Supplier Due Diligence
a practical field guide for mineral traders
1 Why bother?
One fake bill of lading, one under-spec cargo, or one sanctioned counter-party can wipe out an entire trade margin.
Systematic due-diligence up front costs a few hundred dollars and a few days; cleaning up a failed shipment can cost hundreds of thousands and ban you from key markets.
2 The “5-panel” due-diligence model
| Panel | Core questions | Typical evidence |
|---|---|---|
| Legal existence & authority | Are they who they claim? Are they authorised to export the commodity? | Business licence, tax ID, chamber of commerce print-out; mining or export permit; board resolution if signing under seal |
| Financial health & capacity | Can they finance ore extraction, pay port fees, survive payment gap? | 2-year audited accounts, bank reference, D-U-N-S score, proof of warehouse or processing line |
| Product quality & technical capability | Can they deliver grade, tonnage, packaging? | Recent SGS/CCIC/Intertek assay, flow-sheet, capacity statement, previous inspection photos, in-house lab certificates |
| Compliance & reputation | Are they clean on sanctions, AML, corruption, ESG? | World-Check / OFAC scan, adverse-media search, ISO 14001 & 45001 certificates, sustainability or CSR report |
| Operational reliability | Do they actually control the mine or stockpile? How do they load? | Site-visit report, drone imagery, weighbridge calibration log, draft SOP for sampling & moisture control |
3 Step-by-step playbook
Desktop verification (48 h)
Search company registry, export-permit lists, OpenCorporates.
Run owners & directors through OFAC, EU, UN, UK sanctions lists.
Pull a credit report (Dun & Bradstreet, CreditSafe).
Document harvest (3–5 days)
Ask for PDF versions of:
– Business licence, articles of association, tax certificate
– Mining title or trading licence matching HS code
– Last two SGS/Intertek assays for the exact product
– Customer references with invoice & BL numbers redacted
Phone/video interview
Confirm plant location, nearest port, loading method, available packing.
Have them hold up today’s newspaper in the warehouse during a short video call—fast authenticity filter.
Third-party site audit (optional for small lots, mandatory for long-term offtake)
Local inspection agency spends half a day on-site.
Checklist: ore stock size, moisture cover, ROM grade pile vs finished stock, safety conditions, weighbridge serial numbers.
Sample chain-of-custody
Intertek inspector draws & seals a 5 kg composite; lab-split goes to your nominated lab and their lab.
Cross-match results; ±10 % relative allowed on key metals, ±0.2 % on moisture/LOI.
Risk scoring & decision
Score each panel 1(low)-5(high).
Any single “5” = either fix the gap or walk away.
Aggregate ≤12 → proceed under standard LC; 13–18 → require 20 % performance bond; >18 → reject or demand prepaid shipment.
4 Red-flag triggers
| Red flag | Typical fallout |
|---|---|
| Director listed in Panama Papers or on “PEP” list | Heightened AML/KYC — require enhanced banking controls |
| Mining licence “under renewal” | Cargo may be seized by customs at export gate |
| Only photocopied | Rapid |
| Assay sheets older than 12 months | Ore body may have moved grade bands; insist on fresh sample |
| Refusal to allow third-party inspector | Walk away — you will have no defence in a future dispute |
5 Contract clauses that lock the diligence into the deal
Quality tolerance & umpire lab — specify two primary labs + one umpire in advance.
Performance guarantee — bank guarantee or standby LC for 10–20 % cargo value, callable on quality or delivery failure.
Right of audit — purchaser may visit mine or warehouse with 72 h notice.
Force-majeure carve-out excludes licence revocation or sanctions; those are supplier risk.
6 Cost & time benchmarks (for one new supplier)
| Task | Typical cost | Calendar time |
|---|---|---|
| Credit / sanctions report | USD 100–250 | Same-day |
| Third-party on-site audit | USD 900–1 200 + travel | 3–5 days scheduling |
| Independent composite assay (Sb or Au ore) | USD 250–400 | 4–6 days lab |
| Lawyer review of licence pack | USD 300–600 | 2 days |
Total ≈ USD 1 500—cheap insurance against a bad 40 ft container worth USD 80 000+.
7 Key take-aways
Run a five-panel check: legal, financial, technical, compliance, operational.
A half-day site audit & chain-of-custody sample is the single most effective fraud filter.
Hard-wire diligence findings into the sales contract (performance bond, umpire labs, audit rights).
Document everything—if a dispute lands in arbitration, the timestamped diligence file is your first line of defence.
Follow this routine and you drastically cut the odds of stuck cargo, quality claims, or regulatory headaches in your cross-border mineral trades.