Apple, Intel-Backed Rules on Conflict Minerals Stall Exports

Apple, Intel Back Mineral Rules
Rules to stop sales of minerals, like copper, used in electronics are forcing miner to seek new buyers in Asia. Photographer: Daniel Acker/Bloomberg

Rules backed by Apple Inc. and Intel Corp. to stop sales of minerals used in electronics from funding war in Central Africa took effect today, forcing miners from the region to seek new buyers in Asia, according to exporters.

“There is a de-facto embargo, it’s very clear,” said John Kanyoni, president of the mineral exporters association of North Kivu, in the Democratic Republic of Congo. “We’re committed to continue with all these programs. But at the same time we’re traveling soon to Asia to find alternatives.”

Asian consumption is growing to feed booming manufacturing, with copper demand in China, the biggest user of industrial metals, seen rising an average 7 percent a year from 2010 to 2014, more than double the rate of North America, RBS Global Banking and Markets says. China’s mine investments have shifted to Africa from Australia and Canada, Ernst & Young LLP said.

Smelters are no longer buying from exporters in Goma, the center of Congo’s tin ore trade, as miners are unable to comply with the new rules yet, Kanyoni said in the provincial capital.

The Conflict-Free Smelter program applies to shipments of tin ore, tungsten, gold and coltan from Congo and its neighbors and demands mineral processors prove purchases don’t contribute to conflict in eastern Congo. The regulations were developed by the Washington-based Electronic Industry Citizenship Coalition and Global E-Sustainability Initiative in Brussels, representing electronics companies including Intel and Apple.

Obama Signs Act

The U.S. Securities and Exchange Commission will also issue regulations to stem purchases of so-called “conflict minerals” this month, under the Dodd-Frank Wall Street Reform and Consumer Protection Act signed by President Barack Obama in July.

U.S. companies will be required to audit mineral supplies next year to identify purchases that may be tainted by the Congo fighting, according to draft SEC regulations.

African traders want more time to implement programs to track minerals before the new rules take effect, Kanyoni said. An embargo may affect more than 200,000 artisanal miners in Congo, according to Pact, a Washington-based development group helping to implement mineral tracing programs in the region.

Asian manufacturers are unlikely to make up for declining demand and the higher prices paid by producers in the West, Jason Stearns, former head of a United Nations expert group monitoring sanctions on Congo, said by e-mail today.

India and China

“There also may be challenges in separating domestic and international supply chains in India and China to make sure that minerals from eastern Congo do not enter products destined for the U.S.,” Stearns said in response to questions.

Congo is struggling to cut links between armed groups and the mineral trade that have fueled more than a decade of war in eastern provinces. The country is the largest producer of tin ore in Africa and has significant reserves of coltan, tungsten and gold, almost all mined by independent diggers.

The government has been working with industry groups, the Organization for Economic Cooperation and Development and the UN to develop tracing and certification programs. While there has been some success in removing armed groups from mine sites, Congolese soldiers are still involved in smuggling minerals in the east, according to the Ministry of Mines.

President Joseph Kabila says he is seeking to replace artisanal mining with industrial-sized operations to improve government revenue and end the difficult working conditions and human rights abuses that independent miners often face.

At the same time, a six-month ban imposed by Kabila on mining in three eastern provinces that ended last month delayed implementing mineral tracing programs, according to ITRI Ltd., a tin industry group. The president said the ban was meant to root out “mafia groups” that control the mineral trade.

Congo and the state-run China Development Bank agreed last month to develop infrastructure in the African nation. The deal will improve road and rail networks, as well as manufacturing mining, energy and agriculture industries, according to an e-mailed statement from Prime Minister Adolphe Muzito’s office.

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