Conflict minerals law could push prices higher - MSCI ESG
miningweekly.com
By: Matthew Hill
21st January 2011
TORONTO (miningweekly.com) - Analysts at New York-based MSCI ESG said on Friday that a new US law aimed to stop the trade in conflict minerals might lead to higher prices of metals used in devices like computers and cell phones.
The Dodd-Frank Act, which includes a clause requiring companies to report on whether they use minerals sourced from the Democratic Republic of Congo (DRC) or its neighbours, will come into force on April 1.
“It’s hard to know exactly how it’s going to play out, but I think it could drive up prices,” lead technology and telecommunications ESG analyst Meggin Thwing Eastman said in an interview.
DRC president Joseph Kabila in September placed a ban on mining in the restive eastern parts of the country, where reports said illegal mines were funding rebel groups.
The conflict minerals that the Dodd Frank Act, which mainly focuses on financial reform in the US, targets include cassiterite, columbite-tantalite, gold, wolframite and their refined products.
They are used in applications ranging from jet engines to the parts that make cell phones vibrate.
According to the International Tin Research Intstitute (ITRI), the DRC was the second biggest source of tin in the mid-1940s, but it now only accounts for 4% of global tin mine production, with about half of that coming out of North Kivu in the form of casserite.
MSCI in December published a report on the semi-conductor industry, which included a section looking at the state of readiness for the new legislation in the sector. The report found that 14 out of the 24 companies studied had taken measures to ensure their supplies did not come from conflict areas.
These included Intel, AMD, SD Microelectronics, and Samsung.
Some of these companies reported on the measures they took on their websites, while others “slipped it quietly in agreements with suppliers”, Thwing Eastman said.
“There is movement in the right direction,” she added.
MSCI ESG analyst Jesse Shoemaker-Hopkins said that companies she wouldn’t have expected to be reporting on their mineral’s sourcing were doing so.
“The pressure is already moving down the supply chain,” she said.
While the law would only apply to companies listed in the US, Thwing Eastman said it would affect the entire tech hardware industry supply chain, from the biggest companies to the smallest.
MINING BAN
The mining ban that Kabila put in place to try cut off funding from rebel groups had the unintended consequence of halting progress on a initiative the ITRI had put in place to tag and trace metals coming out of the region to ensure they were conflict free.
The institute said earlier this week it urgently needed to restart the process, before the US Securities Exchange Commission (SEC) published the final draft of its rules based on the Dodd-Frank Act in April.
Shoemaker-Hopkins pointed out that Australian miner Global Advanced Metals has reopened its Wodgina mine in Western Australia, to provide conflict-free tantalum supplies.
The DRC is the top global producer of tantalum, used in electronics.
The first draft of the SEC’s rules is open for public comment until January 31.
If companies were found guilty of using conflict minerals under the new law, the SEC could fine them. |
