Corporate Governance

CORPORATE GOVERNANCE STATEMENT

Argonaut Resources NL (the “Company”) and its controlled entities (the “Group”) have adopted the corporate governance framework and practices set out in this statement. The framework and practices have been in place throughout the financial year, and comply with the ASX Corporate Governance Council’s Principles and Recommendations, 3rd Edition (the “Recommendations”), unless otherwise stated.

This Statement has been approved by the Board, and the information provided remains current as at 27 September 2017. Company policies are available in the Corporate Governance section of the Company’s website at www.argonautresources.com.

The Board guides and monitors the business and affairs of the Company on behalf of the shareholders, by whom they are elected and to whom they are accountable.

Principle 1 – Lay Solid Foundations for Management and Oversight

Recommendation 1.1 - Compliant

The functions of the Board are detailed on the Board Charter which can be found on the company website. They include:

  • Review and approval of corporate strategies, the annual budget and financial plans;
  • Overseeing and monitoring organisational performance and the achievement of the company’s strategic goals and objectives;
  • Monitoring financial performance including approval of cash flow statements and annual and half-year financial reports and liaison with the company's auditors;
  • Approving fees of Non-executive Directors;
  • Ensuring there are effective management processes in place and approving major corporate initiatives;
  • Enhancing and protecting the reputation of the organisation;
  • Ensuring the significant risks facing the group have been identified and appropriate and adequate control, monitoring and reporting mechanisms are in place;
  • Appointment, retention and termination of the exploration Director and chief financial officer (cfo) and company secretary;
  • Approving and monitoring major capital and exploration expenditure, capital management, and acquisitions and divestitures;
  • Reporting to shareholders; and
  • Approving decisions concerning the capital of the company.

Throughout the year, the Board has consisted of the following members:

  • Patrick Elliott - Independent, Non-Executive Chairman (appointed 30 June 2003);
  • Malcolm Richmond - Independent, Non-Executive Director (appointed 14 March 2012);
  • Lindsay Owler - Executive Director (appointed 1 June 2005) and Exploration Director; and
  • Andrew Bursill – Non-Executive Director (appointed 16 April 2010), Company Secretary (appointed 16 December 2009) and CFO.

The Chairman’s responsibilities include leadership of the Board and the efficient organisation and conduct of the functioning of the Board.

There is a clear division of responsibilities between the Chairman and the Exploration Director. The Board has delegated to the Exploration Director the authority to manage the day-to-day affairs of the Company. The Board ensures that the Exploration Director is appropriately qualified and experienced to discharge his responsibilities.

Recommendation 1.2

The Company has in place an external supplier to undertake appropriate checks on any potential Director appointments (if required by the Board in addition to their internal checking). Under the Company’s Constitution, all Directors appointed throughout the year as an additional Director or to fill a casual vacancy hold office to the AGM. Current Directors hold office and are required to be considered by Shareholders for re-election under the Listing Rules.

All Directors, whether appointed throughout the year as an additional Director or to fill a casual vacancy or who are due for election under the Listing Rules, are disclosed in the Notice of AGM, with all material information in its possession relevant to a decision on whether or not to elect or re-elect a Director. The company’s constitution provides that at each Annual General Meeting, one third of the Board (other than any Managing Director in office from time to time) or, if their number is not a multiple of three, the number nearest to one third, must retire and, if the retiring Directors so chose, may offer themselves for re-election. All Directors have written contracts with the Company setting out the terms of their appointment.

Details of the Directors’ skills, experience, expertise, special responsibilities and attendance at Board meetings are set out in the Directors’ Report. The Company’s constitution provides that at each annual general meeting, one third of the Board (other than any Managing Director in office from time to time) or, if their number is not a multiple of three, the number nearest to one third, must retire and, if the retiring Directors so chose, may offer themselves for re-election.

Recommendation 1.3

On appointment, directors are provided with a formal letter of appointment and executive management with written employment agreements incorporating job descriptions (where relevant).

Recommendation 1.4

The finance and company secretarial functions are outsourced to an external firm, Franks & Associates. Andrew Bursill of Franks & Associates holds the role of CFO and Company Secretary. The Company Secretary is accountable to the Board through the Chairman on corporate governance matters pertaining to the proper functioning of the Board. All Directors have access to the Company Secretary.

Recommendation 1.5

Recommendation 1.5 is that a Board should establish a Diversity Policy but due to the Company’s size and nature of operations, the Company has not yet established one. The Company currently has two permanent full-time employees. There are no women employees, senior executives or Directors at the present time. As the Company grows, the Board remains conscious of the requirement to establish measurable objectives for achieving gender diversity and for the Board to assess and report annually both the objectives and the progress in achieving them.

Recommendation 1.6 & 1.7

Due to the size of the Company and the Board a continual self-assessment is undertaken in relation to its collective performance and the performance of the Chairman.

The Company has two senior executives, who are also Directors. Given the size and the nature of the Company’s operations, the performance of each executive is monitored on an ongoing basis by the Non- Executive Directors. During the period a formal Performance Review did not take place but a self-assessment of performance is scheduled for the next reporting period.

Principle 2 - Structure the Board to Add Value

Recommendation 2.1

Recommendation 2.1 is that the Board should establish a Nomination Committee. Due to the size of the Company and the Board, no Nomination Committee has been established.

The Board considers the following factors when selecting new Directors and when recommending Directors to shareholders for appointment or re-election:

  • The aim of having a majority of independent Directors on the Board and of having an independent Non- Executive Chairman;
  • That between them, the Directors have appropriate range of skills, expertise, experience and diversity to discharge the Board’s mandate;
  • That each individual Board member has sufficient time to meet his/her commitments as a Director of the Company;
  • The duration of each existing Director’s tenure, noting the retirement provisions of the Constitution, as set out above; and
  • Whether the size of the Board is appropriate to facilitate effective discussions and efficient decision making.

Recommendation 2.2

In line with recommendation 2.2, the Board has developed a Board skills matrix, to simplify the process for identifying any ‘gaps’ in the Board’s skills, expertise and experience. As part of the review of the skills matrix the Board monitor the skills, expertise and experience that are relevant to the Company and assess those requirements against the collective attributes of the Directors. The Board skills matrix will be reviewed by the Directors on annual basis.

Recommendation 2.3

The Board annually assesses the independence of each Director. For this purpose an independent
Director is a Non-executive Director whom the Board considers to be independent of management and free of any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with - the exercise of unfettered and independent judgment, and who:

  1. Is not a substantial shareholder of the Company, is not an officer of, or is not otherwise associated with a substantial shareholder;
  2. Within the last three years, has not been employed in an executive capacity by the Company or another Group member;
  3. Within the last three years, has not been a principal of a material professional advisor or a material consultant to the Company or another Group member, or an employee materially associated with the service provided;
  4. Is not a material supplier to, or customer of, the Company or another Group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; and
  5. Has no material contractual relationship with the Company or another Group member, other than as a Director.

Patrick Elliott and Malcolm Richmond have been assessed as independent Directors. In reaching that determination, the Board has taken into account (in addition to the matters set out above):

  1. The specific disclosures made by each independent Director as referred to above;
  2. That no independent Director has ever been employed by the Company or any of its subsidiaries;
  3. That no independent Director is, or has been associated with a supplier, professional adviser, consultant to or customer of the Company which is material under accounting standards; and
  4. That no independent Director personally carries on any role for the Company otherwise than as a Director of the Company.

Recommendation 2.4, 2.5 & 2.6

Recommendation 2.4 is that a majority of the Board should be independent. The Company has equal numbers of independent and non-independent Directors. As the Chairman has a casting vote at Board meetings, the majority of the Board could be considered to be independent. The Board believes that its current composition is appropriate to deliver on the Company’s stated objectives. The size and scope of the Company’s activities does not justify the cost of appointing further independent Directors at this stage of its development.

There is a clear division of responsibilities between the Independent Chairman and the CEO/Managing Director. The Board has delegated to the CEO/Managing Director the authority to manage the day-to-day operations of the company. The Board ensures that the CEO/Managing Director is appropriately qualified and experienced to discharge his responsibilities.

When a new Director joins the Board they are provided with information about the Company including the Constitution, Board and Committee Charters, Policies and Directors Duties information.

Principle 3 – Act Ethically and Responsibly

Recommendation 3.1

The Company recognises the importance of establishing and maintaining high ethical standards and decision making in conducting its business and is committed to increasing shareholder value in conjunction with fulfilling its responsibilities as a good corporate citizen. All Directors, officers, employees, contractors, consultants and associates of the Group are expected to act with honesty and integrity in all their dealings with stakeholders.

The Group has established a Code of Conduct, which includes requirements to:

  1. Act in good faith in pursuing the objectives of the Company;
  2. Avoid situations which may give rise to a conflict of interest;
  3. Maintain confidentiality in relation to the affairs of the Company, its customers and its suppliers;
  4. Comply with the laws and regulations relating to the Company, particularly the prohibition on insider trading;
  5. Treat each other, suppliers, competitors, clients, customers and other stakeholders fairly and with respect;
  6. Protect and ensure efficient use of the Company’s assets for legitimate business purposes;
  7. Refrain from offering or receiving a bribe; and
  8. Report unlawful/unethical behavior, with those who report violations in good faith to be protected from harassment or discriminatory treatment.

Since the year end, the Board has reviewed the Code of Conduct. The Code is available on the Company’s website and has been circulated to all employees, contractors and consultants.

Recommendation 4.1

Recommendation 4.1 is that the Board should establish an Audit Committee. Due to the size of the Company and the Board, it is more efficient for the full Board to review the integrity of the Company’s financial reporting and the processes to ensure the independence and competence of the external auditors.

While considering external reporting, the Board:

  • Assesses whether financial statements are consistent with Directors’ knowledge and adequate for shareholders’ needs;
  • Assesses the management processes supporting external reporting; and
  • Reviews risk management and internal control systems.

All members of the Board are financially literate and have an in depth understanding of the industry in which the Company operates.

The Board’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender for external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. The audit engagement partner is rotated periodically, as required by the Corporations Act.

An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the Directors’ Report and the notes to the financial statements. The external auditors provide an annual declaration of their independence to the Board.

Recommendation 4.2 & 4.3

The CFO and Company Secretary has been appointed as the person responsible for communications with the Australian Securities Exchange (ASX). This officer is also responsible for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX.

The Exploration Director and CFO and Company Secretary have given a written declaration to the Board required by section 295A of the Corporations Act 2001 that in their view:

  • The Company's financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the Board;
  • The Company's risk management and internal compliance and control system is operating effectively in all material respects;
  • The Company’s financial statements and notes thereto comply with the accounting standards; and
  • The Company’s financial statements and notes thereto give a true and fair view of the consolidated entity's financial position as at 30 June 2017 and of its performance for the financial year ended on that date.

In accordance with recommendation 4.3, the external auditor is requested to attend the annual general meeting and to be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

Principle 5 – Make Timely and Balanced Disclosure

Recommendation 5.1

The Board has established a Disclosure and Communication Policy, which is available on the Company’s website. Amongst other items it details: the Company’s continuous disclosure obligations, disclosure roles, responsibilities and internal procedures, as well as market and shareholder communications.

Principle 6 – Respect the Rights of Security Holders

Recommendation 6.1

The Company discloses information about itself including its: Corporate Governance Statement, Corporate Governance Policies, past announcements, investor updates and other relevant information on the Company website. Shareholders and other interested parties may also subscribe for email alerts using the Company’s website.

Recommendation 6.2

The Board aims to keep shareholders informed of all major developments affecting the Company’s activities and its state of affairs through announcements to the ASX and releases to the media. The Company’s commitment to respect the rights of shareholders is set out in the Disclosure and Communications Policy, which is available on the Company’s website.

Recommendation 6.3 & 6.4

Shareholders may elect to receive electronic notifications when the Annual Report is available on the Company’s website, and may electronically lodge proxy instructions for items of business to be considered at general meetings.

The Board encourages full participation of shareholders at the annual general meeting. Shareholders who are unable to attend general meetings are encouraged to lodge proxy appointments in advance of the meeting.

Principle 7 – Recognise and Manage Risk

Recommendation 7.1 & 7.2

Recommendation 7.1 is that the Board should establish a Committee to oversee risk. Due to the size of the Company the Board concluded that it was more efficient for the full Board to review the integrity of the Company’s risk management processes to ensure a sufficient assessment and management of possible risks.

The Board is responsible for identifying material business risks and implementing procedures to manage those risks. The Board has formalised its processes for documenting the Group’s risk profile in a risk management matrix which is reviewed by the Board at least annually and has been reviewed during the 2017 financial period. Following the review the Board is satisfied that the risk management framework continues to be sound. The risk management matrix identifies areas of risk for the Group and records any remedial action the Group has taken in the management of those risks.

The Board and management identify, monitor and manage compliance issues and significant risks on an ongoing basis. In particular, the Board requires that the risks related to diversified resources exploration, development and production are addressed in proposed operations.

Recommendation 7.3

Due to the size of the Company and its Board, there is no internal audit function and the Board concluded that it was more appropriate for the full Board to consider internal control processes as part of the risk management framework. Key elements of the Group’s internal control systems include:

  • The Code of Conduct, which sets out an ethical and legal framework for all employees in the conduct of the Group’s business; and
  • Financial and reporting systems to provide timely, relevant and reliable information to management and the Board.

Recommendation 7.4

Recommendation 7.4 is that the Board should disclose whether it has any material exposure to economic, environmental and social sustainability risks and if so, how it manages those risks. The Company believes that the following operational risks are inherent in the industry in which the Company operates, having regard to the Company's circumstances (including financial resources, prospects and size):

  • Fluctuations in commodity prices and exchange rates;
  • Accuracy of mineral reserve and resource estimates;
  • Reliance on licenses, permits and approvals from governmental authorities;
  • Ability to obtain additional financing;
  • Acquisition of new business opportunities; and
  • Changed operating, market or regulatory environments.

These risk areas are provided here to assist investors to understand better the nature of the risks faced by the Company, and are not necessarily an exhaustive list.

The Exploration Director and the CFO and Company Secretary have reported and declared in writing to the Board that the Group’s management of its material business risks is effective.

Principle 8 – Remunerate Fairly and Responsibly

Recommendation 8.1, 8.2 & 8.3

Recommendation 8.1 is that the Board should establish a Remuneration Committee. Due to the size of the Company and the Board, it is more efficient for the full Board to review remuneration policy matters. The remuneration of Directors is determined by the Board as a whole having regard to the level of fees paid to Directors by other companies of similar size in the industry to ensure that it is appropriate and not excessive.

The Board considers:

  • Executive remuneration and incentive policies;
  • The company’s recruitment retention and termination policies and procedures for senior management;
  • Superannuation arrangements; and
  • The remuneration of executive Directors, with the exploration Director excusing himself from the deliberations.

The remuneration policy has been disclosed in the Directors Report.

Due to the size of the Company, the structure of both Executive and Non-Executive Directors’ remuneration includes a long-term incentive component, linked to the performance of the Group. The Non-Executive Directors receive no retirement benefits, other than statutory superannuation contributions. Any increase in the maximum total remuneration of the Non-Executive Directors of the Company, which is set at $350,000 is subject to the approval of shareholders.

Any Directors or employees participating in equity based remuneration schemes are prohibited from entering into transactions in products which limit the economic risk of holding unvested entitlements under those schemes.