* Metals merchant under pressure from United Nations
* Minerals trade funding rebel groups in Congo
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By Joe Bavier
KINSHASA, May 4 (Reuters) - Belgium-based minerals merchant Traxys will stop purchasing tin ore from violence-ravaged eastern Democratic Republic of Congo in response to pressure from the United Nations, a company official said on Monday.
The minerals trade has long been a key source of revenue for illegal armed groups in the east, including the Rwandan Hutu Democratic Forces for the Liberation of Rwanda (FDLR), composed in part of fighters responsible for Rwanda's 1994 genocide.
Traxys' decision to pull out of eastern Congo comes amid growing pressure from the United Nations and rights groups to clean up that trade.
"As of June 1, we will stop sourcing any minerals from eastern Congo, that is to say, from (the provinces of) North Kivu, South Kivu, and Maniema," said the official, who spoke on condition of anonymity.
A report published late last year by a U.N. panel of experts charged with investigating violations of a Security Council-imposed arms embargo found that Traxys was part of a mineral supply chain that led back to the Rwandan rebels.
The U.N. report said Traxys purchased in 2007 1,631 tonnes of the tin ore cassiterite and 226 tonnes of coltan, both used to manufacture electronics devices, such as mobile phones and video games consoles, from four Congolese companies which systematically buy from FDLR-controlled mines.
Traxys, which lists among its shareholders several private equity firms and steelmaker ArcelorMittal, rejected the U.N. claims and said on Monday that it had set up its own framework to verify that the minerals it purchased did not support illegal armed groups.
"According to the U.N., that's not enough...We prefer to stop until we can come up with a protocol that will satisfy them," the company representative said.
MOUNTING PRESSURE
The coordinator of the U.N. experts, Dinesh Mahtani, said on Monday that Traxys had not been told to withdraw from Congo, but that the group had asked Traxys for further information on its due diligence scheme.
"There is no current U.N. ban on export of natural resources from the Democratic Republic of Congo," he said in a statement.
"The Group will continue its research on due diligence and on whether companies are knowingly buying minerals controlled by non-state armed groups."
A U.N. Security Council resolution adopted last year calls upon countries to "ensure that importers, processing industries, and consumers of Congolese mineral products" exercise due diligence on the minerals they purchase.
A campaign being led by U.S.-based human rights group Enough Project is calling for more transparency in the sector and stricter laws to force companies to prove the origins of the ore they buy.
However, some observers fear that increasing restrictions on Congolese minerals will simply push companies to look elsewhere for their raw materials and endanger the livelihoods of thousands of local miners.
"Traxys is among the biggest buyers. This will have serious economic consequences here," Namegabe Mudekereza, the head of South Kivu's business association and the patron of one of the U.N.-cited mineral suppliers, told Reuters on Monday.
North and South Kivu remain a volatile patchwork of rebel and militia strongholds despite the official end of a 1998-2003 conflict. The war and subsequent humanitarian disaster have killed an estimated 5.4 million people over the past decade.
(Editing by Daniel Magnowski and Peter Blackburn)