Large-Scale Gold Miners Peer Learning WebinarMoney-laundering through the mineral supply chain –...

Large-Scale Gold Miners

Peer Learning Webinar

1 August, 2013

For distribution: 15 August 2013

Agenda

• Welcome

• Introduction to the OECD Due Diligence Guidance

• View from World Gold Council

• Learnings from implementation

– Perspective from a mining company (AngloGold Ashanti)

– Perspective from a refiner (Rand Refinery)

• Questions/Feedback

• Next steps

Welcome

• Objectives of Peer Learning:

– Foster open and constructive exchange of information

– Learn from companies that are further along in due diligence implementation

– Introduce tools and resources to you

– Answer your questions

• Deliverables from Peer Learning

– OECD Due Diligence Guidance introduction

– Case studies, examples from industry

Peer learning process

Multi-

stakeholder

Steering

Group

• 7 peer groups in Gold

– Large Scale Miners

– ASM

– Refiners

– Banks

– Downstream Users

– Auditors

– Industry initiatives

• Leads identified

Calls with

Peer Group

leads

• Agenda for webinar

• Presenters

• Dates for webinars

Multi-

Stakeholder

Forum

• Dates circulated

• Outreach beyond Forum

1st Peer

Learning

Webinar

• Introduction to DDG

• Examples from industry

• Feedback

2nd Peer

Learning

Webinar

June 5, 2013

late June/ July 2013

• Case studies and tools?

• Decision to continue

with peer learning

July/August

2013

End 2013/

early 2014

Future Peer

Learning

Webinars? Quarterly?

THE OECD DUE DILIGENCE GUIDANCE

Tyler Gillard Head of Project, Legal Adviser

OECD Investment Division

Key features of the OECD Guidance

• One set of expectations

A common framework for due diligence expectations throughout the entire mineral supply chain from mines until end users

• Progressive approach

The promotion of constructive engagement with suppliers in order to gradually affect changes in their sourcing practices without embargoes!

• Different treatment

Depending on mineral (e.g. Supplements on Gold, and 3Ts) and location of company in the supply chain (e.g. upstream and downstream companies), resulting in complementary due diligence processes

Principles of the OECD Guidance

• Due diligence is a dynamic, on-going process with the information collected and built, with quality progressively improved

• Companies are encouraged to integrate the due diligence standards and principles into existing due diligence practices and management systems

• The due diligence recommendations may be carried out jointly through industry or other multi-stakeholder initiatives to save costs and reduce audit fatigue

Local industry and stakeholder initiatives can help companies implement the OECD Guidance within your sector and market – e.g. WGC, LBMA, Conflict-Free Sourcing Initiative (CFSI), RJC, DMCC and other industry programmes operationalise OECD Guidance.

Overview of the OECD Guidance

• Objective:

To provide clear, practical guidance for companies to ensure they do not contribute to conflict or abuses of human rights through their mineral and metal procurement practices

• Method:

5-step risk-based due diligence process

• Scope:

Applies to all companies throughout the entire mineral supply chain that potentially use 3T and gold from conflict or high-risk areas

Structure of the OECD Guidance

Due Diligence Guidance includes:

1. A 5-step risk-based due diligence framework for all minerals from conflict-affected and high-risk areas (Annex I)

2. A model supply chain policy (Annex II): – NO! Sourcing from parties linked to serious abuses

– NO! Direct of indirect support to non-state armed groups

– MITIGATE! Direct or indirect support to public or private security forces

– MITIGATE! Bribery in the supply chain, fraud or misrepresentation of chain of custody or traceability information

– MITIGATE! Money-laundering through the mineral supply chain

– MITIGATE! Non-payment by suppliers of taxes, fees and royalties related to mineral extraction, transport and export, or non-disclosure of payments by suppliers in accordance with EITI

3. Principles for risk mitigation (Annex III)

4. Supplement on Tin, Tantalum and Tungsten

5. Supplement on Gold, including a special Appendix on artisanal and small-scale mining

Supplement on Gold: Application

• Applies to all companies in the supply chain:

– “Upstream companies” refers to all the companies between the mine and the refiner, e.g. mining companies, local exporters, traders of unrefined gold, recyclers, refiners

– “Downstream” companies refers to all companies after the refiner until the consumer, e.g. jewellers, bullion banks, industrial users of gold

Supplement on Gold: Application

•

Mined Gold

• Gold from artisanal source (ASM Gold)

• Gold from large-scale mines (LSM Gold)

Recycled Gold

Grand-fathered stocks

• Before 1 January 2012

Applies to

Five Step Risk-Based Due Diligence

Step 1 • Establish strong company management systems

Step 2 • Identify and assess risks in the supply chain

Step 3

• Design and implement a strategy to respond to identified risks – If red flag identified

Step 4

• Carry out or ensure an independent third-party audit smelter/refiner’s due diligence – If red flag identified

Step 5

• Report annually on supply chain due diligence – If red flag identified

Red Flags

Red flags of gold origin or transit:

• The gold originates from or has been transported through a conflict-affected or high-risk area

• The gold is claimed to originate from a country that has limited known reserves or stocks, likely resources or expected production levels of gold (i.e. the declared volumes of gold from that country are out of keeping with its known reserves or expected production levels)

• The gold is claimed to originate from a country through which gold from conflict-affected and high-risk areas is known or reasonably suspected to transit

• The gold is claimed to originate from recyclable/scrap or mixed sources and has been refined in a country where gold from conflict-affected and high-risk areas is known or reasonably suspected to transit

Red Flags

Supplier red flags:

• Suppliers or other known upstream companies operate in one of the above-mentioned red flag locations of gold origin and transit, or have shareholder or other interests in suppliers of gold from one of the above-mentioned red flag locations of gold origin and transit

• Suppliers or other known upstream companies are known to have sourced gold from a red flag location of gold origin and transit in the last 12 months

Red flag circumstances:

• Anomalies or unusual circumstances are identified through the information collected in Step 1 which give rise to a reasonable suspicion that the gold may contribute to conflict or serious abuses associated with the extraction, transport or trade of gold

Appendix 1 - Creating opportunities for

artisanal and small-scale miners

• The Guidance assumes that legitimate ASM has a key role to play to drive sector-wide change and focuses on means to create market based opportunities for value-creation

• The Appendix to the Gold Supplement to the OECD Due Diligence Guidance offers an agreed roadmap to enable market access through collaborative efforts of all actors involved and to create economically viable development opportunities for artisanal and small-scale miners

Due diligence on gold produced by

artisanal and small-scale miners

• Risk assessment for ASM gold is more flexible: retrospectively (i.e. “top-down”) tracing ASM gold is impractical and sometimes impossible

• Companies that source ASM gold however are expected to “assist and enable Legitimate Artisanal and Small-Scale Mining producers to build secure, transparent and verifiable gold supply chains”: Creates a “bottom-up” flow of information

• Detailed Appendix on how to create economic and development opportunities for artisanal miners

• All stakeholders encouraged to use the suggested measures in the Appendix

Regulation

► July 2010 – Section 1502 of the US Dodd-Frank Act includes specific reporting requirements for companies using 3Ts and gold (DRC focus)

► August 2012 – Final US rules recognise OECD Due Diligence Guidance (OECD = global focus)

► 2014 – EU Regulations expected to be finalised (focus OECD)

17

US Dodd-Frank and EU Regulations

Global industry initiatives for gold

Initiative Organisations involved

Purpose Participation type

Independent audit

required Conflict-Free Sourcing Initiative (CFSI) - includes the Conflict-Free Smelter (CFS) program

Global e-Sustainability Initiative (GESI); Electronic Industry Citizenship Coalition (EICC)®

Verifies that the sources of conflict minerals processed by smelters are conflict-free. Enables downstream companies to identify and source from conflict-free smelters. (Operationalises OECD Guidance for smelter/refiners.)

Voluntary Yes

WGC Conflict-Free Gold Standard and Tools

World Gold Council (WGC)

Establishes a common approach for mining companies to responsibly mine gold and demonstrates that their mining operations do not fuel conflict or the abuse of human rights. (Operationalises OECD Guidance for mining companies.)

Voluntary Yes

LBMA Responsible Gold Guidance

London Bullion Market Association (LBMA)

Ensures that all gold feed stock and all gold produced by refiners are conflict-free. Enables downstream companies to identify and source from conflict-free refiners. (Operationalises OECD Guidance for refiners.)

Mandatory for LBMA accredited

refiners

Yes

RJC Chain-of-Custody Certification Program

Responsible Jewellery Council (RJC)

Supports the identification and tracking of conflict-free gold throughout gold supply chains with the transfer of chain-of-custody documentation.

Voluntary Yes

DMCC Practical Guidance for market participants in Gold and Precious Metals

Dubai Multi-Commodities Centre

Assists DMCC-licensed members and other industry participants in the UAE to enforce OECD due diligence.

Mandatory for all DMCC-licensed

members

Yes

Gold industry Initiatives –

complementarities

Miners Refiners Jewellers

Source: LBMA Responsible Gold

19

Support & Recognition throughout gold supply chain

RJC Chain of Custody Covers All Actors

Source: LBMA Responsible Gold

20

Mutual recognition across the industry

LBMA RJC CFSI

Common Features: 3rd Party Audit, OECD & SEC Compliance

Tailored Focus London Bullion Market Jewellery Supply Chain - Mine

to Retail Manufacturers

Audit outcome Continued Good Delivery Accreditation

CoC Certification Validated Smelter/ Refiner list

Harmonisation RJC CoC, CFS audits = Responsible Gold Requirement

LBMA, CFS = RJC RJC, LBMA audits = CFS.

One Audit Report – Three Programmes

*World Gold Council and ARM Fairtrade/Fairmined initiatives support refiner due diligence

Other Great Lakes-based initiatives

Initiative Organisations involved

Purpose Participation type

Independent audit

required ITRI Tin Supply Chain Initiative (iTSCi)

ITRI; Tantalum Niobium International Study Center; Pact; Channel Research

Supports responsible sourcing from Central Africa through the development of (1) a physical chain-of-custody system that tracks and monitors minerals from mine to smelter and (2) a due diligence system that includes independent audits and mine site and transportation route assessments.

Voluntary Yes

Certified Trading Chains

German Federal Institute for Geosciences and Natural Resources (BGR)

Supports responsible sourcing from Central Africa through the creation of a certification framework for artisanal mining sites.

Voluntary Yes

ICGLR’s Regional Certification Mechanism

International Conference on the Great Lakes Region (ICGLR)

Establishes a certification mechanism for the mining and trading of conflict minerals from the Great Lakes Region.

Mandatory for member countries

Yes

Source: U.S. Government & Accountability Office

OECD Implementation Programme

• Problem-solving and information-sharing

– Common and coordinated solutions

• Collaboration

– Consistency and harmonisation of expectations:

Collaborated multiple industry programmes to support harmonisation and a level playing field

• Promotion and dissemination

– Tools, workshops and training seminars

• Peer-learning

– 3T Pilot from August 2011 – December 2012

– Gold implementation programme launched this year – training and case studies

• ICGLR-OECD-UN GoE Forum

– In-person meeting in May and November each year – next meeting on 13-15 November to be held in Kigali, Rwanda

Selection of OECD Multi-stakeholder

Steering Group members

BEDEWA Observatoire

Gouvernance et Paix

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http://en.wikipedia.org/wiki/File:Flag_of_Canada.svg

http://en.wikipedia.org/wiki/File:Flag_of_Japan.svg

http://en.wikipedia.org/wiki/File:Flag_of_Switzerland_(Pantone).svg

http://en.wikipedia.org/wiki/File:Flag_of_Rwanda.svg

http://en.wikipedia.org/wiki/File:Flag_of_Germany.svg

http://en.wikipedia.org/wiki/File:Flag_of_Israel.svg

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Thank you!

For further information on this project and to

download the OECD Due Diligence Guidance:

www.oecd.org/daf/investment/mining

Contact:

Tyler Gillard, Head of Project

[email protected]

Shivani Kannabhiran

[email protected]

http://www.oecd.org/daf/investment/mining

mailto:[email protected]

mailto:[email protected]

World Gold Council Conflict-Free Gold Standard

What is the Conflict-Free Gold Standard?

• A common approach by which gold producers can assess and provide

assurance that their gold has been extracted in a manner that does not

cause, support or benefit unlawful armed conflict or contribute to

serious human rights abuses or breaches of international humanitarian

law

Why have we developed it?

• An industry-led approach to address concerns that link gold mining to

the financing of armed conflict

• Designed to “operationalise” the OECD Guidance for Responsible

Supply Chain of Minerals from Conflict-Affected and High-Risk Areas

• Intended to promote responsible mining and encourage investment in

conflict-affected areas when it is appropriately undertaken

• Endorsed by LBMA and aligns with their Responsible Gold Guidance

26

The Conflict-Free Gold Standard

World Gold Council | July 2013

How the Standard has been developed?

• Under the mandate of the Board of the World Gold Council and

overseen by the Responsible Gold Steering Committee

• Extensive consultation process, including two draft Standards

• Two pilot case-studies in Mexico and Ghana

• Designed to be both pragmatic and credible

Anticipated timeline

• October 2012: Final Standard published

• 2013: First year of implementation

• Early 2014: First public disclosure re: conformance, with external

assurance

• The World Gold Council is not acting as a certifying body

27

The Conflict-Free Gold Standard


Consultation & Engagement for the CFGS (selection)

28 World Gold Council | July 2013

• World Gold Council member companies and other entities who apply

the Standard will be expected to report publicly on their conformance or

otherwise with the Standard

• This “Conflict-Free Gold Report” should be publicly disclosed in

company reports and/or on the company website and should be

externally assured. This should be done at least annually and will cover

activities over a 12 month period

• Two Guidance Documents are available to support implementation and

assurance:

• Guidance for Implementing Companies

• Guidance for Assurance Providers

• The Standard and Guidance documents include approaches to

addressing deviations from conformance

29

Conformance and Public Disclosure


Conflict-Free Gold Standard: Structure


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

• Companies required publicly to disclose conformance with the Standard

(e.g. in annual report, sustainability report)

• Independent, third party assurance of this disclosure

• Based on established benchmarks (e.g. OECD Guidance, UN Guiding

Principles on Business and Human Rights, Voluntary Principles on

Security and Human Rights, EITI)

5 stage assessment

Part A

Conflict

Assessment

Part B

Company

Assessment

(conflict-areas only)

Part C

Commodity

Assessment

(conflict-areas only)

Part D

Externally-

Sourced Gold

Assessment

Part E

Statement of

Conformance

documentation

Conclusions


Why is the Conflict-Free Gold Standard important?

• Action to eradicate the misuse of gold to fund conflict

• Protects the reputation of gold

• Designed to support responsible production and avoid stigmatising

countries and, thereby, increasing instability and poverty

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

• Developed through an intensive consultation process

• Public disclosure and external assurance

• Credible and pragmatic

• First industry-led standard that seeks to define ‘responsible conduct’ in

conflict-affected areas

Thank you

To view a copy of the Conflict-Free Gold Standard and see views from a

range of stakeholders, please visit:

http://www.gold.org/conflict-free

http://www.gold.org/video/play/gold_standard_film/

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/video/play/gold_standard_film/

CONFLICT-FREE GOLD: LESSONS LEARNT

ANDREW PARSONS

NELLIE MUTEMERI

AUGUST 2013

34 [INSERT PRESENTATION TITLE IN SLIDE MASTER MODE ON the slide numbered 1] [INSERT DATE]

DISCLAIMER

Disclaimer

Certain statements made in this communication, other than statements of historical fact, including, without limitation, those concerning the economic

outlook for the gold mining industry, expectations regarding gold prices, production, cash costs and other operating results, growth prospects and

outlook of AngloGoldAshanti’s operations, individually or in the aggregate, including the achievement of project milestones, the completion and

commencement of commercial operations of certain of AngloGoldAshanti’s exploration and production projects and the completion of acquisitions and

dispositions, AngloGoldAshanti’s liquidity and capital resources and capital expenditure and the outcome and consequence of any potential or pending

litigation or regulatory proceedings or environmental issues, are forward-looking statements regarding AngloGoldAshanti’s operations, economic

performance and financial condition. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may

cause AngloGoldAshanti’s actual results, performance or achievements to differ materially from the anticipated results, performance or achievements

expressed or implied in these forward-looking statements. Although AngloGoldAshanti believes that the expectations reflected in such forward-looking

statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ

materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions,

success of business and operating initiatives, changes in the regulatory environment and other government actions including environmental approvals

and actions, fluctuations in gold prices and exchange rates, and business and operational risk management. For a discussion of certain of these and

other factors, refer to AngloGoldAshanti's annual report for the year ended 31 December 2011, which was distributed to shareholders on 4 April 2012,

the company’s 2011 annual report on Form 20-F, which was filed with the Securities and Exchange Commission in the United States on 23 April 2012

and the prospectus supplement to the company’s prospectus dated July 17, 2012 that was filed with the Securities and Exchange Commission on July

25, 2012. These factors are not necessarily all of the important factors that could cause AngloGoldAshanti’s actual results to differ materially from

those expressed in any forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results.

Consequently, stakeholders are cautioned not to place undue reliance on forward-looking statements. AngloGoldAshanti undertakes no obligation to

update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after today’s date or to reflect the

occurrence of unanticipated events, except to the extent required by applicable law. All subsequent written or oral forward-looking statements

attributable to AngloGoldAshanti or any person acting on its behalf are qualified by the cautionary statements herein.

This communication may contain certain “Non-GAAP” financial measures. AngloGoldAshanti utilises certain Non-GAAP performance measures and

ratios in managing its business. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the reported operating

results or cash flow from operations or any other measures of performance prepared in accordance with IFRS. In addition, the presentation of these

measures may not be comparable to similarly titled measures other companies may use.

AngloGoldAshanti posts information that is important to investors on the main page of its website at www.anglogoldashanti.com and under the

“Investors” tab on the main page. This information is updated regularly. Investors should visit this website to obtain important information about

AngloGoldAshanti.

2


• We are members of the World Gold Council, London Bullion Market Association

(LBMA) and Responsible Jewellery Council

• We implement the OECD Guidance through the World Gold Council Conflict-

Free Gold Standard and London Bullion Market Association Responsible Gold

Guidance

• Queiroz refinery passed LBMA Responsible Gold Audit in June

3

ANGLOGOLDASHANTI


PART A – CONFLICT ASSESSMENT OF OPERATING ENVIRONMENT

4

• Part A of the Standard looks at a desktop conflict assessment of mines’ locations

• Initial 2013 pilot has focussed only on AGA’s African operations

• Part A assessment was conducted by the Public Affairs Africa team (responsible for

political risk and government relations)

Part A focuses on two areas:

• Section 1 International sanctions: “is intended to ensure that the mining and onward

transport of gold does not take place in breach of International Sanctions”.

FOR THIS WE ARE USING EXTERNAL ASSESSMENT: Official sanctions lists for the

countries in which we do business including the websites of the European Union; the

United Nations Security Council; and the UK government’s official sanctions lists. An

evidence pack of these websites was assembled, scanned, printed and stored.

• Section 2 Recognition of conflict: “uses external, objective criteria to assess whether

the area in which the mine is located should be considered ‘conflict-affected or high-risk’”

FOR THIS WE ARE USING EXTERNAL AND INTERNAL ASSESSMENT: (1) the

Heidelberg Conflict Barometer, as required by the Standard, to determine if our operations

are located in ‘conflict affected or high risk’ areas and (2) our own internally developed

‘threat matrix’, and assessed at site level, to determine if our operations self-assess their

situation as ‘conflict affected or high risk’.


INTERNAL AGA THREAT MATRIX ASSESMENT: RISK RATINGS

Step 1

Likelihood

The users must agree upon the likelihood of the key question rating it from Rare to

Certain and assign the corresponding value as per table to the right in Section A.

Step 2

Consequenc

e

The users must consider the consequence of the event, apply a rating from Slight

through to Extreme and assign the corresponding value as shown in the table to the

right in Section A. Both financial and Non financial consequence should be taken

in consideration.

SECTION A

Step 3

Confirm

Risk

The assigned values for likelihood and consequence should be multiplied and the

total sum value compared against the table to the right in Section B in order to

identify the risk rating from Low (total of less than 4) through to High (total of

more than 12).

Step 4

Input Data

The Risk Rating Numerical Value should now be entered into the RRNV Cell (in

front of the corresponding question)SECTION B

Step 5

RepeatRepeat steps 1 to 4 for each key question

Step 6

Theme

Average

COUNTRY THREAT STATUS INDICATOR

PROCESS INSTRUCTIONS TO USER

The average value for the section will be entered in the bottom cell.

Score ELI RESPONSES COLOR CODING

< 4 Low No

4 - 8 Medium Not really

8 - 12 Medium

To HighMost often yes

> 12 High Yes

• The Threat Matrix is an internal tool developed by AGA’s Global Security and

Public Affairs departments

• The threat matrix is being piloted at all of AGA’s African operating

countries

• Provides a supplementary view to the Heidelberg Conflict Barometer


5


• None of the African countries where AGA has operations are currently

subject to international sanctions that relate to the export of gold.

• Mali and the Democratic Republic of Congo are identified as conflict-

affected or high risk countries in either the 2011 or 2012 Heidelberg Conflict

Barometer.

• Operations that we have self-assessed as being in conflict-affected or

high risk countries cannot yet be confirmed, but will be reported on

publicly in 2014. The reason for this is that the methodology used is still being

finalised.

OUTCOMES AND FINDINGS


6

39 [INSERT PRESENTATION TITLE IN SLIDE MASTER MODE ON the slide numbered 1] [INSERT DATE] 7

PART B – HUMAN RIGHTS

• ASSESSMENT: Does company have systems in place to discharge its

responsibility to avoid causing, supporting or benefiting unlawful armed

conflict, or contributing to serious human rights abuses or breaches of

international humanitarian law?

• EVIDENCE: Required in five parts:

i. Public commitment: has human rights policy; participates in

human rights initiatives; etc.

ii. Activities: Either not subject to or not found culpable in credible

allegations of human rights abuses; uses its influence to prevent

abuses by others.

iii. Security: No credible allegations of human rights abuses against

its security personnel; conducts due diligence investigation on its

public and private security providers


iv. Payments and benefits-in-kind: not provided to armed private groups

who have committed or been credibly accused of human rights abuses;

publicly disclosed where made to governments or government entities

v. Engagement, complaints and grievances: engages with stakeholders

including vulnerable groups; has effective systems in place for reporting

of and remedying of concerns and grievances

• To assess its conformance, AGA examined its existing risk management

systems, its policies, standards & procedures on the five areas; conducted

extensive media searches of allegations of human rights violations; assessed

its VPSHR implementation programme and compliance with various human

rights initiatives in which it participates, including the Global Compact and the

UN Guiding Principles on Business & Human Rights

PART B – HUMAN RIGHTS (CONT’D)


• Part C relates to handling of gold and gold bearing material on the mine site

and movement of gold once it leaves the mine. Part C has 3 components:

– Nature of gold production

– Control of the gold at the operation

– Transportation of the gold to the refinery (doré) or smelter (concentrate)

• A risk based approach is adopted for the implementation of Part C:

• Mine site supply chain is mapped from the shaft or pit, to point of gold dispatch

and handover to next participant in the chain of custody

• Risk points for potential gold leakage and process losses or inefficiencies in the

supply chain identified and ranked using information from process experts

• Common gold mine risk points:

– loading of trucks and movement to the plant (open pit mines)

– milling and gravity concentration circuits, loaded carbon handling, elution

circuit

– smelt-house and despatch of gold from the smelt-house

• Focus of gold control is on the extent of gold leakage and how this is managed:

gold that is stolen from the process can be used to fund armed conflict

PART C – COMMODITY ASSESSMENT CHAIN OF CUSTODY


PART C – COMMODITY ASSESSMENT CHAIN OF CUSTODY (CONT’D)

• Operational effectiveness and efficiency around each risk point:

– Analyse and review to determine whether gold is properly controlled and managed

– Supply chain process data around the identified risk points analysed for variances

from industry norms

– Example: tons of ore loaded into trucks in the pit compared to the tons crushed, milled

and treated. Variances greater than 10% require investigation

• Custodianship of the gold from mine to the transport company and eventually

to refinery

– Gold bars are signed over to the transporter at the mine smelt-house

– Due diligence needs to be conducted on the transport company (with the refinery)

– Suitable warranty needed for the refinery and the transporter. This testifies that the

gold being despatched has been produced in accordance with the Conflict-Free Gold

Standard. It is attached to the waybill and bar lists for every despatch of gold

• Mine site assessment involves the following disciplines: Mining, metallurgy,

geology, financial, security, safety and health. Estimated duration is three days

per mine site.

• Assessment uses existing systems and databases for metal accounting, risk

management, mineral resources and ore movement tracking


FINALLY…

11

• Part D: Externally sourced gold. AGA does not source gold externally

• Part E: Management Statement of Conformance. Depends on Parts A – D

• External assurance: The auditors of AGA’s financial and sustainability reports

will provide assurance as part of their annual audit process

• Reporting: In the annual Sustainability Report

• Dodd Frank s1502: short form report required for our Brazilian refinery


LESSONS LEARNT AND CONCLUSIONS

12

• Processes were/are in place, but not necessarily documented or sufficiently

rigorous

• Requirement for implementation of the CFGS helped to fast track some

lagging processes

• Alignment between CFGS and LBMA RGG made for straightforward

conversations with refiners

• On track for external audit in Q1 2014…


Introduction

• Current Status of Responsible Gold Initiatives

o LBMA Responsible Gold Guidance

o Chain of Custody (“green gold”)

o Responsible Jewellery Council

• Organisational Awareness

o Senior Management – this presentation

o Organisation – awareness campaign

o Depositing Customers – sensitisation

o Board – Board Reports

In

Purpose of Presentation


Policies

• Responsible Gold Policy

o Where does Rand Refinery stand?

• Know Your Customer

o Who are we dealing with?

• Anti-Money Laundering

o Are our dealings legitimate?

• Supply Chain Policy

o Where is the gold coming from and how did it get here?

Po

Development and Consolidation


LBMA Responsible Gold Guidance

The LBMA is an organisation that controls the London Gold Market

and in this capacity developed the “Good Delivery Rules” to ensure

the integrity of this market.

As part of these rules the LBMA introduced the Responsible Gold

Guidance (RGG) to ensure that all Refineries adhere to the principles

of Responsible Sourcing as identified by the OECD.

• Rand Refinery is an LBMA Accredited Refinery

• Rand Refinery is an Ordinary Member of the LBMA

• Rand Refinery is an LBMA Referee

• Rand Refinery played an integral role in developing the LBMA RGG

If we do not conform to the RGG, Rand Refinery will lose

Accreditation.

Lr

The only initiative we MUST adhere to.


Process Mapping

The Organisation for Economic Cooperation and Development (OECD) has suggested

a 5 step process of due diligence:

• STEP 1: Establish strong company management systems

• STEP 2: Identify and assess risks in the supply chain

• STEP 3: Design and implement a strategy to respond to identified risks

• STEP 4: Carry out independent third-party audit of smelter/refiner’s due diligence

practices

• STEP 5: Report annually on supply chain due diligence

In order to implement this process and fully understand the Risks, you need to develop

Process Maps. Process Maps rationalise and distil the logical steps to enable all

requirements to be covered. A Depositing Customer Assessment Tool can then be

developed.

This tool enables the Due Diligence Process to be followed and triggers Enhanced Due

Diligence when required.

Pm

Understand the Process – Identify the Risk


Process Mapping Pm

Large Scale Mining

Determine whether the gold producer mines or

transports any gold in a conflict-affected or

high-risk Country and area (“red flagged

operations”).

To do so: - review the context of each location of gold origin and transport,- relying on evidence from credible sources,- and use good faith efforts to make reasonable determinations.

Determine whether the gold producer purchases any

gold (e.g. gold of artisanal and small-scale origin)

potentially from a conflict-affected or high-risk area.

IDENTIFY AND ASSESS RISKS

IN THE SUPPLY CHAIN FOR

LSM GOLD (MEDIUM AND LARGE-SCALE ) “Gold Producers”

Supplier red

flags

Suppliers or other known upstream companies operate in

one of the above-mentioned red flag locations of gold

origin and transit, or have shareholder or other interests

in suppliers of gold from one of the above-mentioned red

flag locations of gold origin and transit.

Suppliers or other known upstream companies are known

to have sourced gold from a red flag location of gold

origin and transit in the last 12 months.

If the gold producer can reasonably determine

that these red flags do not arise in that supply

chain, no additional due diligence is required for

that supply chain.

No

Yes – Identified or info unknown

Map the factual circumstances of the gold

producer’s red flagged operations and other

sources of gold, under way and planned.

Undertake an in-depth review of the context of all

red-flagged locations and the due diligence practices

of any red flagged suppliers

Review research reports, including from governments, international

organisations, NGOs, and media, maps, UN reports and UN Security

Council sanctions, industry literature relating to gold extraction, and

its impact on conflict, human rights or environmental harm in the

country of potential origin, or other public statements (e.g. from

ethical pension funds).

Consult with a combination of local and central governments, local

civil society organisations, community networks, UN peacekeeping

units, and local suppliers. Respond to specific questions or requests

for clarifications made by cooperating companies.

Determine (including through desk research; in-site visits to gold

suppliers; random sample verification of purchase records

proportional to risk; and a review and assessment of purchase and

anti-money laundering and counter terrorist financing (AML-CFT)

procedures and directives, if applicable) if upstream suppliers have

policies and management systems that are consistent with this

Guidance and that such policies and management systems are

operative.

Establish on-the-ground assessment teams

Gold producers with red flagged operations or other sources of Mined

Gold should establish an on-the-ground assessment team (hereafter

“assessment team”) to generate and maintain information on the

circumstances of gold extraction, trade, handling, refining and export

(see below). Gold producers remain individually responsible for

ensuring that the requisite data is gathered, but may wish to facilitate

this by establishing such a team jointly in cooperation with their

customers or other companies in the upstream supply chain supplying

from, or operating in these areas, or via an Industry Programme or

Institutionalised Mechanism. Where „joint‟ teams are not possible, or

companies would prefer not to work jointly, companies should conduct

on-the-ground assessments independently.

1) Ensure that assessors are independent from the activity being assessed and free

from conflict of interests

2) Company assessors must commit to reporting truthfully and accurately and

upholding the highest professional ethical standards and exercise “due

professional care”.

Consider the following factors when contributing to joint on-the-ground

assessments with other companies:

1) the size of the contributing company and the resources available to conduct

due diligence;

2) each company‟s ability to access on-the-ground information

3) the position of the company in the supply chain;

4) the reliability of the company‟s due diligence, as demonstrated by cross-

checking the data provided by the company on all gold inputs

Ensure the appropriate level of competence, by employing experts with

knowledge and skill in as many of the following areas:

1) the operational contexts assessed (e.g. linguistic abilities, cultural sensitivities),

2)the substance of conflict-related risks (e.g. the standards in Annex II, human

rights, international humanitarian law, corruption, financial crime, conflict and

financing parties to a conflict, transparency),

3) the nature and form of the gold supply chain,

4) the standards and process contained in this Guidance.

Provide assessment teams with access to mines, intermediaries, consolidators and/

or transporters within the company‟s control or influence, including:

1) Physical access to sites, including in other countries where trans-shipment or

relabeling is likely;

2) Access to books, records or other evidence of procurement practices, tax, fee

and royalty payments, and export documentation;

3) Local logistics support and assistance;

4) Security for itself and for any information providers.

Establish or support the creation, where appropriate, of community-monitoring

networks and/or multi-stakeholder information units to feed information into the

assessment team. Review, and add to or create if possible, interactive maps that

indicate the location of mines, armed groups, trade routes, roadblocks and

airfields.

Obtain evidence of the factual circumstances of

gold extraction, processing, trade, handling,

transport and export (if applicable)

Location and identity by name of all gold mines for

every output;

Location of points where gold is processed, e.g.,

consolidated, blended, crushed, milled and smelted

into gold doré or alluvial gold output;

Methods of gold processing and transportation;

How gold is transported and processes in place to

ensure integrity, with due regard taken of security

concerns;

Current production and capacity of mine(s), a

comparative analysis of mine capacity against

recorded mine production, and record of any

discrepancies

Current processing production and processing

capacity of mine smelthouse(s), and a comparative

analysis of processing capacity against recorded

processing production, and record of any

discrepancies;

Identification and “know your counterparty”

information of all third party service providers

handling the gold (e.g. logistics, processors and

transportation companies) or providing security at

mine sites and along transportation routes. The

identification should comprise the following

measures, but the extent to which such measures

are carried out should be determined on a risk

sensitive basis: Checking government watchlist information (e.g.

UN sanctions lists, OFAC Specially Designated

Nationals Lists, World-Check search);

Identification of any affiliation of the company

with the government, political parties, the military,

criminal networks or non-state armed groups,

including any reported instances of affiliation with

non-state armed groups and/or public or private

security forces.

Operating licenses, e.g. mining, export;

Identification of the ownership (including

beneficial ownership) and corporate structure of

the companies, including the names of corporate

officers and directors;

Identification of the related businesses,

subsidiaries, parents, affiliates;

Verification of the identity of the companies using

reliable, independent source documents, data or

information (e.g. business registers, extract,

certificate of incorporation)

All taxes, fees or royalties paid to government

related to the extraction, trade, transport and export

of gold;

All payments or compensation made to

government agencies and officials related to the

extraction, trade, transport and export of gold;

The security services provided at the mine sites,

transportation routes and all points where gold is

handled or processed.

The training of security personnel and its

conformity with the Voluntary Principles on

Security and Human Rights.

Screening and security risks assessments of all

security personnel in accordance with the

Voluntary Principles on Security and Human

Rights.

Militarisation of mine sites, transportation routes

and points where gold is traded and exported;

Evidence of any serious abuses committed by any

party in mines, transportation routes and points

where gold is traded and/or processed

torture, cruel, inhuman and degrading treatment

the worst forms of child labour

forced or compulsory labour

gross human rights violations

war crimes

serious violations of international humanitarian law

crimes against humanity

genocide

Information on any direct or indirect support to

non-state armed groups or public or private

security forces

If relevant, the number and name of sites where

any artisanal and small-scale miners operate on the

gold producer‟s concession, an estimate of the

number of miners and an assessment of whether

they can be considered to be involved in

Legitimate Artisanal and Small-Scale Mining

instances of conflict or tensions in the relationship

between medium and large-scale miners and

artisanal and small-scale miners;

If relevant, any instances, reports or suspicions that

ASM gold, or gold from other sources, is being

unknowingly introduced into the gold producer‟s

processing operations (e.g. the mine smelthouse),

and/or fraudulently represented as being mined by

the gold producer.

Assess risks in the supply chain. Assess the information collected and learned through mapping the factual circumstances of the company‟s red flagged supply chain(s). :

1. The company supply chain policy, consistent with Annex II of this Guidance;

2. The due diligence standards and processes contained in this Guidance, as well as information obtained through Step 1 of this Guidance;

3. National laws of the countries where the company is domiciled or publicly-traded (if applicable); of the countries from which the gold is likely to originate; and of transit or re-export countries;

4. Legal instruments governing company operations and business relations, such as financing agreements, contractor agreements, and supplier agreements;

5. Other relevant international instruments, such as the OECD Guidelines for Multinational Enterprises, international human rights and humanitarian law and international anti-money laundering recommendations and guidance.

The gold originates from or has been transported through

a conflict-affected or high-risk area.

The gold is claimed to originate from a country that has

limited known reserves or stocks, likely resources or

expected production levels of gold (i.e. the declared

volumes of gold from that country are out of keeping with

its known reserves or expected production levels).

The gold is claimed to originate from a country through

which gold from conflict-affected and high-risk areas is

known or reasonably suspected to transit.

The gold is claimed to originate from recyclable/scrap or

mixed sources and has been refined in a country where

gold from conflict-affected and high-risk areas is known

or reasonably suspected to transit.

Red flag

locations of

gold origin

and transit

If the gold producer can reasonably determine

that these red flags do not arise in that supply

chain, no additional due diligence is required for

that supply chain.

No

Yes – Identified or info unknown

Determine if the counterparty is a World Gold

Council member and abiding by the conflict free

standard

Yes

No

No additional due diligence is required for that

supply chain, but Rand Refinery reserves the

right to perform additional due diligence


Process Mapping Pm

Large Scale Mining - detail

Determine whether the gold producer mines or

transports any gold in a conflict-affected or

high-risk Country and area (“red flagged

operations”).

To do so: - review the context of each location of gold origin and transport,- relying on evidence from credible sources,- and use good faith efforts to make reasonable determinations.

Determine whether the gold producer purchases any

gold (e.g. gold of artisanal and small-scale origin)

potentially from a conflict-affected or high-risk area.

The gold originates from or has been transported through

a conflict-affected or high-risk area.

The gold is claimed to originate from a country that has

limited known reserves or stocks, likely resources or

expected production levels of gold (i.e. the declared

volumes of gold from that country are out of keeping with

its known reserves or expected production levels).

The gold is claimed to originate from a country through

which gold from conflict-affected and high-risk areas is

known or reasonably suspected to transit.

The gold is claimed to originate from recyclable/scrap or

mixed sources and has been refined in a country where

gold from conflict-affected and high-risk areas is known

or reasonably suspected to transit.

Red flag

locations of

gold origin

and transit

If the Process Map raises a “red flag”, Enhanced due-diligence will

be triggered.


World Gold Council Wg

Conflict-Free Standard

“The objective of our Standard is to create absolute trust that

the gold produced under our guidelines neither fuels armed

conflict, nor funds armed groups, nor contributes to human

rights abuses associated with these conflicts. The Standard is

designed to apply globally, for World Gold Council members

and other companies involved in the extraction of gold.”

• Rand Refinery is an active member of the Steering Committee that

developed the Standard

• Recognition that the Mine Production Chain of Custody ends in the

Melthouse of the Refiner

• Mutual Recognition of LBMA RGG

https://www.gold.org/about_us/who_we_are/our_symbol/


World Gold Council

Part E

Wg

Part E – Statement of Conformance Documentation

Overview

In order to maintain the integrity of the supply chain, companies need to provide a statement

that gold and gold-bearing material being dispatched is in conformance with this Standard.

Suggested Language

The following is suggested language for a Statement of Conformance that should be

supported by appropriate assurance and documentary evidence:

{Mine company name} confirms, to the best of our knowledge, that this gold or gold-

bearing

material has been produced by a mine which is in conformance with the World

Gold Council Conflict-Free Gold Standard.

Gold or gold-bearing concentrate which is NOT in conformance with this Standard will need

to be specified as such.


Depositing Customer Assessment Tool

• Application to trade form updated to include the following:

• Method of material processing – required specifically by OECD

• Method of transport – supply chain audit if required

• KYC for Non FATF/FICA area countries – confirmation of compliance

• Beneficial owner declaration

• Responsible gold procedures – has the company established and implemented policies

and procedures

• Acknowledgement and declaration – abiding by local regulatory requirements with regards

to KYC, AML and not involved in any illegal activities

• Resources to verify information received on application form:

• World Check – risk screening

• Intierra – mining database

• Control risks – country and area risk analysis

• Dun and Bradstreet – background screening for international applications

• Corporate Verification – background screening for local applications

Dc

How will Rand Refinery meet the Requirements?


Depositing Customer Assessment Tool

• Assessment tool is used to identify risks

• BROWN FLAGS – NON NEGOTIABLE FINDINGS

• RED FLAGS – management decision will be taken

• GREEN FLAGS – low risk

• Application and assessment summary is presented to the customer committee for

approval

• Contract will be signed that includes Responsible Gold warranty

• Responsible Gold Declaration on waybill/bar-list

• What have we done so far:

• KYC including EDD and supply chain verification on 12 customers identified by

Deloitte, high risk customers and new applications

• Letter to all customers informing them to include waybill/bar-list warranty

• Issuing of new contracts to customers that have passed the KYC/AML

• Verifying and auditing of all suppliers in the supply chain

Dc

How will Rand Refinery meet the Requirements?


Chain of Custody

• Enhanced Product Opportunities

o Provenance

o Streaming

o Certified Products

• Responsible Jewellery Council

o Chain of Custody Standard

o Holistic Guidance

o “Value-add”

o Global

o Voluntary

Co

What else can/should you be doing?


57

Q&A, FEEDBACK

Next steps

• Forum meeting 13-15 November 2013 in Kigali, Rwanda

• Feedback to this webinar (content, approach) – written comments welcome

• OECD Website: http://www.oecd.org/daf/inv/mne/mining.htm

http://www.oecd.org/daf/inv/mne/mining.htm

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