Company name: ShenzhenCuilu Gold Refinery Co., Ltd.

Location: No.2 Factory Building, Huangshengfa Industrial Zone, Baida Street, Xikeng Village, Henggang Street, Longgang District, Shenzhen

Year-end Report: 2022 LBMA Supply Chain Due Diligence Management Compliance Report

Date of report: February 15th, 2023

Person in charge of report: Li Wenju

Reporter position: Director of Compliance and Risk Control [email protected]

 

Part I: Purpose

In order to meet the requirements of the LBMA Responsible Gold/Silver Guidance, avoid any systematic or extensive human rights violations, avoid conflicts, money laundering and combat terrorist financing, our company has established a strong management system and adopted the supply chain due diligence method to identify and evaluate the risks of all suppliers, so as to ensure that the company's gold/silver supply chain fully meets the requirements of the LBMA Responsible Gold/Silver Guidance.

Part II: General situation of the company

    Shenzhen Cuilu Gold Refinery Co., Ltd., established in July 2007, is located in Huangshengfa Industrial Zone, Baida Street, Xikeng Village, Henggang Street, Longgang District, Shenzhen. It is a precious metal resource integration enterprise integrating gold regeneration, silver recovery, precious metal refining and testing. There are several advanced precious metal refining production lines, which can purify 300 tons of gold and 200 tons of silver annually, mainly producing "Cuilu" brand standard gold ingots, silver ingots and high purity（AU99.999% or more）. "Cuilu" brand has successively won "China Famous Brand" and "China Well-known Trademark", and it is one of the top 100 enterprises in Shenzhen. In September 2009, the company became a comprehensive member of Shanghai Gold Exchange, and it is a qualified enterprise that can provide standard gold ingots and silver ingots. The refining plant covers an area of more than 3,000 square meters and is a leading enterprise in the precious metal purification industry. Companies adhere to the quality first, sincere service as the core business philosophy, the company passed the ISO9001 quality system certification and ISO14001 environmental management system certification in 2009.

All the raw materials of our company come from the gold/silver jewelry production and processing company in China and the old gold and silver ornaments and ornaments at the sales terminal, as well as the related alloy gold and gold.

Part III: Summary of Compliance Activities

Step 1: Establish a strong corporate management system

Statement of compliance:

We have fully met the first step: to establish a strong company management system.

Company policy:

Statement of compliance: The Company issued the Due Diligence Management System for Gold/Silver Supply Chain and the Management Measures for Risk Mitigation in Gold/Silver Supply Chain on April 1, 2022. Our gold/silver supply chain policy strictly prohibits gold/silver suppliers from the following behaviors: 1. Human rights violations, including the use of child labor, torture, inhuman and degrading treatment, widespread use of violence or other serious anti-human rights forced labor, war crimes, and so on. 2. Providing direct or indirect support to illegal armed groups or public or private security forces that illegally control mining areas, dealers, other intermediaries and transportation routes through the supply chain, or illegally taxing or extorting money or mineral products throughout the supply chain ("illegal armed groups, public or private security forces"); 3. Concealing the origin of gold/silver through bribery or fraud; 4. In order to comply with the government's requirements on the extraction, trade and export taxes and fees of mineral products from conflict-affected and high-risk areas; 5. Money laundering or terrorist financing; 6. Financing conflicts; 7. Engaged in high-risk business, such as weapons, gambling, antiques and artworks, sects and their leaders; 8. The beneficiary is a politically sensitive person or wanted person; 9. Comply with the environmental, health, safety and labor laws and/or company policies of the country/region where it operates. The Due Diligence Management System of Gold/Silver Supply Chain stipulates the internal organizational structure and responsibilities, due diligence regulations of gold/silver supply chain, risk identification methods and evaluation standards of gold/silver supply chain, transaction monitoring, document preservation, training and reporting mechanism. In 2022, our company completed the due diligence of all gold/silver suppliers in strict accordance with the system requirements, and carried out risk identification and assessment, effectively controlling the risks in the gold/silver supply chain. At the same time, the company also posted the policy on the official website at http://clgold.com.cn/NewsInfo.aspx?. Id=12726

 

Internal management structure

Compliance statement: The company established an internal management system according to the Due Diligence Rules for Gold/Silver Supply Chain, and defined the management positions and corresponding responsibilities. The company has set up a compliance director and five compliance commissioners. The compliance director of the company is the deputy general manager of the company, and the deputy general manager of the business department, the factory director, the manager of the finance department and the director of the testing center are also appointed as compliance commissioners, who are respectively responsible for the related affairs in the gold/silver supply chain. The compliance director is a senior manager of the company, responsible for the examination and approval of cooperation contracts with suppliers, including whether to cooperate with high-risk suppliers, and the review and supervision of suppliers after the contract is signed. The compliance officer assists the senior management to be fully responsible for the due diligence of the gold/silver supply chain, and is responsible for everything in the gold/silver supply chain, ensuring that the whole gold/silver supply chain of the company meets the risk management regulations and can effectively identify risks and avoid risks. Responsible for the training of due diligence and risk control of gold/silver supply chain, drafting and updating the gold/silver supply chain policy, and providing accurate information for senior managers. The business department is responsible for purchasing raw materials, ensuring the long-term, stable and safe supply of raw materials, and refusing to cooperate with relevant enterprises, organizations or countries in high-risk areas. The responsibility of the compliance officer of finance is to keep the transaction documents of all customers completely. The Compliance Commissioner of the Production Department organizes the gold/silver feeding production to make a feeding record, and adopts a closed process in the production process to ensure the safety and traceability of gold/silver production and processing. And Guidance the warehouse to make a good record of gold/silver warehousing and warehousing according to customers' classification. In 2022, Shenzhen Cuilu Gold Refinery Co., Ltd. strictly implemented the Due Diligence Management System of Gold/Silver Supply Chain and conducted risk due diligence on suppliers. Monitor all transactions to avoid establishing relationships with high-risk suppliers. At the same time, the compliance officer reviews all due diligence findings and results, and all gold/silver material procurement contracts have been approved by the compliance director.

Identification of traceability system and other supply chain participants

Compliance statement: according to the requirements of the management system, the company has established a supply chain traceability system to collect and maintain the supply chain information of each batch, including assigning a separate reference number for each batch of input and output: gold/silver product traceability (gold/silver-> raw materials)-gold/silver-containing material type (mineral gold and silver or recycled gold/silver); -warehousing weight and analysis report; -Raw material warehousing date and finished product warehousing date; Gold/silver product traceability (gold/silver-> customers)-customer information; -Transaction weight and analysis report; -Issue date; According to all the records kept, we can trace back from finished products to raw materials and from raw materials to finished products, and we can trace back the purchase contracts of each supplier for each batch of products. According to the contract contents, we can trace back information including precious metal types, purchase weights, analysis reports and related due diligence documents.

Interact with the counterparty and assist the counterparty to establish due diligence capability.

Compliance statement: when signing a contract with a supplier, the business personnel of the business department shall sign the LBMA Compliance Commitment Letter with all gold/silver suppliers according to the requirements of the management system, and conduct the Supply Chain Due Diligence and publicize the relevant provisions of the LBMA Responsible Gold/Silver Guidance to the suppliers to ensure that they understand the requirements of the company's LBMA management, supply chain policies and required commitments. In the letter of commitment, the other party to the gold/silver supply contract should promise and admit in writing that there is no serious human rights violation related to mineral exploitation, transportation or trade, no direct or indirect support for non-state armed groups, no direct or indirect support for public or private security forces, no bribery or false misrepresentation of mineral sources, and no money laundering. In addition, it has not participated in the payment of taxes, fees and royalties related to mineral exploitation, trade and export in conflict-affected areas and high-risk areas to the government. All the suppliers signed in 2022 have signed relevant letters of commitment.

Transaction monitoring

Statement of compliance: All payments for gold/silver are made through the company's bank account, and there is no cash transaction. These receipts and payments are supervised by banks and national finance and taxation departments, and financial audits are conducted every year. According to the requirements of the management system, supervise the risks in the supply chain of gold/silver suppliers. The refinery checks the received shipping documents, weight documents, inspection reports, invoices, transfer records and other texts of each batch of products. The Compliance Officer is responsible for transaction monitoring, checking the trading background that is inconsistent or suspected to be inconsistent in any form, and confirming the investigation results in writing and reporting to the Compliance Director. All transactions in 2022 are made by bank transfer.

 

Communication and complaint mechanism

Compliance statement: the company has established a complaint mechanism, and the e-mail and contact information of the compliance officer are posted on the official website at:

Http://hunterzhu.cn/article-item-23.html, and the complaint mechanism has made necessary communication with suppliers in the process of purchasing materials containing gold/silver, and internal and external stakeholders can anonymously report violations in the process of gold/silver trading. The factory set up a suggestion box as a way for internal employees to report, and the relevant personnel regularly unpack and check the contents of the report. There were no reported incidents in 2022. In addition, the company has also established a whistleblower protection system to prevent retaliation against whistleblowers and effectively protect their rights and interests.

training

Compliance statement: The company regularly organizes all gold/silver related departments to conduct training, and conducted one training in 2022. 1. On April 7th, 2022, the procurement system document of the person in charge of LBMA required training on supplier investigation procedures, risk registration evaluation and countermeasures; After the training, the effect was evaluated and the training records were kept.

Record retention

Compliance statement: according to the company's requirements, all supplier-related documents, including due diligence documents, risk assessment forms, compliance documents, contract texts, inspection records and warehousing records, shall be kept for at least five years.

Step 2: Identify and evaluate supply chain risks

Statement of compliance: We fully comply with Step 2: Identify and evaluate supply chain risks.

Supply chain risk identification:

Compliance statement: The Due Diligence Rules for Gold/Silver Supply Chain stipulates the methods for identifying supplier risks, covering all risks of gold/silver-containing materials from the place of origin to the refinery. The following risks are identified through the Supplier Due Diligence Questionnaire, such as basic information of suppliers, beneficiary, origin information, responsible precious metal supply chain policy, transportation process, anti-money laundering and anti-financing terrorism, bribery and fraud, human rights violations, transaction monitoring, and support for non-governmental armed organizations. The identification method includes: establishing supply chain customer files, including enterprise name, legal representative, address, contact information, operation mode, production mode, transaction contract, etc. Check the existing supply chain customers regularly. If there are new or changed customers, check their files in time to keep the file database in the latest state. Identify every customer, enterprise and enterprise beneficial owner, and make sure that every customer, enterprise and enterprise beneficial owner in the supply chain is not on any government's wanted list of money laundering, fraud or terrorism, and inquire that the enterprise and enterprise beneficial owner are not on the list of untrustworthy persons through China Executive Information Open Network; Regularly obtain the details of supply chain customers' business and finance, the purpose of gold/silver trading and business operation.

Supply chain risk assessment

Compliance statement: Before the business relationship with suppliers is established, the business department needs to fill in the Due Diligence Questionnaire for Gold/Silver Supply Chain and conduct risk assessment for all gold/silver-containing materials according to the Due Diligence Rules for Gold/Silver Supply Chain. Mineral gold/silver: Suppliers need to provide information on the origin of gold/silver-containing materials, mining license, import and export license, proof of mining information, due diligence documents, in addition, they should also collect business licenses, beneficiaries, credit standing and financial information, whether they are on the government's money laundering list, known fraudsters or terrorists, etc. For some suppliers, compliance officers will go to the site to investigate the authenticity of the information to ensure accurate and reliable evaluation. The evaluation criteria of high-risk supply chain are as follows: 1. Mineral gold/silver or recycled gold/silver comes from, transits through or passes through high-risk areas affected by conflicts or human rights violations. 2. Mineral gold/silver claims to come from a country with limited known reserves, limited resources or limited expected silver production. 3. Regenerated gold/silver comes from a known high-risk area of conflict impact and human rights violation, or it is reasonably suspected to transit through this area. 4. Companies in the gold/silver supply chain or other known upstream companies are located in a country with high risks of money laundering, crime and corruption. 5. The profit owners of companies in the gold/silver supply chain or other known upstream companies are politically sensitive. 6. Companies in the gold/silver supply chain or other known upstream companies actively participate in high-risk business activities, such as weapons, gambling, money laundering, antiques and artworks, diamonds, religions and religious leaders. 7. High-risk countries and regions coming from and passing through, Including: using fragile state index, global conflict barometer, United Nations human development index, United Nations comprehensive sanctions list, United Nations human rights report, Financial Action Task Force (FATF) report, whether it is listed in DFA1502 or not, (a total of 10 countries: the Democratic Republic of the Congo, Republic of Congo, Central African Republic, Rwanda, South Sudan, Uganda, Tanzania, Burundi, , Zambia, Angola), EU CAHRA List and reliable market information about high-risk gold centers/transit centers and countries/regions with high money laundering risks to identify conflict-affected and high-risk areas.

Evaluation method: based on the content of the due diligence questionnaire, combined with the actual information received from suppliers and customers, evaluate and score according to the evaluation criteria of each project, and finally determine the risk level. In 2022, all 27 suppliers of silver materials were evaluated. The main sources of silver provided were the defective products, scraps, old jewelry and old ornaments from Shenzhen silver jewelry manufacturers. According to the investigation, the suppliers' raw materials were mainly the unsalable products and defective products from the exhibition halls and sales terminals in the surrounding areas of Shenzhen, such as Hunan, Fujian, Jiangxi and Guangdong. In 2022, all 176 gold material suppliers were evaluated. The gold materials provided by the suppliers were mainly old gold jewelry and related alloy gold and gold alloy raw materials, all of which came from domestic cities and provinces. According to the identification results of the company's conflict-affected and high-risk areas, China did not belong to the conflict-affected and high-risk areas. In the risk assessment of responsible procurement in 2022, it is determined that the supply chain is low risk. According to the evaluation results, all suppliers are judged as low-risk suppliers.

Reporting of risk assessment results

Compliance statement: The Compliance Officer provides a quarterly review report to the Compliance Director and the top management on behalf of the senior management team. The senior management retains ultimate control and responsibility for the gold/silver supply chain. If it is a high-risk supplier, it must be approved by the top management and stop cooperation immediately.

Transaction monitoring

According to the requirements of the management system, ensure the transaction supervision of the risks in the supply chain of gold/silver suppliers. The refinery checks the received shipping documents, weight documents, inspection reports, invoices and other texts of each batch of products. The Compliance Officer is responsible for transaction monitoring, checking the trading background that is inconsistent or suspected to be inconsistent in any form, and confirming the investigation results in writing and reporting to the Compliance Director. Isolate the gold/silver materials that do not meet the requirements until the risk is reduced to low risk. In 2022, there was no non-compliance with the transaction monitoring and control procedures.

During the audit, some minor nonconformities of suppliers were improved and closed.

Step 3: Implement management strategies for the identified risks.

Statement of compliance: We fully meet the third step: design and implement a management strategy to deal with the identified risks.

Implement a risk management strategy for the identified risks.

Compliance statement (i) Mitigating risks when continuing to trade: When the evaluation of suppliers is at a low risk, we will continue to obtain gold/silver raw materials from the suppliers, and gradually improve their investigation data during the cooperation process, and gradually assist suppliers to establish their due diligence system and help them establish and improve the deficiencies in risk management and control. (ii) Mitigating the risk when the transaction is suspended: when the evaluation result is medium risk, the cooperation will be suspended and the suspicious risk will be investigated until the supplier is determined to be a low-risk supplier. At the same time, isolate incoming materials. The company's gold/silver warehouse is equipped with a high-risk incoming isolation zone to deal with unexpected situations. Within a period of 6 months, if the supplier rectifies the risk item and removes the risk, the transaction will be resumed; if the rectification fails to meet the requirements or the risk cannot be removed, the cooperation with the supplier will be stopped. (iii) Stop trading and get rid of risks: if the supplier is assessed as high risk, or if high-risk items are found during cooperation with the supplier, stop cooperating with it, report the evaluation report and high-risk items to the top management, and put them on the blacklist of the company. You cannot trade with the company within 3 years.

Quantitative measures, performance monitoring, re-evaluation and regular reporting

Compliance statement: The Due Diligence Rules for Gold/Silver Supply Chain stipulates the quantitative management mode of supply chain evaluation, and the risk levels are as follows: (i) low risk, R≥6 points; (ii) Medium risk, 2 points < r < 6 points; (iii) High risk, R≤2 points. If the result of due diligence is low risk, the company has adopted an improvement strategy with clear performance targets within the specified time range, and we will continue to obtain gold/silver raw materials from it. If the due diligence result of the gold/silver supply chain is medium-risk or high-risk, it indicates that there may be money laundering, terrorist financing, fuelling conflict and human rights violations, or there is a high possibility of this, we will immediately stop obtaining gold/silver raw materials from it until the information or data provided shows its low-risk level. According to the results of due diligence in 2022, no supplier needs a risk mitigation management strategy. Regular re-evaluation and continuous monitoring: 1. Every year, the compliance officer of the business department organizes personnel to collect all changes in supplier information, continuously monitor the transaction results and re-evaluate the annual supply chain due diligence to decide whether to continue cooperation. 2. The transportation, warehousing, production and payment of each batch of purchased gold/silver raw materials are monitored by the compliance officer. Periodic report: The Compliance Commissioner submits quarterly reports to the Compliance Director and the top management according to the actual situation of LBMA management. Report and summarize the operation of LBMA management system in this quarter, and put forward the shortcomings and improvement measures. In 2022, our company adopted quantitative means to manage suppliers' scores, and conducted annual supple mentary risk assessment for all suppliers except new suppliers. The Compliance Director has reviewed the evaluation results and submitted quarterly reports to the top management.

Step 4: Arrange an independent third-party audit

Statement of compliance: We are in full compliance with Step 4: Arrange an independent third-party audit.

Compliance statement: In February 2022 and August 2022, independent audits were conducted for the gold and silver supply chains respectively. This year, our company prepared the compliance report as of December 31, 2022 on time, and has commissioned RCS Global to conduct compliance verification for our company.

Step 5: Supply Chain Due Diligence Report

Statement of compliance: We are in full compliance with Step 5: Supply Chain Due Diligence Report.

Compliance statement: We have completed the investigation of all suppliers according to the Due Diligence Management System of Gold/Silver Supply Chain formulated by the company, which meets the requirements of LBMA to be responsible for the management of gold/silver, and formed the 2022 Compliance Report, which will be posted on the company website.http://hunterzhu.cnPublicize.

Limited Assurance Statement on Forced Labour

Compliance statement: we all meet the requirements of prohibiting the use of forced labor, and there is no forced labor in our company and all suppliers.

Compliance statement:

We have formulated the Anti-Forced Labor Management System, and conveyed the requirements of prohibiting the use of forced labor to suppliers in different regions by mail, chat software or commitment letter. And all the gold/silver suppliers of the company were assessed on the risk of forced labor by telephone interview, chat software communication, or on-site visit with suppliers (customers) or asking people who have close contact with suppliers, and the Risk Assessment Report on Forced Labor was formed.

The investigation covers the forced labor in the Anti-Forced Labor Management System, such as: the company prohibits any behavior that restricts labor freedom, such as seizure of identity documents, collection of deposits or collateral, seizure of workers' wages, forced body search, restrictions on workers' access to factories and forced overtime; The company does not use or support the use of any form of forced labor, including prison labor, contract labor, debt-paying labor, slave labor, forced or involuntary labor by means of punishment or intimidation; Managers at all levels, including security guards and managers, shall not be forced to search, work overtime, restrict employees' freedom of movement or intimidate, beat or scold employees. Security personnel are only responsible for maintaining the normal work and life order of the company and protecting the property and personal safety of the company and employees. Security personnel or management personnel shall not force or intimidate employees. The responsibility of security personnel is to protect the safety of personnel and property of the whole company, not to restrict employees' movement or force employees to work.

Through due diligence on the risk of forced labor of suppliers, our suppliers are located in Anhui, Beijing, Shanxi, Fujian, Gansu, Guangdong, Guangxi, Hebei, Henan, Inner Mongolia, Hubei, Hunan, Jiangsu, Jilin, Liaoning, Shandong, Zhejiang, Sichuan, Shanghai, Shaanxi, Yunnan and Tianjin in China. In 2022, there were 203 suppliers, including 84 corporate suppliers and 92 individual suppliers. The raw materials provided were old gold and silver jewelry, gold and silver jewelry, handicrafts and ornaments that were unsalable in exhibition halls and stores. The company inquired through the national enterprise credit information publicity website and the public websites such as APP, and found that all corporate enterprises did not violate the Labor Law of People's Republic of China (PRC) and forced labor.

All employees of the supplier are employed voluntarily, and there is no risk of forced labor in the supplier.

The Company established the Anti-Forced Labor Management System and publicized it to all employees in March, 2022. The system was posted in a conspicuous position in the company, and a smooth complaint channel was established (suggestion box, and the telephone number of the local labor supervision department was published) to give employees the opportunity to reflect their opinions and feelings at work. The company strictly implements the Labor Law of People's Republic of China (PRC) and various systems promulgated by Shenzhen Federation of Trade Unions. There is no forced labor.

 

Part IV: Conclusion.

Our company has implemented effective management systems, procedures, processes and practices in the annual report for the year ending December 31, 2022, which has met the requirements of the LBMA Responsible Gold/Silver Guidance. Our company is committed to continuous improvement and will regularly monitor all corrective measures found internally. Continuously meet the requirements of LBMA responsible gold/silver Guidance.

other

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