The Road Less Traveled Makes All the Difference: Understanding the Road to Conflict-free Minerals

In an effort to curb the funding of militia groups profiting on the mineral trade, initiatives, organizations, auditors and legislation aimed at promoting supply chain transparency have popped up to help companies navigate the supply chain. Their goal is to ensure that when the end product is finalized, all the parties involved can honestly say that their products are 100 percent conflict free.

To help understand the road companies need to follow in order to become 100 percent conflict free, Tantalum Investing News spoke with Andrew O’Donovan, CEO of Global Advanced Metals (GAM), which was recently certified by the Electronic Industry Citizenship Coalition (EICC) and Global e-Sustainability Initiative (GeSi) as conflict free for the fourth consecutive year.

As is often the case, the road less travelled can make the most difference. As far as companies are concerned, ensuring that from mine to mobile phone, end products are 100 percent conflict free is not an easy task.

“It’s a lot of effort and a lot of paperwork” O’Donovan said, adding that “it takes a lot of diligence” as no statements are taken at face value unless you have proof that what a company is saying is true.

Fortunately, companies are not alone in trying to navigate through the murky mineral trade in conflict zones. Organizations like the OECD have compiled what O’Donovan deems a “hefty” set of guidelines that can assist companies with minerals from conflict regions.

Unlike Australia, Brazil or Canada, “[t]he difficulty in the DRC particularly is that there are a lot of artisanal mines or subsistence mines. And some of these mines could be a hole in the ground with three people digging in it basically and that will constitute a mine.” With over 1,500 mines in the northeastern part of the DRC ‘s eastern province alone, pinpointing supply can be close to impossible. But with a more concentrated effort being made to track minerals, hopefully the process could perfected.

As it stands, the mineral tracing process is as such: when tantalum gets extracted, it gets bagged and tagged. This tag will accompany the tantalum throughout its life (including refining) until it reaches its final smelter destination in the US or wherever. At the smelter level, independent audits are performed like the EICC/GeSi Conflict Free Smelter Audit in which a third party auditor determines whether a company is being honest in its paperwork and can truly be declared conflict free.

However, the ball doesn’t stop at the smelter. Original equipment manufacturers (OEMs) and end user companies also have a responsibility to show that their minerals are ethically sources. To do so, legislation put forward by the SEC – The Dodd Frank Act– requires companies to perform an internal investigation of the supply chain in order to comply with transparency.

OEMs must start with “an internal audit, but then part of the legislation requires that if a company determines that the purchased minerals, or that the raw materials come from minerals that come from the DRC.” O’Donovan explained, “So if the OEM discovers that that’s the case then that OEM also has to get an external audit to audit and to certify that what the OEM is saying to the SEC is true.”

Many companies, like GAM, have been actively sourcing conflict free minerals for many years. For other companies, legislation like Dodd-Frank is funneling them in a direction that they perhaps weren’t interested in going. But whatever the case, there is a chance that when Dodd Frank comes into full swing, there will be a much greater chance of success for a conflict free supply chain.

Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.