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2do Foro Peruano-Alemán de Minería y Recursos Minerales
“Extracción de Materias Primas y Desarrollo Sustentable”
Espacio para su
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Formalization as an Important Aspect for
Sustainable Mineral Supply Chains
Dr. Klaus Steinmüller
October 2016, Lima, Peru
Contents
Formality in Mining
Sustainable Supply Chains Definition
Trigger - Central Africa
Laws and Guidelines
Governmental and Private Initiatives
Situation in Peru Relevance for Peru?
Recommendations for Peru
Mining and processing of mineral resources is done:
Based on a valid mining right and
In the frame of valid permits regulating:
Environmental issues covering the whole mining cycle
Health, safety and treatment of employees
Social and Community issues
Payment of fees, royalties und taxes
What means Formality in Mining?
Formality is regulated through:
National legislation
International agreements, e.g. on human rights, protection of workers (ILO),
protection of species, etc.
Internationally recognized voluntary standards, e.g. UN Global Compact,
company standards (e.g. ICMM, GRI), IFC Standards, OECD Guidance, EITI,
etc.
Generally no problem in Industrial Mining
Mining rights exist
Permits exist
Operation is done within acceptable standards
Fees, royalties and taxes are paid
Challenges regarding Formality in Mining
But a problem in Artisanal and Small-Scale Mining*
Mining rights do often not exist
Permits are often not available
Operation is often done outside acceptable standards
Fees, royalties and taxes are often not paid
*Artisanal and Small-Scale Mining = ASM
Generally no problem in Industrial Mining
Mining and Processing
is safe and environmentally friendly
socially friendly and considers human rights
Supply chain is generally short and transparent
Sustainable Supply Chains - from Mine to Consumer
But a problem in Artisanal and Small-scale Mining
Mining and Processing
is often not safe and environmentally friendly (accidents,
environmental impacts)
is often not socially friendly and does not consider human
rights (child labor, forced labor)
Supply chain is generally complex and intransparent, prone for
conflict financing, smuggle and money laundry
Sustainable! Product is mined and processed environmentally and socially friendly
Supply Chain is simple und traceable until the consumer
Certification and Due Diligence in the
supply chain (BGR keyrole)
Mining and trading of Gold, Tin-, Tantalum-
and Tungsten ores* in the Eastern DR Congo
is financing armed conflicts
Illegal trade with „Conflict Minerals“ in the
whole Great Lake Region
Consumer demands for „conflict-free“
resources
ASM is an important livelihood for thousands
of people in the Eastern DR Congo
> 50 % of the Tantalum ores come from this
region (important for the electronic industry)
Trigger – Sustainable Supply Chains for mineral resources
*Tin, Tantalum and Tungsten = 3T
UN Report 2005
Embargo?
Laws and Guidelines regarding Supply Chains für 3 T and Gold
USA: Dodd-Frank-Act (2010): § 1502 (Conflict Minerals Act): Requirements for US
companies, listed on the stock exchange, to report on 3T and gold in their supply chain
for manufacturers, mandatory, for DR Congo und neighboring countries
OECD Due Diligence Guidance (2011) for responsible supply chains of minerals (3T and
gold) from conflict-affected and high-risk areas, 2016 supplement for the sourcing of gold from
ASM
Core items:
Establishment of a Management System (setting standards,
system for control and due diligence in the supply chain)
Risk Assessment and Risk Management of the supply chain
Independent Audits for selected points in the supply chain,
Publication of a Report on due diligence in the supply chain
Company requirements described according to their position in the
supply chain
for exporters and importers, voluntary, valid worldwide
§
Draft EU Regulation (March 2014) on
due diligence obligations for
European importers of Tin, Tantalum,
Tungsten and their ores and
concentrates and Gold
Due diligence obligations (risk
assessment, risk management and
reporting) for all importers of ores and
smelter products
Supervision through a national
authority
Still under negotiation, adoption is
planned at the end of 2016
for importers, will be mandatory, valid
worldwide
Laws and Guidelines regarding Supply Chains für 3 T and Gold (cont.) §
EU Regulation on Due Diligence obligations on mineral resource supply
chains, following OECD Guidance
Traceability in the Supply Chain of 3T and Gold
Kleinbergbau Mine/
Aufbereiter
Lokaler
Exporteur
Verhüttung
(Smelter)
Industrieller
Produzent
Elektronik-
Industrie
Endver-
braucher
UPSTREAM DOWNSTREAM
Erz (Mineralkonzentrate) Verarbeitete Metalle und Produkte
Number of Producers
Certification of Mines and Export
Certification
of smelters Reporting Systems
Artisanal
mining Mine/
processor
Local
exporter Smelter Industrial
producer
Electronics
industry
End
user
Mineral concentrates Metals and manufactured products
BGR Support to sustainable Supply Chains through Certification
Rwanda
CTC mineral certification
pilot project
2008-2011
DRC Rwanda Burundi
DR Congo
BGR module:
National certification system
for the 3T minerals and gold
2009-2017
ICGLR
BGR module:
Support to the Regional
Certification System
2011-2017
BM
Z c
om
mis
sio
ns
Regional Certification Mechanism
1. Inspection, mine site
certification (CTC)
2. Traceability
in the supply chain
3. Audit of Exporter
Mine
Small
Trader
Trader
Export harbor Audits, certification and monitoring done by regional/local authorities
Traceability instrument: Analytical Fingerprint (AFP)
ITRI Tin Supply Chain Initiative (iTSCi), Initiative of the Tin Industry Association
Baseline-Reports: Mineral Producers, Traders, Exporters and Smelters
Marking („tagging“, currently change-over to a digital system) of ores and
concentrates and documentation of the traceability (in databases), independent
risk assessment and audits, focus on conflict standards
voluntary, currently the only accepted system for 3T, conformity with OECD
since March 2011 mandatory in Rwanda, around 100% tagging; started in
several provinces in DR Congo
Industry Initiatives from Mine to Export (3T)
Industry Initiatives from Export to Consumer (3T)
Conflict Free Smelter (CFS) Programme
Initiative of EICC / GeSI (Electronic Industries Citizenship Coalition / Global e
Sustainability Initiative), started in 2008
Annual independent audits of smelters regarding their sourcing and internal “conflict
mineral” guidelines
CFS members have to consider OECD Guidance, iTSCi is recognized as tracing
system
currently over 130 smelters/refiners worldwide conform with the CFS Programme:
45 of 46 Tantalum processors (> 90% market share)
59 of 80 Tin smelters (> 80% market share)
29 of 43 Tungsten processors (> 50% market share)
CFS – conflict free
smelter program
Industry Initiatives from Export to Consumer (Gold)
London Bullion Market Association (LBMA)
accredits gold refiners for complying with OECD standards
mandatory for gold sale at the London Stock Exchange
Responsible Gold Audits based on the certification through
Electronics Industry Citizenship Coalition (EICC)
CFS audit protocol
(currently 65 gold refiners certified, > 85% market share)
Responsible Jewellery Council’s (RJC)
Chain-of-Custody (CoC) Certification
Chain-of-Practice (CoP) Certification
Recognizes certification systems for „upstream“ activities
in ASM, e.g. Fairmined
Sustainable Supply Chain Initiatives in Central Africa
Peru – Relevance for sustainable supply chains for 3T and Gold?
No tantalum mining exists
Tin is mined by industrial mining - MINSUR has own smelter/refiner in Peru,
exports added value
Tungsten is mined by industrial mining - Malaga has off-take contract with Global
Tungsten & Powders (GTP), operation currently on care & maintenance
Most of the gold is mined by industrial mining (Newmont, Barrick, Buenaventura) -
export to Switzerland for smelting/refining
Industrial Mining – Sustainable Supply Chains exist
But around 15 % of the gold is produced by the ASM sector
Introduction of Sustainable Supply Chains?
Peru is not a conflict-affected and high-risk Area!
Peru – Location of Gold ASM
Medio Sur = Ica, Ayacucho
und Arequipa
Peru – Long experience with Gold ASM
1972 - 1992: Banco Minero, Purchase of ASM Gold and support to ASM
1994 - 2002: MIMA, MAPEM and PEMIN projects of the Ministry of Energy and
Mining (MINEM), supporting the ASM sector to get formalized
2000 - 2008: GAMA project of MINEM in cooperation with the Swiss government,
supporting the ASM sector to get formalized
2002 - today: Laws, regulations, action plans and activities to formalize the
ASM sector and to stop illegal trading of gold
Success with Formalization in Puno and Medio Sur, still big problems in
Madre de Dios!
Since 2009: Private Initiatives and Organizations regarding formalization, certification
and responsible supply chains in the Gold ASM sector, e.g.:
Alliance for Responsible Mining (ARM) with the Fairmined Programme,
Fairtrade Gold,
Better Gold Initiative (a PPP between the Swiss Government and
smelters/refiners)
Up to date only few operations comply with the requirements of the Initiatives
Peru – Current situation in the Gold ASM sector
The formalization and certification measures have only a limited impact so far:
The entrance requirements to the initiatives are high and becoming a member is
costly
The initiatives are useful for those ASM operations that are fully organized and
enabled to comply with the standards
The costs for the maintenance and improvement of the standards are carried by a
small market of consumers, who are prepared to pay a premium for the „fairmined/fair
traded“ gold from ASM operations
The Regional Directorates of MINEM (DREMs) of the respective Regional
Government are in charge of the formalization and regulation of the ASM sector, but
there is often a lack of financial resources and staff in order to be able to fulfill
the necessary activities
Private Initiatives
Government
Peru – What could be done?
In order to broaden the impact of the private initiatives:
Peru should enhance its efforts to formalize ASM and implement a traceability
system for ASM supply chains
This should be regarded as a national task, sufficient laws and regulations are
available for this!
The state should:
support gold ASM operations during the whole mining cycle (organization,
planning, exploration, operation, closure)
control and trace supply chains of the ASM sector, from mine to export or to
local/regional processors
Through this:
Operations would be more planable and sustainable regarding technical,
economic, environmental and social issues
A broader market would be created for gold from ASM operations
Lastly, the ASM sector would contribute to an increase of fiscal revenues
Peru – Which measures could be taken?
It is recommended:
to financially strengthen the DREMs and equip them with more staff
to give more competence to the DREMs in regard to the ASM sector
Could Madre de Dios serve as
a pilot project? There are the
biggest problems regarding the
Gold ASM sector!
Muchas Gracias!