Conflict Free and Socially Sustainable - A Practical Discussion of - PowerPoint PPT Presentation

Conflict Free and Socially Sustainable - A Practical Discussion of Conflict Minerals Compliance Rules and the KEMET Case History

Today’s Speakers Dr. Daniel F. Persico Dynda A. Thomas KEMET, Vice President – Squire Sanders, Partner Special Projects

Making Africa Work KEMET’s Socially Sustainable Solution to Sourcing Conflict Free Tantalum

“Making Africa Work” Sourcing Conflict Free Tantalum Agenda: KEMET Electronics Overview Sourcing Conflict Free Tantalum in the DRC Conflict Free Vertically Integrated Supply Chain Social Responsibility & Sustainability SEC 1502 Ruling - Comments One world. One KEMET.

KEMET Electronics Overview • World’s largest user of Tantalum • 4 th largest global electronics capacitor manufacturer • 23 manufacturing locations in 10 countries including United States, Mexico, China, Indonesia, and Europe • Over 10,000 employees worldwide • FY11 revenue of over $1B One world. One KEMET.

“Making Africa Work” Sourcing Conflict Free Tantalum • In the Fall of 2010, the DRC government imposed a mining embargo on the Kivus. This embargo essentially stopped all legal tantalum ore shipments from the DRC. • When the mining embargo was lifted, a situation remained where few were willing to commence mining, or risk using tantalum from the DRC, for fear it may be conflict based. • Dodd Frank provision 1502 unfortunately only added to this reticence. • This unintended consequence has had broad negative social implications for the Congolese citizens in that many have had their livelihoods shut off, thus denying them the ability to provide for themselves and their families. One world. One KEMET.

“Making Africa Work” Sourcing Conflict Free Tantalum • As the industry leader KEMET was interested in a solution to this issue. Working with MMR, an established miner in the DRC, we have jointly demonstrated that socially responsible mining, in the DRC, can be the reality. • Our solution named “Making Africa Work” focuses on building a sustainable framework that embraces lasting prosperity for the Kisengo mining community in the conflict free Katanga Province. • “Making Africa Work” is the only comprehensive social and economic solution in the industry. • KEMET and MMR have developed a process which provides a safe working environment with a clear and transparent chain of custody, for the tantalum ore (Coltan), from the mine to the smelter. One world. One KEMET.

“Making Africa Work” Sourcing Conflict Free Tantalum • The Kisengo mine was the first mine to have the ITRI/iTSCi bag and tag scheme implemented, by the NGO Pact, following the lifting of the embargo. • The mine is managed under a local cooperative allowing all to benefit from the daily output. • The output from the mine will be increased through mechanical means to meet the long term needs of industry; however, the artisanal miners are guaranteed access moving forward. • This plan will support local infrastructure development and economic growth over the long-term. One world. One KEMET.

KEMET’s Conflict Free Vertically Integrated Tantalum Supply Chain KEMET’s Vertically Integrated Conflict Free Mineral Flow Kisengo Mine in Katanga The mine has been certified Conflict Free & Province the iTSCi bag and tag scheme is in place DRC K-Salt CFS pre-audit assessment completed and Tantalite Resources EICC/GeSI CFS audit scheduled for 9/3-4 Jo'burg, SA Capacitor Grade Ta Powder KEMET Blue Powder EICC/GeSI CFS audit after TR audit complete Carson City, NV KEMET tantalum capacitors manufactured from KEMET CFS compliant/conflict free tantalum KEMET Customers KEMET customers guaranteed capacitors EICC & GeSi manufactured from conflict free tantalum. One world. One KEMET.

“Making Africa Work” Social Sustainability Programs • KEMET’s activities in the Kisengo mine site and village differ from other capacitor producers as they include a comprehensive social sustainability program • KEMET has committed $1.5M over the first two years of involvement at the DRC mine site, for sustainability programs such as:  Schools  Health Clinics  Clean water wells  Solar street lighting • It is important to KEMET that we enhance the long term quality of life for the individuals in the village of Kisengo, DRC through education, training, etc. One world. One KEMET.

“Making Africa Work” Sourcing Conflict Free Tantalum • The “Making Africa Work” program is an opportunity to show that social and economic investment can work hand-in-hand to the benefit of all parties involved • It is anticipated that the programs will be self-sustaining once the mine is running with significant output. • A local foundation has been developed to manage the projects and flow of cash focused on meeting the needs of the local community, as well as determine the best organizations with whom to partner, in order to bring resources, training, supplies, etc. to the community. One world. One KEMET.

“Making Africa Work” Sourcing Conflict Free Tantalum • As understood today, KEMET is in compliance with the proposed conflict minerals due diligence requirements under section 1502 of the U.S. Government’s Dodd-Frank Finance Reform Act. • We fully support the EICC/GeSI Conflict Free Smelter program and were involved in crafting the compliance and audit process and requirements. • KEMET has developed the industry’s only closed-pipe, vertically integrated conflict free tantalum supply chain from mine to customer. • It is our hope that our “all-in” approach will be a positive example to those companies remaining on the sideline. One world. One KEMET.

SEC Ruling on Conflict Minerals Provision 1502 of Dodd-Frank Disclosing the Use of Conflict Minerals One world. One KEMET.

SEC Ruling on Conflict Minerals Provision 1502 of Dodd-Frank • First reporting period could be as early as end of 2013 or as late as end of 2016 depending on size and circumstances • Reporting is required if the minerals are “necessary to the functionality or production” of a product manufactured or contracted to be manufactured by the company • A reasonable “country of origin” inquiry must be performed to determine if the minerals originated in the covered countries or are from scrap or recycled sources One world. One KEMET.

SEC Ruling on Conflict Minerals Provision 1502 of Dodd-Frank • Companies that are required to file must exercise due diligence on the source and chain of custody of their conflict minerals and this must conform to a nationally or internationally recognized due diligence framework • The minerals in the report must fall into one of the following designations which have differing audit and certification requirements: • DRC Conflict Free • Not DRC Conflict Free • DRC Conflict Undeterminable One world. One KEMET.

SEC Ruling on Conflict Minerals Provision 1502 of Dodd-Frank • Recycled or Scrap – if a company’s conflict minerals are derived from recycled or scrap sources, products containing such minerals are considered DRC Conflict Free • Gold has special considerations if it is determined to be from recycled or scrap sources then due diligence per the OECD Guidance and a report must be filed. • Report issuers will be required to provide disclosure on the new FORM SD. Calendar year reporting must be completed by May 31 of the following year. One world. One KEMET.

“Making Africa Work” Sourcing Conflict Free Tantalum One world. One KEMET.

“Making Africa Work” Sourcing Conflict Free Tantalum Thank you for your attention Dr. Daniel F. Persico danielpersico@kemet.com David A. Reynolds davereynolds@kemet.com One world. One KEMET.

Conflict Minerals Disclosure 37 Offices in 18 Countries

Section 1502 of Dodd-Frank • Section 1502 of the Dodd-Frank Act of 2010 required the Securities and Exchange Commission (SEC) to establish additional disclosure and reporting requirements to report the use of “conflict minerals” that are sourced from the Democratic Republic of Congo and several neighboring countries. • August 22, 2012, SEC adopted final rules. http://sec.gov/rules/final/2012/34-67716.pdf

DRC and Covered Countries

Conflict Minerals • Conflict minerals supply high-value commodities to industries and manufacturers globally: Approximate % of World Supply from Ore Element Uses Include DRC (2010) Cassiterite Solders, solderable coatings, corrosion resistant 2% - 5% Tin coatings, bronze alloys, glass additive, flame retardants, biocides, chemicals, electric circuits Wolframite Tungsten High temperature applications (lamp and electron 0.5% - 1% microscope filaments, engines, lubricants), hard allows (e.g., turbine blades), tungsten carbide drill bits, etc., munitions, radiation shielding metal coatings on ceramics, semi-conductors Columbite- Tantalum Tantalum capacitors, high refractive index glass, power 20.5% Tantalite resistors, high temperature alloys, corrosion resistance, (Coltan) cell phones, computers, cutting tools, jet aircraft parts Niobium alloys including steels, superconducting alloy 1% Niobium with titanium or tin is used in MRI and other instruments with superconducting magnets. Pacemakers, sodium lamps and arc welding.