Due diligence report 2022
JIANGXI TUO HONG NEW MATERIAL CO.,LTD
I. Company Information (from all sources)
Jiangxi THXC Material Co., LTD. (hereinafter referred to as THXC) was established in 2011 with a registered capital of RMB 550.023 million. It is a holding subsidiary of Jiangxi Guotai Group Co., LTD., a company listed on the main board of Shanghai Stock Market under the State-owned Assets Supervision and Administration Commission of Jiangxi Province (stock code: 603977), and its CID number is CID002842. Company Address: No. 3, Chunyi Road, Yichun Economic Development Zone, Postcode: 336000, Tel :0086-795-3259660. The company is committed to the production of tantalum niobium oxide and potassium tantalum fluoride, the main products: potassium tantalum fluoride, niobium oxide and tantalum oxide. THXC is fully committed to avoiding the use of conflicting materials. We remain true to our original purpose. While providing customers with satisfactory products, we have formulated our own responsible procurement supply chain policy. We promise to shoulder corresponding social responsibilities and strictly abide by OECD guidelines and relevant laws and regulations.
Processing raw material: tantalum niobium ore
The Responsible Supply Chain Policy has been reviewed and approved by senior management, and management is committed to supporting the implementation of this policy and disseminating it widely to relevant stakeholders (suppliers, customers, employees, etc.) and publishing it on the company website:
http://www.hmgj28.cn/English/.
Ii. RMAP Evaluation Summary (All sources)
As a responsible company, THXC has been actively supporting and participating in the annual audit of RMAP. From 2015 to 2019, THXC has undergone five audits, the last of which was approved on July 26, 2021. The evaluation period was: May 1, 2020 to June 30, 2021. Based on this audit, the RMI Audit Committee (ARC) determined that THXC was in compliance with the (2017) Tantalum Audit Manual. The validity period shall be valid within one year from the date of decision. The evaluation period is delayed due to the epidemic situation and the transfer of relevant procurement personnel of the company, and our company will actively cooperate with it. THXC in RMI systems to the status of compliance smelter, due diligence report on the company website, web site: http://www.hmgj28.cn/English/.
Iii. Company Supply Chain Policy (all sources)
To avoid the use of conflict minerals that directly or indirectly finance or benefit armed groups and/or are involved in other serious human rights violations in high-risk and conflict-affected areas, the Company has developed its own supply chain policy, This supply chain policy is fully in line with the third edition of the OECD Guidelines for Responsible Supply Chain Due Diligence on ores from conflict-affected and high-risk Regions (OECD Guidelines). It covers all the risks identified in Appendix II of the OECD guidelines and applies globally. The Company may undertake to deal with any Appendix II risks as soon as they are identified. This policy has been reviewed and approved by senior management and management is committed to supporting the implementation of this policy. This policy has been to relevant stakeholders (suppliers, customers, employees, etc.), can be found in the company's web site http://www.hmgj28.cn/English/.
Iv. Company Management System (all sources)
THXC has established a strict responsible mineral supply chain management system and developed a series of integrated supply chain management systems to prevent any conflict between unknown materials and raw materials entering the supply chain through the following measures and procedures of purchasing and never using raw materials affected by conflict areas, so as to prevent mineral exploration and trade from becoming conflicts. Human rights violations and root causes of insecurity. THXC strictly adheres to its commitment to supply chain policy and has developed internal due diligence processes in the following areas:
-- THXC issued RMI Internal Control System Operation Management Measures, appointed the general manager to oversee the design and implementation of the due diligence plan and risk management, and coordinate the work of relevant departments (including Operation Management Department, Quality Assurance Department, Finance department, production unit and warehouse) to ensure that all departments fulfill their duties. Perform responsible mineral supply chain management and report any warning signs and potential risks identified.
THXC conducts a 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 conduct additional training as required.
A. Internal control system
THXC has updated its due diligence management system to align it with OECD guidelines and RMAP.
-- THXC communicated the latest supply chain policy and purchasing requirements to all identified upstream suppliers.
-- Open and transparent procurement policies
1) The raw material Purchasing statement has been posted on THXC's website, so that each supplier clearly understands our purchasing policy.
2) Responsible Mineral Supply Chain Management System and Management Regulations on Procurement of Tantalum Raw Materials were issued to all internal departments of the company to make every employee aware of them and implement them in accordance with the requirements.
-- Control procedure of raw material purchase
THXC has formulated such control procedures as Supplier Management Regulations, Management Regulations on Origin Traceability of Tantalum-containing Raw Materials and Products, Management Regulations on Batch Number of tantalum Niobium Raw Materials, Management Regulations on Transportation of Tantalum Niobium Raw Materials, Management Regulations on Inspection and Acceptance of Tantalum Niobium ore, Management Regulations on Raw Material Supply Chain Risk Assessment, and KYC Management Regulations on Understanding Suppliers, etc Any "conflict materials" and unidentified materials enter THXC's supply chain.
-- THXC conducts due diligence on suppliers on a continuous basis, in accordance with the OECD Guidelines and the audit requirements of the Responsible Minerals Initiative, conducts due diligence on raw material suppliers annually and verifies their legitimacy, quality assurance and compositeness as a basis for acceptance or disqualification. While maintaining communication with downstream customers, THXC provides CMRT forms to downstream customers as required by the RBA to ensure due diligence in the supply chain.
-- THXC has established a risk assessment committee under the leading group of RMI system operation management, and has appointed the general manager, buyer and RMI specialist in charge to evaluate all the information related to suppliers and raw materials, and determine the rationality of raw materials sources (such as origin, production capacity, type characteristics, etc.). Evaluate the origin of the investigation, the transportation process and the supplier according to the warning signal, find the warning signal, investigate the warning signal and give the handling advice
-- The Company has established a program to support the Extractive Industries and Transparency Initiative (EITI), which is publicly stated on the Company's website.
-- In 2020, THXC has officially become a member of the International Tantalum Niobium Research Center (T.I.C.). The new United report, understand the new policy;
The operation and social responsibility company always closely combines the economic development of the enterprise and the fulfillment of social responsibility, to ensure that under the premise of law and law through technological innovation, production safety, employees' rights and interests, environmental protection, energy saving, emission reduction and other activities to achieve ethical management, fully fulfill the social responsibility.
-- We will strictly comply with the international transportation standards of the seven types of substances, and we will ensure that the disposal, storage and transportation of hazardous substances meet the requirements of relevant laws and regulations. We guarantee that there will be no leakage during transportation and production, so as to prevent adverse effects on the environment and human body
-- THXC has established RMI's appeal mechanism, set up contact channels, collected appeal information from relevant parties, including appeal email address, telephone number and responsible person, and accepted supervision from all walks of life. During the period covered by this report, the company has not received any appeal from relevant parties (affected personnel or whistleblowers).
-- Staff training in various ways. THXC conducts intensive training, OA publicity, conference publicity, display board publicity, RMI official website training college video (wechat publicity), etc. All employees, including the general manager, can fully understand the OECD guidelines and RMAP inspection requirements.
B. Record Retention System: The Company requires that all records related to responsible mineral supply chain management be kept for at least five years and that they be properly used and securely stored in the Company database.
V. Risk Identification and Assessment (all sources)
First, identification of CAHRAS tools and standards: The company has a set of CAHRAS identification and control procedures, including resources used, applicable standards and review frequency. The raw material Procurement Risk Assessment committee of the Company has carried out risk identification for all the procurement of tantalum-containing raw materials involved in accordance with the provisions of the high-risk identification procedure, and recorded the identification results. Our company has established the List of High/Low Risk Areas and the List of Qualified Suppliers. At the same time, the relevant sanctions list was reviewed for all individual suppliers and companies, and no sanctions information was found for individual suppliers and companies during the reporting period.
Second, supplier identification: Understand the supplier process. The Company has conducted basic due diligence on all counterparties. The Company has established a Know the Counterparty (KYC) process to collect and update the information of the counterparty (supplier), including at least the business license of the supplier, shareholder identity information, legal status of the supplier, scope of goods and origin of goods, etc. Strictly collect relevant supporting documents; While requiring all suppliers to complete and return KYC related forms, the company has set up a discrepancy review process. If inconsistent, incorrect or incomplete information is found, the company will ask the other side to provide correct, consistent and complete supporting documents again, whether it will not be included in the list of qualified suppliers.
Third, high risk assessment: Identify and assess supply chain risks. The company has set up the Supply Chain Risk Identification and Assessment Procedure to analyze the potential risks of all suppliers and their raw materials, and confirm whether the warning signals mentioned in the OECD Guidelines on tin, tantalum and tungsten are triggered. Set up a variance review procedure. For the differences between individual suppliers and their raw materials, no relevant differences related to raw materials were found during this reporting period. After the risk identification and assessment of all suppliers, the company issued the corresponding risk assessment report.
The company organizes the identification of supply (business) chain risks and forms a report, which is submitted to the general manager for approval and then implemented.
Before signing a contract for each tantalum raw material purchase transaction, risk assessment and confirmation of mineral source countries (regions) should be carried out by using risk assessment tools according to the information and data provided by suppliers, and a report should be formed. For goods with high risks, the actual situation of existing and planned supply chains should be analyzed, including:
- Assess the background of CAHRA;
- Clarify the chain of custody;
Evaluate upstream supplier activities and relationships;
- Identification of the location and qualitative conditions under which ores are mined, traded, treated and exported; .
We compare the actual situation with the risks in the Model supply chain Policy in Appendix II of the OECD Guidelines to assess the existence and severity of risks in the supply chain. Before signing a contract for each tantalum raw material purchase transaction, we use a risk assessment tool based on the information and data provided by suppliers. Carry out risk assessment for countries (regions) from which minerals come and countries (regions) through which minerals come and form an assessment report, which shall be approved and confirmed by the responsible person of the department and filed. If actual and/or potential risks are identified in the supply chain, they should be immediately reported to the responsible mineral supply chain leader and appropriate action taken.
7. Risk management and risk mitigation strategies
Manage risks according to the above risk identification methods and evaluation reports.
- Communicate with suppliers on risk identification and make relevant records.
- Verify the content irregularly through the network or field inspection channels, if any discrepancy is found and the situation will affect the risk
-- Evaluate the result and suspend the cooperation with the supplier. Basis: Re-risk assessment results to determine the suspension or continuation of cooperation with the supplier.
- The supplier shall timely evaluate the change of mine source and transportation route.
- If the supplier's risk level changes after the reassessment, the supplier shall be informed immediately and the cooperation with the supplier shall be suspended until the supplier provides documentation support in accordance with the management requirements.
- The supplier shall timely evaluate the change of mine source and transportation route.
- If the supplier's risk level changes after the reassessment, the supplier shall be informed immediately and the cooperation with the supplier shall be suspended until the supplier provides documentation support in accordance with the management requirements.
- Review and update frequency: in principle, update once a year, including the update of assessment tools and threshold values. In case of significant changes in tools during the update cycle or other information from other channels proves that the risk level of the original source country has changed, this procedure will be updated in time.
Vi. Risk Management (High-risk Areas)
Based on the above risk identification methodology, an enhanced due diligence program was conducted for raw materials and supply chains identified as "high risk". This includes: 1 Assessment of upstream supplier activities and relationships; 2. Identify the location and quantitative conditions of mining, trading, processing and export of ore; 3. Conduct on-site risk assessment as necessary. During the procurement process this year, many suppliers recommended raw materials from high-risk areas to us, but our company rejected them on the spot, not doing business with them, considering that we currently do not have the ability to conduct enhanced due diligence on some high-risk areas.
As for the high-risk procurement in the company's supply chain involving Sierra Leone during the period of this report, our company immediately carried out incremental due diligence. The supplier failed to provide relevant documents as required by our company and failed to mitigate the risks. After comprehensive assessment, our company decided not to purchase raw materials from Sierra Leone.
However, our company has also made the following risk assessment plans for procurement in high-risk areas:
The company adopts the following plan to assess its risk. Actively refer to the widely accepted upstream guarantee mechanism -iTSCi marking and bagging system or BSP, but during the period of this report, our company has not become a member of Itsci, nor has we purchased BSP.
For both high and low risk, THXC requires all suppliers to provide the following documentation information for each transaction: Supplier's due diligence plan, including KYC questionnaire, company registration certificate or company business license, and mining certificate (if mining company). Pay close attention to governance information related to local companies' operations/national context. Collect supply chain of custody documentation for each transaction to ensure that the source and shipping route of the transaction are understood.
In short, our company will conduct due diligence in strict accordance with the requirements of OECD in future work, so as to ensure that the company's due diligence system can fully identify and manage risks related to the model supply chain policy in Appendix II of OECD Guidelines, and adhere to responsible procurement.
Jiangxi Tuohong New Material Co. LTD
May 6, 2022
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