By Jonny Hogg
NYABIBWE, Democratic Republic of Congo (Reuters) - Miners clustered in a muddy riverbed in eastern Democratic Republic of Congo watch as a bag of tin ore is weighed on scales hung from a shovel and then sealed with a small plastic tag.
The simple "bag and tag" initiative could allow mineral exports from Congo's violent east to flow legally again for the first time since a U.S. law targeting conflict minerals largely brought the trade, a mainstay of the economy, to a standstill.
The tag certifies the tin ore is conflict-free to ensure it will not fall foul of the Dodd Frank Law. Under rules only finalized this year, the law requires U.S. companies buying from a region rich in minerals to ensure their supply does not come from areas controlled by armed groups or corrupt soldiers.
While welcomed by activists trying to halt the flow of blood minerals from east Congo, some researchers and Congolese officials said the crackdown threatened a catastrophic impact on the livelihood of millions of ordinary people who depend directly or indirectly on mining.
The tag scheme now being applied by Congolese authorities with foreign help provides a conflict free certification that can allow mining activity to go ahead without fear of sanction.
"It's really great, better than great," said artisanal miner Roberto Maisha, who works the cooperative-operated Kalimbi mine near the small town of Nyabibwe in South Kivu - accessible along winding dirt roads that snake up into the cloud-covered hills.
The plastic tag on the mined ore carries a barcode that corresponds to a certification document. This acts as a kind of 'passport' for the minerals to be legally exported.
Even before the U.S. legislation took effect, big buyers like Apple Inc and Hewlett Packard stopped sourcing minerals from east Congo, and once flourishing markets that supported tens of thousands of people came to a halt.
"We were really struggling because we couldn't find anyone to buy our minerals," Maisha said, adding he spent months scrabbling to find enough food for his family and unable to pay the fees to send his children to school.
"With the tagging system, things have gotten much better."
Eastern Congo has been racked by violence since the 1990s, as battles over ethnicity and resources saw neighboring countries invade, armed groups spring up and the country's own army turning on the civilian population.
Millions are estimated to have died in nearly two decades of bloodshed, which experts say was fuelled by an illicit trade in tin and gold as well as in coltan and tantalum - widely used in cell phones and computers - all mined in Congo before being smuggled out through neighboring Rwanda, Uganda and Burundi.
Contraband minerals are believed to be helping to finance the leaders of the latest insurgency by M23 rebels in eastern North Kivu province. This has displaced tens of thousands of civilians and triggered a fresh scramble by African, European and U.S. leaders and the United Nations to try again to forge an elusive peace in Congo.
DEBATE OVER IMPACT
The U.S.-based advocacy group Enough, a major backer of the Dodd Frank Act, argues initiatives targeting conflict minerals have brought a 65 percent drop in profits for armed groups from tin, tungsten and tantalum this year.
Enough says the legislation remains necessary to break the link between human rights abuses and minerals in Congo.
But a United Nations report in December 2011 said the crackdown on conflict minerals was hurting miners and pushing the trade deeper into the hands of smugglers, including the man who now heads the M23 rebellion, Bosco Ntaganda.
A so-called "conflict-free tin initiative" seeking to revive the legal trade in minerals was set up by UK-based industry body ITRI. It currently has the only traceability program operating in Rwanda, and in Congo's more stable Katanga province.
But now, with backers including the United States and the Netherlands, a tagging project has also been launched for the first time in the Kivus, the two Congolese provinces that have borne the brunt of years of violence and looting and have been the source of most of the region's conflict minerals.
During the suspension in exports, mining carried on but local prices collapsed by a factor of 6 to less than $1 a kilogram and the only buyers were Chinese exporters untroubled by traceability, and smugglers.
But, a little more than a week after the 'bag and tag' scheme got underway at Kalimbi mine, the price has bounced back to $3.5 per kilogram and more than 3,300 kg in minerals have been tagged here.
There are teething problems however. State workers tasked with preventing corruption say that they have not received their government salaries - although the authorities have dismissed the claims as false.
But if questions over funding and supervision can be overcome, Congo could start to attract back its big buyers, according to U.S. Ambassador to Congo James Entwistle.
"No reform of illegal artisanal mining in the world has attempted traceability on this scale ... We want to make sure there's assistance to help the DRC and regional governments reform their mining sectors ... so they're not abandoned by global markets," Entwistle said.
Kalimbi is for the moment the only mine of an estimated 900 in South Kivu which has internationally recognized traceability, although the government is searching for other sites to launch tagging in the coming months.
SECURITY A WORRY
The effort could be complicated by a deterioration in security across the Kivu provinces this year. Congolese security forces are struggling to control the M23 rebellion and have ceded whole swathes of territory.
But areas free of militants must be opened up to allow minerals exports, according to Eric Kajemba, who works with a local rights group that backs the tagging. "We think it's feasible. The situation is difficult but there are whole zones where mines have been secure for a year or more," he says.
Although officials and rights groups say many smugglers are moving towards easier-to-smuggle minerals like gold to get around tighter restrictions, illegal shipments of tin and other minerals are still being seized. Local officials say that criminal elements within the army are involved.
"The armed groups aren't benefiting (as much) from the trade, it's the soldiers based in Bukavu who are smuggling," one local government official told Reuters, asking not to be named for fear of reprisals.
"At the highest level, the president of the republic and the others, they have to be able to punish," Kajemba says. "If we punish four or five high-ranking officers, I'm convinced that will change everyone's behavior."
A U.N. Group of Experts report this year said that the M23 rebellion in Congo's east was receiving funding from minerals smuggling to Rwanda. It alleged Rwandan officials were backing the insurgency - a claim Kigali strongly and repeatedly denies.
UNCLEARED STOCKPILES A THREAT
Officials also warn that potentially thousands of tons of minerals mined during the suspension and without the "conflict free" tagging are stockpiled across the region and could enter the market clandestinely as trade picks up again.
In Nyabibwe, trader Bisimwa Bashimbe points to sacks of tin ore piled haphazardly in the corner of his bedroom, which he estimates could have a value of $6,000 - this in a country where most people live on less than a dollar a day.
Many traders poured their savings into buying the minerals and now, unable to sell them, they are being forced out of business, according to Bashimbe.
"It's a real problem, we're just asking the international community to allow us to sell our minerals," he says.
Luc Asosa from PACT, an American NGO which is co-coordinating the launch of the traceability project, said the untagged minerals pose a risk to the venture, because if they enter the supply chain they will threaten the credibility of the process.
"Why would someone risk their reputation for a few kilos (of untagged minerals) ... In the end the integrity of the system here in the Kivus will become the key issue," he said.
South Kivu's governor Marcellin Chisambo said that even though miners who lost their savings stockpiling minerals ahead of the traceability scheme are suffering, the state is not going to intervene to help.
"The suspension of exports hurt the miners, and particularly the traders, but also the state ... (But) There's no way to say that these minerals were mined properly," he said.
"We're blocking them, that's the price to pay."
(Editing by Richard Valdmanis, Pascal Fletcher, Janet McBride)