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
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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
LBMA Responsible Gold Forum Paris 1/5/2012
Terry Heymann – World Gold Council 2
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
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• 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.
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Terry Heymann – World Gold Council 3
Global Gold Mining
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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
World Gold Council | World Gold Council Conflict-Free Gold Standard
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Terry Heymann – World Gold Council 4
The Conflict-Free Gold Standard
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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
World Gold Council | World Gold Council Conflict-Free Gold Standard
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Terry Heymann – World Gold Council 5
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
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Consultation & Engagement: Roundtable Participants
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Terry Heymann – World Gold Council 6
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)
World Gold Council | World Gold Council Conflict-Free Gold Standard
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
World Gold Council | World Gold Council Conflict-Free Gold Standard
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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
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
World Gold Council | World Gold Council Conflict-Free Gold Standard
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.”
World Gold Council | World Gold Council Conflict-Free Gold Standard
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Terry Heymann – World Gold Council 8
Heidelberg Institute for International Conflict
Research
15
The Conflict Barometer
World Gold Council | World Gold Council Conflict-Free Gold Standard
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
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
World Gold Council | World Gold Council Conflict-Free Gold Standard
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Terry Heymann – World Gold Council 9
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
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
World Gold Council | World Gold Council Conflict-Free Gold Standard
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
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
World Gold Council | World Gold Council Conflict-Free Gold Standard
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Terry Heymann – World Gold Council 10
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
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
World Gold Council | World Gold Council Conflict-Free Gold Standard
Alignment with regulatory and industry initiatives
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Terry Heymann – World Gold Council 11
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 ✔
World Gold Council | World Gold Council Conflict-Free Gold Standard
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
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LBMA Responsible Gold Forum Paris 1/5/2012
Terry Heymann – World Gold Council 12
Conclusions
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• 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
World Gold Council | World Gold Council Conflict-Free Gold Standard
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:
World Gold Council
10 Old Bailey, London EC4M 7NG
T +44 20 7826 4700
F +44 20 7826 4799
www.gold.org