Our goal is to address the entire lifecycle of the minerals we produce – from the global supply chain of goods and services that supports our operations to the smelting and refining of the ore we mine. Newmont sources from more than 21,000 suppliers worldwide. This complex global supplier network is critical not only to our operations but also to our efforts to ensure ethical conduct, protect workers, contribute to socio-economic development, mitigate our environmental impacts, and promote positive relationships in our host communities. Sourcing products and services from suppliers that are irresponsible, contribute to conflict or violate human rights can be detrimental to our performance and cause irreparable harm to our reputation and relationships with stakeholders.
Sourcing and Procurement
Our policies and standards require us to work with our suppliers in an ethical manner that promotes a responsible, sustainable supply chain. We are committed to fair competition and continuously improving costs and efficiencies while leading in safety, operational, technical, social and environmental practices.
Through our contract terms and conditions, all suppliers are required to ensure goods and services are supplied in a safe and socially and environmentally responsible manner. These terms extend to their sub-contractors whenever practical. All suppliers are assessed against the significant risks facing our business. We conduct due diligence on select suppliers, particularly those that perform work at our operations. As part of our formal sourcing process, suppliers are required to address their programs and performance in a number of areas – including social, environmental, health and safety, and labor practices.
Our Human Rights Standard, which we are implementing in 2016, will require sites to develop appropriate human rights clauses in standard contracts for new suppliers as well as in existing contracts that are up for renewal. These terms will require suppliers to notify Newmont of any human rights issues related to activities conducted on behalf of the Company, and to conduct investigations and develop action plans to address identified issues.
As part of our pre-qualification process for new suppliers, we screen against anti-corruption and sanctioned third parties. In addition, using a number of spend and category management tools, we assess suppliers against a risk matrix. Based on the assessment and other risk factors – including the country in which the supplier is located or past audit performance – we develop an approach and allocate resources toward mitigating any identified risks within our supply chain.
We have commenced work to develop and ultimately implement a more robust supplier screening program that will audit all new suppliers and flag existing high-risk suppliers against anti-corruption and sanctioned third-party, health and safety, human rights and environmental criteria.
Smelting and Refining
The minerals we produce are essential to our global economy. The majority of our total sales – 84 percent in 2015 – is derived from gold production, with the remainder from copper.
Our gold produced in the form of doré is transported to refineries certified by the London Bullion Market Association (LBMA). The Swiss gold refinery Valcambi refines the majority of gold doré produced at our North America, Peru and Ghana operations. A small volume of our doré produced in Peru is refined by Asahi Holdings, which purchased Johnson Matthey in Salt Lake City in March 2015. The Perth Mint in Australia refines gold produced at our Australian mines.
All three refineries 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 contribute to the financing of conflict or degradation of the environment. For more information about the refineries’ commitment to a responsible supply chain, please visit the Valcambi, Asahi Holdings and Perth Mint websites.
Our copper, in the form of concentrate and cathode, is sold to smelters and manufacturers for further treatment. All our copper concentrate and cathode sales contracts include requirements to comply with all permits, approvals and other laws, agree to anti-bribery measures, and – when appropriate – acknowledge our Conflict-Free Gold Standard. Most of our copper concentrate is sold directly to smelters with which we have long-term relationships. However, at times when we produce more concentrate than anticipated, sales will occasionally be made to independent trading companies. In these instances, we may not know in advance where the product is being delivered, but we conduct a vetting process to understand to the greatest extent possible where the trader will be delivering our product.
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, their uses and value streams.
More information on how our products are used is included in our 2015 10-K report.
Our global operating procurement expenditures in 2015 totaled more than $4.4 billion. Of this amount, an estimated 70 percent was competitively bid, resulting in approximately 4,200 contracts.
In 2015, we began work across a number of areas to strengthen our supplier due diligence and governance processes:
- All new contractors and suppliers (100 percent) were screened against anti-corruption and sanctioned third parties in 2015.
We also began tracking the number of new suppliers that we considered selecting or contracting with and the percentage of them that were screened for criteria related to environmental, social, labor relations, and human rights performance. In 2015:
Newmont considered selecting or contracting with a total of 575 new suppliers. Of that total:
- 86 percent were screened using environmental criteria
- 75 percent were screened using labor practices criteria
- 28 percent were screened using human rights criteria
- 79 percent were screened using criteria for impacts on society
- Our KCGM operation in Australia did not track this data for 2015 but will do so going forward.
- Newmont considered selecting or contracting with a total of 575 new suppliers. Of that total:
- A cross-functional team began work to identify the relevant criteria as part of a new supplier due diligence process to screen against human rights, impacts to society and environmental risks.
- Work commenced on further enhancing our supplier risk management and contractor management processes beginning with our Boddington mine in Australia, which has the largest number of contractors among Newmont’s portfolio. The work at Boddington will help inform our approach as we roll out the processes across our other sites in 2016.
- As part of an extensive global exercise to improve efficiencies in our business processes, we implemented an outsourcing strategy that began with our information technology (IT) functions. The IT outsourcing contract was awarded to Infosys, a multinational consulting company headquartered in Bangalore, India.
- Along with the further implementation of local content strategies, we began development of a lifecycle management strategy to improve our engagement with critical suppliers throughout the entire business relationship and to manage our expenditure from a total cost of ownership perspective. This also will contribute toward additional supplier capacity building and optionality.
In May 2015, we published our annual Conflict-Free Gold Report, which concluded that Newmont does not operate mines in areas classified by the Heidelberg Conflict Barometer as “conflict-affected or high risk” and is in conformance with the criteria established by the WGC’s Conflict-Free Gold Standard.
We will continue work to look deeper into our supply chain and improve our due diligence.
All sites are expected to be in compliance with our Human Rights Standard by the end of 2016.
The focus in 2016 will be on addressing internal gaps and engaging with external experts on the design and development of our supplier screening program. A key component of the program will be systemizing the process to assess the highest risks in our supply chain.
We expect to advance work on our lifecycle management strategy.
The next phase of our strategy to improve our business processes through outsourcing will address opportunities within our finance and supply chain organizations. Full implementation of our outsourcing strategy is planned for 2016.
We expect to publicly disclose our 2015 Conflict-Free Gold Report in the first half of 2016.