* Law forcing firms to change their sourcing of African
* Conflict minerals helped fuel wars that killed millions
* Companies urged to be more rigorous in tracing supply
* Profits still go astray in lawless region
By Eric Onstad
LONDON, July 1 (Reuters) - A U.S. law on conflict minerals
is curbing African warlords' presence around mines in Congo,
campaigners say, but its full impact remains unclear, with most
firms failing to pinpoint the origin of their metals by a June
Millions are estimated to have died in nearly two decades of
bloodshed in eastern Democratic Republic of Congo (DRC) fueled
by the minerals smuggled through Rwanda, Uganda and Burundi.
Under the Dodd-Frank financial reform law, U.S. companies
must try to establish the origin of four metals often used by
rebel groups in the area to finance their activities.
Only five percent of firms making filings by a June 2
deadline traced the conflict status of the minerals used in
their products, said Source Intelligence, a U.S. risk management
A grace period means big firms can say they were unable to
get information for two years, but campaigners urged them try
harder, saying the law had already helped but could do more.
"Overall we've been disappointed with the response of
companies, and the lack of meaningful information on the supply
chain checks and risk assessments they are doing, although a few
of the reports have been strong," said Emily Norton, assistant
campaigner with Global Witness in London.
The electronics sector has been the most robust at tracing
the source of its minerals, Norton said, holding up chip giant
Intel as a rare company that had conducted an audit.
Campaigners say the law has had a positive impact in three
of the four metals it covers -- tin, tantalum and tungsten --
while gold remained a problem. Many of the minerals are used in
smart phones and other electronics goods.
"The law has triggered companies right along the supply
chain to change their sourcing practices," Norton said.
A new certification scheme organized by the tin industry
body ITRI is being rolled out in North Kivu after earlier
projects in Congo's copper-rich southeastern provinces of
Katanga and South Kivu.
Sasha Lezhev, senior policy analyst with the Enough Project
based in Washington DC said about two third of mines in tin,
tantalum and tungsten in eastern Congo had been demilitarized.
In a report based on five months of field research, the
organization said minerals not certified as "conflict free" sold
for 30-60 percent less, cutting profits for the armed groups.
Some analysts say the law's impact has been overstated.
A Congolese government adviser cautioned rebel involvement
was hard to track in remote areas and an academic specializing
in the region said profits were still going astray.
"Dodd-Frank and the ensuing initiatives, including
traceability and certification, have removed armed actors from
the mines," said Christoph Vogel, a Congo researcher at the
University of Zurich.
"But now we hear that army commanders are sending
intermediaries to organize taxation on the sites," Vogel said.
Global Witness said last year there was still high-level
military involvement in eastern Congo's gold trade and Lezhev
called on jewelers and the U.S. government to counter this.
Campaigners are also urging the European Union to strengthen
a conflict minerals proposal released in March, making it
mandatory instead of voluntary.
Some of those advising the companies about the law say the
firms find it hard to discover the origin of their supplies.
"We have clients that have literally tens of thousands of
suppliers," said Michael Littenberg, a partner at New York law
firm Schulte Roth & Zabel.
Another consultancy said that information was available and
companies needed to be more rigorous.
Of the 1,306 companies that filed reports, only 14 of them
contacted Indonesia's CV United Smelting Corp, one of the most
widely used tin smelters in the world, said Canadian
environmental consultancy Claigan, which specializes in conflict
"Very few companies showed any due diligence," Bruce Calder,
vice president of consulting services at Claigan, said in a
When the conflict minerals law was first passed, there were
fears that it would lead to companies boycotting the region's
minerals, and some firms initially moved in that direction, but
that is less of a problem now, Littenberg said.
"Most companies have figured out that isn't the right
approach and the NGOs (non-governmental organizations) have also
been pretty vocal that they don't want to see companies
boycotting the region," he said.
The law was watered down by a court ruling after industry
groups challenged it, but an appeal has been launched by the
Securities and Exchange Commission (SEC) which is in charge of
Analysts say it has had little impact in some neighboring
areas, such as Central African Republic on the DRC's northern
border, where the short-lived rule by Seleka rebels last year
triggered an internal political and religious conflict which has
required the intervention of French and African peacekeepers.
"Once in power the movement asserted control of lucrative
trafficking networks (gold, diamond and ivory). Their systematic
looting destroyed what was already a phantom state," said a
report in June by Brussels-based International Crisis Group.
(Additional reporting by Peter Jones in Kinshasa,; Pascal
Fletcher in Johannesburg and David Lewis in Dakar; editing by
Veronica Brown and Philippa Fletcher)