PPA Governance Committee Members Summary Trip Report

Transcription

1 PPA Governance Committee Members Summary Trip Report Feb 4-8 th, 2012-Mike Loch, Jay Celorie, Sasha Lezhnev, Fidel Bafilemba, Richard Robinson Executive Summary During February 4 th -8 th four members 1 of the PPA Governance committee visited the DRC and Rwanda including four mine sites and a trading center, and met with the Provincial Minister of Mines for Katanga, Maniema, South Kivu, and North Kivu along with a number of governmental, business and civil society organizations. The purpose of the mission was to assess the situation on the ground and to get an understanding of the types of projects and criteria that the PPA would need to consider to make the PPA an effective vehicle to assist in the ongoing sourcing of conflict-free minerals from the Great Lakes Region of Africa. There were many discussions and observations made related to the current situation, some of which were contradictory that we were not able to substantiate given our time constraints. Based on the issues discussed with the numerous stakeholders along with observations at the mine sites there is no low hanging fruit or easily identified project. A significant finding of the trip was that conflict-free tagged material from Katanga and Rwanda was generating a significantly higher price than untagged material which is being discounted due to the inability to legally export it. The price for tagged cassiterite is on the order of $ per kilogram and the price for untagged cassiterite is on the order of $2.50 per kilogram. During the course of the mission certain strategies were identified that could be considered when evaluating potential projects. These strategies are: 1. Rewarding constructive behavior where political will has been expressed through action, aligning incentives to reward such behavior. 2. Participants need skin in the game, where they need to commit or already have committed tangible and in-tangible resources to the reform. 3. Need to implement where there is a higher probability of success and where political will exists. 4. Focus on a manageable/practical scope, not take on un-manageable and unrealistic challenges. 5. There needs to be community development and engagement to support a legitimate supply chain (community actors all need to protect the supply chain) and this can be mirrored at the provincial level, while national support may be inconsistent. 6. Harmonization, coordination and synergy needs to be strengthened across current initiatives itsci, BGR, OECD, and ICGLR in order to simplify implementation for economic actors, governments and donors. 7. There is need for broad agreement among an adequate number of key stakeholders on a monitoring system to ensure credibility of the traceability initiatives. 8. There is a need to look at enhancing the efficiency of the various audits and assessments to minimize cost and audit fatigue. 1 Jay Celorie (H-P), Sasha Lezhnev (Enough), Mike Loch (Motorola Solutions) and Richard Robinson (USAID). Fidel Bafilemba from Enough in the DRC, also accompanied the team.

2 Political will of the regional governments vary, as well as within countries and provinces and must be continually monitored, but some areas give reason for optimism, such as Maniema and Katanga. The DRC army needs to pull out of mines, such as Bisie and Omate, and fully pull out of Nyabibwe, where the mission observed limited military presence. It was also evident that each of the four DRC provinces are facing different issues. Likewise on a national level different countries pose different issues. The type of project and complexity of the project will be dictated by the province and/or country in which the project is supported. I. February 4 th Ambassador Walkley in Kigali: Discussion Points Meetings and Mine Visits 1. Briefed the Ambassador on the Solutions for Hope (SfH) project, itsci program, Provincial mining meeting in Katanga, and allegations of smuggling issues in Rwanda. Take Away 1. Encouraged him to use his influence for other countries to join/contribute to the PPA. 2. Richard to prepare a briefing document (on behalf of US State Department and USAID). 3. Work on a common approach message across U.S. Government (USG) and PPA. II. February 4 th, OCHA, IOM, meeting in Bukavu: Discussion Points 1. When considering where to pilot a chain acceptable to Conflict Free Smelter (CFS) there is a need for political will to succeed: a. Need buy in from all stakeholders, government actors, partners, traditional chiefs; b. Be realistic; c. Study carefully; d. Consider ethnic and security component. 2. Soon there will be joint operations from FARDC and MONUSCO going after Armed Groups (AGs) in some of the areas targeted for the Centres de Negoce. 3. The military regimentation process left a vacuum and it created the opportunity for more AGs to form. There were 3 AGs not too long ago and now there are 17 in South Kivu alone. Citizens are at a loss, they are vulnerable and there is chaos. 4. Military only get paid $3 to 5$ per day, and this is very inconsistent, and then they have to pay a percentage to the commander which leaves them in a situation of having to engage in illegal taxing to earn a living. 5. Other issues: Bad harvest year, uncertainty related to the elections, GDRC introduction of valueadded-tax (VAT), Mai-Mai AGs are more aggressive. There is a lack of confidence/faith/hope

3 and GDRC officials are seen as under extreme personal financial difficulties which promote corruption. Take Away 1. Could use a presentation (PPT) to communicate the benefits of legitimate supply chain and how it needs to support community development. A communication about Banro may be useful in terms of their operations and social development, since there is a perception that minerals are leaving DRC without benefit to DRC. 2. How to build political will? a. It is a decentralized government model with potential for provinces to do more, but Kinshasa could play a stronger role; b. Align incentives to create win-win for all key actors; c. Install confidence through a pilot chain; d. Manage influence from neighboring countries particularly Rwanda. III. Feb 4 th, Minister of Mines: South Kivu, in Bukavu Discussion Points 1. The provincial Steering Committee (Comite de Pilotage) was discontinued at suspension of itsci pilot, has not been revived. 2. He seemed to be dependent on others, particularly in Kinshasa, to deal with the situation. His point of view was that since he and others in the GDRC didn t cause the problem with armed groups, he does not feel he has the ability, mandate, or capacity to address the issue. No local committee has been created. 3. He blamed industry for boycotting the region. He blamed the central government for lack of support for security issues. 4. What about an amnesty of the VAT tax for some period of time, given its negative impacts? Take Away 1. Comite de Pilotage could be reestablished, along the lines of North Kivu and Katanga. IV. Head of Office, MONUSCO in Bukavu Discussion Points Mining is the most important economic activity for the region. 2. Security sector reform is a big challenge. The regimentation process led to impacting the stability of some areas with the FDLR re-controlling some areas and other AGs who returned in

4 other areas. Local population was left vulnerable when regimentation happened. Other armed groups were formed or became more aggressive. 3. This security situation makes it difficult for artisanal miners as they have to follow the law of the jungle. 4. The business community (mining comptoirs) is very strong in South Kivu as they got the governor removed, and could be better used to influence political will. 5. The law is there, but the implementation is not. 6. Everyone should take reasonable risks, but can t be 100% certain of anything being safe in the eastern DRC. V. PPA Delegation Internal Discussion Political will and security seem to be critical prerequisites for establishing the pilot legitimate supply chain. Given election uncertainty, regimentation, bad harvest, increased GDRC taxes, PPA will need to choose wisely to assure sponsor support for funding traceability. At the end of the day, stakeholders cannot accomplish a pilot chain if they do not have, or can not access adequate political will. Furthermore, it is apparent that the armed groups and conflict are the result of historic trends related to population pressure and migration, historical political developments/rebellion and warfare, ethnic and cultural differences, the lack of governance and security, and the ability to perpetrate atrocities with impunity. Since the mining ban and regimentation, it is evident that the armed groups are diversifying their economic control on other commodities such as marijuana, palm oil and other retail goods. February 5 th VI. Mugogo Trading Center Discussion Points 1. Visited the Mugogo gold informal trading center that is operated two days per week. As it was Sunday, no trading was occurring. The prior day, 30 grams of gold was traded at $68 per gram. We were informed that traders avoid the trading center when possible. 2. IOM has built one of the four existing Trading Centers at Mugogo which is not yet operational and is planning to build an annex to potentially accommodate cassiterite and tantalum. 3. It is situated on the Banro Concession, which means that most of the surrounding mine sites where gold is mined artisanally are actually illegal. 4. SAESSCAM (the GDRC artisanal mining extension service) was taxing miners who are mining Banro s concession illegally. 5. Talked to a negociant, or buyer, who buys gold on behalf of a Bukavu comptoir who purchased $100,000 of gold in the last month. He showed us his scale and a nugget which represented $204.

5 Take Away 1. The formal Centre de Negoce is not operational and may only be so when and if non-gold, but legal cassiterite ore bodies, are negotiated to be legal for artisanal mining. A potential project is being discussed among Banro, Ecomin (a private company holding small mine permits) and the Ministry of Mines to do this. Gold trading through the CdN may be limited to only those concessions where the title holders agree to do so, and there are several concessions around Mugogo where this may be possible. 2. Very little gold is traded informally, and none formally. 3. Comptoirs avoid the area due to taxation. 4. It is unsure where the 3T material will come from for Mugogo CdN. VII. Lubona Village and Chien Mechant (Mean Dog) Mine Discussion Points The gold mine which is on the Banro concessions has several pits/shafts each of which are managed by a boss. The boss provides equipment to the miners. The mine is operated 24 hours a day. About 100 miners worked on one pit/shaft that was 100 meters deep. There was also another 300m deep shaft with several hundred miners probably working totally at the mine. There were children working in the mine and also in the washing area, down the hill from the mine sites near the village. There were unsafe conditions. Miners were taxed by SAESSCAM daily and military required the production of two hours of mining on every Saturday. The split of 100 grams are divided in this way: 30 grams go to the traditional Chief, 20 grams to the boss for equipment, then 50 grams are split between the miners and the boss. Some miners came to gold from mining the 3T s and mentioned they had come from Bisie (the large cassiterite mining area in North Kivu) and are like prostitutes (in that they go to where the money is). In the processing part, a natural creek was diverted to washing ponds. There was also a crushing and washing station where some underage workers crushed the ore to reveal the gold (there were at least 200 children under 15 years, many of this relatively large number of children may have been related to the fact that the visit occurred on a Sunday). The village had a small market area and trading area. Hair cuts, flashlights, tools, wood, food, clothing, were all available. We interacted with some school age children. Take Away 1. How to allow artisanal mining to occur on commercial concessions? The Ecomin concept, which had laid out with Banro the possibility of a sub-contract between the title holder (Banro, subject to approval by the GDRC to allow for exploitation of minerals other than gold) and Ecomin to manage artisanal production of cassiterite through a closed pipe approach utilizing artisanal miners, seemed worth consideration. A challenge is to make these approaches fit within the GDRC Mining Code, which strictly separates industrial, artisanal and small mine activities. 2. Without formalization, the miners would appear to probably be exploited and are only receiving 25% of the ore price sold to the comptoir.

6 VIII. South Kivu Civil Society Meeting Discussion Points 1. Reviewed the Solutions for Hope (SfH) project and status of itsci traceability in that pilot project. 2. Civil society complained about the lack of a market for material and blamed the central government. 3. Cassiterite was $8 per kilo historically (fair market) but now is fetching a price of $2.25 per kilo. Take Away 1. There is a market for CFS/ tagged material. It fetches a fair market price, as opposed to nontagged material which is discounted. Katanga and Rwanda are examples. 2. The PPA members challenged the Civil Society to take more responsibility for pushing for traceability and to create tagged minerals. 3. PPA recommended not waiting on central government but to do all possible to move things forward at the provincial and local levels. 4. Need to recommend they reestablish the Comite de Pilotage. February 6th IX. Visit to Nyabibwe Mine Discussion Points 1. Nyabibwe town, about three hours drive north of Bukavu on the main road to Goma, is fairly vibrant. Mine concessions are owned by someone else so it is illegally being mined, although the cooperatives claim legal status (their mining exploitation title seemed informal; however, in any case they recognize there is a title holder). Two mining coops are operating at a mine on one pit called Maternity pit which has two tunnels. The Coops are Comebko and Comiko. This is the former itsci pilot site and is a BGR baseline audit site, and the FARDC historical dynamics of control through 2011 are documented in the December, 2011 UN GoE report. According to some miners, the military is extorting fees, although others disputed this. Production of mine is 7-8 tons per week. There are currently 578 workers. It could be as high as 1000 workers per coop or a total of 2000 but they lack equipment. They mentioned that they are spending $5700 per week on fuel for pumping water from shaft (this seems unreasonable as that would be more than 1000 gallons per week). 2. We don t know who the buyers are but we believe it is at a discounted rate ($2.50 per kilo), many miners reporting they were mining to build inventory for future sales (this does not seem credible). 3. They were complaining about many visitors and there are expectations of legal formalized traceability systems in the future.

7 4. The local territorial administrator was attempting to disband the coops operating the mine and take control over the mine. Take Away 1. Possible pilot project if military issue at Nyabibwe and secure transit route to Bukavu can be determined and addressed. This could be challenging given lack of political will. 2. Need to address the mine permit issue, although the reported BGR audit which was undertaken in coordination with the title holder, may clarify any issues. X. Sake Police Station Discussion Points On our drive to Goma, we stopped at the Sake Police Station. IOM had trained police who had been assigned to this station to be Mine Police and to monitor mineral shipments. This police station had just stopped a truck which was attempting to transport minerals without the appropriate papers. The police had received an anonymous tip about the truck and pulled it over. They questioned if they had minerals and the driver said yes, while he requested a chance to call someone to intervene on his behalf. The Mine Police reported that this resulting offense will result in a fine on top of the taxes required for the minerals. Take Away 1. Mine Police training appears to be having a positive effect, the police were well behaved, professional and seemed to know how to handle situations similar to those we observed. XI. Meeting with Minister of Mines: Maniema in Goma Discussion Points The Minister had requested a meeting with the PPA delegation and traveled from Maniema to meet with us. He would like the stockpiles to be allowed to be sold, so as to start traceability and not have contamination in the future of the traced minerals. The PPA agreed that it does make sense to clear the stockpiles, but it cannot be considered that this ore would be conflict free. We believe there are two options: The first option is to sell the stocks now to buyers that are not members of or are committed to the Conflict Free Smelter program. We assume this is where the majority of the minerals are being sold today from the Kivus and Maniema. The second option is to wait until the Dodd Frank SEC rule is published where the final SEC rule may provide some specific guidance on stockpiles. From a CFS standpoint, CFS members re-iterated the fact that the CFS cannot issue a waiver for these stocks. Take Away 1. PPA to prepare a letter explaining its position on stockpiles.

8 XII. Dinner meeting with Dutch Embassy representative in Goma Discussion Points The Dutch government is interested in sponsoring traceability in DRC through a possible agreement with Pact/iTSCi, and this may bring in some high-profile Dutch companies, such as Phillips and Tata Steel. PPA could help support/recommend where appropriate. Take Away 1. Evaluate and encourage the possibility of the Dutch participating in the PPA. February 7 th XIII. Civil Society North Kivu/Pact/Search for Common Ground Meeting in Goma Discussion Points PPA members overviewed the PPA, the trip itinerary, and what we have learned to this point. Discussed the need to make trading centers work as none are working as expected. We need to build community development and networks around the trade centers to support the responsible trade. It was recommended to identify mine sites, if possible, around Rubaya beyond the eleven sites originally validated in August, It was reinforced that political will at all levels is the most important prerequisite. The point was made that we cannot expect all problems to be resolved at the level of the national government. Many things should and could be done at local/provincial levels. CREDO, a local NGO, supports CF minerals and traceability, thankful for PPA. According to CREDO the difficulty in securing legal mining titles and enabling security is a function of political will. There is a need to be inclusive and get all stakeholders aligned. President of Civil Society North Kivu agreed with everything said, expressed the need to work closer with Pact, desires to have CF minerals and welcomes any initiative that supports traceability. He also listed several problems Regimentation has caused redeployment of armed groups in Bisie and Masisi. Lack of political will. Mining site validation not public yet. Alternative livelihoods are needed to give options for civilians to make a living doing something other than mining. Limited access to mine site contributes to insecurity. Children still at many mine sites. Corruption with government officials at mine site.

9 Search for Common Ground, through the State Department Bureau of Democracy, Human Rights and Labor (DRL) project funded to Pact is developing communication with 4 objectives and 11 key messages to support traceability and legitimate mineral supply chains in the Kivus and Rwanda. The plan is to place these messages on the radio. They also developed a comic book that explains the benefits of supporting a legitimate supply chain. The messages and comic book were in French and were not translated into English. PPA members felt that the comic book could be a bit stronger on the following points: how easily the chain can be poisoned by allowing conflict minerals to enter it, the cost difference between traced material and non traced material, and the need for the community to support the chain. A translated version of the objectives and key messages is attached. Take Away 1. Need to start somewhere, small, focused, get all involved on board/aligned, have a consistent communication/message, build political will, demonstrate benefits, with the hope that it will grow. XIV. Commission de Suivi (Follow-through) in Goma at Governor s Office John Kanyoni read from a report of the Commission regarding the Commission s observations, challenges and recommendations (French version is being translated to share with PPA). Here are the recommendations: Facilitate mining title holders conflict resolution through agreements and MOU s validated at provincial and national levels; Publish mining site validation reports; Begin tagging minerals in Rubaya as soon as possible; Organize a mine validation inspection in Iteboro, since it may be more secure than the rest of Walikale Territory; Work out assessment and audit protocol needs; Assure desire of Commission to get North Kivu minerals to comply with OECD, ICGLR and Dodd- Frank, and stated the steering committee members are meeting weekly; Recent security incidents in Walikale confirm that minerals cannot be sourced from there at this time. PPA comments: End users and smelters need credible, reliable, sustainable supply chains that are following the due diligence guidance of OECD. Take Away 1. North Kivu appears to be trying to create the necessary political will. 2. Issues around the 80 tons of seized minerals returned from Rwanda are a problem, since they undermine the credibility of GDRC. 3. Might want to start with something small here.

10 XV. Visit Nyakabingo Mine, Rwanda Discussion Points This mine was the first site to establish the itsci system in either Rwanda or the DRC. Due to delayed travel times, we only visited the stores area. Given what was observed and the discussion, the PPA may want to have an interest in looking at a different traceability system for mines in non-conflict areas and where companies have greater control and management systems as these mines tend to be more tightly controlled, such as semi-mechanized or small-scale industrial. Take Away 1. Mines that are controlled by a single mine operator may want to look at a different electronic traceability system that would provide better quality data in a more timely manner, reduce the labor costs of the paper and pen system of itsci currently, and even consider not necessarily requiring bag-level control. XVI. Mining Sector informal meeting in Kigali Discussion Points The US Embassy set up a meeting with three mining/trading companies to discuss issues around the minerals trade in Rwanda. The discussion centered on looking at ways to minimize the burden and cost of traceability schemes in non-conflict countries. There was also discussion around the reports of smuggling of minerals through Rwanda. Take Away 1. Need to evaluate other traceability programs or look at improving existing systems. 2. The degree and methods of potential smuggling are not easy to determine. February 8 th XVI. Visit Rutongo Mine, Rwanda Discussion Points Reviewed the pilot Met Trak system that Rutongo is piloting. It is a materials tracking software that uses radio frequency identification (RFID) tags to trace the minerals through the mine site processes from the mine through processing to final shipping. Take Away 1. The Met Trak system replaces part of the data management and input system currently used in itsci, but is entirely compatible with the overall itsci traceability system.

11 2. Need to evaluate other traceability programs or look at improving existing systems. 3. There appears to be an opportunity to enhance existing traceability systems to improve data management and provide close to real-time data to the various data systems being established.. Potential Projects 1. Katanga a. Electronic traceability to lower costs, improve accessibility and accuracy of data. b. Support for a light validation process that can address the credibility of conflict-free mining in Katanga and bring Katanga into the GDRC validation terms of reference. 2. Maniema The idea would be to prove that conflict-free sourcing can be done in DRC in addition to Katanga, so that the Kivus can have good models to look to. a. Capacity building to get traceability started, b. Validation to confirm assertion that it is basically conflict-free. 3. South Kivu a. Re-establish provincial steering committee, b. consider a Solutions for Hope type adoption of the Nyabibwe-Bukavu axis. c. As the national Mines Ministry under Promines coordination/management targets other areas of South Kivu, consider support and adoption. d. Support for closed-pipe pilots. 4. North Kivu a. Field trip to Katanga to share successes and show political/economic actors that it could be in their best interest to unite around a conflict-free chain. b. It appears that resources should be adequate to finance traceability, and community support around Rubaya. The PPA could consider other sites within Masisi, and to monitor the security situation in Walikale to see if support for the two CdN there could be operationalized over time. 5. Gold Gold is a major gap, in that armed groups are still largely selling gold, there is reported to be significant migration of 3T miners and traders into gold, and the trade is unregistered. This could also be an area to start demonstration projects, possibly to register miners and support cooperatives, and or help with alternative livelihoods projects for miners in areas adjacent to industrial concessions. a. Consider matching support to Banro s efforts to resettle artisan gold miners at Namoya, on South Kivu/Maniema border. Since the PPA tour it has been revealed that there may be other international gold industrial start-up s in the region and this could be explored

12 as well. Potential leveraging with PROMINES resources could be explored, along with the upstream actors contribution to generate further resources. b. Assess legitimate artisanal gold mining zones, support cooperative and semi-artisanal organizational and technical training. Solutions for Hope Review Prior to the PPA review in the Kivu s and Rwanda, several members of the delegation also participated in a review of the Solutions for Hope (SfH) project in the Katanga province. The SfH project is a tightly controlled closed pipe tantalum supply chain that has been operational since July The purpose of the review was to determine if the SfH pilot process was reliable, sustainable and expandable. Thus far the SfH has been successful. The success has been attributed to several factors including the following: 1. Political will exists in the Katanga Province; 2. MMR, the mine concession holder, has invested in the local community and for long term; 3. There are a limited number of actors in the supply chain; 4. Significant engagement with the local stakeholders at the territorial and provincial level has occurred; 5. The program uses the itsci scheme, has BGR baseline assessment and participates in the OECD Due Diligence Implementation; and 6. Katanga is a relatively low-conflict province. There are several elements of the SfH program that can be shared and leveraged by others in the region that are implementing conflict free sources from the region. For more info on the SfH please visit the web site at

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14 PPA Governing Committee members Summary Trip Report Feb 4-8 th, 2012-Mike Loch, Jay Celorie, Sasha Lezhnev, Fidel Bafilemba, Richard Robinson PPATrip Photos Pact providing security briefing at hotel in Bukavu

15 1. Mugogo Gold Trading Center

16 2. Mugogo Gold Trading Center

17 3. Mugogo Gold Trading Center

18 4. Mugogo Gold Trading Center

19 5. Gold negotiant demonstrating weighting of gold

20 6. Lubona Village and Chien Mechant (Mean Dog) Mine, PPA Delegation overview of mine operations

21 7. Lubona Village and Chien Mechant (Mean Dog) Mine, PPA Delegation overview of mine operations

22 8. Lubona Village and Chien Mechant (Mean Dog) Mine, Gold miners

23 9. Lubona Village and Chien Mechant (Mean Dog) Mine, Gold miners

24 10. Lubona Village and Chien Mechant (Mean Dog) Mine, Gold miners exiting shaft

25 11. Lubona Village and Chien Mechant (Mean Dog) Mine, Gold miner

26 12. Lubona Village and Chien Mechant (Mean Dog) Mine, Washing and Trading center

27 . 13. Lubona Village and Chien Mechant (Mean Dog) Mine, Trading center

28 14. Lubona Village and Chien Mechant (Mean Dog) Mine, washing area and trading center

29 15. Lubona Village and Chien Mechant (Mean Dog) Mine, Village children

30 16. Lubona Village and Chien Mechant (Mean Dog) Mine, Local School

31 17. Visit to Nyabibwe mine, tin miner

32 18. Visit to Nyabibwe mine, washing area

33 19. Visit to Nyabibwe Mine, washing area and trading center

34 20. Sake Police Station outside Goma, truck with suspected illegal minerals

35 21. Rutungo mine, Rwanda, itsci tags and paperwork

36 22. Rutungo mine Rwanda, Met Trak review

37 23. Rutungo Mine Rwanda, Met Trak review

38 1. Aerial of Luba Mine, Katanga Solutions for Hope Mission Photos

39 2. Luba mine local Chief and MMR representative

40 3. Luba mine, Katanga

41 4. Aerial of Mai Baridi Village

42 5. Semimechanised operations at Mai Baridi mine, Katanga

43 6. Mining operations at Mai Baridi

44 7. Sluicing operations at Mai Baridi

45 8. Tagged material from SfH mines at MMR warehouse in Kalemie

46 9. MMR warehouse in Kalemie

47 10. Kalemie territory comité de suivi and SfH delegation meeting

48 11. Katange comité de pilotage and SfH Delegation meeting