A Unified Approach to Conflict Mineral Compliance for the Tungsten Industry. The Westin, Sydney, 23 September 2013

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1 A Unified Apprach t Cnflict Mineral Cmpliance fr the Tungsten Industry The Westin, Sydney, 23 September 2013

2 Backgrund Cmpliance f public US dwnstream tungsten users with the reprting requirements f the US Security and Exchange Cmmittee (SEC) Ruling cncerning sectin 1502 f the Ddd Frank Act (Cnflict Mineral Rule). All US public cmpanies are required t prvide dcumentatin t the SEC if they are using cnflict minerals (Tin, Tungsten, Tantalum & Gld) in their prduct. US cmpanies must file in early 2014 Status in mid-2013 Tw different prgrams, seen as cmpeting. Cnfusin amng tungsten prducers abut what they are suppsed t d. Nt a single tungsten prducer listed s far as cnflict free.

3 TI-CMC Set-up by grup f large tungsten prducers. smelter-level fcus Supprt by relevant industry assciatins: ITIA, Refractry Metals Assciatin (RMA). Develped specifically fr tungsten - takes particularities f tungsten supply chain int accunt. Largely self-assessment, as there is very limited supply frm Cvered Cuntries. Cmplies with the law. Challenge: Dwnstream cmpanies cncerned abut lack f independent review f tungsten surcing. CFS 1 Set-up mainly fr end-users by the electrnics industry. dwnstream fcus Supprted by ther dwnstream industry assciatins. Accepted scheme fr tantalum; making prgress fr tin and gld. One size fits all apprach t 3T, nt taking tungsten specifics int accunt. Based n 3 rd party audits. Cmplies with the law. Challenge: by tungsten prducers viewed as beynd legal requirements and invasive n prducers cmpetiveness and cnfidentiality 1 CFS = Cnflict Free Smelter Prgram

4 Cnflicting Issues: Tungsten prducers especially in Asia are lking fr clarity n which prgram t adhere t what are the legal requirements? - and hw can they assists their custmers? Dwnstream US cmpanies insists n independent validatin (althugh that is mre than required by the law fr supply frm utside f cvered cuntries). Tungsten prducers insist that the realities f the tungsten supply chain must be taken int accunt; including: Very little supply frm Cvered Cuntries, very limited risk t supprt cnflict. Imprtance f China & cmplex recycling supply chain. Extensive trade f intermediates (APT, xide) between the smelter-level cmpanies interdependence difficult t trace back t rigin. Cnfidentiality issues (small market).

5 Establishing a Unified Apprach TI-CMC & CFS started wrking n a unified apprach in mid-2013; several wrking sessins (face-t-face & telecnferencing) CFS recgnizes strng industry knwledge in TI-CMC. TI-CMC recgnizes established CFS prgram and cnfidence f dwnstream players int the latter. Unified apprach t take strengths and cncerns f bth sides int accunt. TI-CMC endrses validatin thrugh a CFS audit. CFS tgether with TI-CMC revised the audit prtcl and prcedures, t make them suitable fr tungsten. Transitin perid and re-audit frequency.

6 Unified Apprach Cmpanies may sign up first with TI-CMC and then register with CFS r vice-versa. Tungsten smelter-level cmpanies wh becme TI-CMC Members sign-up t underg CFS validatin audit within 2 years. TI-CMC Members are Cnflict Free under ruling. Cmpanies will be listed n TI-CMC web-site as Cnflict Free. Once registered with the CFS and member f TI-CMC, cmpany will be listed as in prgress t becme CFS cmpliant n CFS Cmpliant Tungsten Smelter web-site. After CFS validatin: cmpany listed as a Cnflict Free Smelter n CFS Cmpliant Tungsten Smelter web-site.

7 Unified Apprach The Unified Apprach leads t the fllwing advantages fr tungsten prducers: Imprved audit prtcl & prcedure negtiated by the TI-CMC will be used, including extended re-audit perid (3 instead f 1 year) (1) CFS Audit will be financed by dwnstream industry. During the tw year transitin/break-in perid t undertake the audit there will be unhindered trading f intermediates between cmpanies prgressing twards CFS validatin. TI-CMC Membership will facilitate annual legal cmpliance and re-auditing f TI-CMC members will nly be every three years unless the cmpany surces frm the Cvered Cuntries. Imprved cnditins fr tlling agreements. (1) Unless cmpany surces frm Cvered Cuntries..

8 Listing f Tungsten Cmpanies all cmpanies in unified apprach mving up nce validated

9 What t d next: Apply fr TI-CMC Membership and register with CFS (r vice-versa)

10 What t d next: Apply fr TI-CMC Membership and register with CFS (r vice-versa) T apply fr TI-CMC membership (see Fill in applicatin frm (prvided in English, Chinese and Japanese), Sign prvided Cmmitment Letter, Prvide Supplier Cde f Cnduct including Nn-cnflict Statement, Descriptin f the cmpany prgram n Cnflict Mineral issue. Annual fees (range f USD 2500) t keep the prgram ging. T remain active member: Annual reprt n activities / advance / bservatins (fr review nt giving cnfidential infrmatin, but prviding sme real insight int the activities) [additinal DD / audit requirements if surcing frm Cvered Cuntries]

11 What t d next: Apply fr TI-CMC Membership and register with CFS (r vice-versa) Apply fr CFS by cntacting Bryan Fiereck summary steps fllw 1. Agree t NDA and Auditee Agreement then added t CFS Active/Prgressing Twards CFS Validatin list 2. Cmplete Pre-audit Checklist 3. CFS prgram then identifies CFS auditr 4. Auditee schedules and cmpletes CFS audit with designated auditr 5. Auditr issues CFS audit reprt t auditee & Audit Review Cmmittee (ARC) 6. CFS prgram issues CFS Cmpliance Letter t auditee 7. Auditee s cmpany name is added t the publically available CFS Cmpliant W Smelter List psted at 8. CFS prgram t cntact auditee when re-audit is due (annually if surcing frm Cvered Cuntries r every 3 rd year) [additinal DD / audit requirements if surcing frm Cvered Cuntries]

12 Recap: Tungsten-specific changes t the CFS audit prtcl and prcedures Fr Level 1 cuntries and recycling: Spt checks nly (instead verificatin f every purchase f nn-secndary supplies and f >= 125 transactins fr secndary materials) Trading f intermediates between cmpanies listed as TI-CMC members prgressing twards CFS validatin reasnably assumed cnflict free. Fr cmpanies nt using material frm Cvered Cuntries: re-audit perid extended frm 1 t 3 years (as lng as they remain members f TI-CMC). Auditee (and TI-CMC) may attend ARC (Audit Review Cmmittee f CFSI) during review f their audit results; direct ff-takers are excluded frm ARC participatin. Future changes t prtcl shall be agreed between CFSI and TI-CMC.

13 [Side Nte: Supplies frm Central Africa (Cvered Cuntries) Only abut 1% f the annual tungsten intake cmes frm the Cvered Cuntries. Hwever, fllwing legal requirements impsed by the SEC rules, cmpanies using this material [at all levels in the supply chain!], are subject t special rules: Require 3 rd party auditing in line with OECD guidelines fr bth, prir t TI-CMC Membership and CFS validatin audit. Annual re-auditing.

14 Time Line This is very urgent! Dwnstream needs reasnable assurance fr reprting t SEC by May Octber 2013: Public TI-CMC/CFS annuncement Release revised TI-CMC framewrk & CFS W nly Audit Prtcl Initial TI-CMC member list released Initial in prgress twards CFS validatin list released CFSI intends t start CFS audits befre year-end and anticipate the first CFS Cmpliant W Smelter List (with minimum f three cmpliant smelters) t be released in late 2013/early 2014.

15 Cntacts TI-CMC James Dale, TI-CMC administratr TI-CMC bard: CFS Bryan Fiereck, CFS cntact fr W Industry; Cnflict Minerals Prgram Manager, Intel Crpratin

16 Q & A

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