Conflict over conflict metals

Much has been said of the massive scope of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Lisa Reisman, managing editor of MetalMiner.com, sees opportunity in the controversial provisions governing conflict minerals. In this interview with The Metals Report, Reisman discusses how companies are dealing with the new requirements and names companies closest to production in the crucial tantalum, tungsten and tin space.

The Metals Report: Lisa, how will the Dodd-Frank Wall Street Reform and Consumer Protection Act affect industrial users of metals like tantalum, tin and tungsten?

Lisa Reisman: The Securities and Exchange Commission (SEC) adopted a rule mandated by the Dodd-Frank Act that requires companies to publicly disclose if they use "conflict minerals" that originated in the Democratic Republic of Congo (DRC) or a neighboring region.

It's a very broad-brush piece of legislation impacting about 6,000 manufacturers and tens of thousands of their suppliers.

TMR: I understand it gets really complicated on a number of levels. Certain metals mined in certain parts of the DRC are OK, but not in other parts of the DRC. Questions have arisen as to whether the SEC is the right agency to be implementing this sort of restriction and legislation.

LR: You're correct: It is not banning these minerals from all of the DRC but from within certain regions. The problem with a rule like that is that its implementation is typically more of a kneejerk reaction.

We've already seen companies saying that they are not sourcing any materials at all from the DRC—period—even those that are coming from conflict-free sources within the DRC and neighboring regions. Many manufacturers are trying to make sure that they are completely disassociated with the entire area.

Hopefully, companies will begin implementing conflict-mineral compliance programs as an alternative. But there's even some controversy about what kind of report needs to be submitted to the SEC.

Some legal challenges have been mounted over if the SEC even has the right to regulate this kind of thing because it's really about human rights as opposed to shareholder value.

TMR: It seems as if this legislation has enough holes to drive a truck through.

LR: I'd agree. A lot of questions came up before the rule was even published formally. Steel mills that basically take scrap were wondering how they are ever going to find out whether a washing machine manufactured in 1955 has conflict minerals in it. That is impossible to figure out. Some of the issues have bordered on the absurd.

TMR: When is that compliance deadline?

LR: Publicly traded companies have to file the first report in May 2014. Despite the legal challenge to the law, most companies are preparing for the worst, even though it's still possible for the whole regulation to be struck down.

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