Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The good news is the Commerce Department published a list of ”all known conflict mineral processing facilities worldwide” as required by section 1502(d)(3)(C) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The list includes all known processing facilities that process the minerals tin, tantalum, tungsten, or gold.

The bad news is the list does not indicate whether a specific facility processes minerals that are used to finance conflict in the Democratic Republic of the Congo or an adjoining country.  Like many U.S. public companies, the Commerce Department does not have the ability to distinguish such facilities.

The list published by the Commerce Department appears to comply with the referenced specific provision of the Dodd-Frank Act, although as we have noted the list was published late.  And the Commerce Department’s work isn’t done.  The Dodd-Frank Act indicates, among other things, the list needs to be published annually.

But the provision of the Dodd-Frank Act that requires this list is entitled “Report on Private Sector Auditing” and it looks like Commerce hasn’t begun to tackle that responsibility.  Annually, beginning 30 months after passage of the Dodd-Frank Act, Commerce is required to submit a report to Congressional subcommittees that includes :

  • An assessment of the accuracy of the independent private sector audits and other due diligence processes described under the conflict minerals provisions.
  • Recommendations for the processes used to carry out such audits, including ways to (i) improve the accuracy of such audits and (ii) establish standards of best practices.

I know only one or two or a very few issuers submitted private sector audits with the first round of required conflict minerals filing.  Perhaps Commerce has concluded it’s not worth the effort to make the evaluations or maybe the evaluation is underway.  Since the standards for the audits have been published, Commerce certainty could provide recommendations as to the processes used to carry out the audits and establish standards of best practices.

Other interesting information included in the Commerce Department report includes:

  • There are artisanal miners that process small amounts of materials and are known to be employed in eastern Congo. Because these producers of metals are “off the grid,” it is very difficult to trace exactly where these small amounts of materials are smelted.
  • There is also evidence of guerilla smelting operations throughout Africa that create makeshift smelters which 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.
  • Commerce noted that gold purchased through the Shanghai Gold Exchange (SGE) accounts for 15-20 percent of all the gold used for commercial purposes. It is also recognized that the vast majority of the gold sold worldwide is comingled at the SGE. The SGE has not released, nor does it keep, records of where its gold is sourced. Therefore, any material that is purchased through the SGE is untraceable to a smelter, refiner, or processor of origin.


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