Statement of Compliance with the QCA Corporate Governance Code
As of 28th September 2018 as part of a change to the AIM Rules for Companies, AIM companies are required to maintain on its website details of a recognised corporate governance code, how the Company complies with this code and an explanation of any deviations. The information will need to be reviewed every year and the website should include the date on which the information was last reviewed.
The directors of the Company are pleased to present the Corporate Governance Statement for Amur Minerals. Going forward this will be reviewed at the same time as the Annual Report and Accounts are prepared. The Directors of Amur Minerals Plc (“Amur” or the “Company”) recognise the importance of sound corporate governance and have sought to address these new requirements in a timely manner and have set out below the Company’s Corporate Governance Statement.
In ensuring good governance Amur has adopted The Quoted Companies Alliance Corporate Governance Code 2018 (the “QCA Code” or the “Code”) and applies the ten principles of the QCA Code as set out in this statement.
Principle 1: Establish a strategy and business model which promote long-term value for shareholders
The Board has concluded that the highest medium and long-term value can be delivered to shareholders through the continued development of the Kun-Maine sulphide nickel deposit located in the far east of Russia. The Company will continue develop the project to increase its value whilst simultaneously looking for suitable strategic partners who can assist in bringing the project to production.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Company remains committed to listening and communicating openly with its shareholders to ensure that its strategy, business model and performance are clearly understood and communicated. Understanding what analysts and investors think about us, and in turn, helping these audiences understand our business, is a key part of driving our business forward and we actively seek dialogue with the market. We do so via investor roadshows, attending investor conferences, maintaining regular updates on the Companys FAQ page and our regular reporting.
Amur is committed to providing full and transparent disclosure of its activities via the Regulatory Information Service (RIS) of the London Stock Exchange. Company announcements are also available on the Company’s website. Amur has an active and effective investor relations programme that includes institutional road-shows and presentations, effective Annual General Meetings with presentations to shareholders and a high level of disclosure of the Company’s activity to its shareholders.
In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting and investors have access to current information on the Company through its website (www.amurminerals.com) and via the firstname.lastname@example.org email address. The company also retains the services of Blytheweigh as PR advisor.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board recognises that the long term success of the Company is reliant upon the efforts of the employees of the Company and its contractors, suppliers, regulators and other stakeholders. The Board has put in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships.
The Company has staff dedicated to ensuring that it has active relationships with local communities who are within the vicinity of its operations to understand their concerns and expectations thereby seeking to ensure a mutually beneficial co-operation for both sides. The Company is subject to oversight by a number of different governmental and other bodies who directly or indirectly are involved with the licencing and approval process of exploration and mining operations in Russia. The Company makes all reasonable efforts, directly or through its advisers, to engage in and maintain active dialogue with each of these governmental bodies, to ensure that any issues faced by the Company, including but not limited to regulations or proposed changes to regulations, are well understood and ensuring to the fullest extent possible that the Company is in compliance with all appropriate regulation, standards and specific licencing obligations, including environmental, social and safety, at all times.
The Company has close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company, and the Board is regularly updated on wider stakeholder insights into issues that matter to them and the business to enable the Board to understand and consider these issues in decision making.
The Board recognises that our employees are one of our most important stakeholder groups…
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Company has an established framework of internal financial controls, the effectiveness of which is regularly reviewed by the Executive Management, the Audit Committee and the Board in light of an ongoing assessment of significant risks facing the Company.
- The Board is responsible for reviewing and approving overall Company strategy, approving revenue and capital budgets and plans, and for determining the financial structure of the Company including treasury, tax and dividend policy. Monthly results and variances from plans and forecasts are reported to the Board.
- The Audit Committee assists the Board in discharging its duties regarding the financial statements, accounting policies and the maintenance of proper internal business, and operational and financial controls, including the review of results of work performed by the Group controls function.
- There are comprehensive procedures for budgeting and planning, for monitoring and reporting to the Board business performance against those budgets and plans, and for forecasting expected performance over the remainder of the financial period. These cover cash flows, capital expenditure and balance sheets. Monthly results are reported against budget and compared with the prior year, and forecasts for the current financial year are regularly revised in light of actual performance.
- The Company has a consistent system of prior appraisal for investments, overseen by the Chief Financial Officer, Chief Executive Officer and Chief Operating Officer, with defined financial controls and procedures with which each business area is required to comply in order to be granted investment funds for development.
The Board recognises that maintaining sound controls and discipline is critical to managing the downside risks to our plan. The Board has ultimate responsibility for the Group’s system of internal control and for reviewing its effectiveness. However, any such system of internal control can provide only reasonable, but not absolute, assurance against material misstatement or loss. The Board considers that the internal controls in place are appropriate for the size, complexity and risk profile of the Group. The principal elements of the Group’s internal control system include:
- Close management of the day-to-day activities of the Group by the Executive Directors
- An organisational structure with defined levels of responsibility, which promotes entrepreneurial decision-making and rapid implementation while minimising risks
- A comprehensive annual budgeting process producing a detailed integrated profit and loss, balance sheet and cash flow, which is approved by the Board
- Detailed monthly reporting of performance against budget
- Central control over key areas such as capital expenditure authorisation and banking facilities
The following principal risks and controls to mitigate them are:
The Group’s licences
The Group’s activities are dependent upon the grant and renewal of appropriate licences, permits and regulatory consents. The Group’s Exploration and Mine Production licence is valid until 1 July 2035 and grants the Company’s wholly owned subsidiary ZAO Kun-Manie the rights to recover all value from the mineral defined to be present at Kun-Manie. The Group’s licences are regulated by the Russian governmental agencies and contain a range of obligations, failure to comply with which could result in additional costs, penalties being levied or the suspension or revocation of the licence. This would have a material adverse impact on the Group.
Mitigation: management closely monitor compliance with the terms of the Group’s licences and utilises the legal services of Norton Rose Fulbright in Moscow who review all documentation and filings to ensure that communications, filings and any other required contacts maintain conformity with the regulatory agencies of the Russian Federation.
Project development risks
Resource estimates are based upon the interpretation of geological data. Project feasibility studies derive estimates of operating costs based upon anticipated tonnage and grades of ore to be mined and processed, the configuration of the ore body, expected recovery rates and other factors. As a result, actual operating costs and economic returns may differ from those currently estimated.
Mitigation: the scale of the project mandates that all work is conducted by Russian experienced, independent and internationally recognised companies in all areas of proposed and actual project development. Any internally generated studies are held confidentially within the Company until an independent and qualified group, company or experts have reviewed, commented and confirm ed the results of Company work. Project work is undertaken by Russian Federation approved agencies prior to the approval of any study, preproduction, construction and operational approvals are granted. The Company adheres to these regulatory statutes.
Reserve and resource estimates
Reserve and resource estimates may require revision based on actual production experience. The volume and grade of reserves mined and processed and recovery rates achieved may vary from those anticipated and a decline in the market price of metals may render reserves containing relatively lower grades of nickel and copper mineralisation uneconomic.
Mitigation: resources and reserves are independently calculated by internationally recognised organisations to JORC standards. Information related to the calculation of such estimates is based on reports from external companies experienced in metallurgical and processing work as well as the evaluation of long term metal pricing where the Company utilises information provided by external organisations. As the Company is not in production at this time, actual production results cannot be utilised to verify predicted resources and reserves. The Russian Federation requires a separate assessment of reserves and does not recognise resources which are not contained within a mine plan based on a Russian certified study calculated by a qualified agency or organisation. Final reserve numbers are audited by the State Commission on Mineral Reserves who is responsible for tracking and certifying all reserve estimates within the Russian Federation.
The Group’s operations are subject to environmental regulation, including environmental impact assessments and permitting. Russian environmental legislation comprises numerous federal and regional regulations which are not fully harmonised and may not be consistently interpreted.
Mitigation: the Company utilises Equator Principle standards with regard to its monitoring and maintenance of environmental protection. Equator Principle’s are a risk management framework, widely adopted by financial institutions, for determining, assessing and managing environmental and social risk in projects. These standards are among the highest in the world and implementation of such standards is required when international financing of a project is undertaken. By utilising the highest level of standard, the Company meets both Russian and International standards. On an internal Russian Federation basis, the Company is inspected on an annual basis to ensure that the Company is performing and maintaining protection of the environment. The Company employs three suitably qualified individuals to ensure that all work is done to the highest standards and ultimately approved by the appropriate Russian authorities and organisations.
Nickel price volatility
The net present value of the Group’s capitalised exploration assets is directly related to the long-term price of nickel. The market price of nickel is volatile and is affected by numerous factors which are beyond the Company’s control. These factors include world production levels, international economic trends, currency exchange fluctuations and industrial demand.
Mitigation: the Company regularly reviews expected nickel and copper prices from internationally recognised expert sources and assesses the economic viability of its project based upon long term trends and surveys compiled by several resource groups specialised in long term price projection. Nickel and copper price sensitivity is built into the Company’s economic models. Presently, the long term forecast price for nickel is $8.00 per pound and is $2.85 per pound for copper. All study work currently utilises prices of $7.50 and $2.75 for nickel and copper respectively.
Political and economic risks
Most of Group’s assets and operations are based in Russia and are subject to Russian federal and regional laws and regulations. Russian legal and regulatory regime is still undergoing a substantial transformation and is subject to frequent changes and interpretations. Amendments to current laws and regulations governing the Group’s operating activities or more stringent implementation or interpretation of these laws and regulations could have a material adverse impact on the Group.
Additionally, Russian Federation is currently subject to sanctions imposed by various countries, prolonging and tightening of which could have an impact on the Group’s operations.
Mitigation: the Company utilises its Moscow based legal representatives of Norton Rose Fulbright to continuously monitor the situation regarding sanctions and conduct periodic meetings to review changes in the legal and regulatory regime and assess whether such changes are likely to have an impact on Amur. The updates are typically undertaken on a 60 day basis. In addition, the Company is a member of the Mining Advisory Council which consistently works with Russian authorities to assist in the understanding of regulatory constraints and assists in the modification of legislation designed to clarify inconsistencies in legislation and interpretation of the law.
The regulatory environment
The Group’s activities are subject to extensive federal and regional laws and regulations governing various matters, including licensing, production, taxes, mine safety, labour standards, occupational health and safety and environmental protections. Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation or interpretation of these laws and regulations could have a material adverse impact on the Group, cause a reduction in levels of production and delay or prevent the development or expansion of the Group’s properties in Russia.
Mitigation: the Company utilises its Moscow legal team of Norton Rose Fulbright to monitor changes to the regulatory system. In addition, the Mining Advisory Council also participates in reviews and working with the governmental groups responsible for regulatory control and the authoring of new legislation. Proactively, the Company assesses the potential impact of any proposed modifications and is dynamically changing Company policies and approaches to match the Russian regulatory environment. Often planning and work is completed in advance of changes when they are identifiable and could impact exploration and operations.
Russian tax legislation has been subject to frequent change and some of the laws relating to taxes to which the Group is subject are relatively new. The government’s implementation of such legislation, and the courts’ interpretation thereof, has been often unclear or non-existent, with few precedents established. Differing opinions regarding legal interpretation may exist both among and within government ministries and organisations and various local inspectorates. The introduction of new tax provisions may affect the Group’s overall tax efficiency and may result in significant additional tax liability.
Mitigation: the Company continually assesses the tax regime and utilises experienced local staff and state agencies in submission of taxes at all levels. This includes personal taxes, social taxes and any other taxes that the Company must pay on behalf of its employees. These documents and approaches are reviewed by the tax authorities on an annual basis and modifications are undertaken as required.
Russia’s physical infrastructure
Some of Russia’s physical infrastructure is in poor condition. This may disrupt the transportation of supplies, add to costs and interrupt operations, with a potentially material adverse effect on the Group’s business. The Company’s project is remotely located and will need to construct an access road of approximately 320 kilometres from the Baikal Amur rail line to the project site. The Company’s position is that they will have to construct access road to a standard suitable to support the operation on a year round basis. This includes the ability to restock consumables and fuel at site. The fuel transported to the project site will support the mobile equipment fleet (mining fleet included) as well as to fuel on site power generation using diesel fuel l ed generator sets which will preclude the need to construct a power line to the site. Planning is done on a worst case basis and assumes nothing is available over more than half the distance and substantial upgrades to existing pioneer roads located along the western half of the planned road route will be required.
Principle 5: Maintaining the Board as a well-functioning, balanced team led by the Chairman
The Board comprises the Non-Executive Chairman, one Executive Director and three Non-Executive Directors. The Board of Amur is supported by two members of the senior management team. The details and background of the members of the Board and senior management can be found below:
The Board is satisfied that it has a suitable balance between independence on the one hand, and knowledge of the Company on the other, to enable it to discharge its duties and responsibilities effectively. All Directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational. The following Directors are considered to be independent Directors:
Robert Schafer (Non-Executive Chairman)
Brian Savage (Non-Executive Director)
Paul Gazzard (Non-Executive Director)
Lou Naumovski (Non-Executive Director)
The Board has established an Audit Committee and a Remuneration Committee, particulars of which appear hereafter. The Board has agreed that appointments to the Board are made by the Board as a whole. The Non-Executive Directors are considered to be part time but are expected to provide as much time to the Company as is required. The Board considers that this is appropriate given the Companyʼs current stage of operations. It shall continue to monitor the need to match resources to its operational performance and costs and the matter will be kept under review going forward. The Board notes that the QCA recommends a balance between executive and non-executive Directors and recommends that there be two independent non-executives. The Board shall review further appointments as scale and complexity grows.
Attendance at Board and Committee Meetings
The Company shall report annually on the number of Board and committee meetings held during the year and the attendance record of individual Directors. In order to be efficient, the Directors meet formally and informally both in person and by telephone.
Key Board activities this year included:
• Discussing strategic priorities
• Initiating the 2018 field season objectives
• Open dialogue with the investment community
• Discussing the Company’s capital structure and financial strategy
• Discussing internal governance processes
• Discussing the Company’s risk profile
Directors’ conflict of interest
The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience required for the Company. Biographies of the directors are available on the Company’s website. All Directors receive regular and timely information on the Group’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings.
The Board recognises that it currently has limited diversity and this will form a part of any future recruitment consideration if the Board concludes that replacement or additional directors are required. The Board will also review annually the appropriateness and opportunity for continuing professional development whether formal or informal.
Appointment, removal and re-election of Directors
The Board makes decisions regarding the appointment and removal of Directors, and there is a formal, rigorous and transparent procedure for appointments. The Company’s Articles of Association require that one-third of the Directors must stand for re-election by shareholders annually in rotation; that all Directors must stand for re-election at least once every three years; and that any new Directors appointed during the year must stand for election at the AGM immediately following their appointment.
All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense. In addition, the Directors have direct access to the advice and services of the Company Secretary and Chief Financial Officer.
Principle 7: Evaluate the Board performance based on clear and relevant objectives, seeking continuous improvement
The Board has determined that it shall itself be responsible for assessing the effectiveness and contributions of the Board as a whole, its committees (which currently comprise the Audit Committee, the Remuneration Committee) and individual directors. The size of the Board allows for open discussion and the Chairman has regular dialogue with the Chief Executive whereby the Board’s role and effectiveness can be considered. The Chief Financial Officer also has regular dialogue with the Head of the Audit Committee whereby that Committee’s effectiveness can be considered.
Internal evaluation of the Board, the Committee and individual Directors is to be undertaken on an annual basis in the form of peer appraisal and discussions to determine the effectiveness and performance of the Directors and their continued independence. No formal assessments have been prepared however the Board will keep this matter under review and especially if either the size of the Board or the number of committees increases which in turn may require a more formalised assessment and evaluation process to be established to ensure continued effectiveness.
Principle 8: Promote a culture that is based on ethical values and behaviours
The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that employees behave. The corporate governance arrangements that the Board has adopted are designed to ensure that Amur delivers long term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board.
A large part of Amurʼs activities is centred upon what needs to be an open and respectful dialogue with employees, clients and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does. The directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge.
Additionally, the Company has adopted a code for Directorsʼ and employeesʼ dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
Maintenance of Governance Structures and Processes
Ultimate authority for all aspects of the Companyʼs activities rests with the Board, the respective responsibilities of the Chairman and Chief Executive Officer arising as a consequence of delegation by the Board. The Board has adopted appropriate delegations of authority which set out matters which are reserved to the Board. The Chairman is responsible for the effectiveness of the Board, while management of the Companyʼs business and primary contact with shareholders has been delegated by the Board to the Chief Executive Officer.
During the financial year ended 31st December 2018 the Audit Committee currently comprises Brian Savage and Robert Schafer. This committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported. It receives reports from the executive management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee shall meet not less than twice in each financial year and it has unrestricted access to the Companyʼs auditors.
The Remuneration Committee comprises Brian Savage and Robert Schafer. The Remuneration Committee reviews the performance of the executive directors and employees and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The Remuneration Committee also considers and approves the granting of share options pursuant to the share option plan and the award of shares in lieu of bonuses pursuant to the Companyʼs Remuneration Policy.
Given the size and complexity of Amur, the Board has agreed that appointments to the Board will be made by the Board as a whole and so has not created a Nominations Committee.
At each Annual General Meeting one third of the directors must retire by rotation, whereupon they can offer themselves for re-election if eligible. The Board evaluates its performance and composition on a regular basis and will make adjustments as and when indicated. When assessing the independence of each Non-Executive Director, length of service is one of the considerations. The Board will when assessing new appointments in the future consider the need to balance the experience and knowledge that each independent director has of the Company and its operations, with the need to ensure that independent directors can also bring new perspectives to the business.
The Executive Team consists of Robin Young, Jack Swanson, Randy Lewis and Paul McKay with input from the subsidiary managers and teams. They are responsible for formulation of the proposed strategic focus for submission to the Board, the day-to-day management of the Group’s businesses and its overall trading, operational and financial performance in fulfilment of that strategy, as well as plans and budgets approved by the Board of Directors. It also manages and oversees key risks, management development and corporate responsibility programmes. The Chief Executive Officer reports to the plc Board on issues, progress and recommendations for change. The controls applied by the Executive Team to financial and non-financial matters are set out earlier in this document, and the effectiveness of these controls is regularly reported to the Audit Committee and the Board.
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Companyʼs Annual General Meeting. The outcomes of all votes will be disclosed in a clear and transparent manner via the RIS of the London Stock Exchange.
Investors also have access to current information on the Company though its website, www.amurminerals.com, and via the email@example.com email post questions that are incorporated into the FAQ page of the Company’s website. The Company lists contact details on its website and on all announcements released via RNS, should shareholders wish to communicate with the Board.
The Company shall include, when relevant, in its annual report, any matters of note arising from the audit or remuneration committees.