London Bullion

Market Association

(LBMA)

Responsible Silver Guidance – Audit Report (ISO19011:2011) KENNECOTT UTAH COPPER LLC 23 April 2018

ASSESSMENT INFORMATION Refiner Name: Kennecott Utah Copper LLC

Refiner Location: Rio Tinto Regional Center 4700 Daybreak Parkway,

South Jordan, UT 84009 USA and

Kennecott Utah Copper LLC, Precious Metals Refinery,

11500 West 2100 South, P.O. Box 6001, Magna, UT

84044, USA

Refiner Contact Person:

Name, Title:

Email:

Phone:

Ms. Ilse Schoeters

Manager Global Product Safety & Stewardship

Ilse.Schoeters@riotinto.com

+32495900789

Lead auditor and audit team members Dr. Nicholas Garrett, RCS Global

Dates and places where the onsite assessment activities were conducted

April 9-12, 2018

Rio Tinto Regional Center 4700 Daybreak Parkway,

South Jordan, USA and Kennecott Utah LLC Precious

Metals Plant, (2100S 15000W), USA.

LBMA Refiner Assessment Report

Assessment objectives: The purpose of the audit was to assess whether procedures, processes and management practices of

the silver refiner comply with LBMA Responsible Silver Guidance.

Assessment scope: Refiner location(s) included in the assessment scope

Rio Tinto Regional Center 4700 Daybreak Parkway, South Jordan, USA

and Kennecott Utah LLC Precious Metals Plant, (2100S 15000W), USA.

All mentioned facilities were visited. Assessment Period January 1, 2017 – December 31, 2017

Assessment methodology: The auditor is the same auditor, who audited KUC against the LBMA Responsible Gold Guidance in

2017 and 2018 and has familiarity with Rio Tinto’s and KUC’s management system and processes.

The auditor used a triangulation of findings to evaluate the existence and implementation of

appropriate systems at the Refiner, addressing all areas covered by the LBMA Responsible Silver

Guidance.

The audit plan is provided further below. The audit was undertaken at the same time as a Responsible

Jewellery Council Code of Practices Audit, which is why the audit plan spans two half days.

In order to review every aspect of the Responsible Silver Guidance the Auditor undertook a document

review, interviewed management and employees (see list further below), and undertook observations

during a walk-through of the precious metals plant. In addition, the auditor reviewed a sample of

supplier files and transactional files.

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While due diligence as per the RSG needs to be exercised on silver suppliers, no Country of Origin

Annex needs to be completed as part of this audit as the refinery does not source mined silver. All

silver produced by KUC is derived from mining byproduct (anode slimes) with silver per se, first

emerging as silver in Rio Tinto’s precious metals plant on Rio Tinto’s property.

KUC presented the following documents with the auditor for review and they were reviewed during the

course of the audit:

• http://www.riotinto.com/aboutus/policies-standards-and-guidance-5243.aspx; Standards and

Guidance online overview.

• Sample supplier files for supplier file check as per RSG requirement.

• The Way We Work (August 2017 edition)

• Rio Tinto Management System HSEC-B-01 (effective 1 April 2015)

• HSEQ15-003 Data and Record Management Standard Operating Procedure

• Samples of copper concentrates tolling agreement (contracts)

• Rio Tinto Responsible Jewellery Council Chain of Custody Scope Document (last revised 6

January 2017)

• MKTGSOP-002 Operating Procedure External Raw Material Purchasing (last revised 6 January

2017)

• Kennecott Utah Copper LLC Conflict Free Minerals Policy

• MKTGSOP-001 Standard Operating Procedure Precious Metals Order Management

• Sample Invoices used as Chain of Custody Transfer Documents

• Sample country of origin certificates (two), including follow up correspondence with suppliers

(one)

• Managing External Inquiries briefing note 2017

• Internal Workbook Silver Inventory Process

• Brinks Supplier Risk Assessment (2017)

• Employee Training schedule 2017/2018

• Silver bar list

• SAP data and Excel tracking sheet for finished product tracking

• Rio Tinto Business Solution data entry form for incident reporting

• “Listen Up” platform (online)

• Samples of CoC Management Meeting records

• Sample correspondence communicating the Conflict Free Policy to suppliers for three suppliers

• Tracking sheet for active customers

• Sample extracts of Refinery Production and Inventory Report April and August and November

2017

• Rio Tinto 5x5 Risk Assessment Matrix

Statement of the confidential nature of the contents: All the data contained in the assessment report, as well as all information obtained during the

performance of the certification, is private and confidential between the auditing body and the

Refiner.

Any significant or inherent limitations or areas not covered that were within the assessment

scope:

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There were no significant or inherent limitations or areas not covered that were within the assessment

scope.

Assessment criteria: The auditor or assessment team took into account all relevant objective evidence provided by the

Refiner. Relevant evidence was either qualitative or quantitative in as far as it is appropriate and

sufficient to support the auditor or assessment team’s conclusions. Appropriate evidence is evidence

that is relevant and reliable. Sufficient evidence refers to the amount of evidence provided to allow

the auditor or assessment team to reach a conclusion. �

Any actual or potential gaps in the Refiner’s systems in regards to the LBMA requirements are rated in

accordance to the level of risk each presents to the credibility and integrity of the LBMA Responsible

Silver Programme for the responsible sourcing of silver-bearing materials. �

Assessment plan:

Monday, 9 April 2018

(Day 1: LBMA Responsible Silver: Opening meeting)

Tuesday, 10 April 2018 (Day 2: LBMA Responsible Silver: Refinery / Precious Metals Plant walk through / Documentation

review and Interviews)

Time Activity Attendance

10.00am Arrival of the auditor at Kennecott Utah Copper,

Rio Tinto Regional Center. Security screening and

induction.

• Aaron Smith –

Senior Advisor

HSEQ Assurance

10.00 – 10.30am Opening Meeting with Kennecott’s Management

Team to review the purpose, scope and

methodology of the assessment and clarify

required documentation. The meeting should

address: • Any operational changes, challenges, and

impact of changes that may affect the

entity’s performance in regards to the LBMA

Responsible Silver Guidance Standards; • Finalise interview schedule as well as

identify responsible parties to assist the

auditor throughout the process.

Kennecott Management

Team, incl.:

• James Goh –

Commercial

Executive for

by-product sales

and marketing

Aaron Smith -

Advisor - HSEQ

Assurance

• Aaron Smith –

Senior Advisor

HSEQ Assurance

• Ilse Schoeters -

Manager Global

Product Safety

& Stewardship

4.30pm Auditor leaves the facility

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Wednesday, 11 April 2018 (Day 3: LBMA Responsible Silver: Documentation review and Interviews)

09.00 – 09.30am Arrival at the Precious Metals Plant and induction • Aaron Smith –

Senior Advisor

HSEQ Assurance

09.30 – 10.00am Conversation with Supervisors and Superintendent

of Precious Metals Plant • Dan Ervin –

Acting

Superintendent

• Jeff Porter -

Supervisor

10.00am – 12.00pm

Full walkthrough of the Precious Metals Plant: • Review of internal material control

mechanism; • Verification of type of silver material

received;

• Selection of employees for interviews.

Employee Interviews.

As above. PMP

Employees:

- Operator that enters the data: Ryan

Ashley

- Angelo Kallas –

Principal Advisor - HSE

1.00pm – 3.00pm Due diligence management systems review and

application proof:

• Internal management structure to support

supply chain due diligence

• Internal system of due diligence, controls

and transparency over silver supply chain,

including traceability

• Engagement with counterparties

• Employee training and communication

• Risks management in the supply chain

• Risk management plan and risk mitigation

measures

• Reporting on due diligence

• George Stewart

– US Chief

Council

• Peggy Mower –

Revenue and

logistics

coordinator for

by-product sales

and marketing

• James Goh –

Commercial

Executive for

by- product

sales and

marketing

• Aaron Smith –

Senior Advisor

HSEQ Assurance

• Ilse Schoeters -

Manager Global

Product Safety

& Stewardship

5.00pm Auditor leaves the facility

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Thursday, 12 April 2018

(Day 4: LBMA Responsible Silver: Closing meeting)

09.00am Arrival of the auditor at Kennecott Utah Copper,

Rio Tinto Regional Center.

• Aaron Smith –

Senior Advisor

HSEQ Assurance

2.00 – 4.00pm Due diligence management systems review and

application proof:

• Internal management structure to support

supply chain due diligence

• Internal system of due diligence, controls

and transparency over silver supply chain,

including traceability

• Engagement with counterparties

• Employee training and communication

• Risks management in the supply chain

• Risk management plan and risk mitigation

measures

• Reporting on due diligence

• James Goh –

Commercial

Executive for by-

product sales

and marketing

• Aaron Smith –

Senior Advisor

HSEQ Assurance

• Ilse Schoeters -

Manager Global

Product Safety &

Stewardship

• Todd Thomas –

Principal Advisor

Risk

• John Elger –

Controller

4.00 - 4.30pm Customers and transactional file reviews. • Amy Stone –

Commercial

Coordinator for

Moly Marketing

and Sales

• James Goh –

Commercial

Executive for by-

product sales

and marketing

• Aaron Smith –

Senior Advisor

HSEQ Assurance

• Ilse Schoeters -

Manager Global

Product Safety &

Stewardship

6.00pm Auditor leaves the facility.

11.45am – 12.15pm

Closing meeting with Kennecott’s management

team:

• Aaron Smith –

Senior Advisor

HSEQ Assurance

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• Recapitulation of audit findings and

conclusions.

• Next steps.

• Ilse Schoeters -

Manager Global

Product Safety &

Stewardship

List of attendees of opening and closing meeting

Interviews were conducted with the following persons and they also attended the opening and closing

meetings:

• James Goh - Commercial Executive

• Aaron Smith – Senior Advisor - HSEQ Assurance

• Ilse Schoeters - Manager Global Product Safety & Stewardship

Refiner feedback The review of documentation, interviews and walkthrough with KUC personnel showed that KUC

implements, maintains and improves robust management systems covering all aspects of the LBMA’s

Responsible Silver Guidance. No non-conformances were observed. RCS Global thanks KUC’s team for

their cooperation throughout the audit process and their commitment to continuous improvement. All

suggested business improvements were discussed and agreed upon with the management team. The

refiner accepted the assessment result.

Distribution list

This report is issued for the benefit of KUC and will be shared with the Manager Global Product Safety

& Stewardship for further transmission within KUC. The final version of this Refiner Assessment

Report and the LBMA Summary Report will be submitted by the auditing body to the LBMA Executive.

In accordance with Step 5 of the LBMA Responsible Silver Guidance, Refiners should make the LBMA

Summary Report available to the public.

Assessment findings:

Category/subcategory Non-compliance/Observation: Include evidence found to substantiate the non-compliance as well as frequency of its occurrence.

Recommended corrective action

Timeframe for implementing corrective actions

Refiner comments

- - - - -

Assessment conclusions

Compliant Low Medium High Zero Tolerance

Based on the above assessment conclusions, the overall rating of the

Refiner’s performance is determined to represent:

X

ASSESSMENT CONCLUSIONS

Refer to the LBMA Third-Party Audit Guidance, Appendix 1 to determine the level of conformance for each sub-category1.

Non-Compliance – risk level CATEGORY SUBCATEGORY

Compliant Low Medium High Zero

Tolerance A. General Information

B. Step 1:

Establish strong Refiner management systems

1.1: x

1.2 x

1.3 x

1.4 x

1.5 x

1 LBMA Responsible Silver Programme -Third Party Audit Guidance. Appendix 1: Definitions of Non-compliances.

ASSESSMENT CONCLUSIONS

Refer to the LBMA Third-Party Audit Guidance, Appendix 1 to determine the level of conformance for each sub-category1.

Non-Compliance – risk level CATEGORY SUBCATEGORY

Compliant Low Medium High Zero

Tolerance C. Step 2:

Identify and assess risk in the supply chain

2.1 x 2.2 x 2.3 x

D. Step 3:

Design and implement a management strategy to respond to identified risks

3.1 x 3.2 x

E. Step 4:

Arrange for an independent third-party audit of the supply chain due diligence

4.1

x

F. Step 5:

Report on supply chain due diligence

5.1 x 5.2 x 5.3 x

Recommendations for improvement:

Category/subcategory Observation:

Recommended area for improvement

B. Section 2: Set up an internal management

structure to support supply chain due

diligence

1) Everyone in the precious metals plant and the sales and marketing team has received training in competency (on due diligence and chain of custody matters) as encapsulated in KUC’s chain of custody commitments, but this has not yet been integrated into the formal KUC training

1) Undertake a gap assessment against other trainings that KUC is doing in areas covered by the LBMA RSG, such as Business Integrity and other Ethics & Integrity trainings and certifications and the general chain of custody training. Areas that are not yet covered sufficiently

Recommendations for improvement:

Category/subcategory Observation:

Recommended area for improvement

tools. People that may work in the precious metals plant occasionally but are not necessarily assigned to the area permanently are not yet included in the training plan for 2018.

2) The KUC Responsible Jewellery Council Chain of Custody Scope Document (last revised 6 January 2017) is not fully language aligned with the LBMA. It does however cover all the LBMA requirements.

by these trainings should be covered. Where additional training needs are identified:

-ensure new employees receive the required training on the relevant subject matter scheduled for 2018. - occasional assignees to precious metals plant also receive the appropriate training. -training needs to be applied consistently throughout the validity period of LBMA certification.

2) Align the language in the KUC Responsible Jewellery Council Chain of Custody Scope Document (last revised 6 January 2017) fully with the LBMA.

B. Section 2: Set up an internal management

structure to support supply chain due

diligence

The LBMA states that refiners should encourage that their silver-supplying counterparties commit to, and acknowledge in writing the compliance with, a supply chain policy consistent with Annex II of the OECD Due Diligence Guidance Model Policy for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas for all interactions with the Refiners. While KUC communicates its own conflict minerals policy per email and via its website and while contracts stipulate KYC and other requirements, they do not yet include the adherence to the policy as a specific requirement for suppliers. This is principally the

For materials that fall within the scope of the LBMA RSG, make the adherence to KUC’s conflict minerals policy requirements a specific clause in supplier contracts. Encourage those traders that do not yet have their own conflict minerals policy, to ensure they have one and also have a OECD due diligence system in place.

Recommendations for improvement:

Category/subcategory Observation:

Recommended area for improvement

case, as the suppliers are copper concentrate suppliers primarily and only become suppliers of silver, when the silver is separated from anode slimes produced at KUC and further refined on KUC’s property.

Transactional document check For gold, KUC includes chain of custody information on transfer documents, which show the path the gold takes from KUC facility to customer. The same is not yet implemented for silver.

Even though it is not required by the LBMA RSG, include chain of custody information on silver transfer documents as a voluntary commitment to good practice.

The Auditors confirm that: ü The information provided by the Refiner is true and accurate to the best knowledge of

the Auditor(s) preparing this report. ü The findings are based on verified Objective Evidence relevant to the time period for

the assessment, traceable and unambiguous.

ü The Auditor(s) have acted in a manner deemed ethical, truthful, accurate professional, independent and objective.

ü The Auditor(s) are properly qualified to carry out the assessment at this Refiner’s

facility.

Lead Auditor: Dr. Nicholas Garrett

Signature:

Date: 23 April 2018