REPORT SUMMARY
Implementing firm RCS Global Ltd Address: 9a Burroughs Gardens, London, NW4 4AU, U. K [email protected]
CONTACT PERSON: Katie Redmond, Program Manager CONTACT TELEPHONE: +49 176 6080 6483
Title of Report Independent Reasonable Assurance Report to Yunnan Copper Corporation Limited
Type of assessment LBMA ISAE 3000 Assurance Assessment
Refiner Yunnan Copper Corporation Limited 1. Headquarter: Lianmeng Road, Panlong Disrict, Kunming, Yunnan Province, P.R. China.
2. Procurement & sales site (Yunnan Copper Corporation Ltd Marketing Company Import & Export Company): Lianmeng Road, Panlong Disrict, Kunming, Yunnan Province, P.R. China.
3. Smelting & refining site (Yunnan Copper Corporation Ltd Southwest Copper Branch, including Rare & Precious Metals Plant): Wangjiaqiao, Wuhua District, Kunming, Yunnan province, P.R. China.
Assessed Timeframe 1 January 2019 – 31 December 2019
1. INTRODUCTION
We were engaged by Yunnan Copper Corporation Limited to provide reasonable assurance on its Refiner’s Compliance Report for the year ended 31 December 2019.
The assurance scope consists of the Refiner’s Compliance Report.
2. RESPONSIBILITIES The Compliance Officer of Yunnan Copper Corporation Limited (“Yunnan Copper” or “The Refiner”) is responsible for the preparation and presentation of the Refiner’s Compliance Report in accordance with the Version 8 of the LBMA Responsible Gold Guidance (RGG) and Version 1 of the LBMA Responsible Silver Guidance (RSG). This responsibility includes establishing appropriate risk management and internal controls from which the reported information is derived. The criteria identified by the Compliance Officer as relevant for demonstrating compliance with the LBMA RGG and RSG are the activities described within the Refiner’s Compliance Report. Our responsibility is to carry out a reasonable assurance engagement in order to express a conclusion based on the work performed. We conducted our assurance engagement in accordance with International Standard on Assurance Engagements ISAE 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information issued by the International Auditing and
Independent Reasonable Assurance Report 2
Assurance Standards Board and the guidance set out in the LBMA Responsible Gold and Silver Programme - Third Party Audit Guidance for ISAE 3000 Auditors (the Audit Guidance).
This report has been prepared for Yunnan Copper for the purpose of assisting the Compliance Officer in determining whether Refiner’s Compliance Report has complied with the Guidance and for no other purpose. Our assurance report is made solely to Yunnan Copper in accordance with the terms of our engagement. We do not accept or assume responsibility to anyone other than Yunnan Copper for our work, or for the conclusions we have reached in the assurance report.
3. INHERENT LIMITATIONS Non-financial information, such as that included in the Refiner’s Compliance Report, is subject to more inherent limitations than financial information, given the more qualitative characteristics of the subject matter and the methods used for determining such information. The methods used by Refiners to comply with the Guidance may differ. It is important to read the Yunnan Copper’s gold and silver supply chain policy available on Yunnan Copper’s website http://www.yunnan- copper.com.
4. INDEPENDENCE AND COMPETENCY STATEMENT In conducting our engagement, we have complied with the applicable requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants.
In conducting our engagement, we confirm that we satisfy the criteria for assurance providers as set out in the Audit Guidance to carry out the assurance engagement.
5. CONCLUSION In our opinion, the Refiner’s Compliance Report for the year ended 31 December 2019, in all material respects, describes fairly the activities undertaken during the year to demonstrate compliance, and management’s overall conclusion contained therein, is in accordance with the requirements of the LBMA Responsible Gold Guidance (RGG) and the LBMA Responsible Silver Guidance (RSG).
Signature Kevin Wei
Assurance Firm RCS Global Ltd
Date 4 June 2020
City, Country Shenzhen, China
Independent Reasonable Assurance Report 3
RGG & RSG COMPLIANCE REPORT OF GOLD AND SILVER (2019) FOR
YUNNAN COPPER CORPORATION LTD.
YUNNAN COPPER CORPORATION LTD.
20 APRIL 2020
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TABLE OF CONTENTS
1. Introduction
2. Company Profile
3. Summary of Compliance Activities
Step 1: Establishment of Strong Supply Chain Management System Step 2: Risk Identification and Assessment on Supply Chain Step 3: Strategy Design and Implementation in Response to Risk Identification Step 4: To Plan an independent Third-party Audit of Refiner's Due Diligence Practice Step 5: Annual Report on Supply Chain Due Diligence
4. Management Conclusion
5. Other Report Comments
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1. INTRODUCTION
LBMA Gold Responsible Guidance (hereinafter referred to as LBMA RGG) and
LBMA Silver Responsible Guidance (hereinafter referred to as LBMA RSG) are reliability guidelines established by LBMA for qualified gold and silver delivery refineries in compliance with The Organization for Economic Cooperation and
Development (OECD) responsible supply chain due diligence guidelines for ores from conflict-affected and high-risk regions. The purpose of using high standards to conduct due diligence on suppliers is to respond to risks of war, widespread violation of human rights, money laundering or terrorist ACTS in the supply chain; improve the level of enterprise management, establish a reliable supply chain, and prevent enterprise operation from being affected by supply chain risks.
This report summarizes how Yunnan Copper Corporation Ltd. (hereinafter referred to as “Yunnan Copper” or “YCC”) has complied with the requirements of LBMA RGG and LBMA RSG in 2019.
Name of Company YUNNAN COPPER CORPORATION LTD. Address: LianMeng Road, Panlong District, Kunming, Yunnan, P.R. China Reporting time interval : 01/01/2019 - 31/12/2019 Agent Shi Chunke Phone No.: +86 871-63124933 Contact information : E-mail address:[email protected]
2. COMPANY PROFILE
Yunnan Copper was listed in Shenzhen Stock Exchange in 1998. The former of
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Yunnan Copper was Yunnan Smelter which was approved and built during the
1st Five-Year Plan period. YCC manages 11 copper mines and 6 copper smelters, and YCC industry chain engages mainly in mining, ore-dressing, smelting and etc. It is the only one listed company under Chinalco Group and
China Copper for copper business (Stock Name: Yunnan Copper; Stock Code:
000878). YCC have registered capital of RMB 1.699 billion, total assets of RMB
42.364billion, net assets RMB 12.2 billion, operating revenue of over RMB
63.29 billion, and over 10000 employees.
Its major products include copper cathode, gold and silver, it can also recover various rare and precious metals, such as Se, Te, Pt, Pd, In, Re and so on. With strict quality control, all major products are organized and produced strictly according to international standard IS09002 quality management system.
Among them, “Tie Feng” Brand of Copper Cathode has been registered and dealt in Shanghai Metals Exchange (SME) and London Metals Exchange (LME).
“Tie Feng” Brand of Gold Ingot has been registered and dealt in Shanghai
Gold Exchange (SGE). “Tie Feng” Brand of Silver Ingot has been registered and dealt in LBMA.
Up to now, smelting block has achieved annual production capacities:
110,000 tons of copper in Cu concentrate, 1,300,000 tons of high purity copper cathode, 5,000,000 tons of industrial sulfuric acid, 16 tons of gold and
1,300 tons of silver. The smelting production capacity ranks in the forefront of the domestic copper industry. The output of gold is 11.950 tons and the
4 / 20 output of silver is 640.863 tons in 2019.
YCC already got ISO9001: 2015 system certification and ISO14001: 2015 system certification, the production and processing authorization includes cathode copper, gold, silver, and sulfuric acid. In addition, YCC also got
ISO45001: 2018 system certification of occupational health and safety management system.
YCC main sources of gold and silver products include copper concentrate, gold concentrate, copper matte, blister copper, anode copper and high purity copper cathode.
3. SUMMARY OF COMPLIANCE ACTIVITIES
Step 1 Establishment of Strong Supply Chain Management System
Compliance statement: For the year ended of December 31, 2019, we were totally in compliance with the requirements of Step 1: Establishment of
Strong Supply Chain Management System.
1) Internal Management Organization Structure:
In accordance with " YCC Gold Supply Chain Management Regulations", YCC established Gold Supply Chain Management Organization on 2 April 2018.
According to the requirements of LBMA RSG, "YCC Implementation Rules of
Gold and Silver Supply Chain Management" was revised on March 11, 2019.
On the basis of above policy, the Gold and Silver Supply Chain Management
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Organization (hereinafter referred to as the "management organization") was established. The leaders in charge of marketing work acts as team leader of the management organization, members include: Compliance Risk Control
Specialist from YCC, Compliance Specialist from manufacturing enterprise ,
Compliance Specialist from marketing company, Compliance Specialist for imported raw material, Compliance Specialist for domestic raw material, and
Compliance Specialist for raw material business. And Mr. Shi Chunke from the
Marketing Management Department handles daily affairs as YCC Compliance
Officer.
The main responsibilities of the management organization: a) To be fully responsible for all issues of the company's gold and silver
supply chain; b) To review YCC compliance report of gold and silver supply chain and other
externally released reports; c) To review results of due diligence and risk management strategies; d) To supervise implementation of risk identification, risk assessment, risk
control and risk mitigation measures for gold and silver supply chain; e) To draft and update gold and silver supply chain management policies,
and regularly train employees.
Mr. Shi Chunke reported gold and silver supply chain operation, and learned the main points of gold and silver management at the YCC gold and silver supply chain training conference on March 11, 2019. He made the following
6 / 20 arrangements: a) According to the regulations of YCC. Due diligence management policy of
the gold and silver supply chain, all departments shall be responsible for
their work; b) The organizing committee members discussed the low-risk issues
discovered by the third party in 2018, and formulate specific rectification
measures; c) Gold (silver) material procurement department should fully understand
the gold and silver supply chain due diligence management policies
responsible for Yunnan Copper Corporation Ltd., and follow the rules of
information collection, risk assessment and classification to ensure that
all supplier requirements are met; d) The management department should communicate and coordinate
effectively with third-party audit institutions to supervise the
implementation of rectification measures.
Company Policy
On 2 April 2018, YCC issued "YCC Gold Supply Chain Management
Regulations" as the company's due diligence management policy, and carried out a company-wide pilot project, that is, all relevant departments and personnel shall carry out relevant work in accordance with the provisions of
LBMA RGG. In accordance with the requirements of LBMA RSG, on March 11,
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2019, YCC revised "Management Regulations for Gold Supply Chain of Yunnan
Copper Corporation Ltd." into” Implementation Rules for Gold/Silver Supply
Chain Management for Yunnan Copper Corporation Ltd." as the company's new due diligence management policy and made it in public.
The due diligence management policy, of which the core framework is consistent with the LBMA RGG, LBMA RSG and OECD Guidelines on
Responsible Due Diligence of Mineral Supply Chain in Conflict-affected and
High-risk Regions, defines the responsibilities of the relevant departments in the gold (silver) supply chain. The gold (silver) materials purchasing department is responsible for conducting due diligence on domestic and foreign suppliers of gold (silver) materials. The due diligence management policy includes: to carry out due diligence information collection, risk identification, risk assessment and classification, and risk mitigation strategies; to report major issues of compliance management of the gold and silver supply chain to the Compliance Officer of the company; to promote and implement the company's gold and silver supply chain management policies and procedures to suppliers; to archive materials and documents during supplier due diligence. In addition, the due diligence management policy also defines the responsibilities of the company's management departments, manufacturing enterprises, marketing companies, and staff in charge of imported raw materials & domestic raw materials, and raw materials sales.
The due diligence management process includes Yunnan Copper Corporation
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Ltd. Gold/Silver Supply Chain Questionnaire, YCC Gold/ Silver Supply Chain
Due Diligence List, LBMA Gold and Silver Supply Chain Evaluation Statistics, and other tools.
Supplier engagement and transactions traceability
In accordance with existing supplier development standards, LBMA RGG and
LBMA RSG requirements, YCC informs the new suppliers of the company's supply chain management policy, and evaluate their supply chain accordingly before signing the trade agreement. As part of the ongoing due diligence, the gold (silver) materials purchasing department shall continue to focus on the transaction risks, and conduct a continuous risk assessment after signing purchase contract so as to avoid contact with high-risk suppliers. At the beginning of each year, the gold (silver) material procurement department is responsible for collecting changes in supplier information and conducting due diligence on the previous year's supply chain to determine whether to change supplier risk management strategies. YCC’s main products produced from copper pyrometallurgy include copper cathode, gold and silver. There are total ** suppliers of gold and silver materials purchased in 2019 referred to this report, of which, ** domestic suppliers, **gold concentrate suppliers in domestic suppliers, and ** foreign copper concentrate suppliers.
According to the manage requirement, we control the producing materials by keeping the key traceable documents well, such as freight notes, incoming inspection records, purchase contracts, customer information. For gold (silver)
9 / 20 material suppliers in 2019, we conducted due diligence on all existing suppliers in a risk-based manner. Detailed documentation related to supplier risk assessment and transactions was well maintained. All due diligence assessment reports were reviewed and approved by the Compliance Officer and the Head of the compliance management organization.
According to the requirements of Annex II of the LBMA RGG, LBMA RSG and
OECD Guidelines on Responsible Due Diligence of Mineral Supply Chain in
Conflict-affected and High-risk Regions, the company has issued the gold and silver supply chain policy notice to inform the suppliers of the company's policies. The purchasing department is responsible for communicating the requirements of the LBMA RGG and LBMA RSG to external counterparties and the company's policies and procedures for responsible due diligence in the gold and silver supply chain, also in charge of signing the purchase contract.
We are working to ensure that external counterparties promptly understand and comply with the LBMA's new policies and procedures for responsible gold and silver demand.
Training and communication mechanism
To help all personnel involved in the gold and silver supply chain to have an in-depth understanding of the content, methods and procedures of supplier due diligence. On March 11, 2019, the company's Marketing Management
Department held a gold and silver supply chain management training program, including the requirements of LBMA RGG V7, LBMA RSG V1 and
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OECD Due Diligence Guidelines. Meeting Attendance Record and the training topics were recorded. On April 20, 2020, the company's Marketing
Management Department held a gold and silver supply chain management training session, studied YCC due diligence management policies, introduced the international sanctions, the sanctioned countries, high-risk regions, and etc., discussed problems encountered in due diligence, and requested the purchasing department to make rectifications.
Step 2: Risk Identification and Assessment on Supply Chain
Compliance statement: in the year ending December 31, 2019, we fully complied with Step 2: Risk Identification and Assessment on Supply Chain.
Risk identification
The due diligence management policy specifies the methods to be followed in the actual implementation of gold and silver supply chain risk identification.
According to supplier information collected, the gold (silver) material
Purchasing Department shall carry out supplier risk identification. In the process of risk identification, it is necessary to pay more attention to the following risks: whether the mining, transportation and trading processes of mineral products pass through high-risk areas or conflict areas; systematic or widespread violations of human rights, such as the abuse of Labour or child
Labour in the exploitation, transportation or trading of gold and silver; direct
11 / 20 or indirect support for non-state armed groups or public or private security forces, such as illegal extortion or taxation in the course of mining, transportation and transactions; bribery and false reporting of the origin of gold and silver; money laundering and terrorist financing may be at risk of money laundering if the actual controller or significant shareholder of the supplier also runs other high-risk businesses; non-compliance on environment against local regulations.
In March 2020, we collected due diligence information on the supplier supply chain of all gold (silver) bearing raw materials in 2019. In April 2020, we completed the risk assessment of all gold (silver) bearing raw materials suppliers and transactions in 2019 according to the above steps.
Risk assessment
We specify the principles and procedures of risk assessment in our due diligence management policy, including risk assessment on suppliers, transaction and annual supplier supplement.
To perform enhanced due diligence and risk assessment when the red flags
are identified on origin, supplier and the transition route prior to trading.
Red flags about origin includes gold/silver-containing substances transported
from conflict-affected regions or through regions of human rights violations.
Red flags about supplier involves potential risk issues, such as suppliers or
their upstream companies located in high-risk countries, related to money
laundering, crime or corruption. The transition route involves different risk
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issues, one of which is outgoing route of gold/silver bearing materials
through the world's conflict regions or areas where human rights are highly
violated. Security and logistics companies supported directly or indirectly by
non-governmental armed groups or security forces, such as illegal extortion
or taxation during shipping and trade.
Based on the above red flags, a preliminary risk investigation was made. For those suppliers with red flags, the gold (silver) raw material purchasing department shall enforce enhanced due diligence practices and follow additional due diligence procedures. On-site investigations/interviews will be conducted to verify investigation results of the documentary supply chain due diligence, including determination of counterparties, and verification of their identifications and information by using reliable, independent source documents, data or information; to verify identification of counterparties and their beneficiary owners; to check information with government watch lists.
For the mined gold and silver, the information of all companies involved in gold/silver supply chain, including gold/silver producers, intermediaries, gold/silver traders and exporters, and transporters, should be verified. For recovered gold (silver), information on each counterparty involved in the gold and silver supply chain from the point of origin (including the transporter), should be checked.
The gold (silver) raw material Purchasing Department is responsible for assessing risks in the transaction process. Transactions should be regarded as
13 / 20 high risk in the following circumstances : mined gold (silver) or recovered gold
(silver) have been transported through high-risk regions affected by conflict or human rights violations; The information provided by the supplier is seriously inconsistent with the information obtained by the company. If the gold (silver) material procurement department finds that the "normal cooperation" supplier may be involved in or may be involved in money laundering, terrorism financing, conflict-affected and high-risk areas or human rights violations, the company will suspend the transaction and immediately report to the Compliance Officer. The company's management leader will investigate potentially high-risk suppliers. The company will immediately terminate its cooperation with the supplier if there is conclusive evidence that the supplier is involved in money laundering, terrorism financing, conflict-affected and high-risk areas or human rights violations.
By April 20, 2020, we have completed risk assessment on all suppliers of gold and silver bearing raw materials in 2019. In 2019, there were a total of ** suppliers providing materials containing gold and silver, of which ** were domestic suppliers, among which ** were gold concentrate domestic suppliers. There were ** foreign suppliers who were copper concentrate suppliers. For the origin, all transactions are considered as non-high risk, all domestic suppliers of gold-bearing (silver-bearing) raw materials are from
China, and all ** foreign copper concentrate suppliers have legal qualification certificates and are internationally renowned mining companies. In terms of
14 / 20 the identification, the company is a low-risk supplier with strict screening mechanism and strong traceability of gold and silver resources. All domestic suppliers are legal practitioners with business licenses. We learned the types of property and transactions of the suppliers and verified whether the identified beneficial owners were on the transaction list or terrorist organization list issued by Ministry of Public Security of the People’s Republic of China. We collected information on beneficiary owners through questionnaires and business licenses. According to the results of risk assessment, all suppliers of gold-containing and silver-containing raw materials are identified as low-risk suppliers.
At the same time, by checking and comparing the weight and quality of the delivery note and our own lab test report, we can assess commodity risk of our suppliers. According to the risk assessment results, all suppliers of raw materials containing gold and silver in 2019 were identified as low risk.
The Compliance Risk Control Specialist and Compliance Officer are responsible for reviewing the results of due diligence and risk assessment, and the Head of the compliance management organization is responsible for reviewing the results of risk assessment and making further decisions. To input the risk assessment results of all raw material suppliers with gold and silver into "LBMA Gold and Silver Supply Chain Assessment Statistics", including assessment basis, review comments and approval date. In 2019, all suppliers of raw materials containing gold (silver) was listed into low-risk
15 / 20 suppliers.
Step 3: Strategy Design and Implementation in Response to Risk
Identification
Compliance statement: as of December 31, 2019, we have fully complied with Step 3, which is to design and implement a strategy to address identified risks.
According to the results of due diligence on suppliers, suppliers are classified as three categories: low-risk, medium-risk and high-risk. YCC will made different risk management strategies for them.
Risk management strategy for low-risk supplier
If no issues or very few issues are raised during due diligence process, and these issues are not related to money laundering, the financing of terrorism, the encouragement of conflict or human rights violations, our company can implement risk mitigation measures while tracking. For example, if the supplier can provide a risk solution with a clear improvement plan and time schedule, the company can establish a "normal working relationship" with the supplier. Risk solutions should include clear performance objectives, performance evaluation indicators based on quantitative and qualitative analysis, and a reasonable period of time.
Risk management strategy for medium-risk supplier
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If the result of due diligence shows risk level of the supplier in medium risk level, the company shall suspend the transaction and cooperation with the supplier. At the same time, it shall communicate with suppliers to urge them to formulate and implement corrective measures, and continue to trade after confirming that the risks meet the requirements of this regulation within 6 months; If the supplier refuses to provide the relevant legitimacy documents and make rectification within 6 months, the company shall regard it as a high-risk supply chain and terminate transaction with the supplier.
Risk management strategy of high-risk supplier
If the result of due diligence and risk assessment shows that supplier is at a high risk level, the company does not take risk mitigation measures to reduce the risk level. For example, a conclusive evidence to prove that supplier is involved in money laundering and terrorist financing, encouragement of conflicts or human rights abuses, the company shall terminate transactions with suppliers and blacklist the suppliers as well, there shall no deal with them within 3 years, until there is mounting evidence that the supplier has taken steps to restore to the low risk suppliers.
For the suppliers with "normal cooperation" risk solutions in due diligence, the gold and silver raw material procurement department is responsible for implementing risk solutions. According to the due diligence results in 2019, supplier and material with high-risk were not identified, no supplier needs to adopt a risk mitigation management strategy.
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Continuous risk monitoring
At the end of each year, the gold and silver raw material Procurement
Department is responsible for collecting the information of all suppliers on changes, operating conditions and contract execution of the current year to decide whether to continue cooperation. The list of qualified suppliers shall be updated according to the assessment. During the process of business execution, the purchasing agent and the business leader check the following information: estimated weight and quality results; transport documents
(waybills, Proforma invoices, etc.) in high-risk areas; import and export documents for high-risk transactions; and other information available. A written record shall be kept of the results of verification of the transaction background inconsistent with the perception of the supply chain or suspected, and shall be reported to the Compliance Risk control Specialist and the leaders.
Step 4: To Plan an independent Third-party Audit of Refiner's Due Diligence
Practice
Compliance statement: We fully complied with Step 4: To Plan an independent Third-party Audit of Refiner's Due Diligence Practice.
We have entered into a service agreement with RCS Global Ltd (" RCS ") to provide independent third party assurance of compliance with LBMA RGG
18 / 20 and LBMA RSG.
RCS performs an independent third party assurance business in accordance with international standards in the audit or review of historical financial information (ISAE 3000) outside the audit business. The RCS and YCC agree that reasonable assurance measures will be taken for YCC’s compliance report
(2019). The independent reasonable assurance report is shown on above.
Step 5: Annual Report on Supply Chain Due Diligence
Compliance statement: We fully comply with Step 5: Annual Report on
Supply Chain Due Diligence
We have prepared YCC’s Compliance Report based on the requirements of
LBMA RGG and LBMA RSG, reporting the details of annual supply chain due diligence practice from 1 January to 31 December 2019, which is also published on YCC’s official website.
4. MANAGEMENT CONCLUSION
As of 31 December 2019, we established a supply chain process control management system and continued to implement due diligence management policy. YCC collected due diligence information, made risk identification and assessment on supply chain, strategy design in case risks identified, independent third parties assessment on supply chain due diligence, and
19 / 20 prepared 2019 Compliance Report. Therefore, for the year 2019, we have fully complied with the requirements of LBMA RGG and LBMA RSG.
In the next phase of work, we will continue to improve the existing due diligence system in the gold and silver supply chain. Our goal is to more effectively integrate the responsible gold and silver supply chain processes with our existing supply chain processes. Any corrective actions identified will be monitored internally on a regular basis.
5. OTHER REPORT COMMENTS
If users of this report wish to provide us with any feedback on this report, please contact us at: +86 871 6312 4933 or by email [email protected].
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