Financial regulation bill hits Congo mineral trade

* U.S. reform bill aims to stop conflict mineral trade

* Electronics industry unable to ensure clean supply chain

* Western supplier may soon fill void

By Chris Kelly

NEW YORK, July 15 (BestGrowthStock) – Buried inside the U.S.
financial reform bill passed on Thursday by the U.S. Senate is
a little noticed amendment aimed at regulating a market far
from Wall Street — international trade in rare earth minerals
like tantalum from the Democratic Republic of Congo.

The provision could affect stock market favorites like
Hewlett-Packard (HPQ.N: ), Apple Inc (Read more about Apple stock future.) (AAPL.O: ) and Research in
Motion Ltd (RIMM.O: ), which rely on these metals to make their
highly popular electronic gadgets and laptops.

So-called conflict minerals from DRC, still torn by a
1998-2003 war and battling rebels across its territory, are
used in nearly every device in the modern household.

The amendment requires companies that engage in the trade
and use these minerals to file an annual report with the
Securities and Exchange Commission to declare if they are
sourcing their supply chain from the DRC, or an adjoining
country.

This leaves the high-tech companies that manufacture these
products in a bind. While they support efforts to regulate the
trade in these conflict minerals, they have few alternative
sources at the moment, other than Congo.

“From an investment perspective, we have been highlighting
this issue as a critical risk-management issue for companies.
Traceability in the supply chain has gone from a nice to have,
to a must have,” said Lauren Compere, managing director of
Boston Common Asset Management.

LIMITED COLTAN, ENDLESS WAR

Tantalum, or coltan, as it is commonly referred to in
Africa, is precious to the global electronics industry due to
its unique ability to store and release an electrical charge —
essential for the power-storing processes of iPods and iPads,
BlackBerry smart phones and laptop computers.

Stopping the use of these metals mainly sourced from the
DRC is becoming the focus of a worldwide effort to end one of
the deadliest conflicts of the past half century.

As consumer demand around the world for these products
increases, so, too, does the violence and human suffering.

“As of today, it is very difficult to certify our supply
chain is 100 percent free of conflict minerals, but the efforts
that we and our industry are taking are driving us toward that
certainty,” said Zoe McMahon, manager of supply chain social
and environmental responsibility at Hewlett-Packard.

Hewlett-Packard, Apple and Research in Motion all told
Reuters that they supported regulation in an effort to
stimulate demand for supply chains free of conflict minerals.

Since 1998, Congo’s war has killed nearly 6 million people
— the highest war-related death toll since World War Two. The
trade in these conflict minerals has only amplified the human
suffering and bloodshed.

With its vast deposits of gold, tin, tantalum and tungsten,
the country’s mining industry has become a weapon of war for a
number of armed groups, which use sexual brutality and killing
to exploit the mineral wealth.

The war minerals issue is reminiscent of the “blood
diamond” conflict of the 1990s, when illicit trade in diamonds
helped finance devastating civil wars in Angola, Liberia and
Sierra Leone.

The outcry against blood diamonds led to the creation in
2003 of the Kimberley Process Certification Scheme — a method
designed to certify and track diamonds to ensure they come from
conflict-free zones.

The Congo clause is one of the more unique provisions
included in the 2,300-page financial regulation bill.

The amendment, introduced by U.S. Senator Sam Brownback of
Kansas, is the first official step taken by the U.S. government
to stop the flow of minerals contributing to the violence and
human suffering in the Congo.

“The legislation is not a panacea, but it is the first step
in a process that will eventually cut off the flow of gasoline
on Congo’s smoldering fire,” said John Prendergast, co-founder
of the Enough Project, a nongovernmental organization aimed at
ending genocide and crimes against humanity.

IMPOSSIBLE TO TRACK

In the aftermath of the global economic downturn in 2008,
many companies were forced to suspend production, as consumer
demand dried up and supplies mounted and prices fell nearly 25
percent.

But European spot prices of tantalite (TANT-LON: ), which is
used to make tantalum metal, recovered by mid 2010 and jumped
more than 25 percent in June alone to a 9-year high at $60/$70
a lb.

Australia’s Talison Tantalum, which once provided about a
third of the world’s tantalum supply, shut its Wodgina mine in
late 2008, but is now considering a restart as early as next
year amid expectations of a strong demand recovery.
[ID:nLDE6530TW]

Another alternative source was Commerce Resource Corp’s
(CCE.V: ) Blue River Project in British Colombia, which is
looking to produce up to a million pounds of tantalum per year
by late 2012.

But, for now, conflict minerals appear likely to continue
to flow freely, and largely unnoticed.

“Unless there is a fundamental change in the supply base,
conflict tantalum will probably still get into the global
market for the foreseeable future,” said Patrick Stratton,
North American manager at Roskill Information Services Ltd.

“I doubt that any retailer would sell electronic goods in
the full knowledge that they contain conflict minerals. But
they don’t know and, at present, cannot know,” he said.
(Editing by Alden Bentley)

Financial regulation bill hits Congo mineral trade