Due diligence report 2020
JIANGXI TUOHONG NEW MATERIAL CO.,LTD
DUE DELIGENCE REPORT
1. COMPANY INFORMATION (ALL SOURCES)
Jiangxi THXC Material Co., Ltd. (THXC for short) was established in 2011 with a registered capital of 55,002,300 yuan. It is a holding subsidiary of Jiangxi Guotai Group Co., Ltd. (stock code: 603977), a Shanghai stock exchange listed company under the Jiangxi Provincial SASAC (stock code: 603977), with CID number It is CID002842. Company address: No. 3, Chunyi Road, Economic Development Zone, Yichun City, Zip Code: 336000, Tel: 0086-795-3259660. The company is committed to the production of tantalum niobium oxide and potassium fluorotantalate. The main products are potassium fluorotantalate, niobium oxide and tantalum oxide. THXC is fully committed to avoiding the use of conflicting materials. We do not forget our original intention. While providing customers with satisfactory products, we have formulated our own responsible procurement and supply chain policy. We are committed to bear the corresponding social responsibilities and strictly abide by the OECD guidelines and Relevant laws and regulations.
Processing raw materials: tantalum-niobium ore, tantalum metal material and tantalum-niobium scrap
The time period covered by this report: 23 December 2016 solstice 20 December 2020
The responsible supply chain policy has been reviewed and approved by the senior management, and the management is committed to supporting the implementation of this policy. At the same time, it is widely disseminated to relevant stakeholders (suppliers, customers, employees, etc.) and published on the company website:
http://www.74mao.cn/English/.
2. RMAP ASSESSMENT SUMMARY (ALL SOURCES)
As a responsible company, THXC has been actively supporting and participating in the annual review of RMAP. From 2015 to 2019, THXC has undergone 3 audits. The last time it passed the audit was December 23, 2016. According to the audit, the RMI Audit Committee (ARC) decided that Jiangxi THXC Materials Co., Ltd. complies with (2017) Tantalum Review the manual. The validity period is valid within three years from the date of decision, that is, the validity period is from December 23, 2016 to December 23, 2019; due to the 2019 new crown virus incident, our company originally planned to review on December 23, 2019. No postponement until June 4, 2020, the company is in a state of active rectification. In the RMI system, THXC is still in the status of a compliant smelter, and the due diligence report is published on the company’s website at http://www.74mao.cn/English/.
3. THE COMPANY'S SUPPLY CHAIN POLICY (ALL SOURCES)
In order to avoid the use of conflict minerals that directly or indirectly fund or benefit armed groups and/or conflict minerals that involve other serious human rights violations in high-risk and conflict-affected areas, the company has formulated its own supply chain policy , This supply chain policy is in full compliance with the third edition of the OECD Guidelines for Responsible Supply Chain Due Diligence (OECD Guidelines) for minerals from conflict-affected and high-risk areas. It covers all the risks identified in Appendix II of the OECD Guidelines and is applicable worldwide. The company promises to deal with any Appendix II risks immediately upon discovery. This policy has been reviewed and approved by the senior management, and the management is committed to supporting the implementation of this policy. This policy has been widely disseminated to relevant stakeholders (suppliers, customers, employees, etc.) and can be viewed on the company website http://www.74mao.cn/English/.
4. COMPANY MANAGEMENT SYSTEM (ALL SOURCES)
THXC has established a strict responsible mineral supply chain management system, and formulated a series of integrated supply chain management systems. Through the following measures and procurement and never use procedures that are affected by conflict areas, raw materials conflict and prevent any conflict between unknown materials and raw materials Enter the confession chain to prevent mineral exploration and trade from becoming a source of conflict, human rights violations and insecurity. THXC strictly abides by its commitments in supply chain policy, and has established internal due diligence procedures in the following areas:
——THXC issued the "RMI Internal Control System Operation Management Measures", appointing the general manager to supervise the design and implementation of the due diligence plan and risk management, and coordinate the relevant departments (including the operation management department, the quality assurance department, the finance department, the production unit and the Warehouse) work to ensure that all departments fulfill their duties, perform responsible mineral supply chain management and report any warning signs and potential risks found.
——THXC conducts due diligence management system training for key personnel of all relevant departments every year in accordance with the requirements of responsible mineral supply chain management. If the plan is updated, the company will carry out additional training as needed.
A. Internal control system
-THXC has updated its due diligence management system to align it with the OECD guidelines and RMAP.
——THXC company has communicated the latest supply chain policy and procurement requirements to all the identified upstream suppliers.
——Open and transparent procurement policy
1) The raw material procurement statement has been posted on THXC's website, so that every supplier has a clear understanding of our procurement policy.
2) Distributed the "Responsible Mineral Supply Chain Management System" and "Management Regulations on Purchasing Tantalum Raw Materials" to various internal departments of the enterprise, so that every employee is aware of and implements them as required.
——Control procedures for raw material procurement
THXC has formulated the "Supplier Management Regulations", "Management Regulations on the Traceability of the Origin of Tantalum-containing Raw Materials and Products", "Management Regulations on Tantalum-Niobium Raw Material Batch Numbers", "Management Regulations on the Transportation of Tantalum-Niobium Raw Materials", and "Management Regulations on Inspection and Acceptance of Tantalum-Niobium Mine ”, “Raw Material Supply Chain Risk Assessment Management Regulations”, “List of Applicable Laws and Regulations”, “Supplier’s Anti-Corruption and Anti-Bribery Commitment” and “KYC Understanding Supplier Management Regulations” to limit and prevent any “conflict "Raw materials" and unknown raw materials enter THXC's supply chain.
——THXC conducts due diligence on suppliers and maintains continuity. In accordance with the OECD guidelines and the audit requirements of the Responsible Minerals Initiative, it conducts due diligence on raw material suppliers every year, and conducts due diligence on suppliers’ legality, quality assurance level and complexity Re-examination and verification shall serve as the basis for the acceptance or cancellation of its supplier qualifications. While maintaining communication with downstream customers, THXC provides downstream customers with CMRT forms as required by RBA to ensure due diligence in the supply chain.
——THXC has established a risk assessment committee under the RMI system operation management leading group, and has appointed the general manager, purchaser, and RMI responsible commissioner to evaluate all suppliers and raw material-related information, and the rationality of the source of raw materials ( Such as: production area, production capacity, type characteristics, etc.) to determine the origin of the investigation, transportation process, and suppliers in accordance with the warning signals, and the warning signals are found, the warning signals are investigated and the handling opinions are issued
——The company has established procedures to support the Extractive Industries and Transparency Initiative (EITI) and made a public statement on the company’s website.
——THXC has officially become a member of the International Tantalum and Niobium Research Center (TIC) in 2020, and will follow TIC’s new reports in real time to understand the new policies; meanwhile, we have contacted ITSCI in December 2020 to apply for joining the upstream The mechanism to ensure the legal compliance of the supply chain is currently undergoing procedures.
——Actively fulfill social responsibilities and establish a compliant corporate image. Operation and social responsibility. The company has always closely integrated the economic development of the company and fulfilled its social responsibilities, ensuring that technological innovation, safe production, employee rights, environmental protection and energy conservation are passed under the premise of laws and laws. Reduce emissions to achieve ethical management and other activities, and fully fulfill social responsibilities.
——We will strictly abide by the international transportation standards for 7 types of substances, and we will ensure that the handling, storage and transportation of hazardous substances comply with the requirements of relevant laws and regulations. We guarantee that there will be no leakage during transportation and production, thereby preventing adverse effects on the environment and humans
——THXC has established RMI’s appeal mechanism, established contact channels, and collected appeal information from relevant parties, including appeal email addresses, telephone numbers, and responsible persons, and accepted supervision from all walks of life. During the time covered by this report, the company did not receive relevant parties. (Affected persons or reporters) appeals.
——Train employees in a variety of ways. THXC trains through centralized training, OA promotion, conference promotion, display board promotion, RMI official website training academy video (WeChat promotion), etc. All employees, including the general manager, should fully understand them OECD guidelines and RMAP verification requirements.
B. Record retention system: The company requires all records related to responsible mineral supply chain management to be kept for at least five years, and requires correct use and safe storage in the company database.
5. RISK IDENTIFICATION (ALL SOURCES)
First, the company has a set of CAHRAS identification and control procedures, including resources used, applicable standards, and review frequency. The company's raw material procurement risk assessment committee has conducted risk identification of all involved tantalum-containing raw material procurement in accordance with the provisions of the high-risk identification procedure, and recorded the identification results. CAHRA has established the "High/Risk Area List" and "Qualified Supplier List". The relevant sanctions lists were reviewed for all individual suppliers and companies. During the reporting period, no individual supplier and company sanctions were found.
Second, understand the supplier process. The company has conducted basic due diligence on all transaction parties. The company has set up a set of KYC process to collect and update the information of the transaction party (supplier). The content includes at least the supply Supplier’s business license, shareholder identity information, supplier’s legal status, scope of goods and origin of goods, etc., strictly collect relevant supporting documents; require all suppliers to complete and return KYC related forms at the same time that the company establishes a difference audit In the process, if any inconsistencies, errors or incomplete information are found, the company will ask the other party to provide correct, consistent and complete supporting documents again, or it will not be included in the list of qualified suppliers. The KYC of each supply chain purchased by the company has been carefully evaluated. During the reporting period, it was found that the KYC questionnaires of 3 suppliers were incomplete. Our company has implemented the difference review in a timely manner, and has obtained relevant KYC supporting documents since then. All of our suppliers have filled in and returned this form, and the discrepancies were resolved in time.
Third, identify and evaluate supply chain risks. The company has set up the "Supply Chain Risk Identification and Evaluation Procedure" for supply chain risk identification and evaluation to analyze the potential risks of all suppliers and their raw materials to ensure that they will not be triggered The warning signals mentioned in the OECD guidelines on tin, tantalum and tungsten supplements; a difference audit procedure was established to conduct a difference review of each supplier and its raw materials. During the reporting period, no relevant differences related to raw materials were found. After identifying and assessing the risks of all suppliers, the company issued a corresponding risk assessment report. After all the above actions are completed, our company will proceed to the next step of the procurement process.
6. RISK MANAGEMENT (HIGH-RISK AREAS)
Based on the above risk identification methods, an enhanced due diligence plan was carried out for raw materials and supply chains identified as "high risk". This includes: 1 assessing the activities and relationships of upstream suppliers; 2 identifying locations and quantitative conditions for mining, trading, processing and export of ore; 3 Conduct field risk assessment as necessary. In this year's procurement process, many suppliers recommended raw materials from high-risk areas to our company. However, considering that we do not have the ability to conduct enhanced due diligence in some high-risk areas, our company rejected the suppliers and not deal with them.
Risk identification, assessment and management measures were carried out for all high-risk countries (Nigeria / India) involved in purchasing raw materials in the company's supply chain during the reporting period, as follows:
According to our CAHRAS procedure currently, Nigeria is determined as high-risk country. During the period of report, our company has two transactions history with this country, one in 2017 and the other in 2019, In 2020, our company reevaluated the risk of this supplier according to the new inspection standards implemented of June 2018, found that the procurement has triggered warning signals (from high-risk areas), so that, our company conducted enhanced due diligence with this supplier of requirement. Then this two suppliers disappeared in our procurement supply chain in 2020, also disappeared in our suppliers list. As the same time, we never purchased any raw materials from Nigeria in 2020. According to the requirements of RMI management system of our company, enhanced due diligence must be carried out when purchasing from high-risk areas. Due to the limited ability of enhanced due diligence, our company will not purchase raw materials from Nigerian.
According to our new CAHRAS procedure in 2020, India was identified as high-risk country. During the period of report, there were two transactions history in our supply chain, one in 2016 and the other in 2017. In 2020, our company reevaluated the risk of the supplier from the new audit standards of June 2018, found that the procurement had triggered warning signals (from high-risk areas) , we issued the risk assessment report and reported to the general manager immediately. Due to this situation, our company must conduct enhanced due diligence with the supplier as required. This customer is the smelter with the RMI audit, our company has obtained the RMI audit certificate of this smelter and other relevant certification documents. Since then, our company never purchased any raw materials from any other customers in India. If there is a demand for raw material processing in the future, our company will only process the raw materials from smelter with the RMI audit. According to the requirements of RMI management system of our company, enhanced due diligence must be carried out when purchasing from high-risk areas, due to our ability of due diligence currently, our company don't have plan to purchase raw materials from Indian.
Our company also made relevant due diligence plans for procurement from high-risk areas, trained all unqualified and qualified suppliers in OECD guidelines, sent documents on responsible procurement to suppliers, and enhanced due diligence for procurement in all high-risk areas. Our company will not conduct procurement in high-risk areas until we have the ability to do enhanced due diligence At the same time, with the attitude of being responsible for due diligence, our company requires suppliers in low-risk areas to provide retroactive documents as far as possible. For each transaction, our company requires suppliers to provide origin information and retroactive documents, so that we can acknowledge the real transaction source, legal transportation route, the name and location of direct suppliers and the address of the mine.
The company adopts the following plan to assess its risks. Widely participate in the recognized upstream guarantee mechanism-iTSCi marking and bagging system. Our company applied to join iTSCi in December 2020 and complete the application process as soon as possible. For tantalum raw materials from high-risk areas, the company has conducted enhanced due diligence without notice, ensuring that only raw materials certified by the iTSCi marking and bagging system are purchased from iTSCi members. For each high-risk procurement transaction, iTSCi provides the following documents:
1) Event summary report 2) Mine survey recommendations, including a list of mines with potential risks (it is recommended to carry out enhanced due diligence and risk assessment from companies purchasing from these mines) 3) National and regional monthly reports to review general on-site Situation 4) Data summary and other reports THXC focuses on learning other iTSCi reports and documents, such as accident reports, management evaluation reports, company audit reports, etc. The company conducted further due diligence and reviewed relevant documents from upstream plans against information in the public domain and actual transaction information. At the same time, regardless of whether it is high-risk or low-risk, THXC requires all suppliers to provide the following documents and information, which is related to each transaction: Supplier’s due diligence plan, including KYC questionnaire, company registration certificate or company business license , Mining license (if it is a mining company). Pay close attention to governance information related to local company operations/national background. Collect the supply chain custody documents of each transaction to ensure that the source of the transaction and the transportation route are understood.
2) In short, our company will conduct due diligence in strict accordance with the requirements of the OECD Organization for Economic Cooperation and Development in the future work to ensure that the company's due diligence system can fully identify and fully manage the model supply chain in Appendix 2 of the Economic Organization Guidelines Policy-related risks, insist on responsible procurement.
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