And, now, here we are at the end of May. Time continues to fly by so speedily. The weather in New York has not quite broken yet for summer, but we have had a couple of nicely hot and humid days. You know, the usual: Nearly 90°F and 90% humidity. Suit weather it certainly is not.
To be safe, I’m not going to touch upon Mr Trump and his tariffs on both steel and aluminium. That is, I believe, better left to the experts with comments from someone who is not so virulently opposed, ab initio, to the whole concept of tariffs as a negotiating “weapon”. We shall all just have to see what happens. I only feel potential sincere pity for bourbon drinkers in the UK and Europe.
So, on Friday the other week (May 18th), the U.S. finalised (and published in the Federal Register) its list of “critical” minerals. It should, perhaps, come as little surprise that, despite a number of comments suggesting otherwise, there were neither any additions nor deletions from the draft list.
The Department of the Interior (DoI) received 453 comments, including 20 from industry organisations and 18 from mining companies. Of the 147 requests to add a total of 13 minerals to the list, each of copper, gold, lead, moly, nickel, silver and zinc received more than 10 requests. 183 requests were made that uranium be deleted.
Several other points in the Notice in the Federal Register1 are, I think, worth noting (I quote verbatim). First: “This list of critical minerals, while ‘‘final,’’ is not a permanent list, but will be dynamic and updated periodically to reflect current data on supply, demand, and concentration of production, as well as current policy priorities.” It will be interesting to see both how often this happens and what, if anything, triggers such updates.
Second (for those interested in the defence aspect of the exercise): “This final list is not intended to replace those related terms and definitions for minerals or materials that are deemed strategic, critical or otherwise important (e.g., National Defense Stockpile).” This begs the question, then, of just where they actually stand next to such “minerals or materials.” But perhaps this is intentional.
Third, perhaps somewhat belatedly (but of particular importance), the byproduct nature of some of these minerals receives specific mention: “Of the 35 minerals deemed critical, 12 are byproducts. Therefore, strategies to increase the domestic supply of these commodities necessarily consider the mining and processing of the host materials because enhanced recovery of byproducts alone may be insufficient to meet U.S. consumption.”
Finally, the Notice informs us that: “This final list will serve as the Department of Commerce’s initial focus as it develops its report to comply with Section 4 of Executive Order 13817.”… “With this basis, the finalized list of critical minerals provides a starting point for developing a new Federal strategy and a continuing process to strengthen supply chains.”
Providing further gloss, a contemporaneous press release 2 from the US Geological Survey states that the aforementioned “…multi-agency strategy” is due in August. So it looks as if we’ll have to wait ‘til later in the summer to see what the administration is actually going to do with the list. On the basis of historical evidence, I truly don’t believe we should hold our breath. But, you never know, we may be pleasantly surprised…! I shall update members just as soon as the strategy has been published.
Let’s move now from critical minerals to conflict minerals. Since I last wrote about conflict minerals back on May 25th last year, I think a very quick update on what’s been happening here in the US may be in order. (As a further indication of just how time flies, can you countenance that the 2017 Reporting Year will be the fifth year that companies will be required to file Form SDs with the SEC?)
As you may remember, on April 7th last year, the SEC’s Division of Corporation Finance released a statement on the conflict minerals “Rule”, indicating that its staff would not recommend enforcement action if companies only filed a Form SD and not an actual Conflict Minerals Report. This, as can be imagined, led to an immediate political kerfuffle amongst the SEC commissioners – a number of whom are, necessarily, Democrats. It also led to a deal of speculation about whether or not the Rule might either be repealed or the SEC’s ability to enforce it defunded.
Fast forward a year and precisely nothing has actually happened. As law firm Ropes & Gray LLP here in New York so nicely puts it: “At the present time, there does not appear sufficient political momentum behind revision, waiver, or repeal of the Rule, so it is widely viewed as unlikely.”3
In its recent update on conflict minerals disclosure and compliance,4 Ropes & Gray goes on to provide some interesting figures about reporting. In 2016, the fourth reporting year, the numbers for those companies only filing a Form SD and those filing both a Form SD and a Conflict Minerals Report exhibit remained pretty consistent with the previous, 2015, reporting year: 1,153 – only a Form SD (2015: 1,220) and 79% both (2015: 81%). So, not much change there. 5 It will, therefore, be interesting to see the figures for 2017. My surmise is that they will continue to remain pretty consistent.
The update goes into quite some detail about smelters and refiners, and traceability and reporting. This is well worth reading. I should, however, like to end this month’s letter by quoting verbatim (at least I am, then, sure to be accurate) what the firm has to say about the shift in view that has taken place in companies obliged to report on conflict minerals. It is both interesting and, maybe, surprising.
“When the Rule first took effect, the prevailing view at many companies was to treat the filing as a regulatory disclosure and include only the minimum information required by the Rule. The prevailing view now is to treat filings under the Rule like other corporate social responsibility disclosures. Accordingly, a large number of companies are going well beyond the minimum requirements of the Rule in their filings, to ensure that they are receiving credit from NGOs and other stakeholder constituencies for the efforts that they are making to trace the source of the 3TG 6 in their supply chains and, more generally, to source 3TG from sources that do not support conflict.”7
And on that somewhat encouraging note and with best wishes from New York, I shall bid all members a very happy June.
Tom Butcher, May 31st, 2018 ©2018 Tom Butcher
Tom Butcher is an Associate Director at Van Eck Associates Corporation (“VanEck”). The views and opinions expressed herein are the personal views of Tom Butcher are not presented by or associated with VanEck or its affiliated entities.
1 Federal Register / Vol. 83, No. 97 / Friday, May 18, 2018 / Notices: https://www.gpo.gov/fdsys/pkg/FR-2018-05-18/pdf/2018-10667.pdf
2 US Geological Survey: Interior Releases 2018’s Final List of 35 Minerals Deemed Critical to U.S. National Security and the Economy, May 18, 2018, https://www.usgs.gov/news/interior-releases-2018-s-final-list-35-minerals-deemed-critical-us-national-security-and
3 Ropes & Gray LLP: Market Trends 2018/18: Conflict Minerals Disclosure and Compliance, https://www.ropesgray.com/-/media/Files/articles/2018/05/20180524_CSR_Article.pdf?la=en&hash=FA3CE5B31A5CC9EA4B33762AABF3B8A6E16369DB
6 3TG: 1) cassiterite, columbite-tantalite (coltan), and wolframite; 2) their derivatives tin, tantalum, and tungsten: and 3) gold.
7 Ropes & Gray LLP: Market Trends 2018/18: Conflict Minerals Disclosure and Compliance, https://www.ropesgray.com/-/media/Files/articles/2018/05/20180524_CSR_Article.pdf?la=en&hash=FA3CE5B31A5CC9EA4B33762AABF3B8A6E16369DB