Last week, Yamana Gold reported CAD$74,000 of ‘Other Audit Fees’. Normally this would not catch our (or anyone’s) eye, but in this case the other audit fees related “primarily to assurance on the Company’s Conflict-Free Gold Report.” As far as we are aware, this could be the only case where a company has disclosed the cost of obtaining assurance with respect to its use of conflict minerals.
Yamana’s “portfolio includes nine operating gold mines and various advanced and near development stage projects and exploration properties in Brazil, Chile, Argentina, Mexico and Canada.” These fees accounted for just under 2% of the company’s total audit fees and about $.06 per ounce of gold produced in 2015.
Conflict-Free Gold Reports are not required by SEC rules and regulations, but they are similar to the Specialized Disclosure Report (Form SD) requirements for conflict minerals, which include gold as well as tantalum, tin, and tungsten. Conflict-Free Gold Reports are a part of the Conflict-Free Gold Standards issued by the World Gold Council. In 2015, Newmont Mining included their Conflict-Free Gold Report and an independent limited assurance report by reference in their Form SD.
The independent limited assurance report provides a review of the design and implementation of a company’s procedures, much like an Independent Private Sector Audit (IPSA). As we have discussed previously, there were only six companies that issued an IPSA with their Conflict Mineral Reports as a part of their Form SD in 2015.
Without assurance from an independent third party it is difficult to rely on data. As we see with the Yamana fees, an engagement of this size and scope is not cost prohibitive. Therefore one should hope to see higher quality (reports with assurance) reporting as companies enter their third year of reporting on conflict minerals.