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Sourcing of Minerals from conflict-afflicted areas

Traxys Annual Due Diligence Report 2016

 

             The Traxys Group is a group of companies engaged in the international sourcing and marketing of metals, minerals, ores and concentrates and related financing and other services. Traxys does not itself manufacture or contract to manufacture any products. Traxys operates in Luxembourg, the United States and a number of other countries around the world.

             Traxys is firmly committed to conducting its business with integrity and transparency and in compliance with all applicable laws and regulations. In its sourcing of ore and minerals from conflict- affected areas, Traxys strives to influence the supply chain in a positive manner and follows the OECD due diligence guidance for responsible supply chains of minerals from conflict-affected and high-risk areas (“OECD Guidance”). The OECD Guidance is a government-backed multi-stakeholder initiative to promote transparent mineral supply chains and avoid contributing to conflict through mineral sourcing practices, while enabling communities to benefit from their mineral resources. Although Traxys is a privately-owned company and therefore not directly bound by it, we observe Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, HR 4173, (the “Act”) and the rules promulgated by the Securities and Exchange Commission (“SEC”) for SEC-reporting companies that use minerals originating in the Democratic Republic of Congo and adjoining countries. Traxys also reports and certifies its supply chain upon request by its customers, some of which are US public companies bound by the Act.

This report follows the OECD Guidance’s five-step framework for due diligence reports and covers sourcing and trading by Traxys of tin, tantalite, tungsten and gold (“Relevant Material”) from the Great Lakes area in Africa (“Relevant Area”) in the 12-month period to December 31, 2016 (the “Covered Period”).

Traxys has been at the forefront of efforts to source mineral and metals in an ethical manner and to avoid a de facto embargo of producers from conflict affected areas by engaging in responsible trade with mineral producers who participate in conflict-free and transparent supply chain initiatives. Traxys was an early member and backer of iTSCI, a responsible supply chain initiative of the International Tin Research Institute (ITRI) and a multi stakeholder programme of traceability and due diligence involving local governments, mineral producers, exporters, traders and smelters, designed to address concerns over coltan, cassiterite and wolframite originating from the DRC and adjoining countries, and winner of the prestigious edie Sustainability Leaders Award 2017 for Sustainable Supply Chains Leader 2017 for its work in bringing positive change in tin supply chains, including the iTSCi programme. Traxys continues to be engaged in an open dialogue and to cooperate with iTSCI in ongoing efforts to address operational challenges and expand the reach and scope of the conflict-free supply chain initiative.

iTSCI works to maintain trade with responsible supply chain participants in the DRC and adjoining countries including Rwanda, Uganda and Burundi, as well as to meet due diligence expectations of the international community in terms of guidance from the UN, the OECD Guidance and the Act. iTSCI’s process enables traceability by means of (i) due diligence, which includes on-the-ground visits and assessments of mine sites and production from such sites, (ii) a tagging system of mineral from mine-site to smelter, and (iii) independent audits. iTSCI’s supply chain traceability system has grown to currently monitoring trading of almost 18,000 tonnes of mineral concentrate from approximately 1340 mines.  

Traxys was also a founding member and active participant in the Conflict Free Tin Initiative, a project spearheaded by the government of The Netherlands, together with PACT, in September 2012 to establish a conflict-free tin sourcing program in South Kivu (http://solutions-network.org/site-cfti/). The Conflict Free Tin Initiative worked to bring conflict free areas of the Kivu back into responsible international supply chains. This region’s economy had collapsed due to internal and cross-border conflicts and US legislation that created a de facto embargo. The Initiative introduced a tightly controlled conflict-free supply chain using the iTSCi procedures of traceability and due diligence. Committed to the initiative were companies such as Apple, Research In Motion (makers of BlackBerry), Royal Philips Electronics, Tata Steel, Motorola Solutions, Alpha, AIM Metals & Alloys, Malaysia Smelting Corporation and Traxys.

                Before these certification systems were established, Traxys did not purchase minerals from the Great Lakes region in 2009-2010.  Since resuming purchases of ores and concentrates from the Relevant Area in 2011, Traxys not only considers for purchase only iTSCi-tagged material but further undertakes its own cross checks and meaningful plausibility assessments and, when warranted due to the seller appearing on alerts or enhanced due diligence lists, demands additional information and mine assessment reports from suppliers to determine that activities observed on the ground correspond to the reported production. Traxys closely monitors iTSCI’s periodic reports and alerts on the mineral trade and developments resulting from iTSCI’s continued mine-site visits and reviews and other on-the-ground work.  In its agreements for purchase of material with suppliers from conflict-affected areas, Traxys requests that such suppliers represent and warrant their compliance with applicable laws and regulations and iTSCI’s procedures and reserves the right to audit and discontinue relationships with suppliers upon breach.    

Traxys has also joined, at some customers’ request, the iPoint Conflict Minerals Platform, used by many manufacturing companies to exchange company-level and smelter data up and down the supply chain.  

 

Establishment of strong company management systems:

Traxys’ position on conflict minerals is set out in its Conflict Minerals Position  (the “Policy”, available on the website http://www.traxys.com/en/about-us/corporate-governance/position-on-conflict-minerals), which sets forth Traxys’ firm commitment to comply with the relevant provisions of the Act and to further the objectives of the OECD Guidance. The Policy furthers the objectives and guiding principles laid out in Traxys’ Code of Conduct to conduct business in an ethical manner and in accordance with all applicable laws and regulations.  Traxys also has an internal due diligence protocol outlining the due diligence process the company undertakes when sourcing Relevant Material.

Traxys has established a conflict minerals due diligence working group (“Due Diligence Working Group”) with dedicated resources in the Risk, Legal, Senior Management and Trading areas. Ultimate responsibility for compliance rests with Traxys’ Chief Operating Officer.

 

By making the Policy available on its website as well as by internal discussion and communications and by including relevant provisions in contracts with suppliers, Traxys has appropriate processes to disseminate the Policy to all relevant employees and suppliers. Traxys periodically reviews the Policy to determine whether any revisions or changes are necessary.

 

Supply Chain Risk Assessment

During the Covered Period, Traxys sourced (i) cassiterite from Rwanda, South Kivu, North Kivu, Katanga and Maniema, and (ii) columbo-tantalite from Rwanda, South Kivu, Katanga and Maniema.  No wolframite or gold were sourced from the Relevant Area by Traxys during the Covered Period.

Traxys undertakes due diligence with respect to proposed new suppliers and, if satisfied, approval is granted by Traxys’ Due Diligence Working Group. Due diligence includes plausibility checks on the material, including material specifications and production quantities, and its purported source, know-your-counterparty (KYC) internal assessment and third-party checks.  Due diligence has led, in an number of occasions, to Traxys declining to purchase tagged minerals because material specifications gave rise to doubts as to the real origin of the material being different from that reported.

All of Traxys’ suppliers of Relevant Material from the Relevant Area are ITSCI members and Traxys has purchased only tagged material during the Covered Period. ITSCI compliance provisions are included in all contracts with suppliers and regular contact is maintained with suppliers to ensure ITSCI requirements are met and all requested information disclosed.  Supporting documentation is kept for purchases of Relevant Material, including Form C, records of payments, certificates of origin, customs export declarations, transport documents and evidence that iTSCI tags are always placed in the container for the Relevant Material.   

Traxys does not undertake any cash purchases and pays all suppliers by international bank transfer. No payments have been made to public or private security forces in relation to purchases of Relevant Material during the Covered Period.

Traxys is in regular contact with iTSCI teams to exchange information, support capacity of suppliers and to discuss issues or concerns. Responsible individuals review monthly reports, incidents reports and alerts on suppliers as a way of monitoring good standing of suppliers on an on-going basis. 

 

Response to Risks

Traxys’ due diligence protocol includes a risk management plan for newly identified risks. Any identified risk is to be discussed within the Due Diligence Working Group with a view to determine appropriate measures such as further investigation, suspension or disengagement. 

If a red flag or concern is raised concerning a supplier of Relevant Material, depending on the nature and seriousness of the concern, the Due Diligence Working Group will (i) request an explanation and propose a plan to mitigate or address the concern, (ii) decide not to enter into or to suspend temporarily the purchase of products of that origin until remediation or corrective action has been implemented; and (iii) if warranted, terminate the contract with the affected supplier.

Contracts for Relevant Material include provisions allowing disengagement with a supplier upon breach by the supplier of undertakings to comply with OECD Guidance as applicable to their operations.  If warranted by incidents, alerts or otherwise, Traxys will exercise such rights. During the Covered Period, Traxys has not had to disengage with any supplier.

Further, Traxys has adopted a whistleblower protection and reporting mechanism that encourages employees to report any suspected breach of applicable law or of Traxys’ Code of Conduct or other policies as well as integrity concerns generally. 

 

Audit of Supply Chain Due Diligence

Traxys’ operations in respect of Relevant Material underwent an audit by iTSCI’ appointed auditor at the company’s headquarters in Luxembourg in February, 2014, to assess implementation of the OECD Guidance and evaluate adherence to iTSCI’s traceability and due diligence procedures. Full access was granted by Traxys to company sites, documents, management and other relevant personnel. The audit report is available on iTSCI’s website. 

 

Report on Supply Chain Due Diligence

The present report outlines Traxys’ supply chain due diligence efforts with respect to the Relevant Material during the Covered Period.


New York / Luxembourg

March 2017