standards of “yellow

book”


Consulting LLC207


IPSA ObjectivesObjective 1:

Express an opinion or conclusion whether the design of the issuer’s due

diligence framework, as set forth in the Conflict Minerals Report,

with respect to the period covered by the report, is in conformity

with, in all material respects, the criteria set forth in the nationally or

internationally recognized due diligence framework, and

IPSA Auditor Tips for Objective 1:

• Be able to map design of due diligence (DD) framework to applicable

framework (OECD or other)

• Map DD framework to the OECD 5 steps

• Consider OECD sub-steps; map where possible; provide rationale

for gaps (applicability, materiality)


Consulting LLC208


IPSA ObjectivesObjective 2:

Express an opinion or conclusion whether the issuer’s description of the

due diligence measures it performed as set forth in the Conflict

Minerals Report, with respect to the period covered by the report, is

consistent with the due diligence process that the issuer undertook.

IPSA Auditor Tips for Objective 2:

• Review contents of Conflict Minerals Report (CMR)

• Segregate the section that describes what you did

• Be able to produce supporting evidence

• Segregate background, conclusions, and forward-looking

statements


Consulting LLC209

“If you say it, make sure you can prove it.”


Example of Statements to Report on

“what you did” This Year

What did You Do in 2014 to Save for Your Child’s College

Education?

• I put $3,000 into a college account.

• I enrolled in an automatic saving plan.

• I took steps so I can begin saving money next year.

• My child will be able to go to any college s/he wants.

• I made Coursera a “favorite” on my child’s browser.


Consulting LLC210

What is suitable audit evidence? (What is auditable?)

Do the statements align with a stakeholder’s desired outcome?


What did You Do in 2014

for Conflict Minerals Due Diligence?

• The company has been in business for 20 years.

• We surveyed our suppliers.

• We reviewed supplier responses.

• We made every effort to get responses from our

suppliers.

• We made sure the CMRTs were accurate.

• We will improve our procedures in 2015.

• We have a conflict-free part.

• We have quarterly meetings with our customers.


Consulting LLC211

What is suitable audit evidence? (What is auditable?)

Do the statements align with a stakeholder’s desired outcome?


2. Other Conflict Minerals Audits:

What IPSA Doesn’t Evaluate• Is the filer conflict-free?

• Was the filer conflict-free all year?

• Have they included all the products?

• Are the conclusions in the CMR correct? Reasonable?

Supported?

• Is the filer doing enough to find out?

• Is the compliance program efficient?

• Is this product conflict-free?

• Do minerals come from other conflict regions?

• Will the company be conflict free next year?


Consulting LLC212


2. Other External ReportingContent, message should be consistent among all external

reporting channels.

• Publicly-available

– Form 10-K

– Company website

– Sustainability report

– Marketing

• External, but targeted

– CMRTs

– Customer surveys

– Shareholder presentations

– Professional/ trade associations


Consulting LLC213

Be able to support all claims or assertions.


2. Other Types of

Audits/AssessmentsAudit to another standard:

• Customer requirement

• Company policy

• Progress towards a goal

• Readiness Assessment

• Focused review

• Peer Review/ Benchmarking


Consulting LLC214


3. Ensuring a

Successful IPSAWhat does “successful” look like?

• Clear expectations re: objectives, audit process (plan,

procedures, output), resource needs

• Planning process creates/ confirms expectations

• Field procedures go according to plan

• Uncertainties, gaps, or findings are conveyed as soon as

possible

• Reporting is clear, concise

• Audit meets quality, schedule, budget commitments

• Client gets value from the exercise

215


3. Considerations in Selecting

IPSA Audit Firm

• Independence: criteria? How maintained?

• Your company’s ground rules for using financial

auditor (Sarbanes-Oxley)

• Relevant experience

– SEC filings

– Performance audits

– Subject matter: Dodd-Frank Conflict Minerals & applicable

frameworks (OECD)

– Systems, controls, business process

• Auditor staff: individuals; credentials

216


3. Considerations in Selecting

IPSA Audit Firm

• Understanding of the context of the IPSA (as nested

within your CMR)

• Cultural fit with your company; your instincts

• Deliverable(s)

• Costs

• References

• Commitment to a successful outcome

217


3. How Can an IPSA Go Wrong?

• Inadequate planning

• CMR: disorganized; irrelevant content;

unsupportable statements

• Straying beyond scope

• Mis-aligned expectations of IPSA process,

outcome, or deliverables

• Failure to include all relevant groups (Internal

Audit, SEC Counsel. Etc.)

• Resistance to change

218


4. IPSAs & the Year(s) Ahead

• Conflict Minerals programs could get more complicated

in 2014

– Second transition year (of two!)

– Product level activity; there could be multiple valid CMRTs at

the same time.

– Potential disconnect between CMRTs to customers and SEC

filing

• Compelled speech & IPSAs?

• Consider “trial IPSA” in 2014

• Identify/ retain IPSA auditor early

• Stay tuned for regulatory, legal developments.

219


5. Contact Information &

Resources

Douglas Hileman, CRMA, CPEA

www.douglashileman.com

See also:

www.DFCMAudit.com

www.DFCMTraining.com

Mobile: 818 416 6403

220

White papers on the DFCM research available on all sites.Research on filings by supply chain tier, forward-looking statements

availableSurvey on practitioners’ DFCM experiences & predictions open until

10/31/2014 (link on sites)

http://www.douglashileman.com/

http://www.dfcmaudit.com/

http://www.dfcmtraining.com/


Douglas Hileman Bio

(Audit & Conflict Minerals Focus)

• 35 years of experience in compliance, external reporting, auditing (9 years in industry)

• “Specialty audits”: to contracts; transaction; litigation support; enforcement; audit readiness

• 6 years at PricewaterhouseCoopers LLP: ~100 financial audit procedures; Sarbanes-Oxley; internal audit

• Audit to terms of SEC Consent Decree

• Commented on draft SEC Rule for Dodd-Frank Conflict Minerals (DFCM); referenced in final rule ~10 times

• Helped clients build, improve DFCM compliance programs; training

• Conducted an Independent Private Sector Audit (IPSA) submitted with 2013 filings

221

Conflict minerals:

Managing the independent

private sector audit (IPSA)

September 30, 2014

For discussion purposes only

223 Copyright © 2014 Deloitte Development LLC. All rights reserved.

Filings and filers:

• The majority of filers included a Conflict Minerals Report (CMR) as an exhibit to their

Form SD. Moreover, the majority of filers were domestic registrants, although some were

foreign

Year one reporting observations

22%

78%

Form SD only

Form SD including CMR 14%

86%

Foreign

Domestic

Deloitte analysis of SEC Form SD and CMR fillings as of July 21, 2014


Executive signatory and filing by industry:

• Most Form SDs were signed by the CFO, with several General Counsel signatures,

among others

• Most of the companies that filed were in the Consumer & Industrial Products industry,

followed by Technology, Media and Telecommunications industry


48%

24%

14%

14% Finance

Legal

Operations

Other

54%

30%

4%

11%

1%

Consumer and Industrial Products

Technology, Media, and Telecommunications

Energy and Resources

Life Sciences and Health Care

Financial Services



CMR Approach:

• Approximately 53 percent of registrants did not distinguish Reasonable Country of Origin

Inquiry (RCOI) from due diligence

• Approximately 49 percent of registrants intentionally separated the description of their due

diligence design (generally by making an assertion about their design) from the description

of due diligence measures performed (generally by using headings for each section)

• Approximately 47% of registrants used the steps in the Organisation for Economic Co-

operation and Development (OECD) Framework to organize their description of due

diligence measures performed




Due diligence measures disclosed and IPSA readiness


• Year one filings included various approaches to describing conflict minerals

compliance:

− Quantitative descriptions: number of suppliers surveyed, supplier survey

response rate

− General descriptions: requirements established for all suppliers

• Registrants should consider the attributes of suitable and available criteria that

are required for an independent private sector auditor to perform an IPSA:

− Suitable criteria is objective, measurable, complete, and relevant

− Terms such as “best practice” or “to the best of our knowledge” are not

objective or measurable


Risk mitigation/future due diligence measures


• Not required until year two, however 55% of registrants included such

disclosures

• Clearly separating due diligence measures performed from those expected to be

performed in the future is likely to help the registrant and the independent private

sector auditor distinguish whether CMR content is within or outside the final

rule’s scope for IPSA purposes

• Cautionary language regarding forward-looking statements was included in

23% of the CMRs


Leading examples

Exhibit 1.01

Conflict Minerals Report (excerpt)

I. Introduction

[The registrant included an introductory section, although not required.]

II. Reasonable Country of Origin Inquiry

OECD Step 1: Establish Strong Company Management Systems

A. Adopt and commit to a supply-chain policy

Activities performed:

[Disclosed RCOI activities here]

Ill. Due Diligence

Due Diligence Design: [The registrant included an assertion in the CMR that its due diligence conforms to/is consistent

with specific steps of the nationally or internationally recognized due diligence framework that it used.]

Due Diligence Measures Performed: [The registrant used the following format to disclose the description of the

measures it has taken to exercise due diligence on the source and chain of custody of the conflict minerals.]

OECD Step 3: Design and implement a strategy to respond to identified risks.

A. Report finding to designated senior management

Due Diligence Design Due Diligence Measure Performed

[Disclosed design of due diligence] [Disclosed due diligence measures performed for calendar 2013]


Leading examples

Exhibit 1.01

Conflict Minerals Report (excerpt)

I. Introduction

[The registrant included an introductory section, although not required.]

II. Reasonable Country of Origin Inquiry

OECD Step 1: Establish Strong Company Management Systems

[The registrant included a description of the RCOI measures taken in accordance with OECD Step 1.]

OECD Step 2: Identify and Assess Risk in the Supply Chain

[The registrant included a description of the RCOI measures taken in accordance with OECD Step 2.]

Ill. Due Diligence

1. Due Diligence Design: [The registrant included an assertion in the CMR that its due diligence conforms to/is consistent with

specific steps of the nationally or internationally recognized due diligence framework that it used.]

2. Due Diligence Measures Performed: [The registrant used the following format to disclose the description of the measures it has

taken to exercise due diligence on the source and chain of custody of the conflict minerals.]

OECD Step 3: Design and implement a strategy to respond to identified risks

[The registrant included a description of the due diligence measures taken in accordance with OECD Step 3.]

OECD Step 4: Carry out independent third party audit of supply-chain due diligence


OECD Step 5: Report on supply-chain due diligence


IV. Due Diligence Results

[The registrant included the list of smelters/refiners used to process minerals necessary to the registrant's products, the country of origin

and mines of origin.]

V. Future Measures

[The registrant included a description of future measures to improve due diligence processes]


• An opinion or conclusion is to be expressed as to:

1) Whether the design of the issuer’s due diligence framework set forth in the CMR, is

in conformity with, in all material respects, the criteria set forth in the nationally or

internationally recognized due diligence framework used by the issuer

2) Whether the issuer’s description of the due diligence measures set forth in the CMR

is consistent with the due diligence process that the issuer undertook

Two types of engagements are allowable:

Examination attestation engagement Performance audit

• May only be performed by CPAs or

individuals working for a licensed CPA

firm or a governmental auditing

organization

• Standard form of the report

• May be performed by other than licensed CPAs or

individuals working for a licensed CPA firm, such as

consulting firms

• Report contains the audit results, including findings,

conclusions, and recommendations including, but not limited

to:

• A description of the nature and extent of the issues

being reported and the extent of the work performed

that resulted in the finding

• Details of the performance audit, including objectives

of the procedures performed in conducting the audit

and results of such procedures

Attestation engagement versus performance audit


Registrants should stay alert for the following:

• The Legal Challenge

- En banc review at the U.S. Court of Appeals for the D.C. Circuit

- The SEC and Amnesty International asked the D.C. Circuit to reconsider its ruling in

light of the AMI opinion

- Executive Order: the White House announced expanded sanction with respect to

"individuals and groups tied to militias involved in the illicit trade of natural resources

from the region" of the Democratic Republic of the Congo (DRC)

• SEC Head of Corporate Finance, Keith Higgins, observations

- “Sharpening up the precision” when describing the RCOI

- Companies should not suggest their products are conflict free if they don’t declare

“DRC conflict free” and obtain an IPSA

- Companies should disclose the smelter or refiner used to process their minerals, if

such facilities are known

Marketplace developments


Registrants should also stay alert for the following:

• Expectations published by leading non-governmental organizations and sustainable and

responsible investors on this topic.

• Published expectations in the context of their industry and its position in the supply chain:

• Greater market scrutiny of additional Year 1 filings and market impact analyses, with a

focus on impact to registrants as well as impact on the region of focus.

Registrants may wish to consider the above expectations in developing their

organization’s conflict minerals compliance program and reporting process

Marketplace developments


Next steps

We encourage registrants to:

• Consider the potential implications related to the organization of the RCOI and

due diligence disclosed in the CMR, with an eye toward the requirements of the

IPSA.

• Evaluate the clarity and sufficiency of their disclosures in the CMR of due

diligence measures performed and the need to demonstrate suitable criteria in

anticipation of an IPSA.

• Take demonstrated and focused efforts to increase the level of confidence in the

data gathered and performance measurements related to supplier engagement,

and focus on sufficiency of documentation to support activities undertaken and

related disclosures.

This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial,

investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it

be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your

business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms,

and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”)

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www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to

attest clients under the rules and regulations of public accounting.

Copyright © 2014 Deloitte Development LLC. All rights reserved.

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Member of Deloitte Touche Tohmatsu Limited


Conflict

Minerals

Regulatory

Updates

The US, the EU, and beyond


Roadmap

• U.S. – SEC, Court of Appeals, Executive Orders, Rumors

• E.U. – Elections and implementation

• Beyond – Canada and In-region

U.S. – SEC by the Numbers

The filings are in!

• 1,315 Form SDs – Only 22% of the SEC’s estimate

• CMRs were filed with 77%– SEC estimated 75 percent of Form SD filers also file a CMR

• 80% stated “undeterminable” or similar– 4 audits a few “conflict-free” statements

• About 60% tracked to OECD 5-Steps

• 70% used the CMRT

• About 15% listed smelters or refiners

• About 15% stated CFSI membership – BUT not the same 15%


U.S – SEC Observations (Sept. 15 to ABA)1. Overlap in the RCOI and due diligence processes

– no requirement for issuers to perform an RCOI if they move directly on to the due diligence phase.

– “But if you determine that your conflict minerals didn't come from” the conflict region, “you should be providing clear and specific language about the process that you used to reach the determination.”

2. Companies that have not chosen to label their products as conflict-free should avoid disclosure that suggests so

– “If you say your [product] is conflict-free, you have to provide an independent private sector audit, so nudging up close to that with some implied statement is probably not a good idea.”

3. SEC is unlikely to provide additional interpretive guidance due to pending litigation in the U.S. Court of Appeals


U.S. – SEC Actions

SEC rumored to be working on “batch” of FAQs and guidance, including a position on compounds.

• Letter to SEC in June memorializing a telephone conversation where SEC suggested compounds are not conflict minerals for the rule’s purpose– Verbal confirmation reported in July

• BUT– No agreement in writing

– No legal opinion for SEC counsel

– No guidance likely until after court


U.S. – Court of Appeals

• Court of Appeals says: 1st Amendment prevents requirement to say “Not DRC Conflict-Free”– Magic words no longer required!

• En Banc opinion in American Meat Institute v. U.S. Dept. of Agriculture suggests otherwise– Can require factual and uncontroversial disclosure that, so long as the

government's interest is "substantial" and there is a “reasonable fit“

• SEC filed for En Banc on Conflict Minerals

• Date not yet set


U.S. – Other Dodd-Frank Issues

• Annual GAO report identified challenges to issuers and past deadlines by Dept. of Commerce

• Dept. of Commerce published a list of 3TG “processors” in Sept.– Compiled info from USGS, GAO, LBMA, DMCC, OECD, & CFSP-compliant

– Inconsistencies and likely inaccuracies inhibit its usefulness

– CFSI is educating on our process and knowledge

• Calls for evaluation on regulation’s impact region– Over 70 academics and experts


U.S. – Executive Orders

• Order from 2006, but revised in 2015 restricts trade with:– support to persons, including armed groups, involved in activities that

threaten the peace, security, or stability of the DRC;

– support to persons that undermine democratic processes or institutions in the DRC;

– the illicit trade in natural resources of the DRC;

• CFSP traceability covers much of this– Assurance that CFSP-compliant smelters are sourcing responsibly


European Union

• Refresher: Covers 3TG, but not limited to DRC– Self-certification scheme for importers

– Responsible smelter list

• Elections have removed a major supporter, but new sponsor already in place

• European Commissions working on “implementing guidelines”– CFSI providing technical and expert support to commission

• Anticipated debate and vote spring or summer 2015 – Implementation not likely until mid-late 2016


Canada and In-Region

• Dodd-Frank 1502-type legislation voted down in Canadian Parliament on Sept.– Unlikely to re-emerge

• In-Region– Uganda revising mining law originally passed on 2003

– DRC full membership in Extractive Industries Transparency Initiative (EITI),

• global organization promoting good management of oil, gas and mineral resources

– DRC mining code revision


Regulatory Up-Date Summary

• Plenty of activity, but very little change.



OECD UpdateOECD implementation program on responsible mineral supply chains (gold and 3T) and introduction to the 3-5 November Kinshasa conference and objectives

The OECD Due Diligence Guidance

Implementation programme -

update

14th CFSI workshop

30 September 2014

Mr. Louis MaréchalResponsible Business Conduct (RBC) UnitOECD

Reminder - OECD Due Diligence Guidance

for Responsible Mineral Supply Chains

Objective

To provide clear, practical guidance for companies to ensure they do not contribute to conflict or abuses of human rights through their mineral and metal procurement practices

Method and scope

5-step risk-based due diligence process, applies to all companies throughout the entire mineral supply chain that potentially use minerals conflict or high-risk areas

Features

One set of expectations throughout the entire mineral supply chain from mines until end users

Progressive approach, promoting constructive engagement with suppliers

Complementary and practical due diligence measures depending on mineral and position of company in the supply chain

Five Step Risk-Based Due Diligence

(Annex I)

Step 1• Establish strong company management systems

Step 2• Identify and assess risk in the supply chain

Step 3

• Design and implement a strategy to respond to identified risks

Step 4

• Support independent third-party audit of the smelter/ refiner’s due diligence

Step 5• Report annually on supply chain due diligence

OECD Implementation Programme

Over 500 organisations involved

– Governments (OECD and non OECD), international organisations, business, civil society and other experts

Information-sharing and promotion of due diligence

– Tools, workshops, working groups, webinars, peer learning, training

Outreach in producing regions (Africa’s Great Lakes region, West

Africa, Colombia) and processing/consuming countries (US, China, India, Middle East, Turkey etc.)

Collaboration and problem-solving

– Coordinated solutions

– Harmonisation and mutual recognition of industry programmes

– Promotion of responsible mineral sourcing from conflict-affected and high-risk areas

Bi-annual Forum on Responsible Mineral Supply Chains

Mandarin edition of the Due Diligence Guidance available since May 2014

In February2014, the OECD presented on responsible business conduct, including the Due Diligence Guidance, in workshop organised with the Chinese Enterprise Confederation and GIZ

In June 2014, OECD presented to APEC Mining Ministers Roundtable in Beijing

MOFCOM designated the China Chamber of Commerce Metals, Minerals and Chemicals (CCCMC) as key partner to work with the OECD on responsible business conduct in minerals

OECD and CCCMC are exploring collaboration and signing of a Memorandum of Understanding (MOU) on responsible mineral sourcing, to cover due diligence outreach in China and a tool to help Chinese companies operationalise the Guidance

The OECD Secretariat and CFSI will present on Responsible Mineral Supply Chains (90 minute session) on 24th October Exploration Exchange conference in Beijing, China

Implementation and outreach in 2014 -

Focus on China

Democratic Republic of the Congo

• Series of Train the Trainer sessions planned in DRC (Bukavu in July 2014, Kinshasa in November 2014, Kisangani in June 2015-TBC, etc)

• April 2014 : Gold baseline assessments launched

Turkey

• Training with Borsa Istanbul in April 2014

• Translation of the Due Diligence Guidance into Turkish (October 2014)

• Upcoming Train the Trainer planned for November 2014

Colombia

• Mission in February 2014 to lay the foundations for fruitful cooperation with the Colombian government and main mining stakeholders

• September 2014: Gold baseline assessments launched

Other - Introduction to OECD Due Diligence Guidance:

• September–Eurométaux (European Association of the Non-Ferrous Metals Industry) and Japan Business Council in Europe

Other implementation and outreach in

2014

• 3T Commercial Risk and Risk Mitigation

– Draft paper on commercial risk and risk mitigation was not adopted by the group

– Focus is now on discussing cases / real-life scenarios and risk mitigation options to help companies develop reasonable risk mitigation approaches in response to commercial risks

– Aim: to establish good practices in terms of commercial risk mitigation over time, drawing from the real-life cases discussed in the group

• Artisanal and small-scale mining (ASM) Hub

– Development of concept tool to enable buyers to source responsible gold from conflict areas

– Several webinars held on issues such as closed pipe projects, the role of large-scale mining and its engagement with ASM, the role of governments in formalisation activities, etc

Implementation - Update on working

group activities

• Worst Forms of Child Labour (WFCL) in Mining

– Draft of a set of recommended actions to help Forum stakeholders address the issue of WFCL in mining

• Audits

– A series of webinars introduces the different existing audit programmes

– Presenters include representatives from the programmes and practitioners who talk about challenges and lessons-learnt from the audits they conducted

Implementation - Update on working

group activities, cont’d

• Forum: 3-5 November at the Grand Hotel in Kinshasa

• Focus of 8th Forum:

– Review and advance implementation of upstream due diligence in the Great Lakes Region

– Emphasize the human rights elements to due diligence implementation as highlighted in Annex II of the Guidance

– Understand the due diligence expectations of responsible buyers and investors in conflict-affected and high-risk areas

– Encourage discussion and dialogue on how to formalise artisanal and small-scale mining on the ground

• Train the Trainers training for local actors on the Due Diligence Guidance: 30 and 31 October in Kinshasa, DRC

8th Forum on Responsible Mineral

Supply Chains

Regulation – update on EU initiative

► March 2014 – Draft EU initiative and legislation released:

Voluntary self-certification scheme for importers of 3T and gold into EU common market

Based on OECD Due Diligence Guidance

Accompanying measures include public procurement benefits, SME financing for due diligence, global responsible smelter lists and funds for OECD implementation programme

► Next steps:

Beginning of discussion at European parliament in November.

Intention to develop a certification scheme and draft a guidance on identification of conflict-affected an high-risk areas.

Thank you

For further information on the OECD’s work on

Responsible Business Conduct

http://mneguidelines.oecd.org/

http://mneguidelines.oecd.org/mining.htm

Or email: Louis Maréchal

[email protected]

http://mneguidelines.oecd.org/

http://mneguidelines.oecd.org/mining.htm


http://mneguidelines.oecd.org/responsible-business-conduct-matters.htm

http://mneguidelines.oecd.org/responsible-business-conduct-matters.htm