World Gold Council Conflict-Free Gold Standard Presented by Terry Heymann 2 May 2012 Meeting of the OECD-hosted forum on implementation of due diligence in the gold supply chain
Agenda 1. The World Gold Council 2. Global Gold Mining 3. The World Gold Council Conflict-Free Gold Standard Development & Consultation Features Structure 4. Other schemes 5. Conclusions 2
Introducing the World Gold Council The gold industry s market development organisation Recognised global authority on gold and its uses Active in the investment, jewellery, official and technology sectors Offices in London (head office), New York, Beijing, Shanghai, Tokyo, Mumbai and Chennai 9 of the world s top 10 gold mining companies in membership London (Head Office) New York Beijing Shanghai Tokyo Mumbai Chennai Offices 3
World Gold Council members 23 members representing over 65% of global corporate gold production 70% share of market capitalisation Associate Members China National Gold Corp., Franco-Nevada Corp., Hutti Gold Mines Co., Mitsubishi Materials Corp. and Royal Gold Inc. 4
Global Gold Mining 5
Global mine production is geographically diverse... North America 14% Other 3% Russia and others 13% Asia 19% Africa 20% Latin America 20% Oceania 12% Top 5 gold producers: China (13%), Australia, US, Russia and South Africa, Based on 2010 survey. Totals may not equal 100% due to rounding, Source: GFMS 6
The Conflict-Free Gold Standard 7
The Conflict-Free Gold Standard Responsibly undertaken, mining and its related activities can play an important role in achieving sustainable development and alleviating poverty reduction The Conflict-Free Gold Standard provides a mechanism through which gold producers can demonstrate that their gold has been extracted in a manner that does not fuel conflict or the abuse of human rights typically associated with such conflicts Builds on existing good practices and internationally accepted benchmarks (e.g. UN Guiding Principles on Business and Human Rights; Voluntary Principles on Security and Human Rights; EITI; etc) Conformance with the Standard will be externally assured 8
End 2011 / Start 2012 Ongoing work July 2010 June 2011 May 2011 March 2010 March 2012 H2 2011 Conflict-Free Gold Standard: Development Process Steering Committee established Finalisation of OECD Guidance Consultation exercise Engagement with governments, NGOs and industry participants Roundtables in London, New York and Johannesburg Published Exposure Draft Dodd-Frank signed into law Published draft World Gold Council conflict-free standards Stress tests at site level (Ghana and Mexico) Consultation on Exposure Draft and draft Assurance Framework Ensure alignment with s.1502 rules and OECD gold supplement Member implementation support 9
Consultation & Engagement: Roundtable Participants 10
Conflict-Free Gold Standard: Structure For conflict-affected regions 5 stage assessment Part A Conflict Part B Company Part C Commodity Part D Externally- Sourced Gold Part E Statement of Conformance documentation For non-conflict affected regions, parts A, D and E remain relevant Independent, third party assurance 11
Part A Conflict For conflict-affected regions 5 stage assessment Part A Conflict Part B Company Part C Commodity Part D Externally- Sourced Gold Part E Statement of Conformance documentation Companies need to carry out due diligence about operating environment but should not have primary responsibility for defining conflict Three triggers 1. UN or regional sanctions 2. Authoritative national measures 3. Heidelberg Institute for Conflict Research Conflict Barometer regional ratings; 5 (severe war) 4 (limited war) Not intended to exclude output from conflict-affected areas merely to ensure that it is not causing conflict 12
Conflict assessment Definition of conflict-affected or high-risk is consistent with OECD Guidance: An area identified by the presence of armed conflict, widespread violence, including violence generated by criminal networks, or other risks of serious and widespread harm to people. Armed conflict may take a variety of forms, such as a conflict of international or non-international character, which may involve two or more states, or may consist of wars of liberation, or insurgencies, civil wars. High-risk areas are those where there is a high risk of conflict or of widespread or serious abuses as defined in paragraph 1 of Annex II of the OECD Guidance. Such areas are often characterised by political instability or repression, institutional weakness, insecurity, collapse of civil infrastructure, widespread violence and violations of national or international law. 13
Heidelberg Institute for International Conflict Research The Conflict Barometer 14
Part B Company For conflict-affected regions 5 stage assessment Part A Conflict Part B Company Part C Commodity Part D Externally- Sourced Gold Part E Statement of Conformance documentation Intended to ensure strength of company management systems -Commitment to human rights -Corporate activities and disclosure (e.g. payments to governments) -Security arrangements (e.g. risk assessments; control of private and public security) -Transparency of payments and benefits in kind -Community engagement; whistleblowing and grievance mechanisms 15
Part C Commodity For conflict-affected regions 5 stage assessment Part A Conflict Part B Company Part C Commodity Part D Externally- Sourced Gold Part E Statement of Conformance documentation Intended to assess the risk that gold may directly or indirectly fund conflict and associated human rights abuses -Tracking of gold-bearing material to avoid leakage of material -Treatment of low gold-bearing concentrates -Segregation of non-conformant materials -Transport arrangements Standard s scope ceases when custody of gold transfers to refiner 16
Part D Externally-Sourced Gold For conflict-affected regions 5 stage assessment Part A Conflict Part B Company Part C Commodity Part D Externally- Sourced Gold Part E Statement of Conformance documentation Intended to ensure that any gold brought-in by a conforming mine is produced responsibly Sets out due diligence requirements 17
Part E Statement of Conformance documentation For conflict-affected regions 5 stage assessment Part A Conflict Part B Company Part C Commodity Part D Externally- Sourced Gold Part E Statement of Conformance documentation Companies need to provide a Statement of Conformance that the gold leaving their mine-site is in conformance with the Conflict-Free Gold Standard Useful for refiners to aid their due-diligence processes 18
Alignment with regulatory and industry initiatives 19
Five-Step Framework for Risk-Based Due Diligence in the Mineral Supply Chain 1. Establish strong company management systems 2. Identify and assess risk in the supply chain 3. Design and implement a strategy to respond to identified risks 4. Carry out independent third-party audit of supply chain due diligence at identified points in the supply chain. 5. Report on supply chain due diligence 1. Internal organisation of the company to oversee conformance with the Standard 2. The Standard requires companies to assess operation al risks and procurement processes 3. The Standard lays out demanding practices for operating in conflict-affected areas 4. Does not cover refinery audits; however conformance is externally assured 5. The Standard requires an annual, externally assured public statement relating to conformance 20
Alignment with Section 1502 of Dodd-Frank Still awaiting final rules from the SEC. However, conformance with the Standard will clearly demonstrate that gold has been produced in a manner that is not fuelling conflict We remain concerned that Section 1502 could have unintended consequences, leading to stigmatisation of responsibly-produced minerals from the DRC and the Great Lakes Region As such, we support the inclusion of a category of indeterminate origin which would allow a refiner to mix conflict-free gold from different sources; need to segregate gold from the DRC makes it economically unfeasible We support the SEC aligning their rules closely with the OECD Due- Diligence Guidance 21
Harmonisation of Gold Supply Chain Initiatives World Gold Council LBMA EICC RJC Applies to Mining companies Refiners Refiners All supply chain Focus Conflict-free; OECD Due Diligence; leading human rights instruments OECD Due diligence, Know Your Customer and Anti-Money Laundering Country of origin; Dodd Frank Act Code of Practices; OECD Due Diligence Audit outcome Third party assurance of good practice and due diligence Good Delivery Accreditation Validated Smelter/ Refiner list Chain of Custody Certification Harmonisation Supports refiner due diligence for mined gold under LBMA, RJC, EICC Opportunity for harmonisation with RJC and EICC Opportunity for harmonisation with LBMA and RJC RJC Chain of Custody will recognise LBMA and EICC re conflict-sensitive sourcing. World Gold Council Standard supports mined gold due diligence for Chain of Custody 22
Conclusions Action to eradicate the misuse of gold to fund conflict Protects the reputation of gold Enables mining operations to continue if they can prove to stakeholders they are working responsibly Underlines gold s role as a source of social and economic development Consultation open until 30 June 2012 23
Thank you To view a copy of the Draft Conflict-Free Gold Standard, please visit: http://www.gold.org/about_gold/sustainability/conflict_free_standard/ To submit comments on the Draft Conflict-Free Gold Standard, please email: conflictfreestandard@gold.org World Gold Council 10 Old Bailey, London EC4M 7NG T +44 20 7826 4700 F +44 20 7826 4799 www.gold.org