ITRI was very pleased to hear of the decision of the Government of the DRC to lift the mining suspension which has been in place in the Provinces of North and South Kivu and Maniema since early September 2010; the key cassiterite mining areas of central Africa.
As always, we will continue whenever possible to support the Government in their efforts to find solutions to the conflict minerals issue, and recognise that the Minister of Mines, Martin Kabwelulu has committed to putting in place a mineral tracing program that will conform with international standards.
However, resumption of mining poses many significant challenges to the tin industry, especially in relation to the future possibilities for continuation and/or expansion of the iTSCi traceability and due diligence project.
In terms of operation in the three provinces previously affected by the suspension, key points to note are;
- The operational structure set-up for the pilot project in South Kivu in mid-2010 has been dismantled. No iTSCi field project staff have been retained.
- Levels of project cash reserves are extremely low, since exports, and therefore comptoir payments into the activities, have been suspended for six months, while certain costs have still been incurred during the period of uncertainty.
- Plans for the introduction of the system in these Provinces will need to be redrawn, including reassessment of the security situation, recruitment and training of staff, as well as re-budgeting and consideration of funding methods.
- At this critical point in time, key participants in the project also face difficult decisions on whether to restart purchasing from those Provinces and continue with the iTSCi project, or not. These decisions will be affected by the shortly anticipated final SEC rules under the US conflict minerals law, but more immediately relate to requirements on smelters defined by customers in the electronics sector who are impacted by that law, and which are intended to be effective from 1st April.
All major tin producers recognise that new requirements have been placed on their customers by the US conflict minerals law in terms of disclosure of use of minerals from the DRC and adjoining countries. ITRI members therefore hope to agree an audit protocol under the Conflict Free Smelter (CFS) programme being developed by the EICC and GeSI which can be considered reasonable, and which will therefore allow widespread producer participation.
The US law requires companies to carry out due diligence to establish the country of origin of the affected minerals, and if from the DRC or adjoining countries, to report on the efforts made to track minerals from the region to a specific mine, and determine the conflict status of the material.
The draft CFS protocol considers that without a credible traceability and certification system in place it is impossible to determine the origin of minerals originating from the region, and thus no smelter purchasing those minerals will be able to meet the criteria for ‘DRC conflict free’. However, no system is yet in place and it is estimated that it will take between 2 or 3 years to implement the iTSCi project across all affected areas and countries of central Africa.
Malaysia Smelting Corporation (MSC) were instrumental in setting up the iTSCi due diligence project, and as the only remaining ITRI producer purchasing minerals from the central African region are absolutely vital to its continuation, and key contributors to its success. However, now, as a direct result of the CFS requirements, the continuing involvement of MSC, is uncertain.
The electronics business is an important customer for all tin producers. The world solder market uses nearly 200,000 tonnes tin, with the Asian solder market alone using 147,000 tonnes i.e. 75% of the global sector total. MSC, as the 3rd largest tin producer in the world, is a key supplier to the Asian market, and takes the requirements of all customers very seriously. Unfortunately however, it is not feasible to implement the iTSCi system across eastern DRC and Katanga, Rwanda and in some areas of Burundi and Uganda, before the 1st April. Therefore, while a proportion (around 15-20%) of input feed into MSC is purchased from Africa, it will no longer be possible to both continue with those purchases and satisfy the requirements of the CFS audit programme.
Without the support of MSC, it is unlikely that ITRI would continue any project activity in the region, and the planned expansion of the project in the non-conflict area of Katanga, and the continuation of activity in Rwanda would also need to be reconsidered.
Clearly it is not the wish of the tin industry to pull out of the central African region at the exact time that all local actors are ready and willing to move forward in co-operation to progressively address conflict financing in a constructive and positive way, but under the prevailing circumstances there may be no option.
It is envisaged that full implementation of the iTSCi project could be completed by around mid-2013, but in order for that to be possible, it is essential to continue trade while increasing the level of traceability and assurance over time. We therefore hope that through urgent discussions over the next few days we can find a way forward that will satisfy all parties in the supply chain and allow us to support the DRC, and other Governments in the region, to implement systems that will satisfy international markets.
If this is not possible then the much discussed enforced de-facto embargo, driven by the US Dodd Frank Financial Reform Act, will shortly become a reality. Hundreds of thousands of artisanal miners in the region, as well as their direct dependents, and all participants in associated businesses in the local economy will suffer increased, and significant levels of hardship.