Commerce Dept. Can't Tell Which Smelters Are Conflict-Free

Is your company having a hard time determining whether the materials you use contain “conflict minerals” that were mined in the war-torn Congo?  Well, it seems the government can’t classify smelters and refiners as conflict-free either.

The U.S. Department of Commerce this week released a long-delayed list of “all known conflict mineral processing facilities worldwide,” The 400-plus list of global locations includes all known facilities that process the minerals tin, tantalum, tungsten, or gold. It stops short, however, of indicating whether a specific facility processes minerals that are used to finance conflict in the Democratic Republic of the Congo or an adjoining country. “We do not have the ability to distinguish such facilities,” an introduction to the list says.

A Securities and Exchange Commission rule requires companies to vet their supply chains for conflict minerals and disclose any use. The first disclosures, using the new Form SD, were filed in May. While businesses faced that Dodd-Frank Act imposed deadline, the Commerce Dept. has been slow to meet the related demands placed upon it.

In June, a report by the Government Accountability Office looked at the role various federal agencies play in the effort to crack down on the use of conflict minerals that support violent militia groups. It chided the Commerce Dept. for delays in its Congressional mandate to compile a list of global conflict minerals processing facilities. “Commerce did not have a plan of action, with associated time frames, for developing and reporting on the list of conflict minerals processing facilities worldwide,” the report said, noting that smelters and refineries are seen by many as the choke point for the distribution of conflict minerals.

In response, agency officials pledged to provide Congress with the list by Sept. 1, 2014, a deadline it overshot by a week. The list will be published annually and future editions are likely to make good on Congressional requirements not yet met, including a review of the accuracy of independent private sector audits and recommendations for best practices that may improve those compliance audits.

The Commerce Dept. list details some the challenges faced in making conflict minerals assessments. Its list of gold refiners was limited to facilities that produce refined gold that is deliverable to various local or international exchanges. However, gold ores and concentrates at both commercial-scale and artisanal mines are most often processed into intermediate semi-refined forms, at or near the mine site, before being processed into a deliverable form. That means listed gold refineries may be one or several steps removed from the direct source and may be using intermediate gold products as well as scrap.

Another hurdle is that some artisanal miners that process small amounts of materials and are known to be employed in eastern Congo. Because these producers are “off the grid,” however, “it is very difficult to trace exactly where these small amounts of materials are smelted,” the Commerce Dept. says.

There is also evidence of guerilla smelting operations throughout Africa that build makeshift smelters to produce an intermediary product of tantalum, tungsten and tin, and then ship the product overseas to scrap yards and informal metal traders and exchanges. The materials are often transshipped to another country and then flaked or shaved prior to being sent to a smelter, the agency says.

Yet another issue: gold purchased through the Shanghai Gold Exchange accounts for 15-20 percent of all the gold used for commercial purposes and  “the vast majority of the gold sold worldwide” is comingled there,” the agency says, adding that the facility “ has not released, nor does it keep, records of where its gold is sourced.”  For now, any material that is purchased through the SGE is untraceable to a smelter, refiner, or processor of origin.