The LGL Group, Inc.
Conflict Minerals Report
For the Year Ended December 31, 2021
This Conflict Minerals Report (the “Report”) for the year ended December 31, 2021 was prepared by The LGL Group, Inc. (hereinafter referred to as the “Company,” “we,” “us,” or “our”) pursuant to Rule 13p-1 under the Securities Exchange Act of 1934, as amended (the “Rule”), on a consolidated basis, in accordance with the instructions to Form SD, as modified by the Public Statement on the Effect of the Recent Court of Appeals Decision on the Conflict Minerals Rule issued by the Director of the Division of Corporation Finance of the SEC on April 29, 2014 (the “SEC Statement”).
The term “Conflict Minerals” is defined in the Rule and refers to gold and cassiterite, columbite-tantalite, gold, wolframite, or their derivatives, which are limited to tin, tantalum, and tungsten (collectively, the “Conflict Minerals” or “3TG”). The Rule requires disclosure of certain information when a company manufactures or contracts to manufacture products containing Conflict Minerals that are necessary to the functionality or production of those products. These requirements apply to registrants whatever the geographic origin of the conflict minerals and whether or not they fund armed conflict.
In accordance with the instructions to Form SD, as modified by the SEC Statement, this Report outlines the diligence measures undertaken by the Company to assess the source and chain of custody of necessary conflict minerals in its supply chain. This Report is not subject to an independent private sector audit in accordance with the instructions to Form SD and the guidance set forth in the SEC Statement
Company and Product Overview
The Company is a globally positioned producer of industrial and commercial products and services. We operate in two identified segments.
| • | Our electronic components segment is currently focused on the design and manufacture of highly engineered, high reliability frequency and spectrum control products. These electronic components ensure reliability and security in aerospace and defense communications, low noise and base accuracy for laboratory instruments, and synchronous data transfers throughout the wireless and internet infrastructure. |
| • | Our electronic instruments segment is focused on the design and manufacture of high- performance frequency and time reference standards that form the basis for timing and synchronization in various applications. |
Covered Products
We conducted an analysis of our products and determined that certain Conflict Minerals, specifically gold, tantalum, tin, and tungsten, are necessary to the functionality or production of substantially all our products. Those products include RF modules, XOs, OCXOs, TCXOs, VCXOs, DOCXOs, cavity/combine filters, ceramic filters, lumped element filters, crystal filters, crystal resonators, frequency and time references, amplifiers, auto switches and network time servers.
Supply Chain Description
Our business depends on an extensive network of global suppliers to provide the materials and parts required to make our products. As a downstream company, there are multiple tiers of suppliers between us and the ultimate raw materials sources of the Conflict Minerals that enter the manufacturing process. To complicate matters further, such Conflict Minerals are frequently included in parts that we purchase from our suppliers rather than being purchased by us in raw form. Therefore, we must rely on our suppliers to further work with their suppliers to provide us with accurate information about the origin of the 3TG in the materials and parts that we purchase.
Reasonable Country of Origin (RCOI)
The Company has actively engaged with our customers and suppliers for several years with respect to the use of conflict minerals. To determine whether necessary 3TGs in our products originated in Covered Countries, we retained Assent Compliance (“Assent”), our third party service provider, to assist us in reviewing our supply chain. We provided a list composed of suppliers associated with the Covered Products to Assent for upload to the Assent Compliance Manager tool (“ACM”). We deemed it impractical to filter this list further to exclude some possibly irrelevant suppliers because we could not determine definitively the presence or absence of conflict minerals in all parts supplied to the Company for our products.
We utilized the Responsible Minerals Initiative’s Conflict Minerals Reporting Template (“CMRT”) version 5.12 to conduct a survey of all in scope suppliers. During the supplier survey, we contacted suppliers via the ACM. Assent requested that all suppliers complete a CMRT and included training and education to guide suppliers on best practices and the use of this template. Assent monitored and tracked all communications in the ACM for future reporting and transparency. We directly contacted suppliers that were unresponsive to Assent’s communications during the diligence process and requested such suppliers to complete the CMRT form and submit such form to Assent.
Due Diligence Program
Our due diligence measures have been designed to conform to the five-step framework in The Organization for Economic Co-operation and Development (OECD) in the publication OECD (2016) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas: Third Edition, OECD Publishing (OECD Guidance) and the related supplements for gold and for tin, tantalum and tungsten.
The Company’s due diligence measures included:
1. | Establish strong company management systems. |
| • | Adopted a Conflict Minerals Policy Statement, communicated it to relevant suppliers, and posted it on our website. |
| • | Structured internal management to support supply chain due diligence. |
| • | Engaged with our suppliers through our RCOI and due diligence activities aimed at ensuring that they do not contribute to human rights abuses or conflict. |
| • | Engaged Assent to assist us with evaluating supply chain information regarding 3TGs, identifying potential risks, and in the development and implementation of additional due diligence steps that we undertake with suppliers in regards to conflict minerals |
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2. | Identify and assess risk in the supply chain. |
In accordance with OECD Guidelines, it is important to identify and assess risks associated with conflict minerals in the supply chain. Risks were identified by assessing the due diligence practices of smelters and refiners identified in the supply chain by upstream suppliers that listed mineral processing facilities on their CMRT declarations. Assent compared the facilities listed in the responses to the list of smelters and refiners maintained by the RMI to ensure that the facilities met the RMI definition of a 3TGs processing facility that was operational during the 2020 calendar year.
In order to assess the risk that any of these smelters posed to our supply chain, Assent determined if the smelter had been audited against a standard in conformance with the OECD Guidance, such as the Responsible Minerals Assurance Process (“RMAP”). We do not typically have a direct relationship with 3TGs smelters and refiners and do not perform or direct audits of these entities within our supply chain. In cases where the smelter’s due diligence practices have not been audited against the RMAP standard, a potential supply chain risk exists.
We are working to validate the smelter/refiner entries from the submitted CMRTs. Due to the provision of primarily supplier-level CMRTs, we cannot definitely determine their connection to the Covered Products.
Each facility that meets the RMI definition of a smelter or refiner of a 3TGs mineral is assessed according to red flag indicators defined in the OECD Guidance. Assent uses numerous factors to determine the level of risk that each smelter poses to the supply chain by identifying red flags. These factors include:
| • | Geographic proximity to the DRC and covered countries; |
| • | Known mineral source country of origin; |
| • | RMAP audit status; |
| • | Credible evidence of unethical or conflict sourcing; |
| • | Peer assessments conducted by credible third-party sources. |
As part of our risk management plan under the OECD Guidance, when facilities with red flags were reported on a CMRT by one of the suppliers surveyed, risk mitigation activities are initiated. Through Assent, submissions that include any red flag facilities immediately produce a receipt instructing the supplier to take their own risk mitigation actions, including submission of a product specific CMRT to better identify the connection to products that they supply to the Company, and escalating up to removal of these red flag smelters from the supply chain.
As per the OECD Guidance, risk mitigation will depend on the supplier’s specific context. Suppliers are given clear performance objectives within reasonable timeframes with the ultimate goal of progressive elimination of these red flags from the supply chain. In addition, suppliers are guided to the Assent University learning platform to engage in educational materials on mitigating the risk of smelters or refiners on the supply chain.
Additionally, suppliers are evaluated on program strength (further assisting in identifying risk in the supply chain). The criteria used to evaluate the strength of the program are based on these four questions in the CMRT:
| • | Have you established a conflict minerals sourcing policy? |
| • | Have you implemented due diligence measures for conflict-free sourcing? |
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| • | Do you review due diligence information received from your suppliers against your company’s expectations? |
| • | Does your review process include corrective action management? |
When suppliers meet or exceed those criteria, they are deemed to have a strong program. When suppliers do not meet those criteria, they are deemed to have a weak program.
3. | Design and implement a strategy to respond to identified risks. |
Together with Assent, we developed processes to assess and respond to the risks identified in our supply chain. In response to this risk assessment, the Company has a risk management plan, through which the conflict minerals program is implemented, managed, and monitored. As the program progresses, escalations are sent to non-responsive suppliers to outline the importance of a response via CMRTs and to outline the required cooperation for compliance with the Rule.
We engage each of our suppliers that we have reason to believe are supplying us with 3TGs from sources that may support conflict in the Covered Countries to establish an alternative source of 3TGs that does not support such conflict, as provided in the OECD Guidance.
4. | Carry out independent third-party audit of supply chain due diligence at identified points in the supply chain. |
As a downstream manufacturer, the Company does not have a direct relationship with 3TG smelters and refiners and does not perform or direct audits of these entities within its supply chain. We rely on industry efforts, such as RMI, to influence smelters and refiners to be audited and certified through RMI’s Responsible Minerals Assurance Program (“RMAP”).
Assent also directly contacts smelters and refiners that are not currently enrolled in the RMAP to encourage their participation and gather information regarding each facilities’ sourcing practices on behalf of its compliance partners. We are a signatory of this communication in accordance with the requirements of downstream companies detailed in the OECD Guidance.
5. | Report on Supply Chain Due Diligence. |
The Company submitted our annual 2021 Conflict Minerals Report to the SEC, the public and our shareholders on May 27, 2022. This report and the associated Form SD for 2021 are publicly available on the Company’s website at www.lglgroup.com under the heading “Investors” then “Investor Relations” and placed under the “Corporate Governance” section towards the bottom of the page under “Conflict Minerals Report”.
Due Diligence Results
Survey Results – For the 2020 reporting year, we received CMRT forms from 48% of the suppliers surveyed. All final CMRT submissions were reviewed and validated to ensure no inaccuracies or gaps in data were found. One of the suppliers was unable to correct their CMRT and as such, is still listed as an invalid submission.
Smelters and Refiners – Attached as Appendix A is a list of all of the smelters and refiners listed by our suppliers in their completed CMRTs that appear on the lists of smelters maintained by the RMI. Since many of the CMRTs we received from our suppliers were made on a company or division level basis, rather than on a product-level basis, we are not able to identify which smelters or refiners listed on Appendix A actually processed the 3TGs contained in our products. Therefore,
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our list of processing smelters and refiners disclosed in Appendix A may contain more facilities than those that actually processed the 3TGs contained in the Covered Products.
Countries of Origin – Appendix B includes an aggregated list of the countries of origin from which the reported facilities collectively source conflict minerals, based on information provided by suppliers and the RMI. As mentioned in the above section, many responses were provided at the company level, therefore, Appendix B may contain more countries than those that are actually the sources of the 3TGs in the Covered Products.
From the responses that we received from our suppliers, while we did not have any that indicated any direct issues with non-compliance, we will be working to find alternate suppliers for some of our products.
Ongoing and Planned Efforts to Mitigate the Risk and Improve Due Diligence
As an indirect purchaser of 3TG minerals several levels removed from the actual mining or smelting of the minerals, our position in the supply chain is remote. As a result, our due diligence efforts cannot provide absolute assurance regarding the source and chain of custody of the 3TG ultimately included in our products. We intend to take the following steps to improve the due diligence conducted and to further mitigate any future risk of sourcing 3TG that benefit armed groups:
• | Continue to develop supplier engagement strategies that may improve the RCOI response rate. |
• | Leverage Assent to obtain CMRTs on a product-specific basis to enable us to determine which smelters and refiners actually process 3TGs contained in our products. |
• | Continue to include a 3TG compliance provision in new or renewed purchase agreements with direct material suppliers to set forth expectations such that direct material suppliers will cooperate with our due diligence measures. |
• | Engage with any direct suppliers found to be supplying us with 3TG from sources that support conflict in any Covered Country to seek to establish an acceptable alternative source of 3TG. |
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APPENDIX A – Smelter List
Metal | Smelter Name | Country | Smelter ID |
Gold | Advanced Chemical Company | United States Of America | CID000015 |
Gold | Metalor USA Refining Corporation | United States Of America | CID001157 |
Gold | Aida Chemical Industries Co., Ltd. | Japan | CID000019 |
Gold | Allgemeine Gold-und Silberscheideanstalt A.G. | Germany | CID000035 |
Gold | AngloGold Ashanti Corrego do Sitio Mineracao | Brazil | CID000058 |
Gold | Argor-Heraeus S.A. | Switzerland | CID000077 |
Gold | Asahi Pretec Corp. | Japan | CID000082 |
Gold | Asaka Riken Co., Ltd. | Japan | CID000090 |
Gold | Aurubis AG | Germany | CID000113 |
Gold | Bangko Sentral ng Pilipinas (Central Bank of the Philippines) | Philippines | CID000128 |
Gold | Boliden AB | Sweden | CID000157 |
Gold | C. Hafner GmbH + Co. KG | Germany | CID000176 |
Gold | CCR Refinery - Glencore Canada Corporation | Canada | CID000185 |
Gold | Chimet S.p.A. | Italy | CID000233 |
Gold | Dowa | Japan | CID000401 |
Gold | Eco-System Recycling Co., Ltd. East Plant | Japan | CID000425 |
Gold | Heimerle + Meule GmbH | Germany | CID000694 |
Gold | Heraeus Metals Hong Kong Ltd. | China | CID000707 |
Gold | Heraeus Precious Metals GmbH & Co. KG | Germany | CID000711 |
Gold | Ishifuku Metal Industry Co., Ltd. | Japan | CID000807 |
Gold | Istanbul Gold Refinery | Turkey | CID000814 |
Gold | Asahi Refining USA Inc. | United States Of America | CID000920 |
Gold | Asahi Refining Canada Ltd. | Canada | CID000924 |
Gold | JX Nippon Mining & Metals Co., Ltd. | Japan | CID000937 |
Gold | Kennecott Utah Copper LLC | United States Of America | CID000969 |
Gold | Kojima Chemicals Co., Ltd. | Japan | CID000981 |
Gold | LS-NIKKO Copper Inc. | Korea | CID001078 |
Gold | Materion | United States Of America | CID001113 |
Gold | Matsuda Sangyo Co., Ltd. | Japan | CID001119 |
Gold | Metalor Technologies (Suzhou) Ltd. | China | CID001147 |
Gold | Metalor Technologies (Hong Kong) Ltd. | China | CID001149 |
Gold | Metalor Technologies (Singapore) Pte., Ltd. | Singapore | CID001152 |
Gold | Metalor Technologies S.A. | Switzerland | CID001153 |
Gold | Metalurgica Met-Mex Penoles S.A. De C.V. | Mexico | CID001161 |
Gold | Mitsubishi Materials Corporation | Japan | CID001188 |
Gold | Mitsui Mining and Smelting Co., Ltd. | Japan | CID001193 |
Gold | Nihon Material Co., Ltd. | Japan | CID001259 |
Gold | PAMP S.A. | Switzerland | CID001352 |
Gold | Royal Canadian Mint | Canada | CID001534 |
Gold | Shandong Zhaojin Gold & Silver Refinery Co., Ltd. | China | CID001622 |
Gold | Solar Applied Materials Technology Corp. | Taiwan | CID001761 |
Gold | Sumitomo Metal Mining Co., Ltd. | Japan | CID001798 |
Gold | Tanaka Kikinzoku Kogyo K.K. | Japan | CID001875 |
Gold | The Refinery of Shandong Gold Mining Co., Ltd. | China | CID001916 |
Gold | Tokuriki Honten Co., Ltd. | Japan | CID001938 |
Gold | Umicore S.A. Business Unit Precious Metals Refining | Belgium | CID001980 |
Gold | United Precious Metal Refining, Inc. | United States Of America | CID001993 |
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Gold | Western Australian Mint (T/a The Perth Mint) | Australia | CID002030 |
Gold | WIELAND Edelmetalle GmbH | Germany | CID002778 |
Gold | Ogussa Osterreichische Gold- und Silber-Scheideanstalt GmbH | Austria | CID002779 |
Gold | Zhongyuan Gold Smelter of Zhongjin Gold Corporation | China | CID002224 |
Gold | Geib Refining Corporation | United States Of America | CID002459 |
Tantalum | Exotech Inc. | United States Of America | CID000456 |
Tantalum | F&X Electro-Materials Ltd. | China | CID000460 |
Tantalum | Jiujiang Tanbre Co., Ltd. | China | CID000917 |
Tantalum | Ulba Metallurgical Plant JSC | Kazakhstan | CID001969 |
Tantalum | H.C. Starck Co., Ltd. | Thailand | CID002544 |
Tantalum | H.C. Starck Tantalum and Niobium GmbH | Germany | CID002545 |
Tantalum | H.C. Starck Hermsdorf GmbH | Germany | CID002547 |
Tantalum | H.C. Starck Inc. | United States Of America | CID002548 |
Tantalum | Global Advanced Metals Boyertown | United States Of America | CID002557 |
Tantalum | Changsha South Tantalum Niobium Co., Ltd. | China | CID000211 |
Tantalum | Guangdong Zhiyuan New Material Co., Ltd. | China | CID000616 |
Tantalum | JiuJiang JinXin Nonferrous Metals Co., Ltd. | China | CID000914 |
Tantalum | NPM Silmet AS | Estonia | CID001200 |
Tantalum | Ningxia Orient Tantalum Industry Co., Ltd. | China | CID001277 |
Tantalum | Yanling Jincheng Tantalum & Niobium Co., Ltd. | China | CID001522 |
Tantalum | Telex Metals | United States Of America | CID001891 |
Tantalum | Hengyang King Xing Lifeng New Materials Co., Ltd. | China | CID002492 |
Tantalum | FIR Metals & Resource Ltd. | China | CID002505 |
Tantalum | KEMET Blue Metals | Mexico | CID002539 |
Tantalum | Jiangxi Tuohong New Raw Material | China | CID002842 |
Tin | Chenzhou Yunxiang Mining and Metallurgy Co., Ltd. | China | CID000228 |
Tin | Alpha | United States Of America | CID000292 |
Tin | Dowa | Japan | CID000402 |
Tin | EM Vinto | Bolivia | CID000438 |
Tin | Fenix Metals | Poland | CID000468 |
Tin | Gejiu Non-Ferrous Metal Processing Co., Ltd. | China | CID000538 |
Tin | China Tin Group Co., Ltd. | China | CID001070 |
Tin | Malaysia Smelting Corporation (MSC) | Malaysia | CID001105 |
Tin | Metallic Resources, Inc. | United States Of America | CID001142 |
Tin | Mineracao Taboca S.A. | Brazil | CID001173 |
Tin | Minsur | Peru | CID001182 |
Tin | Mitsubishi Materials Corporation | Japan | CID001191 |
Tin | Jiangxi New Nanshan Technology Ltd. | China | CID001231 |
Tin | O.M. Manufacturing (Thailand) Co., Ltd. | Thailand | CID001314 |
Tin | Operaciones Metalurgicas S.A. | Bolivia | CID001337 |
Tin | PT Artha Cipta Langgeng | Indonesia | CID001399 |
Tin | PT Babel Surya Alam Lestari | Indonesia | CID001406 |
Tin | PT Mitra Stania Prima | Indonesia | CID001453 |
Tin | PT Prima Timah Utama | Indonesia | CID001458 |
Tin | PT Refined Bangka Tin | Indonesia | CID001460 |
Tin | PT Stanindo Inti Perkasa | Indonesia | CID001468 |
Tin | PT Timah Tbk Kundur | Indonesia | CID001477 |
Tin | PT Timah Tbk Mentok | Indonesia | CID001482 |
Tin | PT Tinindo Inter Nusa | Indonesia | CID001490 |
Tin | Rui Da Hung | Taiwan | CID001539 |
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Tin | Thaisarco | Thailand | CID001898 |
Tin | White Solder Metalurgia e Mineracao Ltda. | Brazil | CID002036 |
Tin | Yunnan Chengfeng Non-ferrous Metals Co., Ltd. | China | CID002158 |
Tin | PT ATD Makmur Mandiri Jaya | Indonesia | CID002503 |
Tin | O.M. Manufacturing Philippines, Inc. | Philippines | CID002517 |
Tin | PT Rajehan Ariq | Indonesia | CID002593 |
Tin | Metallo Belgium N.V. | Belgium | CID002773 |
Tin | Metallo Spain S.L.U. | Spain | CID002774 |
Tin | Thai Nguyen Mining and Metallurgy Co., Ltd. | Viet Nam | CID002834 |
Tin | PT Menara Cipta Mulia | Indonesia | CID002835 |
Tin | Guangdong Hanhe Non-Ferrous Metal Co., Ltd. | China | CID003116 |
Tin | PT Bangka Serumpun | Indonesia | CID003205 |
Tin | Tin Technology & Refining | United States Of America | CID003325 |
Tin | Ma'anshan Weitai Tin Co., Ltd. | China | CID003379 |
Tin | PT Rajawali Rimba Perkasa | Indonesia | CID003381 |
Tin | Luna Smelter, Ltd. | Rwanda | CID003387 |
Tin | Yunnan Tin Company Limited | China | CID002180 |
Tungsten | A.L.M.T. Corp. | Japan | CID000004 |
Tungsten | Kennametal Huntsville | United States Of America | CID000105 |
Tungsten | Chongyi Zhangyuan Tungsten Co., Ltd. | China | CID000258 |
Tungsten | Global Tungsten & Powders Corp. | United States Of America | CID000568 |
Tungsten | Hunan Chenzhou Mining Co., Ltd. | China | CID000766 |
Tungsten | Hunan Chunchang Nonferrous Metals Co., Ltd. | China | CID000769 |
Tungsten | Ganzhou Huaxing Tungsten Products Co., Ltd. | China | CID000875 |
Tungsten | Wolfram Bergbau und Hutten AG | Austria | CID002044 |
Tungsten | Xiamen Tungsten Co., Ltd. | China | CID002082 |
Tungsten | Jiangxi Yaosheng Tungsten Co., Ltd. | China | CID002316 |
Tungsten | Jiangxi Xinsheng Tungsten Industry Co., Ltd. | China | CID002317 |
Tungsten | Xiamen Tungsten (H.C.) Co., Ltd. | China | CID002320 |
Tungsten | Jiangxi Gan Bei Tungsten Co., Ltd. | China | CID002321 |
Tungsten | Chenzhou Diamond Tungsten Products Co., Ltd. | China | CID002513 |
Tungsten | H.C. Starck Tungsten GmbH | Germany | CID002541 |
Tungsten | Masan Tungsten Chemical LLC (MTC) | Viet Nam | CID002543 |
Tungsten | Jiangwu H.C. Starck Tungsten Products Co., Ltd. | China | CID002551 |
Tungsten | Niagara Refining LLC | United States Of America | CID002589 |
Tungsten | Ganzhou Haichuang Tungsten Co., Ltd. | China | CID002645 |
Tungsten | Hydrometallurg, JSC | Russian Federation | CID002649 |
Tungsten | FIR Metals & Resource Ltd. | China | CID002505 |
Tungsten | Japan New Metals Co., Ltd. | Japan | CID000825 |
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APPENDIX B – Countries of Origin
Countries of Origin * | ||
| Australia | Mexico |
| Austria | Peru |
| Belgium | Philippines |
| Bolivia | Poland |
| Brazil | Russian Federation |
| Canada | Rwanda |
| China | Singapore |
| Country | Spain |
| Estonia | Sweden |
| Germany | Switzerland |
| Indonesia | Taiwan |
| Italy | Thailand |
| Japan | Turkey |
| Kazakhstan | United States Of America |
| Korea | Viet Nam |
| Malaysia |
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* Country of origin information of the Conflict Minerals used by RMAP Conformant smelters is provided by the RMI. Due to confidentiality restrictions, the RMI may only disclose country of origin information on an aggregate basis where the country of origin is not the DRC. | ||
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