Conflict minerals: new reporting regulations
Implications for mining & metals companies
These requirements have reporting implications for most metals producers, even if they are not producing from a conflict region, as they need to prove that they do not come from these Covered Countries.
Support of the Legislation and Standard will boost an organization’s social license to operate.
They involve not just the assurance function, but will also have operational and financial implications in the compliance of these regulations.
In a change from the draft rule, the SEC determined that mining companies are no longer considered manufacturers, unless the issuer also engages in manufacturing, whether directly or indirectly through contract.
However, miners will be requested by parties further down the supply chain to provide evidence of the conflict-free status of shipments. Smelters and refiners are directly implicated.
If an issuer determines its products are conflict free (i.e., minerals may come from covered countries but they did not benefit armed groups), the company must obtain a certified independent audit of its Conflict Minerals Report.
Audits of these reports must be conducted in accordance with Government Auditing Standards (known as the “Yellow Book”) for attestation engagements or performance audits.
Companies will need to thoroughly review the integration of these principles into both their operational and assurance models. This Standard is not just a reporting exercise. It entails changing the operational model to ensure that the gold in the supply chain is legitimately mined and conflict-free.
While the Standard has been developed for gold, it can be applied by any metals producer seeking to avoid involvement in conflict minerals.
The scope of the assurance engagement is to provide limited or reasonable assurance on the company’s Conflict-Free Gold Report. The Independent Assurance Report addressed to the Board of Directors or management should state the assurance provider’s conclusion. The report must be publicly disclosed alongside the Conflict-Free Gold Report or there should be clear sign-posting as to where it can be accessed.
For companies that already receive independent assurance over their sustainability reporting, assurance over the Standard may be incorporated into the sustainability assurance report as an additional assurance scope area3.
The implementation of these regulations means that mining and metals companies may need evidence that they do not inadvertently support the armed conflict, and that they are now part of the solution in stopping conflict minerals. Customers of mining and metals companies may request reports or assurances beyond those required by regulation.
However, even though adherence to both will be costly in terms of time and compliance, the support of the Legislation and Standard will boost an organization’s social license to operate.