Regional Mineral Supply Chains, Conflict Risks and Due Diligence

Map Source: BGR

Owing to the logistical framework characterizing the Great Lakes Region, almost all 3T minerals and artisanal gold (collectively classified as “conflict minerals”) produced in the eastern DRC need to pass through its eastern neighbours (Uganda, Rwanda, Burundi, Tanzania, Kenya), either officially (in full conformance with all export procedures) or at under-declared customs values or smuggled altogether. Mineral shipments are trucked to the sea ports of Dar-es-salaam and Mombasa (containers of 3T concentrates destined for smelters in Southeast Asia and elsewhere) or pass one of the region’s international airports on their way to the local souks in Dubai/United Arab Emirates (the main destination for artisanal gold, usually hand carried by passengers in a plane).
All of the DRC’s eastern neighbours acting as transit states have a significant mineral sector of their own. The proportion of smuggled DRC minerals reflected in national exports can be dominant or subordinate compared to the national production component in these transit countries, with individual proportions often changing through time in response to regional smuggling incentives (e.g., lower mineral export royalties).

Artisanal gold mining sites in the eastern DRC (orange symbols) and common regional gold smuggling routes (adapted from IPIS 2013; information based on UN Group of Experts reports). Industrially produced gold in the DRC is exported via Kinshasa Source: BGR

DRC Conflict Financing and Mineral Smuggling
Mineral smuggling does not automatically imply conflict financing. International observations on artisanal mining and “conflict minerals”– the 3Ts and gold – in the eastern DRC in recent years are superimposed on the complex background of a dynamic ASM and regional mineral trade sector. The actual conflict relevance of individual minerals is changing in response to the evolution of the DRC conflict economy. Initially, during the Second Congo War (1998-2001), plundering of coltan (and subsequently cassiterite) resources were main drivers to sustain the war. More recently (2013-2015), a boom in artisanal gold mining combined with stricter sourcing standards for 3T minerals has shifted conflict financing in the eastern DRC in large parts to artisanal gold as well as other natural resources such as charcoal. Regional smuggling risks for 3T minerals continue to apply but actual conflict risks for ASM gold are significantly higher than for the 3Ts.

Widespread UN and civil society research efforts on this situation have ultimately given rise to establishing internationally relevant reporting regulations and supply chain management procedures for “conflict minerals”:

• An OECD-hosted international consultation process on supply chain due diligence developed guidelines for companies to responsibly source from and engage in conflict-affected and high-risk areas, such as the eastern DRC, and continues monitoring the guidelines’ implementation.
• The US Dodd-Frank Act defines the need to implement due diligence for conflict mineral supply chains geographically, introducing special reporting requirements for all “conflict minerals” (and derivatives) originating from either the DRC or any of its adjoining countries.
• The Regional Certification Mechanism of the International Conference on the Great Lakes Region (ICGLR) defines due diligence responsibilities for the 3Ts and gold to apply in all twelve ICGLR member states. Some member states (in particular Rwanda and the DRC) have passed comprehensive national regulations to enforce the certification mechanism.
• The industry-led Conflict-free Smelter Program currently categorizes all countries of the Great Lakes region as “level 3” where private sector stakeholders (essentially smelters and associated supply chains from mines to local traders and exporters) need to demonstrate implementing certain due diligence requirements. The program has major leverage with regards to international 3T smelting and processing.
• The European Union is in advanced discussions to finalize a regulation on responsible sourcing of “conflict minerals”, with a global scope.
  

ASM gold smuggling, from DRC and other sources, is reflected in the increasing discrepancy between officially declared exports from the Great Lakes Region and registered imports in Dubai (the main destination of the region’s ASM gold). Data shown represents ASM gold exports and imports in kilogram Source: BGR

As such, applying due diligence when sourcing “conflict minerals” (the 3Ts and gold) from the Great Lakes region has now essentially become mandatory through regional and international regulatory instruments. However, while enforcement of these sourcing standards has become increasingly widespread in the 3T sector over the last few years, feasible implementation concepts hardly exist at all in the ASM gold sector so far.