wolfram bergbau & hütten ag due diligence report for ...€¦ · oecd due diligence guidance...

W o l f r a m B e r g b a u u n d H ü t t e n A G

Mine + Processing Plant Refining Plant + Head Office

A-5730 Mittersill/Austria A-8543 St. Martin i.S./Austria

PO Box 9 Tel. +43 3465 7077-0

Tel. +43 6562 4137-0 E-mail: [email protected]

St Martin i.S., Austria, 28 February 2018

OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas [1]

Wolfram Bergbau & Hütten AG Due Diligence Report for Mineral Supplies in Year 2017 (“OECD Step-5 Report”)

Note: Other than previous reports that had been arranged in line with the OECD guidance itself, Wolfram Bergbau & Hütten AG’s OECD Step-5 Due Diligence report for the year 2017 is following wherever deemed possible and appropriate the suggested outline for OECD Step 5 Smelter Public Reports in Annex IV of the Responsible Minerals Assurance Process – Tungsten Smelter Standard published on 1 December 2017.

1. Company Introduction

Wolfram Bergbau & Hütten AG (WBH) is a world-leading vertically integrated manufacturer of tungsten

carbide and tungsten metal powders. The company operates two facilities in Austria:

a modern underground scheelite mine at Mittersill, Salzburg, and

a state-of-the-art recycling, refining and powder manufacturing facility at St. Martin i.S., Styria.

The registered address is Bergla 33, A-8543 St. Martin i.S., Austria; webpage: www.wolfram.at. The

company is not affiliated with other companies using the name “Wolfram”, as this is simply the name for

the chemical element tungsten in many languages, e.g., in German, Russian or Portuguese.

WBH’s St. Martin facility is listed by the Responsible Minerals Initiative (RMI, formerly known as Conflict

Free Sourcing Initiative, CFSI) under smelter ID CID002044.

Since 2009, the company is part of the global Sandvik group, headquartered in Sweden.

In line with its Mission Statement, WBH is committed to ensure best practice with respect to safety,

health, environment and ethics at all stages of its supply and production chain. WBH fully supports the

activities of the Organisation for Economic Co-operation and Development (OECD) to avoid the use of raw

materials which finance armed groups in the Democratic Republic of Congo (DRC) and its neighbouring

countries (collectively often referred to as the “Covered Countries”) as well as other Conflict-Affected and

High-Risk Areas (CAHRAs).

WBH is supporting its customers to comply with the SEC Conflict Mineral rule concerning section 1502 of

the Dodd-Frank Act. WBH is a founding member of the Tungsten Industry – Conflict Mineral Council

(TI-CMC) and, based on an independent 3rd party audit, is listed as conformant to the Responsible Minerals

Assurance Process assessment protocol (commonly known as “Conflict Free Smelter”). WBH is also full

member of ITSCI (International Tin Supply Chain Initiative).

[1] OECD (2016), OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas: Third Edition, OECD Publishing.

http://www.wolfram.at/

OECD Step-5 Report for 2017

WBH OECD step-5 report for 2017.docx

WBH’s products are tungsten metal powder (100% W) and tungsten carbide powder (94% W, 6% C). The

company sources its raw material from

its own mining operation,

secondary raw materials (scrap),

tungsten ore concentrates from mines worldwide including the so-called “Covered Countries”, and

intermediate products such as Ammonium Paratungstate (APT) and Tungsten Oxide (BTO, YTO).

Besides tungsten-bearing raw materials, carbon black is required for some of WBH’s products as well as a

few tonnes of dopant metals annually. Certain quantities of cobalt, tantalum and molybdenum-bearing

by-products are generated in WBH’s recycling and refining activities.

2. RMI Audit

The most recent 3rd party audit of the Conflict Free Smelter Program (CFSP; now known as Responsible

Minerals Assurance Process, RMAP) was undertaken from 22 to 24 March 2017 for the one-year audit

period from 1 March 2016 to 28 February 2017. Lead auditor was Mr. Karl Daumüller (on behalf of SGS

Germany GmbH).

The audit summary report is not public; the successful audit is demonstrated by inclusion in the list of

RMAP Conformant Tungsten Smelters on the web page of RMI:

http://www.responsiblemineralsinitiative.org/tungsten-conformant-smelters/

3. Company Management System

Overview and History

WBH is audited against ISO 9001, 14001 and OHSAS 18001 industry standards since 1994, 1999, and 2010,

respectively. The ISO 9001 management system of WBH (QSGU system) prescribes, besides others, the

supply and productions procedures within the company, using a comprehensive set of policies,

instructions and procedure documents. Specific Conflict Mineral-related instructions have been added in

mid-2014. The management systems are audited on a regular basis, with the most recent audit being

undertaken by Intertek Certification AB, Sweden, in August 2017. The ISO 9001 certificate is valid until 14

September, 2018.

WBH has been sourcing from what is now known as the Covered Countries in Central Africa since the mid-

2000s; and supply chain due diligence, especially with respect to CSR issues like child labour avoidance

and EHS has been undertaken from the onset, although in a less formalised way than since 2014. WBH

has participated in the OECD multistakeholder meetings from the onset, and on the ground, has taken

part in early 3rd party efforts such as the Certified Trading Chain (CTC) programme of the German

geological survey (BGR). WBH was instrumental to reopening the tungsten supply chain from the area

after the de-facto boycott experienced as unintended consequences of the Dodd-Frank Act / SEC Conflict

Mineral Rule in around 2013/14.

The current policies are still influenced by the original focus of Conflict Mineral politics on the Covered

Countries in the Great Lakes’ Region in Central Africa. However, beside specific prescriptions concerning

compliance with Dodd-Frank Act and the CFSP, the company’s purchasing rules contain also an obligation

of conflict free ethical sourcing from any CAHRA.




The company is currently working on updated procedures to fully cover the expectations of the RMI RMAP

Tungsten Smelter Standard published on 1 Dec 2017 in a more formalised and better documented way

than this was the case so far. RMI is still working on implementation and guidance documentation, and

this will be awaited before revised procedures are introduced.

Supply Chain Policy

WBH has adopted and published on its web page a Conflict Mineral Statement. First version effective

December 2012; second version in February 2014; current version since October 2015:

http://www.wolfram.at/wp-content/uploads/2017/04/Conflict-Mineral-Statement.pdf

A revised version reflecting a more general approach to CAHRAs and the rebranding of CFSI and iTSCi will

be published in due course, most likely together with the new set of procedures in line with the RMAP

Tungsten Smelter Standard from 1 Dec 2017.

WBH believes Conflict Mineral compliance must be seen within a larger framework of general CSR

considerations. Conflict Mineral obligations are covered in the Wolfram/Sandvik Supplier Code of Conduct

(SSCoC), which all suppliers are bound to sign off, implement and which forms a part of all raw material

supply contracts.

WBH considers a short crisp Conflict Mineral Statement a more effective tool to promote compliance with

the expected standards than the generic lengthy Model Supply Chain Policy in Annex II of the OECD

Guidance.

So far, WBH has used the OECD Due Diligence guidance as the underlying guiding principle of its supply

chain procedures without formally adopting the principles in Annex II as an internal policy document.

While the SSCoC deals with overarching expectations and requirements, the company’s procedures were

at least partly customised to the expectations of the CFSI CFSP Supply Chain Transparency Smelter Audit

Protocol and Audit Procedure for Tungsten, both published on 19 Nov 2013. Details are provided further

below.

The SSCoC is available under https://www.home.sandvik/globalassets/6.-about-us/sustainable-business/

our-operations/governance/codes-of-conduct/supplier-code-of-conduct-pdf/english.pdf and all suppliers

are assessed against a list of “Rejection Criteria” as first-pass review of compliance with the SSCoC.

Management Structure and Responsibilities

WBH is a Business Unit within Sandvik product area SMS Supply, in turn part of Sandvik Machining

Solutions (SMS). A dedicated member of WBH’s management team, reporting directly to the president of

the company, is as Conflict Mineral Appointee (CMA) responsible for implementation and oversight of the

supply chain due diligence for WBH. This function is independent of but closely collaborating with the

direct purchasing unit.

The CMA has 30 years of experience in the mineral industry, 10 years of which have been in the tungsten

industry, a wide range of experience with artisanal to industrial mining, mineral processing, metal

accounting and the geology of ore deposits. He serves currently as chairman of the board of the TI-CMC

and is member of the RMI Standard Advisory Group.

http://www.wolfram.at/wp-content/uploads/2017/04/Conflict-Mineral-Statement.pdf

https://www.home.sandvik/globalassets/6.-about-us/sustainable-business/%20our-operations/governance/codes-of-conduct/supplier-code-of-conduct-pdf/english.pdf

https://www.home.sandvik/globalassets/6.-about-us/sustainable-business/%20our-operations/governance/codes-of-conduct/supplier-code-of-conduct-pdf/english.pdf



Procedures, System of Controls, Transparency and Third-Party Assurance

There are two instructions within WBH’s Management System (ISO 9001 / QSGU System), Section PP6/1

– Beschaffung von Primär- und Sekundärrohstoffen (procurement of primary and secondary raw

materials) that deal specifically with the requirements the Conflict Free Smelter Program:

PIB/01 – for primary raw materials from outside of the Covered Countries, for secondary raw

materials and for intermediates; and

PIB/02 – additional provisions for primary raw materials from the Covered Countries.

These instructions are currently being revised to better reflect the most up-to-date understanding of the

OECD guidance, the move from a focus on the Covered Countries to CAHRAs worldwide, the RMAP

Tungsten Smelter Standard from 1 Dec 2017 as well as changes in the company’s documentation process

(implementation of the MBControl database system). This update will also consider required changes due

to rebranding (e.g., from CFSI to RMI).

In summary and together with the SSCoC, beside others, these rules specify supplier selection criteria,

minimum documentation needs, and raw material reception procedures. There are specific (stricter)

requirements for supplies from the Covered Countries, including mine site visits prior to the first delivery,

annual re-visits, plausibility assessments and participation in an acceptable traceability programme. WBH

prefers direct interaction with the mine owners, does only accept supplies from specific mines and only

under specific circumstances and in minor quantities has procured consolidated material.

All supply contracts and/or pre-contract negotiations for mined material include relevant language

assuring that

Minerals are exclusively mined at specific mines;

WBH receives all required documentation and has the right to visit; and

WBH has the right to return concentrate that does not conform to these requirements or where

ITSCI reporting on the tags indicates a different origin from the agreed ones.

The instructions describe also material reception, scanning of the tags and (in case any concerns are

raised) a “red flag” policy, as well as the clearance procedures prior to utilisation of the concentrates.

WBH is a full member of ITSCI and all supplies from the Covered Countries are covered by either the ITSCI

or Better Sourcing Program (BSP) traceability programmes (“bag & tag”) and associated due diligence,

mine site baseline studies and shipment reports. This serves as independent 3rd party assurance of their

conflict-free origin and that certain minimum standards with respect to compliance, child labour and

similar are adhered to. The company would also consider alternative traceability schemes if and once they

become available.

Supplies of intermediates (mainly APT and BTO/YTO) are exclusively sourced from smelters/refiners that

are listed by the RMI on the Conformant Tungsten Smelter lists:

RMAP conformant tungsten smelters

TI-CMC category A members (= TI-CMC members progressing towards RMAP conformance); or

RMAP active tungsten smelters

and therefore, are considered reasonably DRC conflict free:

http://www.responsiblemineralsinitiative.org/tungsten-conformant-smelters/ .




The company advised their suppliers that only RMAP conformant tungsten smelters will be acceptable

from 1 Mar 2018 onwards unless a specific approval is issued by WBH’s Conflict Mineral Appointee. Given

the long time smelters are often listed as “active” and lack of transparency while being “active”, these

smelters will henceforth only be accepted based on individual assessment and if they are truly new

smelters in ramp-up phase and members of TI-CMC.

Suppliers must provide adequate documentation to trace back the intermediates to these smelters.

In line with the company’s purchasing policy, all supply contracts for raw material include contractual

acceptance with the SSCoC, which sets out minimum requirements concerning legal compliance and

various CSR issues such as environmental and EHS performance, child labour and similar. The code of

conduct provides also for both, general Conflict Mineral compliance for all CAHRAs plus specific

requirements for material originating from the Covered Countries. Specific conditions for these purchases

are also included in the relevant purchase contracts.

Relevant WBH personnel has been trained in the application of the procedures. In addition, the awareness

of the overall workforce has been raised by articles in the company newspaper and a presentation in a

townhall meeting.

WBH’s current supply of raw materials is covered by two levels of grievance mechanisms:

Sandvik’s global whistle blower system “Speak Up”; and

ITSCI’s grievance mechanisms in the Covered Countries.

In addition, stakeholders might raise their concerns via RMI’s webpage.

As part of the company’s overall management system, the Conflict Mineral procedures are included in

internal and third party auditing in the framework of ISO 9001, with the most recent audit being

undertaken by Intertek Certification AB, Sweden, in August 2017

WBH is a full member of ITSCI, and the approach to OECD compliance has been assessed by Synergy Global

Consulting (UK) in the framework of the membership application in 2014.

WBH has been first audited by the Conflict Free Smelter Program (CFSP; now RMAP) in March 2015 and

confirmed as Conflict Free Smelter. Successful re-audits were undertaken in April 2016 and March 2017.

By itself, the CFSP audit is currently not seen as an independent assessment of whether or not a

smelter/refiner can be considered as “OECD compliant” although the overall assessment is quite

substantial. WBH welcomes the fact that the 2017-version of the RMI RMAP Tungsten Smelter Standard

is intended to provide a full OECD compliance assessment.

Finally, the current report and the description of Conflict Mineral handling on the company’s webpage

provide additional transparency concerning the company’s procedures and policies.

Record Keeping System

Over the past years, WBH introduced an MB Control database system across most technical departments.

All incoming shipments, inventory and feed of the plant with the various raw materials are documented

in the MB Control system, which is linked to the SAP system used for the financial accounting.

In MB Control, all tungsten raw material is given unique batch numbers upon contract award, shipment

notice or latest upon arrival on the premises. Upon acceptance (e.g., upon assaying), the material is also

listed in SAP. All relevant paper documents are scanned and stored within MB Control and/or SAP.



For material from Central Africa, all tags are kept on site, and small back-up samples would allow

fingerprinting test should there be doubt of the material’s origin. Information from the traceability

providers ITSCI and BSP, such as baseline studies or shipment-specific data, is kept on file on the

company’s server.

All direct suppliers are registered in a master data file. Information about the individual mines, visits and

so on is available in hardcopy (field books), reports and e-mail notes.

4. Risk Assessment

Risk Assessment Process, Methodology and Results, including On-the-Ground Assessments

Until recently, main focus of Conflict Mineral assessments was to exclude a link between the concentrate

in question and violent conflicts in the Great Lakes’ region of Central Africa ( “DRC conflict free” in the

sense of the Dodd-Frank Act, section 1502). Besides, CSR related issues are routinely assessed by WBH for

all suppliers, like legality of the operation and child labour. With one exception where WBH is currently

setting up a closed-pipe supply chain and a single small lot was already included in the 2017 supplies, WBH

is reasonably sure that its concentrate supplies do not origin from any other CAHRA than the Great Lakes,

but no formal process to identify CAHRAs has yet been set up. Decision to accept or not supplies from a

given mine are done on a one-by-one basis, based on all information deemed to be required.

Similar to the CFSI CFSP Supply Chain Transparency Smelter Audit Protocol and Audit Procedure for

Tungsten from 2013, the WBH procedures distinguish supplies based on differentiation of country of

origin (L1, L2, L3, DRC), and between mined materials, intermediates and secondary raw materials.

The vast majority of WBH’s supplies fall into very well-defined and documented categories:

Secondary raw materials that by physical aspect (e.g., used or off-spec tools) and/or chemical

composition (tungsten in form of metallic W or WC) can be identified “with certainty” as being

“secondary”;

Typical on-spec intermediates from other tungsten refiners (APT, BTO, YTO); and

Tungsten ore concentrates, containing wolframite or scheelite originating from specific mines

worldwide, comprising both, artisanal and small-scale Mines (ASM) and large-scale industrial mines

including WBH’s own mine in Austria.

The overall raw material mix is completed by minor amounts of synthetic scheelite (either from treatment

of concentrates to remove certain contaminants or from recycling) and other pre-processed recycling

products.

For all common raw materials, the WBH procedures give specific minimum expectations with respect to

documentation of origin and “conflict-freeness”, as has been described above for the intermediates. For

“special cases”, a one-by-one assessment is required, guided by the established assessment route for the

more common raw materials, including, for example, close contact with a manufacturer of synthetic

scheelite and review of its sourcing practices.

As mentioned before, the WBH approach is an integrative risk assessment, where the risk to support

conflict is evaluated along with other CSR risks like child labour, violation of labour rights, inhumane

treatment and so on, as detailed in the SSCoC.



When looking at support of conflict, WBH considers that the risk is minimal, if

For secondary raw materials, the nature of being indeed of secondary origin has been established;

For intermediates, the origin from a refinery that is listed by RMI RMAP has been established; and

For mined raw materials, origin of approved mine sites is assured, including adequate chain of

custody and plausibility assessments.

The process for mined materials is described further below.

Methodology and Results, including On-the-Ground Assessments, for Assessment of Mined Materials

WBH sources from a large number of individual mine sites world-wide. WBH’s supply management system

is focussed on providing the best possible assurance that the sourced material is indeed coming from pre-

selected defined mines, which have been visited by WBH and (in case of supplies from Central Africa)

validated by ITSCI, BSP, IPIS or similar organisations. The management system calls for a combination of

own efforts and supporting evidence by accepted traceability schemes such as ITSCI and BSP, where

applicable.

In line with WBH’s Management System, all mines are visited; for mines in Central Africa in general before

supplies commence, while mines outside of this area might supply test deliveries before an on-site visit is

undertaken. This delayed visit schedule is based on an informed decision of the company’s CMA. In any

case, a plausibility assessment is required before deliveries are accepted.

The foremost means to control the identified risks is to optimise the chain of custody, i.e., to avoid the

risk that material from unidentified sources enters the supply chain of WBH.

All deliveries are assayed, and a review of the assay data is used to identify outliers or “unusual results”.

X-Y graphs are used to show distribution and patterns for different mines and areas of origin.

Over the past years, WBH staff has obtained a good sense for “suspicious” observations, and checks back

with members of the purchase team or the CMA if required. Examples are “dark colour” of scheelite

concentrates or elevated radiation for material apparently attributed to a mine where radiation is

exceptionally low. WBH’s conflict mineral procedures also allow for issuing “red flag” reports that can only

be overwritten by the Purchasing Manager or the CMA.

In addition to the requirements directly related to the OECD Guidance, the company requires continuous

improvement of OHSE conditions in the mining area. This assures that also the miners participate in

benefits of the supply chain.

Supplies from CAHRAs / the Great Lakes’ region in Central Africa

All supplies to WBH have to conform to the conditions laid out in the SSCoC. In case of supplies from

CAHRAs, two requirements are of particular interest:

Ethical, legally compliant, non-conflict supply with documentation that supports Conflict Free

audits in line with OECD requirements, for example by RMI; tagging, traceability and baseline audits

by organisations such as ITSCI play an important role to underpin this requirement.

Plausibility of supply beyond pure tagging, i.e., assurance that the supplies come indeed from the

mine listed as its origin.



The risks of adverse impact are thus related firstly to failure of the assurance programmes to provide

robust assessment of possible relation to conflict and the legal conditions, and secondly to failures in the

assessment of the plausibility that the supplies in question are indeed originating at their alleged origin.

In Rwanda, the principle risk is that material smuggled from neighbouring countries or from illegal mining

is tagged at approved mine sites. This risk is mitigated through ongoing presence and plausibility

assessments.

In the Eastern DRC, the overall situation is more fragile. At the same time, supply chains are more complex

through the added level of négociants and it is important to assure that Due Diligence beyond pure “tag

& bag” is implemented. One area of concern is the large number of non-validated sites that have no “legal”

outlet although conditions itself might well be on the same level as that of validated sites. This situation

can be considered as unfair or even non-justified and leads to added pressure on tagging agents and ITSCI

personnel at approved sites to accept off-site material for tagging. Additional efforts of all stakeholders

are required to make supplies chains from the DRC more robust.

In Burundi, while smuggling is less a problem, child labour, involvement of PEPs and general

legal/commercial compliance are areas of concern.

For supplies from the Covered Countries, i.e., to assure DRC conflict free supplies, WBH undertakes the

following:

Uses exclusively sites that are approved by the company as well as ITSCI or BSP and covered by

tagging;

Regular visits of WBH Management Team members in the region (three trips in 2017, visiting about

13 supplying mine sites including all large suppliers plus several potential future suppliers);

Semi-permanent presence through an experienced consulting geologist/engineer, undertaking

exploration, providing training and supervising beneficiation and mining projects for the various

suppliers in the area. Works since 2009 on behalf of WBH and undertakes also baseline studies for

new potential suppliers. His presence provides also additional oversight with respect to plausibility

of the supplies;

Follow up with ITSCI and BSP on observations and inconsistencies to avoid being overly reliant on

the traceability schemes; and

Regular Review of data provided by IPIS, ITSCI and the press in general to gain an understanding of

the various conflicts and political developments.

Previously, WBH sourced exclusively from several specific “larger-scale” (in Central African scale) mines

in Rwanda. Rwanda is a country with reasonably good governance, and it has well-working security and

tax collection systems. The country is not a conflict area by itself, but considered a likely transit country

with the risk that material originating from neighbouring countries is declared to be of Rwandan origin.

For these supplies, WBH considers the risk to inadvertently support conflict minimal as long as the

company can demonstrate that the concentrate it is sourcing originates indeed from the mines selected

by the company.

Starting in 2016, beside the above-mentioned well-established supply chains, the company started to

evaluate additional supply opportunities in the region of the Great Lakes. As such, in 2017, the company

reviewed additional supply opportunities in Rwanda. WBH approved supplies from several

additional mine sites and visited a couple of others, where further work would be required before



regular purchases could be undertaken. Material from some of these sources has been included in

the supply chain, although “commercial reliability” (i.e., loyalty) leaves to be desired. Technical

cooperation with help of the WBH consultant at some of these sites intends to create a better bond

with the suppliers.

reviewed the possibility to return to Burundi, where the company obtained supplies until 2013. A

long-term partner of WBH offered concentrates from the same artisanal areas as earlier supplies

and WBH purchased a limited amount of material while engaging in on-site reviews.

Obtained further supplies from South Kivu, following a second on-site visit and based on review of

IPIS/ITSCI/ICGLR that classified all involved sites as “green”.

All shipments were tagged and fully documented (baseline & shipment reports) by ITSCI. However,

following WBH’s risk-based approach, some of these supply chains were discontinued due to various

observations like lack of leverage that could be imposed in the complex trading chains, alleged smuggling,

unwillingness of intermediates to engage more directly with the supplying mines or issues around tagging.

The planned supply chain from another CHARA would be essentially closed-pipe; WBH cooperates actively

with the mine; and the overall set-up (one specific industrial though smaller-scale mine) and the specifics

around the conflict in question indicate that a separate assurance programme will unlikely be required.

5. Risk Management

Risk Mitigation Strategy

By far most of CAHRA-related supplies come from a number of selected mines in Rwanda, which are

supplying their entire production to WBH since several years. The company has tested other CAHRA-

related supply chains. A balanced approach is required in order to not apply de-facto boycotts on less

developed mining areas, which would actually benefit from inclusion into the supply chain of an advanced

Western offtaker, and the risk management of the company. While the idea to use alternative smaller-

scale suppliers in Rwanda is still pursued, supply chains in the DRC (South Kivu) and Burundi have been

discontinued, mainly due to the lack of leverage to develop sustainable supplies demonstrating

continuous improvement in the field of OHSE. No evidence of supporting conflict was identified.

Principle risk mitigation is through the use of a selected suppliers sourcing from designated mines only.

WBH does not rely on baseline reviews by a third party (e.g., ITSCI) alone, but insists on direct mine visits.

This precludes the use of material mixed from various sources that has been “approved” by “bag & tag”

alone.

With all decisions, WBH must take the company’s position as a respected world-class supplier into

account, as well the possible impact on other supplies from Central Africa (or any other CAHRA): any

contraventions that compromises WBH’s conflict-free status would lead to an immediate suspension of

the supplies at least until the problems have been solved.

As the challenges are diverse and unpredictable, and the overall number of concerned suppliers limited,

it appears reasonable not to have a fixed pre-defined risk management plan in place, but undertake risk

management ad-hoc, taking the guidance of OECD into account.

In case that problems are identified or red flags raised, depending on the magnitude of the case, either

the President of the company or the CMA will take the required decisions in coordination with other

affected parties.



Involvement of Affected Stakeholders

Aim of the Conflict Mineral regulations is to protect the most vulnerable groups at or near the upstream

end of the mineral supply chains: local miners, their families, and the population of the mining countries

at large; from violence, human rights violation and child labour. With its purchasing policy, WBH tries to

provide a positive impact:

no boycott of minerals from CAHRAs per se as this would deprive the communities from income

and the chance of development. Instead, the company allows for active sourcing when the supply

chain fulfils ethical standards and does not support conflict.

For approved supply chains, providing incentives to continuously improve the conditions on the

mine site and to give a helping hand with respect to technical development.

This approach can only work with the help of all actors along the supply chain:

Mine operators (companies or cooperatives) need to be loyal and not look for the “last penny” at

each individual sale of concentrates. A reliable longer-term offtake relation is required to make

collaboration and technical help worthwhile.

The same applies to intermediates and especially the exporting traders. In addition, they need to

be open (e.g., provide adequate information and ITSCI sheets), play to the rules of WBH and the

traceability providers, even if they consider them excessive, and demonstrate diligence and

precision when it comes to the tagging systems.

The traceability providers (ITSCI, BSP, others, if they become available) have to do their best to

maintain credibility. With own site visits and plausibility assessments, WBH has established a back-

up system, but especially for smaller suppliers, reliable traceability by tagging is currently the only

system that is acceptable for 3rd party audits of the smelters. Shortcomings in the programmes are

noted and brought to the attention of the providers.

RMI’s RMAP as the currently only active “Conflict Free Smelter Program” needs to maintain its high

standards and credibility without losing the balance between feasibility, practicalities and

expectations of the downstream. WBH feels that a stronger focus on timely re-audits and duration

of the “active smelter” status is required, respectively some public disclosure to explain delays and

changes to supply patterns for audited smelters.

Direct customers have been supportive when WBH discussed resumption of sourcing from Central

Africa in 2014. It is important that the entire downstream supply chain accepts Central African

supplies if cleared by the traceability providers and RMI, which in turn, as described above, requires

strong focus on credibility of these organisations.

The two current traceability providers, ITSCI and BSP, are involved in fierce competition and a “war of

words” (incident reports, public letters…), which has the potential to impact on the overall reputation of

the process and thus, is contra-productive for both sides. WBH’s supplier use both systems, and the

company calls for fair competition without trying to impose new barriers. ITSCI is supporting very small

producers, and for a fair competition, BSP would need to avoid cherry-picking either.

ITSCI’s system of incident reporting and base line studies is partly lacking the transparency required for

WBH to comply with the expectations of the OECD guidance. With respect to incident reports, WBH

cannot fulfil its requirement to assess risks, if no details are reported on the individual incidents (and the

little that is reported, comes often with several months of delay). Baseline reports contain excessive

redacting (blackening), even for issues like involvement and human rights abuses by armed groups –

information that should definitely be shared for the assessment by the individual offtakers.



It is important for WBH to be able demonstrating adequate assurance of the conflict-free origin of its

supplies in case that a 3rd party programme fails to convince the stakeholders of its robustness or integrity.

WBH is interested to hear about possible concerns related to the programmes the company relies on.

WBH reviews relevant reports by ITSCI, IPIS and similar organisations and follows up on ITSCI incident

reports whenever they concern suppliers in the company’s supply chain.

With respect to “smelters/refiners” (i.e., potential supply chain partners for intermediates), it would be

important to have a public register of compliance with the OECD guidance for companies sourcing in

CAHRAs. WBH considers that it is the responsibility of RMI that companies sourcing in these areas are only

listed as RMAP compliant if OECD compliance has been demonstrated within a reasonable timeframe.

As long as there are no other contributions to finance upstream traceability and due diligence systems,

costs therefore need to be assumed by local operators and exporters, as they stand in competition with

concentrates from industrial players in non-CAHRAs. One tungsten unit from either source has (or should

have) the same value, as long as it is acceptable for the entire downstream supply chain. WBH values the

quest of various organisations, including the OECD, to attract additional funding from downstream

companies, however, results seem to be meagre.

Unreasonable expectations by the downstream end of the supply chain concerning the level of due

diligence for smallest-scale upstream suppliers will lead again to competitive distortions and the possible

call for de-facto boycott. It appears that support of NGOs active in the field to help miners on local level

would be more beneficial than, for example, complex blockchain solutions. The latter could indeed map

supply chains in detail but put the burden to provide assurance again on the weakest link, as the level of

required documentation would essentially be the same for a large industrial miner and a smallest-scale

ASM in Central Africa. This would become immediately a question of economy of scale.

Description of Efforts to Track and Monitor Progress.

Given the rather limited number of direct suppliers and underlying mines, WBH has currently no pre-

defined set-up to track progress. Suppliers (or underlying mines) that are found to compromise WBH’s

conflict free status, that fail the test of “Rejection Criteria” (related to the SSCoC), or that refuse to

cooperate with respect to continuous improvement of the OHSE conditions in supply chains, will be

removed from the approved suppliers.

Observations concerning shortcoming and positive developments at the mine sites are included in site

visit reports and other correspondence, which is backed up on the company’s server. Furthermore, a file

with information about all active mines is kept as input for the annual RMAP audits.

A more systematic system is currently being set up to accommodate both, the internal supplier audits and

the provisions of the new RMI RMAP Tungsten Smelter Standard from Dec 2017.

6. Specific Information for 2017

General Supply Pattern

WBH keeps a register of all incoming tungsten-bearing material in a customised MB Control database,

which allows for the information to be exported into Excel format and thus, transferred into RMI’s

standard Line Item Summary (LIS). Unique batch numbers are generated for all discernible quantities of

raw material, which especially in case of secondary raw materials leads to numerous separate batch

numbers being assigned to individual truck loads.



In 2017, more than 1600 individual batches of highly variable weight were recorded in the data base for

tungsten raw material receipts, with 450 of these comprising concentrates. With the 2017-supplies being

covered by the 2013-version of the RMI (then CFSI) tungsten standard, incoming mined raw materials

were classified into L1 and L3 origin.

Around 94% of the individual batch numbers relate to:

secondary raw materials;

supplies from WBH’s own mine;

supplies from industrial and (semi-) artisanal mining operations outside of the Covered Countries;

supplies from legacy stocks; and

intermediates from smelters/refiners listed on the CFSI webpage as reasonably conflict free,

and as thus, are considered to be DRC conflict free per se as long as documentation indicates that nature

(e.g., “scrap”) or origin are correctly reported. The remaining 6% are concentrate batches from the

Covered Countries.

WBH notes that there is no unanimously accepted definition of CAHRA available yet, and that the EU

commission and other organisation work on guidance for companies in this matter. Based on WBH’s

assessment of the areas of origin, besides the routine well-controlled and documented purchases from

the Great Lakes’ region in Central Africa (Covered Countries), the company is currently establishing a

closed-pipe supply chain from another CAHRA, with one small test lot being included in the 2017 supplies.

The country in question cannot be named yet, as the project is still vulnerable to competitor activities.

Detailed material balance calculations demonstrate that all in- and outgoing tungsten quantities are

accounted for.

Supplies from the Covered Countries

Supplies from the Covered Country accounted for 6% of the individual batch numbers (100 batches of

highly different weight) and provide a minor but not insignificant portion of WBH’s raw material needs.

These supplies come largely from specific mines in Rwanda, but also from three mining areas in the DRC

and several mining areas in Northern Burundi.

Documents for every single batch are verified by a 3rd party auditor during the RMI RMAP compliance

audits. Supplies until 28 Feb 2017 were part of the audit undertaken from 22 to 24 March 2017, the

remainder will be reviewed during forthcoming audit scheduled for early April 2018.

In 2017, the WBH CMA undertook three visits to Central Africa and visited essentially all supplying mines.

In addition, WBH’s consultant maintained a semi-permanent presence in the region and undertook,

beside his more technical agenda, several Due Diligence visits in Rwanda, Burundi and the DRC.

Summarised site visit reports form part of the documentation available during the RMI audits. A number

of smaller-scale opportunities in Rwanda are currently being developed in cooperation with license

holders and exporters.

In Rwanda, presence of GMD agents is still an issue, so tagging itself is sometimes of limited reliability,

but WBH’s plausibility assessments and review of assay results give a good support for the origin of

supplies shipped to WBH.



WBH requests copies of the ITSCI tagging reports (mine and/or négociant plus export tag lists) from all

suppliers, which allows the company to establish the link between the delivered quantities and the origin

immediately upon delivery (i.e., well ahead of the receiving the ITSCI shipment reports) and before

material is processed.

The 2017-shipment reports from ITSCI (as far as available by writing this report) have not indicated any

deviation from the expected origin for the batches obtained by WBH, with exception of a single tag that

was erroneously attributed to another mine.

All deliveries to WBH are fully supported by ITSCI or BSP tagging and documentation. However, during the

year, WBH discontinued several supply chains based on its risk-based approach, due to various reasons

including

lack of leverage on the mines to improve operational conditions,

possible involvements of PEPs,

issues of tagging, or in general,

where more direct supervision and leverage was required to manage risks adequately than was

possible under the proposed commercial set-up.

At one specific site, concerns around implausible tonnage patterns and possible smuggling from near-by

“non-approved” sites were detected and later supported by whistle-blower activity. Since no satisfying

solution found in cooperation with ITSCI, WBH discontinued sourcing from this area.

Comments on current supply chain issues in the Great Lakes’ region

The company started sourcing from Central Africa in the early 2000s and has always undertaken Due

Diligence, notably with respect to issues around Child Labour and OHSE, although in a less formalised way

than during the past few years. One driver was to provide a secure offtake for local suppliers against their

commitment to continuous improvements, so that the local workforce benefits from the supply chain.

Over the years, WBH has obtained a good understanding of the specific conditions on the ground, and

through technical cooperation, provided “help to self-help” – teaching simple solutions to improve

productivity and safety without creating undue dependency on expensive first-world solutions.

As the OECD writes in the introduction to the OECD guidance that “companies involved in mining and

trade in minerals have the potential to generate income, growth and prosperity, sustain livelihoods and

foster local development”. At the same time, the companies may face the risk to contribute to adverse

effects, human rights abuses and conflict.

While a boycott cannot be a solution, all involved stakeholders including local miners have to understand

that a supply chain has to be also economic. Supplies from Central Africa stand in competition with

supplies from rest of the world, and advance in various areas is required to improve acceptance and

competitiveness of supplies from the small-scale operations in this region (or from CAHRAs at large). The

fact that this list is essentially unchanged from last year’s report demonstrates the urgency to progress:

More robust yet less complicated traceability solutions including a faster turnaround of traceability

information and more informative baseline studies including meaningful plausibility assessments.

A fairer share in costs between up- and downstream for Due Diligence costs.

More attention to capacity building of artisanal miners and formalisation of the sector.



A level playing field – it does not make sense if exceptions for downstream industry and

unreasonable thresholds (as now for example proposed by the EU Conflict Mineral rule) pave the

way for illicit / unverified material to enter a “legitimate” supply chain.

More attention to the meaning of Due Diligence for the different Supply Chain actors, e.g.,

overcome “blind reliance” on bag & tag and whitewashing through production of intermediates

outside of the region.

Providing a conductive environment by the various governments in the region, with harmonisation

of taxes and duties, and elimination of bureaucratic hurdles that sometimes even hamper Due

Diligence (e.g., unrestricted access to mining areas, ease to obtain visas, dispatch of samples).

It is important that local actors understand that longer-term reliable arrangements are indispensable

when it comes to development. If cooperatives look mainly for short-term gains, no downstream actor is

willing to invest beyond the “next container” – and no positive development can be reached. At the same

time, local exporters must take a larger share in responsibility, cannot just rely on tags and push

responsibility to miners, ITSCI and offtakers alike. Supply chains should be as short as possible, and the

role of the so-called négociants as an intermediate actor between mines and exporters should be

reviewed. The négociants are not validated in the ITSCI system, and they might also deter from a more

direct involvement of exporters with miners in view of improvement of mining conditions.

As for the traceability programmes, ITSCI was instrumental to allow local miners to gain again access to

the world market, but more transparency would be desirable to allow the smelter-level to fulfil its Due

Diligence obligations in line with the OECD guidance. Robustness of the first step – adding a tag (be it

physical or virtual) to the daily production is the biggest challenge for reliable results.

Accessibility to funding remains critical, and as discussed on the OECD Meetings, it would be important

that the (far) downstream pays a fair share: They depend on these programmes to declare their products

“Conflict Free” but simply take traceability for given. If pushed on intermediate levels, this would have

the potential to create again a de-facto boycott – why accepting higher DD costs for smallest-scale

suppliers, when larger suppliers from non-CAHRAs offer concentrate at the same price? The question of

economy of scale is important: Due Diligence costs for the baseline audit are essentially independent from

the production – i.e., small mines have much higher costs per mtu of tungsten produced. And a Due

Diligence in a CAHRA is far more difficult than, for example, one in western Europe.

.

Steffen Schmidt, P.Geo. (APGO)

Project Manager - International Mining & Conflict Mineral Appointee

Wolfram Bergbau und Hütten AG