While blockchain may still be primarily associated with cryptocurrencies, it is increasingly being used in the mining sector to provide assurance, transparency and traceability within the raw materials supply chain.
This places the spotlight on the responsible sourcing of these metals and minerals, particularly those mined in conflict or high-risk zones. CHANTELLE KOTZE reports.
This article first appeared in Mining Review Africa Issue 11, 2020
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Tracing the provenance of a particular commodity is not a new concept in the mining industry, with many mining companies using paper certificates and tags for tracking their production.
However, the way in which mining companies and end users are able to track raw materials throughout the supply chain has evolved, thanks to digitalisation and technological developments such as blockchain.
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Blockchain is essentially a modern, more secure and decentralised database, which makes it possible to trace the raw material back to the point of origin by means of digital certificates.
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These digital certificates contain data that allows companies to verify that the raw materials they receive has been mined in environmentally and socially sustainable ways.
The overall aim of this is to combat corruption, human rights abuses, child labour and environmental devastation in the raw material supply chain.
When using blockchain technology, a specific piece of data or transaction is stored to a blockchain at every point along the supply chain journey to keep track of where the metals or minerals come from and the conditions under which they were mined.
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From the moment that any data is stored to a blockchain, it cannot be changed. While the existing information can be improved or amended, a transaction history of that will always remain on the blockchain – thus validating the origin of the data.
This is one of the major benefits of blockchain, in that it creates trust throughout the supply chain due to the immutable nature of the record, supporting the source of origin of the materials, particularly in the African mining sector where many minerals and metals of the future are being mined.
This also allows and empowers off-takers and end users of these minerals and metals to take action based on the data available to them.
A spotlight on mining supply chains
Berlin-based technology start-up Minespider, an open blockchain protocol for responsible raw material tracking, founded in 2018, has since collaborated with Google to track the transparency within its tin supply chain, and Volkswagen to trace the supply chain for lead from the point of origin to the factory.
According to Minespider founder and CEO Nathan Williams, the Minespider blockchain protocol is a departure from supply chain tracking protocols that use private, permissioned blockchains, in that Minespider is a proprietary protocol built on a public blockchain.
This means that individual companies are in control of their own data, unless access is granted to a certain party. The multi-layer architecture of Minespider guarantees the security of the sensitive supply chain data despite the open source approach.
The Minespider blockchain creates digital certificates that separate data into three different layers, depending on whether the data should be publicly visible, transparent between members of the same supply chain, or private between a company and their customer.
This allows sharing of sensitive transparency information with supply chain participants securely, Williams explains.
The advantage of having a public blockchain versus a private blockchain is that everyone within the raw material supply chain is able to work on one system.
“This single system allows any number of responsible suppliers to join, creating a web of custody, as opposed to only an end-to-end chain of custody from mine to end user,” says Williams.
The more data that exists on one blockchain, the more companies are provided with added flexibility when conducting due diligence – making the process much more straightforward.
Williams believes that the rise of electric vehicles and battery energy storage technologies has thrust the mining supply chain into the spotlight, as several of the raw materials required in the manufacture of batteries, such as cobalt, is sourced from potential conflict regions, such as the Democratic Republic of Congo.
Regulations surrounding the responsible sourcing and traceability of conflict metals and minerals have only been a decade in the making, which they first came to the fore upon the signing of the Dodd Frank Act Section 1502 in 2010, bringing to light the far-reaching problem of conflict minerals.
It was this, followed by the subsequent release of the SEC’s Conflict Minerals Rule and the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, that prompted companies to start undertaking supply chain due diligence and to start investing in responsible mining and sourcing.
Moreover, in 2017, the European Union signed into law their own conflict minerals legislation, further deepening the market for minerals traceability.
The EU’s Conflict Minerals Regulation, which comes into force on 1 January 2021, requires that EU importers of 3TG (tin, tungsten, tantalum and gold) perform due diligence to determine whether their material comes from a conflict affected or high-risk area, which sometimes finance armed conflict or are mined using forced labour.
In September, Minespider was granted €180 000 by the EIT RawMaterials Start-up & SME Booster Programme funded by the EIT (a body of the European Union supported under the Horizon 2020 research and innovation programme).
The Ore Source minerals due diligence compliance tool
With this grant, Minespider will develop Ore Source, a due diligence product (an application built on top of the Minespider blockchain) that helps mines and smelters capture key information that importers in the European Union need in order to comply with EU Conflict Mineral Regulation.
“This application will help European importers have better access to data on the materials they purchase in order to operate in this new regulatory environment,” says Williams, who adds that we are moving away from a world of anonymous commodities, to one of trusted products.
The Ore Source product extends the capabilities of Minespider’s open, public blockchain protocol by allowing mines and smelters to provide information to distinguish their products from the rest of the market.
Mines and smelters who use the app upload key data such as bills of lading, invoices, company policies, and third-party certifications, which are assembled into a digital certificate and linked along the supply chain.
By affixing a simple QR code to a mineral shipment, or on an invoice, the recipients of the materials have all the data they need to ensure their compliance with the EU regulation, secured on Minespider’s public blockchain protocol.
“Responsible producers are often at a disadvantage in the global market,” says Williams, who notes that Ore Source is a solid first step toward making responsibly sourced material the norm instead of the exception.
Companies importing material into Europe benefit from this information, as they have everything they need to conduct due diligence. This means they can view transport routes, analyse production site responsibility, and demonstrate a chain of custody for their raw materials.
Ore Source will also offer analytical tools that allow material importers to identify potential conflict areas and other red flags, Williams explains, noting that this will enable them to ask further questions when needed and ensure all of their imports have been sourced responsibly.
Showcasing responsibility measures
Based on the adoption of blockchain in the mining supply chain, Williams says that it will become clear which responsible supply chain actors want to participate transparently and which actors would rather remain anonymous, noting that there is no reason that minerals and metals should be bought and sold anonymously in this technologically evolving world.
Companies that currently track on blockchain tend to be those who do good work, and when they do good work, they are at a disadvantage on the global market because they have spent time and money to be responsible and compliant – an aspect of doing business that their customers do not necessarily see.
“It is therefore Minespider’s plan that if you provide customers with the ability to know where their raw materials come from, suddenly you start to level the playing field and the companies that do not provide data are now at a disadvantage,” explains Williams.
In so doing, these companies may now be incentivised to be responsible and transparent as part of the cost of doing business.
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