Conflict Free Tantalum and Unintended Effects

By Michelle Smith–Exclusive to Tantalum Investing News

The issue that minerals, such as tantalum, from the Democratic Republic of Congo (DRC) are being used to support violent acts and violent groups is clear. The problem, which is being largely addressed by barring these conflict minerals from the supply chain, thereby eliminating the flow of revenue to malicious recipients, is now a major focus in the industry. But, it is an initiative that has had unintended effects, some of which may remain to be seen. Addressing armed conflict in the marketplace, as it turns out, is not as clear-cut as first believed.

The US’ Dodd-Frank Act requires the Securities and Exchange Commission (SEC) to address the issue of conflict minerals. The SEC is still trying to comply but is under pressure since the outcome is expected to have global effects.

The SEC has already proposed rules requiring companies to disclose whether they use tantalum from the DRC or surrounding countries, and if so, to outline the measures taken to ensure proceeds do not support conflict.

In February, the US Chamber of Commerce wrote to the SEC expressing concerns about the impact its proposed rules would have on the economic and living standards in Africa. Private investment, which was highlighted as an economic driver in the region, are at risk of facing a “chilling effect” the Chamber warned.

Despite the absence of the final rules, this chilling effect has already materialized, from what some may consider an industry imposed embargo.

Tantalum consumers are now largely shunning materials from the DRC. Focused on preventing tarnish on their company brands and supporting what appears to be a noble cause, few seemed to consider that turning their backs on the DRC not only closed the pipeline of revenue to militias, but also to artisinal miners who rely on the mineral trade for survival. As a result, massive numbers of people have suddenly found themselves unemployed.

The Congolese government has reached out the SEC urging them to follow guidance developed by the UN and the Organization for Economic Cooperation and Development, which would involve defining “due diligence as a continuous process, proactive and reactive, by which companies take reasonable measures in good faith.”

The Chamber of Commerce’s also reminded the SEC that it is legally obligated to consider the impact any rule may have have on competition.

According to the Chamber, the cost-benefit analysis of the proposed measures fails to show any benefit to investors, increased efficiencies for the marketplace, or capital formulation. The agency points to the SEC’s estimate that compliance costs could total over $71,000,000 and impact over 5,000 companies. A measure the Chamber therefore describes as “economically significant.”

The SEC rules could also prove disadvantageous in other ways.

China has a reputation for playing by its own rules and the industry took notice when it appeared that the Chinese too seemed to support the sourcing of conflict-free tantalum. However, reports continue to surface that China, unlike its western counterparts, is still getting tantalum from the DRC and at deeply discounted prices.

Further, it must be remembered that China has some domestic supply and the Chinese have secured a contract for the bulk of the conflict-free tantalum from Fluminense in Brazil. In addition, Chinese consumers can continue to compete in the open market with ther consumers who have far less, if any, guaranteed supply.

The competitive advantage the Chinese could gain if western consumers hold steadfast to austere sourcing practices should not be ignored. China has already announced plans to develop strategic stockpiles of metals including tantalum, thereby making themselves less susceptible to international pricing. With adequate supply, the nation could become a powerful force in the tantalum industry.

Complicating matters more is that this metal is believed to be subject to severe shortfalls. There is only a limited amount of tantalum available and the portion which is clearly conflict-free is even smaller.

While consumers are largely acting on their social responsibility now, it is inconceivable that in a market struck by deficits, all will have the ability to turn their noses up at supplies that cannot be deemed beyond a shadow of a doubt as conflict free.

The issue of conflict-free tantalum as it has been approached thus far comes dangerously close to pitting business interests against ethical concerns. The Chamber of Commerce warned that there is a possibility that among other things it will lead to false reporting. The agency outlined several “bold steps” the SEC could take to get a better grasp on the situation.

Acting on at least one of them, the SEC announced that on October 18 it will host a roundtable on conflict minerals. This forum will provide the various stakeholders an opportunity to exchange views and provide input. After which, the SEC hopes to be in a better position to write effective rules.

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  • Dodd-Frank is remarkably naive and removed from the actual


    As a result of Dodd-Frank and the demonization of minerals
    instead of criminals, exportation of these four minerals has nearly evaporated
    from the Congo. While all of you are pontificating about what should be done,
    honest miners all across the Congo are now starving because they can’t find a
    buyer for their coltan and other minerals.


    We have 50 tons of coltan from a local tribe sitting in a
    warehouse. Six weeks ago we had a buyer. Today we can’t find anyone buying
    coltan. The fact that ours is well documented, government tracked and approved
    and done through a highly visible process that tracks it from the mine to the
    ship is irrelevant – no one is buying. The smelters all say that minerals
    coming out of the Congo are radioactive now. They have no reason to buy there
    and open themselves up to question and investigation when they can buy the same
    minerals a dozen other places on the globe without the possibility of


    Everyone likes to say this isn’t impacting people on the
    ground. But please note who everyone is quoting – giant NGOs, giant
    organizations, giant corporations and giant governments. Not a single person
    who claims this isn’t a problem on the ground is quoting anyone on the ground.


    I can produce chiefs and whole tribes who have been
    devastated by this demonization of minerals instead of criminals. The
    Dodd-Frank solution has one fatal flaw – it is a nuclear option. Although it
    doesn’t prohibit the sale of these minerals, the demonization of minerals in
    general by the advocacy groups and this bill is enough to scare all the buyers
    away – which has already happened.


    Dodd-Frank is like blaming houses for the presence of a
    burglar. It burns down every house in the town so the burglar has nothing to
    steal. The burglar will simply move on to steal from stores instead of houses.
    Meanwhile 1,000,000 people in the Congo who depend on mining for a living are
    being devastated by the universal collateral damage of this nuclear option.


    The militias existed LONG before they found minerals as a
    source of revenue. What in the world makes anyone think that burning down the
    entire mining industry in the Congo will put them out of business? What an
    incredibly naive and simplistic solution.


    Get the United Nations to grow a backbone and go in and root
    out the militia. Or require Kinshasa to grow a backbone. Do anything we can to
    rid the world of those militias, but don’t do it at the expense of every man,
    woman and child throughout the Congo related to mining.


    There are six regions where these minerals are mined – five
    of which are hundreds to a thousand miles from the conflict zone and aren’t
    even connected by a road. Dodd-Frank burns all of them down, too.


    While all of you important people are quoting each other and
    patting each other on the back for your nuclear option, we’re quoting chiefs,
    tribes and hundreds of thousands of people on the ground who have been
    devastated by your move. You have the blood of the Congolese on your hands. The
    very people you think this is supposed to protect are being destroyed by it.
    Meanwhile, the militia who existed long before they found minerals as a source
    of revenue, will merely move on to the next house and rob it instead.


    I challenge you to take a poll of the Congolese involved in
    mining throughout the Congo and asked them what they think of this solution.
    But of course, that would assume you don’t know what’s best for them, and of
    course, you do.





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