Supply Chain Stewardship

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In 2018, Newmont procured around $4.4 billion in goods and services from nearly 8,000 suppliers worldwide, ranging from multinationals to small local suppliers based near our projects and operations. Understanding the risks present in our diverse and dynamic supply chain and working with suppliers that share our values and goals are critical to our operations.

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  1. Category planning – embeds alignment across the supply chain department, supporting functions and the business plan to increase transparency on operational requirements and to ensure Newmont and its suppliers meet those requirements
  2. Pre-qualification – provides an understanding of a supplier’s overall risk profile through a pre-qualification process that includes a prohibited party, anti-bribery and anti-corruption screening; financial health assessment; historical and current safety performance; and social, environmental, security and human rights history
  3. Plan and scope – develops a scope of work (SOW) that articulates the services or goods to be supplied in order to undertake a cross-functional tier and risk assessment, and assigns the appropriate risk level
  4. Source and execute – a cross-functional working group evaluates a supplier’s ability to execute the SOW in accordance with Newmont standards, and, upon awarding the contract for goods and/or services, develops a risk-specific supplier management plan (SMP) to embed risk mitigation activities and performance metrics specific to the risk profile of both the SOW and supplier
  5. Mobilization – ensures the supplier, and all parties who engage with the supplier, understand what is required for the successful mobilization and ongoing delivery of the SOW through the SMP
  6. Supplier management – mitigates identified risks and supports efforts to deliver services in a safe, compliant and efficient manner throughout the lifecycle of the contract by ensuring the SMP activities are managed, monitored and tracked
  7. Closeout – reviews the completion of deliverables, identifies potential risks related to demobilization, assesses performance against plans, and provides an opportunity to discuss feedback from both the supplier and the Company

The SRiM framework must be applied to suppliers that provide critical goods and are identified as having extreme (tier 1) or high (tier 2) risks.1

1 Our Merian operation in Suriname currently is not included in the SRiM program. Merian recently implemented SAP, which supports the SRiM program, and is expected to implement SRiM in the future.
Smelting and refining

The gold we produce is transported in the form of doré to refineries certified by the London Bullion Market Association (LBMA). Swiss refinery Valcambi refined a majority of Newmont’s doré produced at our North America, Peru and Ghana operations for most of 2018. In October, we signed new refining agreements, and as a result, Asahi Refinery in Salt Lake City, Utah, now refines the doré produced at our North America operations. Our Ghana operations use Swiss refinery MKS PAMP and our operations in South America – Yanacocha and Merian – use another Swiss refinery, Argor-Heraeus. The Perth Mint refines the gold produced at our Australian operations.

All refineries used by Newmont comply with the LBMA Responsible Gold Guidance to ensure the entire chain of custody is responsible and does not source gold from areas and operations that finance conflict or degrade the environment. They also conform to the Responsible Minerals Initiative’s (RMI) Responsible Minerals Assurance Process, in which independent audits validate a smelter or refinery’s management processes for responsible mineral procurement. For more information about the refineries’ commitment to a responsible supply chain, please visit the Argor-Heraeus, Asahi Refining, MKS PAMP, Perth Mint and Valcambi websites.

The copper we produce is sold to smelters and manufacturers in the form of concentrate and cathode for further treatment. All copper sales contracts include requirements to comply with permits, approvals and other laws, and agree to anti-bribery measures. Copper concentrates sold by Newmont contain gold, and provisions within the concentrate sales contracts require the buyer to acknowledge our Conflict-Free Gold Standard. Most of our copper concentrate is sold directly to smelters with which we have long-term relationships. However, when we produce more concentrate than anticipated, sales will occasionally be made to independent trading companies.

Our Product Stewardship Standard aims to reduce downstream environmental, safety, health and social impacts through minimum requirements for managing and vetting downstream buyers. The standard also establishes a set of environmental, health, safety, technical and social criteria and a due diligence and review process. Although the standard does not implicitly apply to doré, our refining agreements include provisions that address the spirit of the standard and allow for due diligence as well as audits should we identify any concerns with a refiner. The standard does not apply to copper cathode sales because we sell to trading companies that then sell to various fabricators with which we do not have any direct relationship.

More information about our products is included in our 2018 10-K report.

Responsible sourcing

There is a growing expectation from downstream end-users, such as electronics manufacturers, and key stakeholders, for mining companies to transparently report and assure performance on a number of environmental, social and governance (ESG) standards and criteria. To better position Newmont as a trusted and leading source of responsible gold, in 2018 we launched a responsible sourcing strategy.

Developed by an internal cross-functional working group, the strategy incorporates input from external responsible sourcing thought leaders and analyses of leading guidelines, initiatives, standards and codes. The broad objectives of the strategy are:

  1. Report and assure operational performance – transparently report and assure ESG performance in line with expectations of key stakeholders;
  2. Value chain management – implement effective management of our value chain in a proactive and transparent manner;
  3. Internal governance and capacity – establish appropriate internal governance structures to promote awareness and ensure effective implementation; and
  4. External engagement – lead, engage, monitor and influence policies and practices to promote alignment with our responsible sourcing framework.

Through industry associations, such as the World Gold Council (WGC) and the International Council on Mining and Metals (ICMM), we aim to better understand the potential impacts of our products and their uses and value streams. In 2018, we also joined the Responsible Minerals Initiative (RMI), which brings together representatives from more than 350 companies and associations across multiple industries to discuss best practices on responsible mineral sourcing.

Performance

Supplier risk

Implementing our global Supplier Risk Management (SRiM) program, which aims to significantly improve how we manage risks within our supply chain, was a significant area of focus in 2018. Among the key activities:

  • We updated and implemented our Supplier Management Standard to align with the requirements of the SRiM program, established a clear and consistent methodology for classifying high-risk suppliers, and ensured all supplier risk management plans and associated actions were captured and tracked in an online tool accessible to both the suppliers and contract owners.
  • To support the program’s implementation, compliance with the Supplier Management Standard and the process governance, we launched an online lifecycle management toolkit and created a certification program for contract representatives across the Company.
  • At the end of 2018, 94 percent of our tier 1 suppliers (i.e., those that provide critical goods and have been identified as having extreme or high risks) had developed and approved supplier management plans. Around 23 percent of all tier 2 suppliers had developed supplier management plans. By the end of 2019, the target is for all tier 1 and tier 2 suppliers to have supplier management plans in place.
  • We initiated an audit of suppliers identified as high risk from a corruption perspective and developed a program to audit suppliers with an elevated risk of impacting human rights that we will introduce in 2019.
  • We facilitated anti-corruption training for some of the high-risk suppliers identified by the regions and plan to expand the training to all high-risk suppliers.
  • In each region, we held forums with tier 1 and 2 suppliers and contractors to introduce the SRiM process and gather feedback to incorporate into the program’s implementation.

To monitor compliance and track the program’s performance, we designed a governance structure and established a global cross-functional governance steering committee. Once implemented in 2019, the committee will meet at least twice a year to review regional compliance data. Regional governance committees – made up of members of the regional leadership team – will meet quarterly to review compliance and supplier performance. A governance support team within our supply chain organization will provide monthly updates to site general managers and contract owners, and will engage with the global steering committee to ensure any risk profile changes and requirements are addressed and implemented.

Screening and pre-qualification

A key aspect of our SRiM program is the pre-qualification phase in which a risk rating is assigned to the supplier based on screenings, assessments and performance reviews.

All prospective suppliers received an initial screening for anti-corruption and anti-bribery, and current suppliers were screened on an ongoing basis. Any potential or existing supplier flagged during these screenings was disqualified from conducting business with Newmont.

In 2018, all tier 1 and tier 2 suppliers were issued a pre-qualification questionnaire related to social, environmental, human rights, health and safety, ethics and compliance, and security and information technology risks. All outstanding questionnaires were escalated to the contract owner to discuss with the supplier. During the year, we developed more consistent human rights pre-screening criteria, and by the end of 2019, all suppliers are expected to be screened against these criteria.

With the SRiM program launching in late 2018, the focus in 2019 will be on further embedding the program across our regions and sites through robust communications and support as we realign processes and approaches that have been in place for many years.

Responsible sourcing

Implementation of the responsible sourcing strategy’s first phase began in the second half of the year and involved defining what responsible sourcing means for Newmont, mapping existing initiatives in this space, and determining redundancies and gaps with existing policies, standards and activities – including our SRiM program and Conflict-Free Gold Standard compliance, as well as industry initiatives and partnerships. Our Product Stewardship Standard, which was finalized in 2018, also supports the strategy.

During 2018, Newmont collaborated with the WGC and its members to develop the Responsible Gold Mining Principles – a new framework that recognizes and consolidates existing international standards for responsible mining under a single structure. The Principles are designed to complement the LBMA Responsible Gold Guidance that ensures gold refineries apply high standards of governance including robust frameworks for compliance, due diligence and risk management. Development of the Principles included extensive consultation with stakeholders. This work will continue in 2019 along with the development of an assurance framework to ensure external assurance is consistently conducted.

Focus areas for 2019 include identifying and addressing gaps in the site and value chain readiness assessments and reporting requirements, identifying a fit-for-purpose assurance mechanism, and evaluating additional membership or partnership opportunities around responsible sourcing.

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