Blockchain not silver bullet for mine operations: Verisk Maplecroft VP

London — Blockchain -- digital ledger -- technology could profoundly change the operation of mineral supply chains, from producer to consumer, although it may not be a silver bullet on its own, according to Gus MacFarlane, vice president at global risk analysis firm Verisk Maplecroft.

Although blockchain technology represented part of a larger compliance solution, it was not necessarily a simple, all-in-one answer to an increasingly hot topic throughout 2019, MacFarlane told S&P Global Platts in an interview.

Blockchain technology has the potential to deliver high levels of transparency and assurance around the "journey" minerals have taken through otherwise opaque or complicated value chains", MacFarlane said.

"I think people are still finding their feet. It is not being applied on a mass level by the mining sector yet, but it could get there once the technology, related processes and commercial relationships are up and proven. This is particularly important given the amount of scrutiny being placed on Congolese cobalt in the context of booming battery demand, as well as disclosure requirements around the sourcing of 3TG [tin, tantalum, tungsten and gold] minerals."

Glencore to be on board

Glencore, one of the world's largest cobalt producers, said late last year it was set to join the Responsible Sourcing Blockchain Network to support responsible sourcing and production practice industry-wide.

Members of RSBN include automakers, refiners and miners. According to a statement, the network's blockchain technology offering has moved beyond proof of concept and was on track to become commercially operational by spring 2020.

"The other challenge is how blockchain can address the fact that ore from multiple sources is often amalgamated into single batches of metal during smelting and refining," MacFarlane said.

Mining, at its most simple, is a process of digging up dirt, filtering it for minerals or ore, smelting and then refining to a product.

"It is the smelters that are key to the success of traceability and assurance," MacFarlane said. "The combining of multiple ore sources during this process means it has traditionally represented a natural 'weak point' in terms of tracing individual batches of metals back to their origin – and by extension, their earlier exposure to human rights and other risks."

"The fact that a whole batch of metal could be made up of multiple ore sources (some traceable and some not) and could be 'contaminated' by ore from any single source linked to human rights abuses, potentially presents its own challenges in terms of maintaining the unbroken integrity of the blockchain process."

Responsible Minerals Initiative

The Responsible Minerals Initiative, which helps companies disclose and communicate about smelters in their supply chain, explains in its Blockchain Guidelines that minerals and metals may be transformed using extraction, chemical and or metallurgical methods. "Material may also be blended, disaggregated, transported or traded without any transformation of the mineral or metal itself," it says.

"Each transformation of the mineral, metal or product is expected to be carried out within defined parameters," the Responsible Minerals Initiative said. "Transformation parameters may be entered manually to the Blockchain...through single transaction traceability, batch traceability and mass balance approach."

However, for the blockchain network to be wholly secure, it requires all actors involved to be on board the platform and requires continuous monitoring in relation to new members joining or leaving the network.

"We are unlikely to achieve a completely tight, collective blockchain system until everyone is onboard and the system [is proven] completely secure," MacFarlane said.

"But if you have selected value chains with only a small number of suppliers – particularly where companies can encourage them to adopt blockchain, and in turn suppliers can encourage sub-suppliers to adopt the technology – your chances of achieving a secure line of blockchain traceability is much better."

Traceability and value chain impact

MacFarlane said the focus on traceability and value chain impact will likely spread to other, more mainstream metals, with companies seeking to differentiate between the cross-lifecycle ESG credentials of their own products compared to those of their peers (i.e. as a means of competitive advantage).

Inevitably, as the application of Blockchain matures, it could do much to support this process in terms of both traceability and data collection across the product lifecycle.

"A lot of ESG stakeholders are increasing shifting their attention to the impacts taking place across product value chains," MacFarlane said. "Not just the direct impacts of the end-producer."

ESG -- environmental, social and governance compliance, and which has become an increasingly hot topic -- refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business.

As investors become more in tune with ESG requirements, miners are reacting to ensure they stay up to date.