Gold and Conflict World Gold Council Conflict-Free Gold ... · PDF fileWorld Gold Council...

LBMA Responsible Gold Forum Paris 1/5/2012

Terry Heymann – World Gold Council 1

World Gold Council Conflict-Free Gold Standard

Presented by Terry Heymann | 1 May 2012

LBMA Responsible Gold Forum

Agenda

2 World Gold Council | World Gold Council Conflict-Free Gold Standard

1. The World Gold Council

2. Global Gold Mining

3. The World Gold Council Conflict-Free Gold Standard

• Development & Consultation

• Features

• Structure

4. Other schemes

5. Conclusions



Introducing the World Gold Council

3

• The gold industry’s market development organisation

• Recognised global authority on gold and its uses

• Active in the investment, jewellery, official and technology sectors

• Offices in London (head office), New York, Beijing, Shanghai, Tokyo,

Mumbai and Chennai

• 9 of the world’s top 10 gold mining companies in membership

Offices

London

(Head Office)

New York Tokyo Beijing

Shanghai

Mumbai

Chennai

World Gold Council | World Gold Council Conflict-Free Gold Standard

World Gold Council members


• 23 members representing over 60% of global corporate gold production

• 70% share of market capitalisation

Associate Members China National Gold Corp., Franco-Nevada Corp., Hutti Gold

Mines Co., Mitsubishi Materials Corp. and Royal Gold Inc.



Global Gold Mining


Global mine production is geographically diverse...

6

Africa

20%

North

America

14%

Asia

19%

Russia

and

others

13%

Oceania

12%

Latin America

20%

Other

3%

Top 5 gold producers: China (13%), Australia, US, Russia and South Africa, Based on 2010 survey. Totals may not equal 100% due to rounding, Source: GFMS




The Conflict-Free Gold Standard


The Conflict-Free Gold Standard: Objectives

8

• Responsibly undertaken, mining and its related activities can play an

important role in achieving sustainable development and alleviating

poverty reduction

• The Conflict-Free Gold Standard provides a mechanism through which

gold producers can demonstrate that their gold has been extracted in a

manner that does not fuel conflict or the abuse of human rights typically

associated with such conflicts

• Conformance with the Standard will be externally assured




En

d 2

011 /

Sta

rt 2

012

Conflict-Free Gold Standard: Development Process

9

Consultation on

Exposure Draft

and draft Assurance

Framework

Ensure alignment

with s.1502 rules

and OECD gold

supplement

Member

implementation

support

Steering

Committee

established

Dodd-Frank

signed into law

Finalisation of

OECD Guidance

Published draft

World Gold Council

conflict-free standards

Consultation exercise

• Engagement with

governments, NGOs

and industry

participants

• Roundtables in

London, New York

and Johannesburg

Marc

h 2

010

Ju

ly 2

010

May 2

011

Ju

ne 2

011

H2 2

011

Stress tests at

site level (Ghana

and Mexico)

Marc

h 2

012

Published

Exposure Draft

On

go

ing

wo

rk


Consultation & Engagement: Roundtable Participants




Conflict-Free Gold Standard: Main Features

11

• Shows that corporate gold mining can be an agent for social and

economic development for communities and countries

• Declaration of Principles on Mining and Armed Conflict

• Internationally accepted benchmarks (UN Guiding Principles on Business

and Human Rights; Voluntary Principles on Security and Human Rights;

EITI; etc)


12

• For non-conflict affected regions, parts A, D and E remain relevant

• Independent, third party assurance

Conflict-Free Gold Standard: Structure

For conflict-affected regions – 5 stage assessment

Part A

Conflict

Assessment

Part B

Company

Assessment

Part C

Commodity

Assessment

Part D

Externally-

Sourced Gold

Assessment

Part E

Statement of

Conformance

documentation




Part A – Conflict Assessment

13

• Companies need to carry out due diligence about operating environment

but should not have primary responsibility for defining conflict

• Three triggers

1. UN or regional sanctions

2. Authoritative national measures

3. Heidelberg Institute for Conflict Research – Conflict Barometer

regional ratings; 5 (severe war) 4 (limited war)

• Not intended to exclude output from conflict-affected areas – merely to

ensure that it is not causing conflict


Part A

Conflict

Assessment

Part B

Company

Assessment

Part C

Commodity

Assessment

Part D

Externally-

Sourced Gold

Assessment

Part E

Statement of

Conformance

documentation


Conflict assessment

14

Definition: ‘conflict affected or high risk’

“An area identified by the presence of armed conflict, widespread

violence, including violence generated by criminal networks, or other

risks of severe and widespread harm to people. Armed conflict may

take a variety of forms, such as conflict of an international or non-

international character, which may involve two more states, or may

consist of wars of liberation, or insurgencies and civil wars. High

risk areas are often characterised by political instability or

repression, institutional weakness, insecurity, collapse of civil

infrastructures, widespread violence and violation of national and

international war.”




Heidelberg Institute for International Conflict

Research

15

The Conflict Barometer


Part B – Company Assessment

16

• Intended to ensure strength of company management systems

-Commitment to human rights

-Corporate activities and disclosure (e.g. payments to governments)

-Security arrangements (e.g. risk assessments; control of private and

public security)

-Transparency of payments and benefits in kind

-Community engagement; whistleblowing and grievance mechanisms


Part A

Conflict

Assessment

Part B

Company

Assessment

Part C

Commodity

Assessment

Part D

Externally-

Sourced Gold

Assessment

Part E

Statement of

Conformance

documentation




Part C – Commodity Assessment

17

• Intended to assess the risk that gold may directly or indirectly fund

conflict and associated human rights abuses

-Tracking of gold-bearing material to avoid ‘leakage’ of material

-Treatment of low gold-bearing concentrates

-Segregation of non-conformant materials

-Transport arrangements

• Standard’s scope ceases when custody of gold transfers to refiner


Part A

Conflict

Assessment

Part B

Company

Assessment

Part C

Commodity

Assessment

Part D

Externally-

Sourced Gold

Assessment

Part E

Statement of

Conformance

documentation


Part D – Externally-Sourced Gold

18

• Intended to ensure that any gold ‘brought-in’ by a conforming mine is

produced responsibly

• Sets out due diligence requirements


Part A

Conflict

Assessment

Part B

Company

Assessment

Part C

Commodity

Assessment

Part D

Externally-

Sourced Gold

Assessment

Part E

Statement of

Conformance

documentation




Part E – Statement of Conformance documentation

19

• Companies need to provide a Statement of Conformance that the gold

leaving their mine-site is in conformance with the Conflict-Free Gold

Standard

• Useful for refiners to aid their due-diligence processes


Part A

Conflict

Assessment

Part B

Company

Assessment

Part C

Commodity

Assessment

Part D

Externally-

Sourced Gold

Assessment

Part E

Statement of

Conformance

documentation


Alignment with regulatory and industry initiatives




Five-Step Framework for Risk-Based Due

Diligence in the Mineral Supply Chain

21

1. Establish strong company

management systems

1. Internal organisation of the company to oversee

conformance with the Standard ✔

2. Identify and assess risk

in the supply chain

2. The Standard requires companies to assess

operation al risks and procurement processes ✔

3. Design and implement a strategy

to respond to identified risks

3. The Standard lays out demanding practices for

operating in conflict-affected areas ✔ 4. Carry out independent third-party audit

of supply chain due diligence at

identified points in the supply chain.

4. Does not cover refinery audits; however

conformance is externally assured ✔

5. Report on supply chain due diligence 5. The Standard requires an annual , externally

assured public statement relating to conformance ✔


Harmonisation of Gold Supply Chain Initiatives

World Gold

Council LBMA EICC RJC

Applies to Mining companies Refiners Refiners All supply chain

Focus Conflict-free;

OECD Due

Diligence; leading

human rights

instruments

OECD Due diligence,

Know Your Customer

and Anti-Money

Laundering

Country of origin; Dodd

Frank Act

Code of Practices;

OECD Due Diligence

Audit outcome Third party

assurance of good

practice and due

diligence

Good Delivery

Accreditation

Validated Smelter/

Refiner list

Chain of Custody

Certification

Harmonisation Supports refiner

due diligence for

mined gold under

LBMA, RJC, EICC

Opportunity for

harmonisation with

RJC and EICC

Opportunity for

harmonisation with

LBMA and RJC

RJC Chain of Custody

will recognise LBMA and

EICC re conflict-sensitive

sourcing. World Gold

Council Standard

supports mined gold due

diligence for Chain of

Custody




Conclusions

23

• Action to counter the misuse of newly-mined gold to fund conflict

-Protects the reputation of gold

-Tackles a source of violence and human rights abuses

-Enables mining operations to continue if they can prove to stakeholders

they are working responsibly

-Underlines gold’s role as a source of social and economic development

• Consultation open until 30 June 2012


Thank you

To view a copy of the Draft Conflict-Free Gold Standard, please visit:

http://www.gold.org/about_gold/sustainability/conflict_free_standard/

To submit comments on the Draft Conflict-Free Gold Standard, please

email:

[email protected]

World Gold Council

10 Old Bailey, London EC4M 7NG

T +44 20 7826 4700

F +44 20 7826 4799

www.gold.org

http://www.gold.org/about_gold/sustainability/conflict_free_standard/

mailto:[email protected]

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