LBMA Responsible Gold Guidance Enables Gold Industry to Meet SEC Final Conflict Minerals Rules
On the 22nd August the US Securities and Exchange Commission adopted a rule that implements Section 1502 of the Dodd-Frank Act. This requires companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo (DRC) or an adjoining country.
The LBMA has played a leading role in ensuring that once these rules are in place, the global gold market will be able to continue to function smoothly while at the same time allowing market participants to demonstrate that their gold-containing products are "conflict free" for the purposes of the SEC rules.
This has been achieved by the development of the LBMA's Responsible Gold Guidance (the “Guidance”) which all Good Delivery gold refiners must comply with in order to maintain their LBMA accreditation. Compliance with the guidance is reviewed annually by independent auditors and results are submitted to the LBMA, as well as being made publicly available.
The Guidance is an extension of the due diligence practices already followed by all responsible gold refiners and it also adopts the five step risk-based approach used in the OECD Due Diligence Guidance on Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (Dec 2012). The SEC final rules repeatedly endorse the OECD Guidance as a "nationally or internationally recognized due diligence framework” for fulfilling Dodd-Frank requirements of conflict mineral due diligence. The SEC says that it “satisfies our criteria and may be used as a framework for purposes of satisfying the final rule’s requirement that an issuer exercise due diligence in determining the source and chain of custody of its conflict minerals.” In addition, the SEC endorses the OECD Gold Supplement as such a framework for gold. The gold industry has worked diligently with the OECD to make the Gold Supplement a sound and workable guidance, with representation from the LBMA, the World Gold Council and the Responsible Jewellery Council.
Gold industry programmes for refiners, such as those developed by the LBMA and the RJC, were implicitly recognised as compliant with the SEC rules. “An issuer would have reason to believe representations were true if a processing facility received a ‘conflict-free’ designation by a recognized industry group that requires an independent private sector audit of the smelter, or an individual processing facility, while it may not be part of the industry group’s ‘conflict-free’ designation process, obtained an independent private sector audit that is made publicly available.”
Stewart Murray, Chief Executive of the LBMA said “The SEC rule makes a number of changes from the proposals they announced in December 2010 to improve its practical implementation, which are beneficial for gold supply chains. The LBMA Gold Guidance goes beyond the requirements of the SEC rule and is therefore already well positioned to more than fulfill the expectations of this rule and of comparable international standards.”
David Gornall, Chairman of the LBMA added “At the 2011 LBMA Conference in Montreal I announced that the issue of Conflict Gold was the LBMA’s number one priority. Since then the LBMA has worked diligently with other bodies particularly the World Gold Council, the Responsible Jewellery Council, EICC-GeSI and the OECD over the past two years, to prepare itself for these rules. The outcome reflects favourably on the effective work undertaken by the LBMA and these other industry bodies with which it has been working closely”
For further information on the LBMA Responsible Gold Programme, please see the LBMA website page on Responsible Gold.
A full copy of the SEC rule can be viewed at http://www.sec.gov/rules/final/2012/34-67716.pdf
About the London Bullion Market Association (LBMA)
The LBMA is the international trade association that represents the market for gold and silver bullion, which is centred in London but has a global client base, including the majority of the central banks that hold gold, private sector investors, mining companies, producers, refiners and fabricators. The current membership includes 129 companies which are involved in the loco London bullion market, including trading houses, banks, refiners, miners and fabricators as well as those providing services to the market such as consultants, supervisors and assayers. The membership encompasses a total of 22 countries. The LBMA was formally incorporated in 1987 at the behest of the Bank of England to take over the roles previously played by two separate organisations, the London Gold Market and London Silver Market, whose origins go back to the mid-nineteenth century. For more information about the LBMA, please visit www.lbma.org.uk.
About the LBMA Good Delivery List (GDL)
In the refining industry, the LBMA Good Delivery List includes the world’s pre-eminent refiners of gold and silver, located in 31 countries. The List is widely recognized as the de facto standard for the quality of gold and silver market bars. This recognition is based on the stringent criteria that applicants must satisfy before being listed, as well as the regular proactive monitoring of accredited refiners by the LBMA. In addition to satisfying the LBMA’s technical standards, a refiner seeking LBMA accreditation must meet a number of non-technical criteria in relation to ownership, tangible net worth, operating history and corporate responsibility. Total refined gold production by the refiners on the List was more than 4,000 tonnes in 2009, well above world mine production of 2,611 tonnes. For silver, refined production by listed refiners of 22,800 tonnes was marginally greater than the 22,342 tonnes of mine production in the same year.