Resource World Magazine

24 www.resourceworld.com o c t o b e r / n o v e m b e r 2 0 1 4 A sked to name some of the worst con- flicts over the past 20 years, most people would probably say Afghanistan or Iraq. Some might then mention the genocides in Rwanda or the Democratic Republic of Congo (DRC) or the civil wars in Liberia and Sierra Leone. Sadly, minerals and metals played an important role in these murderous conflicts, helping dictators or militiamen raise funds to buy more weap- onry and pursue further violence. Opponents of mining often argue that sourcing minerals and metals from a coun- try wracked by conflict or civil unrest should be banned and the operations run by foreign investors closed. Yet measures like these frequently do more harm than good: legitimate governments are deprived of much-needed royalties, while local peo- ple are left without work or dependent on artisanal mining – with all the dangers and environmental damage this can entail. In response, there has been a concerted effort to create industry guidelines that help ensure mining output is untainted by vio- lence or corruption. In addition, standards are being embedded to facilitate indepen- dent oversight of operations, supply chains and in-country expenditure. This includes instruments like the Extractive Industries Transparency Initiative that continues to gain greater traction. "There has also been the develop- ment of OECD [Organisation for Economic Co-operation and Development] guidance, which the WGC [World Gold Council] has been actively involved in helping to shape. Additionally, there is section 1502 of the USA's Dodd Frank Act," WGC director Terry Heyman told Resource World. Section 1502 obligates US-listed pro- ducers to identify whether any of their material is sourced from the DRC or adjoin- ing nations. If so, a company must produce a report detailing due diligence on its minerals and the custody chain involved. This must be independently audited. The European Commission has also proposed draft regulations to establish a system of self-certification and due diligence for operators in conflict-affected areas. gRoWing PRoMinenCe For gold, members of the WGC felt that a standard should be developed to bring the best of these initiatives and practices together. It should also address potential issues specific to gold mining in higher- risk environments. "It's important for the industry to ensure gold production is responsible and conflict free, particularly if you are operating in frontier markets such as the DRC," Heyman explained. "Conflict-free gold has increased in prominence, with demand for adherence to the standard coming from across the sup- ply chain, particularly from the electronics, jewellery and banking industries." Work on formulating the standard began in 2009 and was completed by October 2012. "The genesis was to create a standard that assists co panies with operations in or potentially in conflict-affected regions, helping them to demonstrate that their operations are responsible," Heyman said. The standard is open to all gold produc- ers, not just members of the WGC. It has five central components. Part A involves conflict assessment to determine if a region is either high-risk or conflict-affected. Here a company has several bodies it can refer to, including the European Union, African Union, Organization of American States, the United Nations and the Heidelberg Institute of Conflict Research. The latter produces the Heidelberg Conflict Barometer that ranges from one to five, with four classed as limited war and five as war. If the country or region is in conflict, then a company uses Part B to assess whether it has the appropriate systems in place to ensure its output does not fuel or fund unlawful warfare or human rights abuses. Part C then requires a company to evaluate the movement of ore or gold while in its custody, again to mitigate the risk of output being tied to conflict. If a company acquires gold from an external source, then, under Part D, it needs to examine the acquisition process and parties involved, ensuring conflict-free status. For Part E, a company reports con- formance to Parts A-D depending on relevance. This is then assured by an inde- pendent third party. "Companies have to show conformance with the standard and publish their findings on their web- site or within their sustainability report," Heyman explained. "And just as companies get external assurance on financial report- ing, so they need to get external assurance on their conflict-free gold reports." Companies that find themselves in Conflict-free gold – setting the standard by Simon Rees INVESTMENT

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