CONFLICT MINERALS AND THE DODD FRANK ACT Impact on the gold and tungsten supply chain

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1 CONFLICT MINERALS AND THE DODD FRANK ACT Impact on the gold and tungsten supply chain Cecilia Gardner, President & CEO Sec Conflict Minerals in West Africa Tin, Tungsten, Tantalum and Gold Address the violence and systematic human rights violations in the region End the use of these minerals to fund the activity Compels listed companies to file a report with the SEC that their products are not made with minerals from this region (DRC and adjoining nations) Session B Gardner 1

2 Who is impacted? Companies that file with the SEC (publicly traded) Companies that are anywhere in the supply chain of SEC listed companies that supply these minerals (or products made with them) For the jewelry industry it is tungsten and gold that are relevant SEC filing company obligations Must inquire as to the origin of their tungsten and gold (or products made with these), and disclose this information to the SEC by filing a conflict minerals report done by employing supply chain due diligence whether or not their gold or tungsten is conflict free Existing stockpiles of minerals already refined or items made of these minerals (or the minerals themselves) are exempt if they were in inventory before January 31, 2013 (substantiate!) Session B Gardner 2

3 Who are SEC filing companies? Banks Some large refiners Some large manufacturers of jewelry (Richline, etc.) Some large retailers: Sterling, Tiffany, Federated Department stores, retailers owned by Berkshire Hathaway, etc. In the jewelry business, probably (excluding banks and refiners) Supply Chain Due Diligence SEC listed companies will develop: Strong management systems to govern supply chain, and detect whether any is sourced in conflict region Identify risks regarding a suppliers operations that could create liability Develop a strategy to address identified risks Third party process audit of smelters/refiners Create a report on the due diligence Session B Gardner 3

4 Special Role: Refiners/Smelters This is a choke point and should be identified. If not possible, create a system that allows you to identify Refiner should be employing due diligence to ensure that their supply chain is conflict free Refiners should be certified conflict free, or prove their due diligence system they implement or be accredited as good delivery using the LBMA system (more on this later) Exception: Recycled Gold Company must make an inquiry whether their products are made with recycled gold, disclose that inquiry to the SEC and if the inquiry determines that the minerals originated only from recycled gold, further supply chain due diligence is not required, and there is no need to submit a Conflicts Mineral Report. These products are conflict free! BUT.. Session B Gardner 4

5 Recycled gold is high risk for a means of laundering conflict gold Companies are urged to implement know your counter party (KYC) procedures (such as those required under the USA PATRIOT Act for dealers in precious metals) Identify all parties to a transaction, including acquiring some form of government issued identification; monitor all transactions for red flags So, what should I do? Are you in the supply chain of a SEC filing company? Is your customer in the supply chain of a SEC filing company? If so, than you should cooperate with the requirements that are being implemented by the supply chain to allow the SEC listed company to properly comply COMMUNICATE with your customers and your suppliers!!! Session B Gardner 5

6 More on Due Diligence Programs There are some pre packaged due diligence systems already developed that can be adopted depending on your place in the supply chain: Miners: World Gold Council s Conflict Free Gold Standard Refiners: London Bullion Market Association s Good Delivery list of accredited gold refiners; EICC electronics use these minerals (esp. tantalum), and this organization has created a system can be placed on a Conflict Free Smelters List More: Office of Economic Cooperation and Development ( OECD ) Due Diligence Standards, and supplements on 3 T s and Gold for general use, and already described Responsible Jewellery Council s Chain of Custody certification for precious metals also for general use. Goes beyond the requirements of Dodd Frank, but covers those requirements. Session B Gardner 6

7 What do I need to find out? Do you have tungsten or gold in your products? Are you in the supply chain of a publicly traded company? Where is the gold or tungsten you use in your products refined? How can you answer this question? Is the gold or tungsten you used recycled? If so, how is that substantiated, and have I identified my source of supply and segregated that inventory? Be ready to answer questions! If you are in the supply chain of a SEC filing company, they will be asking you: The origin of your gold and tungsten, and how you know it is it conflict free? Who refined or smelted your gold or tungsten A description of your due diligence program To see your third party independent audit of your system If it is recycled, how is it substantiated as such? Session B Gardner 7

8 JVC Tool Kit We are developing guidance and templates for businesses to use that are in the supply chain to a SEC listed company for gold or tungsten Similar to our USA PATRIOT Act Compliance Kit this new tool kit will include a Due Diligence Program and Policy based on OECD a do it yourself way to implement due diligence Will provide templates for communications to business partners, guidance for audits and more Should be published this coming Fall Time for your questions! Session B Gardner 8