Conflict Mineral Rules Becoming Established in Africa, Experts Say

July 14 - Despite challenges and initial suspicions, rules covering the international trade in conflict minerals are taking hold in Africa and are providing a legal framework for small enterprise mining operations to bring the minerals to the international market, experts said at a panel discussion in Washington DC.

Legal production and sale of tin, tungsten and tantalum is viable five years after a new US law began requiring companies to disclose whether they are obtaining minerals that had fostered violence in central Africa, said Yves Bawa, regional director and program manager for the NGO Pact in the central Africa.

When the US Dodd-Frank Act went into effect in 2010 it essentially imposed a de facto embargo on the three minerals from the region. Now, Bawa said, 80,000 miners in the region are employed in the mining sector and earning incomes from artisanal, or small scale, mining that follows a strict standard of compliance with the law.

Pact, which has been engaged in the conflict mineral issue, released a report entitled "Unconflicted: Making conflict-free mining a reality in the DRC, Rwanda and Burundi." The report provided an update on the impact of the law and their assessment of how it has affected production, conflict and the lives of workers.

3Ts of Conflict Minerals

Conflict mineral is a term applied to any of the three minerals mentioned above, sometimes called the 3Ts, and to gold when they are produced or sold by people who use the profits to fuel violent conflict. During the regional wars of central Africa, many guerrilla and state-related groups engaged in extensive mining and brokerage operations to buy their weapons and materiel.

The issue gained attention, in part, because of the increasing demand for tantalum (which comes from a mineral know as Coltan or Tantalite) for use in electronic devices.

Bawa, who works in the Democratic Republic of Congo, Rwanda and Burundi and addressed the DC audience by Webcam, said that when Dodd-Frank went into effect in 2010 many local miners believed it was set up to punish and control them. Many companies responded to the law's requirement of reporting the provenance of their mineral supply by simply terminating their purchases from the region.

Pilot projects and implementation of non-conflict supply chain practices brought the trade back on line gradually, Bawa said. In the report, Pact said that more than 800 active sites are producing about 1,700 metric tonnes a month of ore under a tracking program called the ITRI Tin Supply Chain Initiative (iTSCi). ITRI is the acronym for the International Tin Research Institute, a group headquartered in the United Kingdom.

Compliance Process

The iTSCi program tracks tungsten and tantalum as well as tin. The program monitors mining for connection to conflict, and if none is found it allows the miners to tag their sacks of mineral designating compliance. Then, the iTSCI program monitors the transport of the raw material through the supply chain to the smelters and the refiners.

By cooperating with the program these processor companies can document that they have sourced their raw material from conflict-free situations, allowing them to market their products to world customers as conflict-free minerals. In turn, the US customers are able to report to the SEC, as required by law, that they are not using minerals from businesses that support conflict.

The European Union and Canada are now considering their own version of a conflict mineral reporting and compliance law.

Business Case for Engagement

Jean-Paul Meutcheho, director of corporate sustainability for Global Advanced Metals of Boston and Pennsylvania, said his firm sees three business motivations for sourcing minerals from central Africa in the face of strict compliance standards.

First, he said, it adds value to their refined products by helping customers know that they have conflict-free minerals. Those customers must report whether they can or cannot determine the conflict status of the minerals. Meutcheho said compliance with the process enables the customers to report they do not use conflict minerals.

Second, smelters and refiners are the "chokepoints" of the compliance process, he said. If the smelters and refiners are in compliance, he said, then all the downstream steps in the supply chain would also be in compliance, he said.

Finally, the compliance process enables the industry to engage in trade with central Africa and obtain raw material from the region, he said. This has a social benefit as well as an economic one, he said, since it enhances the legitimate and free market economic activity of the area, he said.

Gold Remains A Problem

Karen Hayes, senior global director of Pact's Mines to Market program, said that Dodd-Frank only addresses tin, tungsten and tantalum, which are minerals that are found in heavy, rocky ores. The law does not address gold, which remains a conflict mineral of choice for armed groups.

A chunk of gold has high monetary value in its natural, pre-refined condition. A militant could put an easily marketed quantity of gold in his pocket and walk across the border easily, compared to transporting bulky sacks of ore to specialized buyers.

Tin, tungsten and tantalum, on the other hand, are only useable after they have been smelted out of the ores where they are found naturally. (These ores are Cassiterite, Wolframite, and Tantalite or Coltan, respectively.) "Who wants to walk around the bush with a 20 kllogram bag of rocks?" she said.

The proposed EU regulations would include gold in its standards for conflict-free mineral compliance.

Risks of Non-Compliance, Opportunities for the Future

Gare Smith, an attorney at Foley Hoag, said that companies that are suspected of using conflict minerals in their products face both reputational and legal risks. Many consumers are actively seeking to avoid products that contain conflict minerals, he said. Further, use of conflict minerals could lead to a company facing lawsuits alleging complicity in human rights abuses under the Alien Claims Tort Act.

Kay Nimmo, the manager of sustainability and regulatory affairs at the International Tin Research Institute, said that the conflict-free compliance effort is looking to enter a phase in which more funds could be channeled back to the communities that operate conflict-free mines. These funds would be used for social development programs such as the end of child labor and economic development activities. Her group had established the iTSCi process before the Dodd-Frank Act was passed in the United States.

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