Putting an End to Conflict Minerals in the Congo

Critical Metals

Resource Investing News reporter Damon van der Linde interviews industry leaders from ITRI and TIC as well as human rights groups the Enough Project and Global Witness about the ongoing mission to end the trade of conflict minerals from the Democratic Republic of the Congo.

By Damon van der Linde—Exclusive to Tantalum Investing News

The Democratic Republic of Congo has been home to countless atrocities that continue to afflict the civilian population; atrocities committed by various competing armed groups vying for profits from its rich supply of minerals, particularly tin, tungsten and tantalum – collectively referred to as the “3Ts” – and gold.

Some five million people have been killed in the central African state since the start of a 1998-2003 war, and government and U.N. forces are struggling to uproot rebel groups still active in the minerals-rich east, particularly the North and South Kivu areas, which share a porous border with Rwanda, Uganda and Burundi.

Many of the DRC’s minerals are dug from unofficial artisanal mines and concerns that the proceeds from their sale support rebel groups responsible for recent massacres and rapes have led to new efforts to clamp down on trade.

The mission of achieving responsible sourcing of minerals in the DRC is a complex multi-stakeholder process that must be viewed from a logistical, political and financial standpoint. Trying to finding a solution to this problem has drawn on input from representatives in the mineral trading and processing industry, electronics producers, both local and national governments, and NGOs. All these groups have certain unique and sometimes competing objectives and priorities, and all are claiming to put the best interests of the victims of conflict minerals at the forefront of their initiatives.

One established move towards monitoring conflict minerals is the Tin Supply Chain Initiative (iTSCi), which was started in 2009 by ITRI, a not-for-profit organization representing the tin industry. They were soon joined on the project by the Tantalum-Niobium International Study Center (T.I.C) with the goal of streamlining the process by incorporating multiple minerals. Funding was obtained in March of 2010 for a pilot project at a few mine sites in the DRC.

Then, in early September 2010, just a few months after the pilot project was launched in June, DRC President Joseph Kabila banned mining in North Kivu, South Kivu and Maniema, areas rich in gold, tin ore cassiterite, and hi-tech mineral coltan, in a bid to stop armed groups, government troops and smugglers from profiting from mining. More than five months later, the ban is still in place and none of these minerals can be legally exported from those areas.

“There are rumours that the ban will be lifted by the end of the month, but there have been rumours of impending lifting for quite some time,” said Richard Burt, President of T.I.C. in an interview with Resource Investing News.

In August 2010, US President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into Law. Part of the financial reform bill is Section 1502 Conflict Mineral Act, which aims to cut off income to armed groups obtaining funding from the minerals. The Conflict Mineral Act states that companies with a Security Exchange Committee (SEC) reporting requirement (US stock exchange listed companies) will have to disclose if conflict minerals are used to produce products sold to US consumers. As of April 1, 2011, minerals from this region with no certificate will not be accepted by US companies, which representatives from ITRI say is too soon for an effective program to be put in place.

“It’s a pretty short deadline and it’s impossible to actually make sure this thing is traceable by that point,” said Kay Nimmo, Manager of Sustainability & Regulatory Affairs for ITRI in an interview with Resource Investing News. “The US laws are actually preventing the project from going ahead rather than contributing to it and improving the situation in the DRC.”

On January 14, 2011, ITRI and T.I.C. released a joint press release calling on the downstream portion of the tin and tantalum industry (i.e. electronic and other manufacturing companies) to commit to picking up the initial US$1.5 million tab before the US Securities and Exchange Commission (SEC)-set January 31 deadline for comments from stakeholders.

“It’s rushed, but the writing’s been on the wall for quite some time that this was going to happen so it shouldn’t be so shocking,” said Aaron Hall, Policy Analyst at the human rights not-for-profit organization, the Enough Project in an interview with Resource Investing News. “When the legislation passed it became real and everyone had to catch up and put something in place.”

By January 28, representatives from both the TIC and ITRI said that although they were receiving positive signs from some downstream companies, their needed contributions were still not there, with the deadline looming just days away.

“If there are signs that people are masticating and thinking about dusting off their checkbooks, we’ll be giving it a bit longer. If it becomes obvious that the downstream industry says ‘tough shit, guys,’ then it will fail,” said Burt of the T.I.C. “And if it fails, two things will happen: there will be a de facto embargo of legitimate materials coming out of the Congo, which means only illegitimate material will flow, or the tin and tantalum industry in that area would collapse and some 10 million people would be without any form of income.”

Then, on January 31—the original set deadline for comments—the SEC announced the deadline would now be extended until March 2, 2011 allowing additional time to analyze the issues and prepare comments for the coming regulations.

There are several methods for monitoring the origin of minerals at different points in the supply chain. The Electronics Industry Citizenship Coalition/Global e-Sustainability Initiative (EICC-GeSI) Extractives Working Group has developed a Conflict-Free Smelter (CFS) Assessment Project to map the supply chain of tin, to audit tin smelters, and to validate those smelters that can prove they do not use any conflict tin from the DRC before sending the minerals to component manufacturers. The Enough Project is a contributor to the EICC-GeSI Extractives Working Group, which also includes smelters, material buyers and members of the downstream industry like electronic and automotive manufacturers.

“The smelter is the chokepoint because if you can certify that the smelter is conflict free, it streamlines the process,” said Hall.

ITSCi works in conjunction with the CFS, using a “bag and tag” system whereby numbered tags label sacks of minerals at the mine sites, and are then monitored as they move their way up the supply chain. The objective of the iTSCi is to track tin ore produced in the DRC back to the mine of origin.

“You could probably come up with 10 or 15 things off the top of your head for why that might be problematic, from roadblocks on the transport routes to people manipulating what’s in the bag,” said Hall. “So, certainly that’s not the ideal system, but the only game in town right now. There’s still debate as to what the best mechanism for regional certification is and I think that’s going to continue, at least in the short term.”

Hall says maintaining transparency is another major priority for monitoring the flow of minerals, particularly in an industry that puts value in maintaining confidential business information. Some of regulation requirements could include sharing information about mine capacity, volumes and dates of shipments.

“If the bagging and tagging system does not allow for input outside of its own walls or is not transparent and does not allow data sharing amongst stakeholders, we find it hard to endorse because how else can anyone verify this is a credible process if you can’t understand what’s going on,” said Hall.

The coming weeks could be crucial for the performance of companies that are involved in any business that involves the “3T” minerals, from traders to product manufactures, and those that are not able to prove their sources are conflict free by April 1, could be hit hard.

“There has to be pressure on companies to carry out due diligence. Investors have a huge role to play,” said Annie Dunnebacke of Global Witness, an international non-government organization with a focus on natural resource exploitation and human rights issues, in an interview with Resource Investing News.

Leadership is needed for these programs to continue. ITSCi and the CFS Assessment Program will both be employing individuals to monitor their initiatives, but without strong government backing, these initiatives have a much higher possibility of failure.

“One clear leader has yet to emerge to shepherd the process through and right now, from where I’m sitting, it seems like a fragile coalition at best,” said Hall.

Hall says that The International Conference on the Great Lakes Region (ICGLR), a coalition of 11 African states, is poised as the most appropriate leader in monitoring the flow of minerals in the region, though with the passing of the Dodd-Frank Act, the United States government should step in as an involved partner with the ICGLR.

“We’ve passed legislation and there’s consumer demand, but if you don’t have the appropriate political engagement in this process you stand to throw resources into this problem with no leadership and it will probably fail,” said Hall.

One bottom line is that the goal to move towards the use of minerals – or at least the “3Ts” – with some accountability for a conflict-free origin is happening. Though there are naturally disagreements in this process, there is also a level of cooperation, even if it means initially putting an imperfect system in place.

“It’s a start. You have to take small steps forward. The fact that governments and industry are thinking about this shows concern and to a large extent they are willing to tackle the problem,” said Hall. “I think it’s remarkable that the multiple stakeholders involved in this process have been able to come together in such a short amount of time and make progress towards setting up a regional certification regime for these minerals.”

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