Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement

Economic Briefing for DFID
Mapping Initiatives on Conflict Minerals in Eastern DRC
and Opportunities for Engagement
by Laure Gnassou, Economic Affairs Officer
(gnassou@un.org)
Political Affairs Division
28 November 2014
Kinshasa, The DRC
MONUSCO

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Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs
Officer (gnassou@un.org) MONUSCO, Political Affairs Division, 28 November 2014
OUTLINE
INTRODUCTION: The DRC at Glance
1. Overview of the Artisanal Mining Sector in the DRC (2002-2014)
2. Attempts at Addressing Conflict Minerals Issue in Eastern DRC (from the
Six-Month Mining Ban of 2010-2011 to the Impact of the Section 1502 of Dodd-Frank Act of
21st
July 2010)
3.Mapping Conflict Free-Minerals Initiatives in Eastern DRC
4. Beyond Conflict Free-Minerals Initiatives: Attempts at Addressing
Business Models of Armed Groups
CONCLUSION: Transition from Militarized Economy to Peace Economy: Where
does Stand Eastern DRC?

Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014
INTRODUCTION: The DR Congo at a Glance
1. Total Population (in 2013 (e)): 80.46 million
2. Key Macroeconomic Indicators
* Real Gross Domestic Product (GDP) Growth (in 2014): 8.6%
* Annual Inflation Rate (23/11/2014): 1.27%
* Exchange Rate (25/11/2014): USD 1 = CDF 926.023
3. Private Sector
Foreign Direct Investment (FDI) Inflows to the DR Congo
(in 2013): USD 2,098,000,000
Graph 1. Geography of the DRC
4. Socio-Economic Indicator
In 2014, DR Congo ranks 186 out of 187 countries in
terms of Human Development Index (HDI)- UNDP
Non Inclusive Economic Growth
Source: IMF, The World Economic Outlook (October 2014), Central Bank of Congo (http://www.bcc.cd), UNDP, The 2014 Human Development Report: Sustaining
Human Progress: Reducing Vulnerabilities and Building Resilience, UNCTAD, and The 2014 World Investment Report: Investing in the SDGs: An Action Plan. 3

1. Overview of the Artisanal Mining Sector in the DRC (2002-2014)
4
2001 2003 2005 2007 2009 2011 2013
20102002 2008
Mining Code
(11 July 2002)
Mining Regulation
(26 March 2003)
ARTISANAL MINING
The US Legislation on Conflict-Free Minerals
(Section 1502 of Dodd-Franck Act of 21 July 2010)
ARTISANAL MINING
Mining Ban in Kivus and Maniema
(9 September 2009- 10 March 2010)
2012
Ongoing Review of Mining
code ( as of March 2012)
2014
2015
ARTISANAL MINING
Conflict-Free Smelters (CFS) Program
(as of 1 April 2011)
ARTISANAL MINING
ICGLR – Regional Initiative against the Illegal
Exploitation of Natural Resources (RINR) -
(2008) & Lusaka summit of December 2010 (6 tools )
2004 2006
ARTISANAL MINING
OECD Due Diligence Guidance
(as of December 2009)

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2. Attempts at Addressing Conflict Minerals Issue in Eastern DRC
* President Kabila declaration of 9 September 2010 & “Arrêté” of Minister of
Mines of 20 September 2010
* Lift of the Mining Ban in Maniema, North Kivu, and South Kivu of 10 March 2011
Rise in raw materials prices,
notably tin
Negative impact on the
economies of 3 provinces and
the national economy
2.1. Mining Ban in North Kivu, South Kivu, and Maniema (from 9 September 2010 to 10
March 2011)
Legal Framework
Mining Ban
Application
Effects
Suspension of Mining activities: the holders of mining rights, the “comptoirs”, the
“negociants”, and the artisanal diggers, except Banro (South Kivu), Somikivu
(North Kivu)
Several cases of violation of mining ban in Kivus, and ManiemaIn practice
Disruption of supply chains of minerals
Source: London Metal Exchange (LME), 1 August to 31 March 2011.
Graph 2. Tin Price (cash buyer) from 1 August 2010 to 31 March 2011
In aftermath of the international
financial crisis of 2008-2009.

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2.2. Addressing Conflict Minerals: Dodd-Frank Act of 21st
July 2010 (Artisanal Mining)
Raw Materials : Coltan, Cassiterite, Wolframite (tungsten), gold, and any other minerals or
its derivatives determined by the US Secretary of State
Modalities: Reporting companies using the 3T & gold
originating in the DRC or adjoining countries for the
functionality or production of their products will have
to submit an annual report to the Security Exchange
Commission (SEC) disclosing whether their products
contain the above mentioned minerals. Independent
audits will be carried out for the companies
concerned .
Impact on Business Strategies of Economic Operators
The DRC The Rest of the World
Graph 3. Map of The DRC
Countries: The DRC and " adjoining countries"

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Key minerals Coltan , Cassiterite (Sn) (LME), Au
(NYMEX), Wolframite (tungsten)
Mining sites
Mining companies
“Unités de traitements” formely
known as Comptoirs”
International trading companies of raw materials
End-user
Industries
Insecurity
Supply chain
free of
conflict
minerals ?
Metal Smelters
Other economic operators
Commodities Markets
Banks
Transport companies
Customs
Electronics, Automative, Jewelry
Traceability &
certification
of raw
materials?
(Towards a
better
regulation of
the artisanal
mining
activities)
Eastern DRC
International
Note: - (*) companies operate under Congolese law (--- sprl), Parent company listed or not on TSX or JSE or AIM,…
2.3. Impact of the US legislation on Conflict-Free Minerals
“Négociants” or Traders
Certificatio
n of mining
sites
1502 of Dodd-Frank
Act of 21st
July 2010
Implementation of an international Conflict
Free Smelter (CFS) audit for smelters on 1
April 2011
- Focus on Business Strategies of Economic Operators

Shift in Artisanal Mining Activities
(Cassiterite) in Eastern DRC as of
2011: North-East Katanga &
Maniama vs. North Kivu & South
Kivu
Graph 4. Official Exports of Cassiterite in USD and Volume from 2003-2013
Graph 5. Official Exports of Cassiterite in Volume from 2009-2013
Source: Laure Gnassou on the basis of “Centre d’Evaluation, d’Expertise et
de Certification (CEEC), 26 November 2014.
Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de
Certification (CEEC), 26 November 2014.
- Artisanal Mining Activities in Eastern DRC: Focus on Data
Artisanal Mining
Drop in official exports of cassiterite
over a decade.
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Graph 6. Official Exports of Coltan in USD and Volume from 2003-2013
Graph 7. Official Exports of Coltan in Volume from 2009-2013
Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de Certification (CEEC), 26 November
2014.
Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de Certification (CEEC), 26 November
2014.
Shift in Artisanal Mining Activities
(Coltan) in Eastern DRC as of 2011:
North-East Katanga & North Kivu
(leading provinces).
Artisanal Mining
Rise in official exports of coltan
over a decade.
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Graph 8. Official Exports of Wolfram in USD and Volume from 2003-2013
USD
Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de Certification
(CEEC), 26 November 2014.
North-East Katanga still a leading
Province:
Export of wolfram (in 2011): 40,500 kg
(in 2012): 67,000 kg
(in 2013): 60,231 kg
Artisanal Mining
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Graph 9. Official Exports of Gold in Volume from 2003-2012
Graph 10. Official Exports of Gold in USD from 2003-2012
Increase of industrial gold due to Kibali Gold
Mine (Province Orientale (Ituri)) and Banro
(South Kivu & Maniema) since 2011
No traceability system for artisanal gold &
Rare Earth Elements (REE)
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3.1. Conflict Minerals & Risk Mitigations: Donors and Private Sector Support
3. Mapping Conflict Free-Minerals Initiatives in Eastern DRC
Process Starting Date Location Funding Remarks
Donors Private
Sector
Artisanal Mining
Production
Qualification &
Validation of artisanal
mining sites
2012 Eastern DRC BGR
USAID
MONUSCO (1)
n.a. “Arrêté” n°58 of 29
February 2012 on
qualification & validation
of mining sites
Traceability (2) ITRI Tin Supply Chain
Initiative(ITSCI) by ITRI
for 3T
2011 North-East
Katanga
n.a. Minerals
Exporters
Official Minerals
Exportation
(CEEC)
ICGLR Regional
Certificate
30 June 2013 (2 bis) Kinshasa Promines/
The world
Bank (3)
Minerals
Exporters
(4)
Independent
Audit of Supply
Chain
Internal Process Eastern DRC n.a. Minerals
Exporters
Annual report
ICGLR Requirement Eastern DRC USAID n.a. upcoming
Source: Laure Gnassou.
Note: (1): Upcoming system by Better Sourcing Program (BPS) for 3T; (2) Upcoming traceability system for gold – CEEC Initiative; (2 bis): The ICGLR regional certificate was launched
on 30 June 2013. In practice, the CEEC issued the first ICGLR regional certificate on 20 January 2014; (3) Promines/The World Bank funded ICGLR certificates printing; & (4) Minerals
exporters must pay USD 350 per ICGLR regional certificate.
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4. Beyond Conflict Free-Minerals Initiatives: Attempts at Addressing Business Models
of Armed Groups
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Armed Groups
4.1. Volatile Security Situation in Eastern DRC
- Increase in Human Rights Violations and IDPs
- Disruption of Economic Activities
* Dynamic of Conflict Minerals, illegal taxation
system
* Negative Impact on Macroeconomic
Developments (increase in budgetary expenditures,
mainly due to sovereignty-related spending)
Graph 11. Main Eastern Provinces
Source: MONUSCO Map, 14 May 2012.

* Military Operations
(FARDC & MONUSCO
assistance)
* Mediation (Armed
groups/Government & the
international community
support)
Attempts at Addressing Security Crisis and Dismantling Business Models of Armed Groups
in Eastern DRC
Tools
“Cartel”
Armed Groups (critical salaries issue)
“Acting as Economic Operators”
Agriculture + Forestry
Mining Sector
Illegal Taxation
Tax Collection at Borders
Harassment of
Population (limited
production cost)
Militarized
Economy or
War Economy
in Eastern
DRC
East African
Community:
Burundi
Kenya
Rwanda
Tanzania
Uganda
(in 2014: 143.5 million
of population)
4.2. Business Models of Armed Groups in Eastern DRC
* DDR Process
(Better economic incentives for
returning to economic activities,
including agri-mining activities)
Political & Diplomatic Issues Security Issue Economic Issue
* Demilitarization of mining artisanal sites/concessions 15

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Governance of Mining Sector
(Artisanal & Industrial) (Optimal situation)
Security in the Rift Graben
(Optimal situation)
Macroeconomic Stability including
Conducive Business Climate (Optimal
situation)
Infrastructure & Energy
(Optimal situation)
CONCLUSION: Transition from Militarized Economy to Peace Economy: Where
does Stand Eastern DRC?
The DRC
Addressing infrastructure and energy deficit
throughout the country, notably Eastern DRC
(Ongoing)
Addressing insecurity in the Rift Graben
(Ongoing)
Improving macroeconomic stability including
private sector development (Foreign Direct Investment (FDI)
inflows to the DRC (in 2013): USD 2,098,000,000) & pro-poor
spending
(Ongoing)
Thank You
Addressing conflict minerals spiral in Eastern DRC
Creation of growth poles around industrial projects
including Kibali Gold Mine (Ituri) and Banro (South
Kivu) (Ongoing)

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