conflict mineral smelter verification

Top 3 Problems with Smelter Verification

2015

Table of Contents

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1. Volume of Data2. Supplier Inaccuracies3. Engaging Smelters4. What is happening in Indonesia?5. Q & A

Problem #1 – Volume of Data


Supplier entries on the CMRT form can number in the 1,000sWhen you have 100s or 1,000s of Suppliers, the sheer size of the data presents a problemNeed to view all of the data – how can this be with 100,000s of potential entries

Consolidation of dataMerging Duplicates while still maintaining integrity of original informationPurging invalid smelters (AKA Pawn shops)Purging invalid entries (Ex: “???????”)

Cross-Referencing dataReconciliation of data with CFSI, LBMA and DOC lists

Both are moving targets (Ex: CFSI list changes smelters and your Suppliers change smeltersNo Single source, publically available list – for that you need a friend service Provider

Managing all of this data at scale is extremely difficult due to the size, complexity and dynamic nature of the data. In addition, you as the CM Program owner can not control those 3 items

Problem #1 – Volume of Data – Solutions!


Establish a Smelter Data WarehouseYou must parse the data so that it can be handled outside of the CMRTThis can be as complex using IT tools or as simple as a spreadsheet

This becomes your company’s reference for Smelter info and the gatekeeper for CMRT & SEC reporting (more on that next week!)

Track key metrics:CID#CFSI StatusCountries of originOther 3rd Party status (Ex: LBMA)

Create Merge & Purge rules and stick to them!If you are going to use a manually administered Smelter Data Warehouse, acknowledge the limitations (Ex: You won’t be able to match Smelters to products) and create rule setsMerge duplicates and Purge bad data accordinglyEx Rules:

Merge data if CID, Metal and Country matchPurge data if Smelter name is not on DOC list

GOALThis Warehouse should be what you paste into your CMRT and report on your CMR

Problem #2 – Supplier Inaccuracies


Many suppliers have limited understanding of SmelterTheir bad data is your bad data

Smelter data almost viewed as an afterthought Since no Smelter is a direct supplier of theirs, they feel it is not their responsibility

Common response: “This what my Supplier gave me.”

Invalid data RAMPANT in Supplier CMRTsAir quote Smelters – “Smelters”

Not really smeltersQuite often traders, sometimes literally pawn shops

Old CIDs or 2.0+ CFSI IDsCID and Smelter info does not matchCorrupt data (?????s, bad characters, etc)

If you do not fix these problems and simply pass them on, you are part of the problem

Problem #2 – Supplier Inaccuracies – Solutions!


Educate your Suppliers!Create an FAQ

These are the known smelters:CFSILMBADOC

If you have Smelters on your list that aren’t on these list, then they are probably not a real smelterWhy it is important

Bad smelter info can be jeopardize corporate filing of SEC issuers

Feel free to directly you Supplier to our Success Center where your suppliers can access this info for free: http://www.assentcompliance.com/supplier-success-center/

Outline your rules for Smelter Verification – BE TRANSPARENT You should be disclosing your process in the CMR anywaysIt will help Suppliers understand what they should doIt will help customers understand what information your Merged & Purged as well as whyDon’t just copy and paste Smelter lists from your Supplier CMRTs

Merge and Purge!

http://www.assentcompliance.com/supplier-success-center/

http://www.assentcompliance.com/supplier-success-center/

Problem #3 – Engaging Smelters


For Smelters on the DOC list but not on the CFSI/LBMA list, this can be a real problem (These are commonly referred to as undocumented smelters) No group efforts on Due Diligence is being done on the sources of 3TGS from these Smelters

You need to either undertake those efforts internally or work with someone who is

Native Language and Time zone issuesDepending on your geographic location, communication can be impractical and data review impossible

Artisanal & Guerilla MiningPose the same problem with Smelters which “Mom & Pop shops” do for Manufacturers

Lack of records of SourceSpecifically Shanghai Gold Exchange

Convincing Smelters of the merits of joining a 3rd Party Smelter certification programNot SEC issuersMany tiers removed from the end users

Problem #3 – Engaging Smelters – Solutions!


Remember the criteria of Dodd-Frank and 2 key tenets of any potential Audits:Your ProcessYour execution of the Process

Your process should account for non-CFSI/LBMA smeltersYour execution should include outreach and be executed in good faith (along with meeting the criteria of reasonableness)

Quick tipsTake the list of Undocumented Smelters from your Smelter WarehouseThese Smelters need to feed back into your current Conflict Minerals data gathering processThe following information needs to be obtained:

Intent to enroll with a Regulated body (Ex: CFSI or LBMA)?Date of intent

Disclosure of Current Conflict Minerals policies3TG Sources (NOTE: Many smelters will not provide countries but areas)

This is very difficult part of the Due Diligence process but best efforts must be made in order to satisfy your requirements and provide accurate data to your customers.

Indonesia


Most Indonesian Smelters are owned by the Indonesian Government (Ex: “PT ______”)

In 2013, Friends of the Earth (FOE) published a study that documented widespread Human Right’s & Environmental issues within the Indonesian mining industry, specifically Bangka Island

This findings include:Worker safetyChild LabourEnvironmental damage done from Tin silt runoff

Leading OEMs have put together working groups and fact finding missions including:AppleSamsungSony MotorolaLG

No regulatory framework has been proposed but this is the sort of information that fuels discussions on expanding the Conflict Minerals regulations (primarily EU-based discussions)

Here is a link to more info: http://www.ebnonline.com/author.asp?section_id=1059&doc_id=268088

http://www.ebnonline.com/author.asp?section_id=1059&doc_id=268088

http://www.ebnonline.com/author.asp?section_id=1059&doc_id=268088

2015 – What’s next


Give us CMRTs you have received from your Supply Chain and will run a Red Flag analysis & Data Validation check on them at no cost!

Slide deck and Recording to be sent shortly

Continued Tactical level Webinar Series

Last webinar in the series next week – February 5th – 11am EST

Creating reports for the SEC

Register here: https://attendee.gotowebinar.com/register/8571762226576845826

https://attendee.gotowebinar.com/register/8571762226576845826

https://attendee.gotowebinar.com/register/8571762226576845826

Questions


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