Audit Summary Report 2016

 

Table of Contents

I. Introduction 5

II. Audit Objectives 5

III. Audit Scope 5

A. Audit Period 5

B. Physical Sites and Description 5

IV. Audit Team 5

V. Audit Methodology 6

VI. Summary of Audit Observations 6

A. Conflict Minerals Policy (Section IV) 6

B. Mass Balance Calculation (Section V) 6

C. Origin Determination (Section VI) 6

1. Origin Determination Level 1 7

2. Origin Determination Level 2 7

3. Origin Determination Level 3 7

4. Verification of legacy and secondary material 8

5. Verification of material received from a supplying smelter 8

VII. Opening and Closing Meeting 8

VIII. Limitations and General Feedback 9

 

 

 

I. Introduction

 

Jiangxi Tuohong New Raw Material Co., Ltd. is a Tantalum smelter. The major tantalum products are Tantalum oxide and K2TaF7 etc. 

Main operations are as below:

1. Tantalum ore – crushing - solution – extracting- precipitation by Ammonia- washing-dry- calcinations- Tantalum oxide

2. Tantalum ore – crushing - solution – extracting-K2TaF7

II. Audit Objectives

 

The objective of the audit is to assess the auditee’s level of compliance with the requirements of the Conflict Free Smelter Program Supply Chain Transparency Smelter Audit Protocol for Tin and Tantalum, Revision of 21 November 2013.

 

III. Audit Scope

 

The audit is carried out against the Conflict Free Smelter Program Supply Chain Transparency Smelter Audit Protocol for Tin and Tantalum, Revision of 21 November 2013.

 

It covers the following entity and material:

- Entity audited: Jiangxi Tuohong New Raw Material Co., Ltd.

- Material audited: Tantalum

 

A. Audit Period

 

12/24/2015 - 11/20/2016

B. Physical Sites and Description

 

Exact company name: Jiangxi Tuohong New Raw Material Co., Ltd.

Physical address: NO.3, Chunyi Road, Economic Development Zone, Yichun City, Jiangxi Province, China

Types of materials received:

・Types of Ta feed materials: TANTALITE, COLUMBITE, Waste K2TaF7 solution

 

Types of Ta products produced:

Tantalum oxide and K2TaF7 etc. 

Manufacturing Process:

1. Tantalum ore – crushing - solution – extracting- precipitation by Ammonia- washing-dry- calcinations- Tantalum oxide

2. Tantalum ore – crushing - solution – extracting-K2TaF7

IV. Audit Team

 

David Fang: Leader Auditor

V. Audit Methodology

 

Opening meeting and had Interviews with corporate management and site responsible persons - to understand the company background, site operation, conflict free purchasing policy and procedure, training, lot number control, business with suppliers, industrial definition about incoming materials and finished goods, and also implementation of the due diligence process. 

 

Site walk through – to observe the process flow from raw material warehouse, manufacturing plants to product warehouse, at the same time sample selection for inventory spot checks in raw materials warehouse, finished goods warehouse.

 

Document review - company policy related to procurement of Tin containing material, material balance including inventory spot check and transaction document, material receipts documentation and test report for non-secondary materials, materials received and issue records.

 

Closing meeting held to review the audit findings.

 

VI. Summary of Audit Observations

A. Conflict Minerals Policy

· Jiangxi Tuohong New Raw Material Co., Ltd. Conflict-free Minerals Procurement Statement is established on May 1, 2014, and publicly available at: 

· This statement includes policy of only purchasing raw materials that are conflict-free and that meet the requirements of the OECD Due Diligence Guidance for Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, and require suppliers to strictly abide by their own country or United Nations about class7  transportation regulations of dangerous goods.

· The factory established Purchase management procedure TH/QP-10 issued on May 1, 2015 and Material and product transportation procedure TH/QI-61 issued on May 1, 2015, and tantalum sourcing requirements of the policy are incorporated in the mentioned procedures.

· There were only two suppliers used by the auditee, and they signed "The letter of commitment" and send them to the auditee.

· CFSP training was conducted annually for employees and management.

1. Training about EICC management system for employees was conducted on Sep 5, 2016 by Huang Shuigeng/ Manager, and employees such as Liu Yulan/ Warehouse staff Peng Xiaojing/ Tester etc attended the training.

2. Training about EICC management system for management was conducted on Apr 11, 2016 by Huang Shuigeng/ Manager, and management such as He Jianbin/ purchase manager, Lei Yun/ sale manager etc attended the training.

C. Mass Balance Calculation

 

· Quantity variance is 2.06% which is acceptable.

· The system used for the calculation by manual system.

· Auditor has reviewed the sales records with summary, shipping records, sale contract, sale invoice etc, and all 8 batches of Shipment in May 2016 were selected. All records matched the Mass Balance. And the total weight of K2TaF7 content was 4000Kg.

· During the walkthrough samples selected were spot checked in the recording system, which indicated that the traceability information including the materials type, weigh and status, were recorded and tracked. For example, 161001-A/B/C 18206 Kg which met the material records.

 

D. Origin Determination 

Raw material is purchased by procurement department, origin and transportation documentation is collected and reviewed. E.g.: purchase order, invoice, mining license, certificate of analysis, delivery record etc for ore from Level 1 countries (China), and purchase order, test records, delivery records and compliant smelter list from CFSI website etc for materials from other smelters.

 

1. Origin Determination Level 1

 

a. LSM Sources

· There were total 10 level 1 purchases and auditor reviewed all 10 batches. The ore from   Level 1 country include: purchase order, invoice, mining license, certificate of analysis, delivery record etc. And all 10 batches of ores came from China.

 

b. ASM Sources

 

· No purchase from ASM sources in Level 1 country.

2. Origin Determination Level 2

 

a. LSM Sources

 

· No such purchase from Level 2 country.

b. ASM Sources

 

· No such purchase from Level 2 country.

 

3. Origin Determination Level 3

 

· No such purchase from Level 3 country.

4. Verification of legacy and secondary material

 

· No legacy material purchased.

· No secondary material purchased.

 

5. Verification of material received from a supplying smelter

 

· There were 38 batches of material (total 304189.04 Kg) received from a supplying smelter, and selected 5 batches of them for review. The material provided by other smelter was TANTALITE, COLUMBITE and Waste K2TaF7 solution which was a semi-product in Tantalum smelting process, and relevant records include: purchase order, test records, delivery records and compliant smelter list from CFSI website etc which met the requirement of Audit Protocol, all the materials came from a compliant smelter named Zhuzhou Cemented  Carbide Tantalum niobium division which located in China.

VII. Opening and Closing Meeting

 

List the opening and closing meeting attendees:

 

Auditee:

Huang Shuigeng–Manager 

Yuan Xinsheng-Vice general manager

He Jianbin-Purchase manager 

He Zhipeng-Workshop supervisor 

Lei Yun- Sale staff 

 

Auditor:

David Fang – Lead Auditor, SGS China

 

Observer:

Mr.  Li–section chief of Yichun Branch, AQSIQ

Mr.  Xiao–section chief of Jiangmen Branch, AQSIQ

 

Opening meeting –Auditors introduced audit objective, methodology and agenda. Auditee made an introduction to the company and site operation. Both parties signed NDA and Integrity agreement. 

Closing meeting – Lead auditor reports preliminary audit result.

VIII. Limitations and General Feedback

 

Nil