UBS, LONDON 5 OCTOBER 2011

1. NICHOLAS GARRETT
RESOURCE CONSULTING SERVICES
WWW.RESOURCEGLOBAL.CO.UK
UBS, LONDON
5 OCTOBER 2011
Sustainable Mining:
The Dodd Frank Act Section 1502
On ‘Conflict Minerals’

2. RESOURCE CONSULTING SERVICES (RCS)Content
Resource Consulting Services’ ‘Conflict Minerals’ Expertise
Dodd Frank Act Section 1502 on ‘Conflict Minerals’ - Summary
Dodd Frank Act Section 1502 Compliance: How to get it right
SUSTANABLE MINING:
The
Dodd
Frank
Act
Sec1on
1502
‘Conflict
Minerals’

3. Resource Consulting Services
A globally leading consultancy that specialises in:
• The extractive industries;
• Natural resources;
• Land investment;
• Supply chain management
We provide research and advisory services for a range of world-class clients, helping
them:
• Develop and optimise policies, strategies and management systems;
• Make investment decisions;
• Comply with good practice and regulatory obligations.
We assist a number of companies, governments and development NGOs in managing
their response to the Dodd Frank Act Sections 1504 and 1502.
RESOURCE CONSULTING SERVICES (RCS)

4. The ‘Conflict Minerals’ Issue RESOURCE CONSULTING SERVICES (RCS)
• In parts of the eastern DR Congo we are seeing a state of pervasive insecurity perpetuated by
state weakness, which allows armed groups and corrupt state officials (incl. parts of the national
army) to prey on economic activity and the civilian population.
• The economy is import dependent and exports principally raw materials. The rogue actors prey
on the trade in cheese, drugs, charcoal, timber and minerals.
• Within this economy minerals – gold, tin, tantalum and tungsten - have been singled out, as they
fetch particularly high prices, providing rogue actors with revenue, though estimates vary as to how
much money it actually requires to maintain a level of insecurity (in reality not much at all). The
value in tin-ore exports alone was estimated as more than 100 million USD in 2008.
• The trade connects to international buyers (smelters and refiners) often in Asia and onwards to
component manufacturers the jewellery sector and in the end, the brand name end-users and
consumers.
• Artisanal mining is a massively important employment generator (estimated 500,000 - 1 Million
artisanal miners in eastern DRC, who use the revenue they earn to sustain the livelihood of on
average 5 additional people per person.
• The civilian population, including the artisanal miners suffer significant human rights abuses in
their search for a sustainable livelihood, which is compromised by a state unable to provide
security and prevent rogue actors from preying on economic activity.
• The principle international responses to this issue has been to promote mineral trade control
measures in the way of traceability and certification schemes. This response is contested as it fails
to address the issue of state weakness.

5. Resource Consulting Services
and ‘Conflict Minerals’
We have spent a lot of time and effort investigating and understanding the issue.
Photo: Nicholas Garrett’s field research in Bisie mine under control of 85th brigade, North Kivu,
2007. © Mark Craemer
RESOURCE CONSULTING SERVICES (RCS)

6. Resource Consulting Services
and ‘Conflict Minerals’
RESOURCE CONSULTING SERVICES (RCS)
In 2007/2008 we conducted a reverse supply chain investigation from the Bisie mine and broke the
story in the Financial Times.
Many, but not all end users did not know or did not know enough about the issue of conflict minerals
and felt compelled to engage on the issue, as well as manage their risk exposure.

7. Since then we have applied our knowledge of the issue and our expertise in supply chain management
to advise investors, companies at all levels of the supply chain, governments and donors as well as
development NGOs in their response to the issue. We do NOT partake in advocacy.
Resource Consulting Services
and ‘Conflict Minerals’
RESOURCE CONSULTING SERVICES (RCS)
For an extract of our clients, please refer to:
http://www.resourceglobal.co.uk/clients.php
RCS
Mining and
Trading
Companies
Smelters and
Refiners
Intermediate
Manufacturers
Brand
companies,
e.g.
Electronics
Banks and
Investors
Development
NGOs
Governments /
Donors

8. The Dodd Frank Act Section 1502
on ‘Conflict Minerals’ - Summary
1
RESOURCE CONSULTING SERVICES (RCS)

9. DF 1502 ‘Conflict Minerals’ RESOURCE CONSULTING SERVICES (RCS)
Western consumer driven concerns that the “exploitation and trade of
conflict minerals originating from the DR Congo and adjoining countries
is helping to finance conflict characterised by extreme levels of violence
in eastern DR Congo…”
The law
Motivation
The Dodd-Frank Act signed into law on July 21, 2010, contains a ‘Section
1502’, which adds additional reporting requirements for SEC registered
companies’, concerning the sources of ‘conflict minerals’.
‘Conflict Minerals’
‘3T’ Metals
• Tantalum: Columbite-tantalite (‘coltan’)
• Tin: Cassiterite
• Tungsten: Wolframite
Gold
Others determined by Secretary of State to contribute to conflict financing
in DR Congo (currently not applicable)

10. DF 1502 ‘Conflict Minerals’ RESOURCE CONSULTING SERVICES (RCS)
Mechanism
Affected Countries
• Angola; Ÿ Rwanda;
• Burundi; ŸSouth Sudan;
• Central African Republic; ŸTanzania;
• Democratic Republic of Congo; Ÿ Uganda;
• Malawi; Ÿ Zambia
• Republic of Congo;
• others to be determined by Secretary of State (currently not applicable,
but big ? over Colombia, Myanmar and others)
Replication of perceived successes of supply chain traceability in
diamonds (KP), forestry and textiles industries. Hotly contested
whether DF1502 has merit as a trade control and conflict resolution
instrument (the “gold” and “de facto ban” issues)!!!
Role models
By ensuring that companies’ supply chains are “conflict free” helping to
cut off a key financing of parties to the conflict: ‘forcing’ an estimated
1,200 SEC registered companies, which may be sourcing ‘conflict
minerals’ from the DRC and adjoining countries, or which are unable to
verify source, to file a publicly available ‘conflict minerals report’ annually.
Indirect pressure to ensure supply chains are ‘conflict free’ to avoid
reputational and commercial damage.

11. DF 1502 ‘Conflict Minerals’ RESOURCE CONSULTING SERVICES (RCS)
Determine if
‘issuer’ (company filing
SEC reports) is subject to
DF 1502
Determine if ‘conflict
minerals’ originated in DRC
and adjoining countries;
subsequent exposure of
the result
Conduct supply chain due
diligence to determine
“conflict free” status;
complete independently
audited report
Simplified SEC 3-Step Disclosure
Requirements

12. DF 1502 ‘Conflict Minerals’ RESOURCE CONSULTING SERVICES (RCS)
Upstream
• Mining
• Trading
• Investors
• Banks
Downstream
• Smelters,
• Refiners,
• Intermediate
manufacturers,
e.g. solder,
capacitators etc
• Investors
• Banks
Brand End-Users
• Electronics
• Automotive
• Music
instruments
• Jewelry
• Financial sector
• Aerospace
• Defense
• Retailers
• Etc.
• Investors
• Banks
Affected Industries

13. How are banks and investors affected?
• Risk of investing in non-compliant companies (e.g ethically conscious clients; legal
consequences)
• Direct compliance requirements if trading or buying, e.g. gold
• High profile issue among NGOs – reputational risk
• Affect PRI and EP implementation
• Affect due diligence activities in DRC + 9 country investments
How are upstream operators affected?
• Investments in mining of ‘conflict minerals’ in the DRC + 9 surrounding countries – must have
due diligence processes in place
• Advocacy pressure and reputational risks if non-compliant
• Violation of voluntary good practice guidelines if non-compliant
• Compliance requirement to sell into supply chain of SEC registered companies
• Lower prices if selling into grey market, i.e. China, India etc…
How are downstream operators affected
• SEC listed companies that trade or use the 3Ts and gold must at least interrogate their supply
chains to see if affected and may need a due diligence process in place.
• Advocacy pressure and reputational risks if non-compliant
• Violation of voluntary good practice guidelines if non-compliant
RESOURCE CONSULTING SERVICES (RCS)DF 1502 ‘Conflict Minerals’

14. Getting it Right: Dodd Frank 1502
Implementation
3
RESOURCE CONSULTING SERVICES (RCS)

15. DF 1502 Implementation
1. The SEC has not published the accompanying regulations yet, so there is a degree of uncertainty about DF
1502 implementation. A meeting on October 18, 2011 may bring more clarity.
2. With limited time available, we help companies implement the OECD Due Diligence Guidance for
Responsible Supply Chains, as the most likely way to achieve DF1502 compliance in time. It is the most
broadly supported due diligence framework, endorsed by the US State Department and others.
3. Most of you know traditional due diligence, but this goes beyond! “Due Diligence is an ongoing, proactive and
reactive process through which companies can ensure that they respect human rights and do not contribute to
conflict.” - Concrete actions depend on a company’s exact position in the supply chain!
Main points of OECD Due Diligence Guidance
Companies should assess risk by identifying factual circumstances of its activities and relationships and evaluating
the facts against relevant standards provided under national and international law and other initiatives. The OECD
Due Diligence Guidance provides a model framework.
5 step framework suggested by OECD – each step has a number of subcategories
1. Establish strong company management systems
2. Identify and assess risk in the supply chain
3. Design and Implement a strategy to respond to the 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
Interrogating supply chain is only 12 part of compliance.
RESOURCE CONSULTING SERVICES (RCS)

16. DF 1502 Implementation RESOURCE CONSULTING SERVICES (RCS)
Assess
• Rapid
Assessment
• Determine
scope
• Determine
cost
of
developing
implemen1ng
and
sustaining
a
compliant
strategy
• Etc…
Diagnose
• In-­‐depth
management
systems
assessment
• In
depth
risk
assessment
• Gap
analysis
• Recommenda
1ons
for
changes
• Etc…
Develop
• Develop
policy,
policy
implementa1o
n
guide,
management
systems
• Build
on
and
enhance
exis1ng
systems
to
save
costs
• Etc…
Implement
and
Sustain
• Implement
the
newly
designed
systems
and
processes;
• Train
staff
in
their
applica1on;
• Provide
ongoing
inves1ga1ve
oversight;
• Provide
ac1ve
audit
prepara1on
• Etc…
Snapshot
of
RCS’
ADDIS©
Methodology
for
OECD
Due
Diligence
Guidance

17. DF1502 Implementation Challenges
The key challenges in real world implementation are:
1. Companies don’t know where their material comes from! Unknown exposure!
2. Companies are waking up late to their responsibilities or not at all. The SEC estimates 1,200 of 5,500 SEC
listed companies will be affected or around 20%.
a) Management fails to understand the severe repercussions of “not doing it properly”.
You must report if you fail an audit! There is significant group of advocacy organisations
there waiting for you to fail, so that they can build their next campaign (and funding proposal) around
you!
3. Putting the right systems and processes in place requires, time, resources, expertise and management input.
Name brands with resources are having difficulty with implementation – tier 2, 3 and 4 suppliers often feel
completely overwhelmed by the requirements and have limited capacity to act. For a name brand, sorting out
your own house is not enough! Relying on industry collective action platforms and their activities is not enough!
Individual companies will be audited, not the industry collectively.
4. Companies over-emphasise technical aspects of due diligence and prioritise process and procedure over policy
and management systems. In fact, verification of the supply chain is only one part of due diligence. Much of the
work companies have to do is on company policy and management systems, which is expertise is required.
5. There is not a lot of time! The issuance of the final regulations is expected before the end of 2011.
In that case the first reporting cycle would be the year ending 12 months after the issuance of the regulations.
RESOURCE CONSULTING SERVICES (RCS)

18. DF 1502 Implementation
What if I am confused about this? Follow the RCS Decision tree and talk to us!
We have developed and apply a comprehensive methodology.
This is only an introductory snapshot.
RESOURCE CONSULTING SERVICES (RCS)
Step
0:
Do
you
fully
understand
the
issues
and
regula1ons
that
will
affect
your
company?
Have
you
comprehensively
assessed
how
the
Dodd
Frank
1502
requirements
affect
your
company?
How
should
new
requirements
fit
into
exis1ng
procurement
policies?
Yes
No
RCS
can
conduct
a
Rapid
Analysis
-­‐
to
understand
the
Impact
and
develop
a
Response
appropriate
for
your
company
Steps
1
A
and
B:
Have
you
iden1fied
the
gaps
between
the
OECD
Due
Diligence
requirements
and
your
company’s
management
system?
Yes
No
RCS
can
conduct
a
gap
analysis
of
the
company’s
needs
to
meet
the
OECD
Due
Diligence
requirements.

19. www.resourceglobal.co.uk
n i c h o l a s g a r r e t t @ r e s o u r c e g l o b a l . c o . u k