Conflict minerals: new reporting regulations
There has been an increasing international focus on conflict minerals emanating from illegal mining operations in the Democratic Republic of Congo (DRC) and adjoining countries in Africa, also known as Covered Countries.
In maintaining its social license to operate, the mining and metals sector must ensure it has stewardship of its supply chain and that it fully respects human rights at each stage.
There are concerns that funds earned from minerals sales from some illegal mines in this region are being used by armed groups to finance regional conflicts.
Groups such as the Organisation for Economic Co-operation and Development (OECD), the Electronics Industry Citizenship Coalition (EICC), the World Gold Council (WGC) and the Global e-Sustainability Initiative (GESI) have been working to bring about change.
Two groups have now issued formal reporting regulations to combat conflict minerals, one legislated and one voluntary:
1. Dodd-Frank Section 1502 and the SEC’s final rule
The US Congress enacted legislation that requires US Securities and Exchange Commission (SEC) registrants to provide certain disclosures about the use of specified conflict minerals emanating from the Covered Countries. Conflict minerals are currently defined as cassiterite, columbite-tantalite, gold, wolframite and their derivatives (limited to tin, tantalum and tungsten).
On 22 August 2012, the US SEC adopted a rule pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 1502) that requires the implementation of the disclosure requirements of the new law.
This is applicable to all SEC issuers (including foreign issuers) that manufacture products where “conflict minerals are necessary to the functionality or production” of the product, and requires companies utilizing conflict minerals in their products to disclose the source of such minerals.
Section 1502 is a disclosure requirement only and places no ban or penalty on the use of conflict minerals. The law is aimed at dissuading companies from continuing to do business with mines that exploit workers and are financing regional conflicts in the Covered Countries.
2. Conflict-Free Gold Standard
The Conflict-Free Gold Standard is designed to be implemented by World Gold Council member companies and other entities involved in the extraction of gold.
It seeks to establish a common approach by which gold producers can assess and provide assurance that the manner of their gold extraction does not contribute to serious human rights abuses or breaches of international humanitarian law1.
The Standard will act as an Industry Programme to operationalize the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict- Affected and High-Risk Areas.
It is also designed to complement and integrate with other industry-led initiatives including the London Bullion Market Association’s Responsible Gold Guidance2.