Corporate Governance

CORPORATE GOVERNANCE STATEMENT 2017

Aguia Resources Limited, (the “Company”) and its controlled entities (the “Group”) have adopted the corporate governance framework and practices set out in this statement. The board of directors of the Company (the “Board”) is responsible for its corporate governance, that is, the system by which the Group is managed. The corporate governance framework and practices have been in place throughout the financial year, and comply with the third edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (“Recommendations”), unless otherwise stated below.

This statement has been approved by the Board, and the information in the statement remains current as at 29 September 2017. Company policies and charters are available in the ‘Corporate’ section of the Company’s website at www.aguiaresources.com.au.

Principle 1: Lay Solid Foundations for Management and Oversight

1.1 Role of the Board and Management
In carrying out the responsibilities and powers set out in the Company’s Board Charter, the Board recognises its responsibility for the stewardship of the Company.

In addition to the matters it is expressly required by law to approve, the specific responsibilities of the Board are outlined below:

  • Ensuring compliance with the Corporations Act, Canadian securities laws, the Listing Rules of any stock exchange on which the Company is listed (“Listing Rules”) where appropriate and all other laws;
  • Providing leadership and developing, implementing and monitoring strategic operational and financial objectives for the Company and the overall performance of the Company;
  • Appointing appropriate staff consultants and experts to assist in the Company’s operations;
  • Ensuring appropriate financial and risk management controls are implemented;
  • Setting, monitoring and ensuring appropriate accountability and a framework for remuneration of Directors and executive officers;
  • Establishing and overseeing the Company’s process for making timely and balanced disclosure of all material information in accordance with the Listing Rules;
  • Implementing appropriate strategies to monitor performance of the Board in implementing its functions and powers;
  • Implementing and overseeing the Company’s risk management framework to enable risk to be identified, assessed and managed and to set the risk appetite the Board expects Management to operate within;
  • Appointing the Chairperson;
  • Appointing and removing the Managing Director/Chief Executive Officer and Company Secretary;
  • Approving the appointment and where appropriate removal of members of Management;
  • Contributing to and approving Management’s development of corporate strategy and performance strategy;
  • Monitoring Management’s implementation of strategy and performance generally and ensuring appropriate resources are available to management;
  • Monitoring the effectiveness of the Company’s governance practices;
  • Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures;
  • Approving the annual budget;
  • In conjunction with the audit committee, approving and monitoring financial and other reporting systems of the Company (including external audit) and the integrity of these systems; and
  • Appointing and overseeing committees where appropriate to assist in the above functions and powers.

The Board’s role and the Group’s corporate governance practices are continually reviewed and improved as required.

1.2       Information on New Directors
The Company has in place an external supplier to undertake appropriate checks on any potential director appointments. 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.

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

1.4       Professional Advice
The Board has determined that individual directors have the right in connection with their duties and responsibilities as directors, to seek independent professional advice at the Group’s expense. The engagement of an outside adviser is subject to prior approval of the Chairman and this will not be withheld unreasonably. If appropriate, any advice so received will be made available to all Board members.

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

1.5       Diversity
Recommendation 1.5 is that the Company should establish and disclose a diversity policy. Due to the Company’s size and nature of operations, the Board has not yet implemented a diversity policy but the Board recognises the value of diversity and the opportunities that it brings. As the Company grows and positions become available, the Board remains conscious of the requirement to establish a diversity policy and will seek to promote and increase diversity.

Recommendation 1.5 also states that the Company should report against a set of measurable objectives for achieving gender diversity. Due to the Company’s size and nature of operations, the Board has not yet established measurable objectives for achieving gender diversity.

The Company currently has no permanent full-time employees; rather it uses the services of a number of consultants. There are six directors on the Board, one of whom is female.

 1.6       Performance Review – Board and Directors
Recommendation 1.6 includes the requirement to disclose whether a performance evaluation for the Board, its Committees and directors has taken place in the reporting period. The Nomination and Remuneration Committee undertook an evaluation of the Board and its individual directors during the year.

1.7       Performance Review – senior executives
Arrangements put in place by the Board to monitor the performance of the Group’s executives include:

  • a review by the Board of the Group’s financial performance;
  • annual performance appraisal meetings, incorporating analysis of key performance indicators with each individual, to ensure that the level of reward is aligned with respective responsibilities and individual contributions made to the success of the Group;
  • an analysis of the Group’s prospects and projects; and
  • a review of feedback obtained from third parties, including advisors.

Recommendation 1.7 includes a requirement to disclose whether a performance evaluation for senior executives has taken place in the reporting period. The Nomination and Remuneration Committee undertook a performance evaluation of the senior executives during the year.

Principle 2: Structure of the Board to Add Value

2.1 Nomination Committee
Recommendation 2.1 is that the Board should establish a nomination committee. The Board considers that the Group is not currently of a size, nor are its affairs of such complexity to justify the formation of a nomination committee at this time. The Board as a whole 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;
  • the aim of having an independent director, other than the Board chairman, as the chairman of the Audit and Risk Management Committee;
  • that between them, the directors have the appropriate skill base and range of expertise, experience and diversity to discharge the Board’s mandate;
  • that each individual director 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 below; and
  • whether the size of the Board is appropriate to facilitate effective discussions and efficient decision-making.

Where appropriate, independent consultants will be engaged to identify possible new candidates for the Board. To date, new candidates to join the Board have predominantly been sought through referrals, rather than through professional intermediaries.

Directors are initially appointed by the full Board, subject to election by shareholders at the next annual general meeting. Under the Company’s Constitution a director (other than the managing director and only one managing director where the position is jointly held) is subject to reappointment by shareholders not later than the third anniversary following his/her last appointment. The nomination of existing directors for reappointment is not automatic and is contingent on performance and on the current and future needs of the Company.

2.2 Board Skills Matrix
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 assesses those requirements against the collective attributes of the directors. The Board skills matrix will be reviewed by the directors on an annual basis.

Details of the Directors’ skills, experience, expertise and attendance at meetings are set out in the Directors’ Report in each year’s Annual Report.

2.3/2.4 Independent Directors
The Company currently has the following Board members, who served as directors throughout the year unless otherwise stated below:

  • Mr Justin Reid – Managing Director (appointed 7 April 2015)
  • Mr David Gower – Independent non-executive Director (appointed 30 November 2012)
  • Mr Brian Moller – Independent non-executive director (appointed 18 December 2013)
  • Mr Alec Pismiris – Independent non-executive director (appointed 26 March 2014)
  • Mr Paul Pint – Executive Chairman (appointed on 12 January 2016)
  • Diane Lai – Non-executive Director (appointed 7 July 2017)

Details of the directors’ skills, experience, expertise, special responsibilities, attendance at board meetings and dates of appointment are set out in the directors’ report.

In assessing the independence of the directors, the Board has defined within its Board Charter an independent director to be a non-executive director (ie. not a member of management) who does not have a material relationship with the Company.

The Board Charter lists examples of potentially material relationships with the Company;

  • Having a relationship which could, in the view of the Board, be reasonable expected to interfere with the exercise of the director’s judgement;
  • Being, within the last 3 years an employee or executive of the Company or an immediate family member of an employee or executive of the Company;
  • Having within the last 3 years been a material professional adviser or material consultant to the Company;
  • Having, within the past 3 years, subject to certain exceptions, been the partner or employee of a firm that is the internal or external auditor of the Company, or had an immediate family member with whom they share a home, similarly engaged with the internal or external auditor of the Company;
  • Receiving, or having an immediate family member who is employed as an executive officer of the Company who has received, more than $75,000 in direct compensation from the Company in any 12 month period during the past three years;
  • Accepting directly or indirectly, any consulting, advisory or other compensatory fee from the Company or a subsidiary other than as remuneration for acting in their capacity as a Director, and
  • Being a partner, member or executive of an entity that provides consulting, legal, investment banking, or other financial advisory services to the Company.

Materiality for these purposes is determined on both quantitative and qualitative bases. An amount which is greater than five percent of either the net assets of the Company or an individual director’s net worth is considered material for these purposes.

Justin Reid and Paul Pint are executive directors and are therefore not independent.

Brian Moller is a partner of the law firm HopgoodGanim, which periodically provides legal advice to the Company. As HopgoodGanim is a material consultant to the Company, Brian Moller is deemed not to be an independent director.

Alec Pismiris, David Gower and Diane Lai are deemed to be independent directors.

The Company’s Constitution provides that the number of directors shall not be less than three and not more than ten. The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the appointment and further expense of additional independent non-executive directors. The Board believes that the six individuals on the Board can, and do, make independent judgments and act in the best interests of shareholders.

In accordance with the Corporations Act 2001 and the Company’s Constitution, directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Group. Where the Board believes that a significant conflict exists, the director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered.

2.5       Chairman
The Chairman’s responsibilities include leadership of the Board and the efficient organisation and conduct of the functioning of the Board. Paul Pint is the Chairman of the Board, although Mr Pint is an executive director and therefore not independent, the Board have concluded that Mr Pint suitable able to perform the role objectively.

The role of the Chairman has been defined in the Company’s Board Charter to include the following criteria;

  • The Chairman must be able to commit the time to discharge the role effectively;
  • The Chairman is responsible for the leadership of the Board, ensuring it is effective, setting the agenda of the Board, conducting the Board meetings and conducting the shareholder meetings. The Chairman should facilitate the effective contribution of all directors and promote constructive and respective discussions between Board members and Management;
  • In the event that the Chairman is absent from a meeting of the Board then the Board shall appoint a director to act as chair for that meeting; and
  • The Chairperson is also responsible for shareholder communication and arranging Board performance evaluation.

2.6       Director Induction
The Board implements an induction program for new Directors which involves providing information about the Company, its constitution and policies and practices. The Board is continually informed by Senior Management of key developments in the Company’s business and the industry in which the Company operates.

Principle 3. Act ethically and responsibly

3.1       Code of Conduct
The Group has a Code of Ethics and Conduct in place which provides guidelines aimed at maintaining high ethical standards, corporate behaviour and accountability within the Group.

All Group personnel and directors are expected to:

  • respect the law and act in accordance with it;
  • respect confidentiality and not misuse Group information, assets or facilities;
  • value and maintain professionalism;
  • avoid real or perceived conflicts of interest;
  • act in the best interests of shareholders;
  • by their actions contribute to the Group’s reputation as a good corporate citizen, which seeks the respect of the community and environment in which it operates;
  • perform their duties in ways that minimise environmental impacts and maximise workplace safety;
  • exercise fairness, courtesy, respect, consideration and sensitivity in all dealings within their workplace and with customers, suppliers and the public generally; and
  • act with honesty, integrity, decency and responsibility at all times.

Any member of Group personnel that breaches the Code of Ethics and Conduct may face disciplinary action. If a member of Group personnel suspects that a breach of the Code of Ethics and Conduct has occurred or will occur, he or she must report that breach to management. No member of Group personnel will be disadvantaged or prejudiced if he or she reports in good faith a suspected breach. All reports will be acted upon and kept confidential.

Since the year end, the Company has adopted a more detailed Code of Conduct, which is available on the Company’s website.

Principle 4. Safeguard Integrity in Corporate Reporting

4.1       Audit Committee
During the year, the full Board reviewed the integrity of the Company’s financial reporting and the processes to ensure the independence and competence of the external auditors. The Audit and Risk Management Committee held its first meeting on 16 September 2015 and has a formal charter, which is available on the Company’s website.

The Audit and Risk Management Committee consists of Brian Moller (independent non-executive director) as Chairman, David Gower (independent non-executive director) and Alec Pismiris (independent non-executive director). All members of the Committee are financially literate and have an understanding of the industries in which the Group operates, full biographies can be found within the Company’s annual report and on the Company’s website. Meeting dates and attendance information for the Committee, is detailed below;

Directors 27/09/2016 10/03/2017
Brian Moller (Chair) 2 2
Alec Pismiris 2 2
David Gower 2 2

The Committee’s primary function as detailed within the Committee’s Charter is to assist the Board in discharging its responsibility to exercise due care diligence and skill in relation to the Company, in respect of the Audit:

  • recommending to the Board the external auditor to be nominated for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for the Group;
  • recommending to the Board the compensation of the external auditor;
  • ensuring that the quality of financial controls is appropriate for the business of the Group;
  • reviewing the scope and results of external and internal audits;
  • directly overseeing the work of external auditors and resolving disagreements between management and the external auditors regarding financial reporting;
  • monitoring corporate conduct and business ethics, including auditor independence and ongoing compliance with laws and regulations;
  • maintaining open lines of communication between the Board, Management and the external auditors, thus enabling information and points of view to be freely exchanged;
  • reviewing matters of significance affecting the financial welfare of the Group;
  • ensuring that systems of accounting and reporting of financial information to shareholders, regulators and the general public are adequate;
  • reviewing the Company’s financial statements, MD&A and annual and interim profit and loss press releases before the Company publicly discloses the information;
  • considering whether the Company’s financial statements reflect the understanding of the Committee members of, and otherwise provide a true and fair view of, the financial position and performance of the Company;
  • considering the appropriateness of the accounting judgements or choices exercised by management in preparing the Company’s financial statements;
  • reviewing the Group’s internal financial control system;
  • considering the appointment or removal of the external auditor, the rotation of the external audit partner and approving the remuneration and terms of engagement of the external auditor;
  • developing, reviewing and maintaining a policy on hiring partners and employees, and former partners and employees, of present and former auditors in compliance with the requirements of Canadian National Instrument 52-110 “Audit Committees”;
  • monitoring and reviewing the external auditor’s independence, objectivity and performance, taking into consideration relevant professional and regulatory requirements and the performance of the external auditor;
  • developing and implementing policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provisions of non-audit services by the external audit firm and making recommendations on any proposal by the external auditor to provide non-audit services;
  • pre-approving all non-audit services provided by the external auditor; and
  • where the Company has an internal audit function, reviewing and making recommendations regarding:
  • the appointment or removal of the head of internal audit;
  • the scope and adequacy of the internal audit work plan; and
  • the objectivity and performance of the internal audit function.

4.2       CEO/CFO declarations
The Board receives a written assurance from the CEO and the CFO for each financial reporting period that in their opinion, the declaration provided by them in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

4.3       External Auditors present at the Annual Meeting
The Company’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is considered 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.

A representative from the external auditor attends each annual general meeting to answer any questions concerning the audit of the Group and the contents of the auditor’s report.

Principle 5. Make Timely and Balanced Disclosure

5.1       Market Disclosure Policy
The Market Disclosure Policy requires executive management to determine when a market release is required to comply with the ASX Listing Rule continuous disclosure requirements. The Policy sets out details of accountability for the preparation and approval of ASX releases and is available on the Company’s website.

Principle 6. Respect the Rights of Shareholders

6.1       Website Information
The Company discloses information about itself, ASX announcements, its Corporate Governance Statement and all its Corporate Governance Policies on the Company’s website.

6.2       Investor Relations
The Group places considerable importance on effective communications with shareholders.

The Group communicates with shareholders and other stakeholders in an open, regular and timely manner, so that the market has sufficient information to make informed investment decisions on the operations and results of the Group. The following communications are posted on the Company’s website:

  • ASX Quarterly Cash Flow Reports;
  • Interim Financial Statements and Management’s Discussion and Analysis
  • Half Yearly Report and Management’s Discussion and Analysis;
  • presentations at the Annual General Meeting/General Meetings;
  • Annual Report and Management’s Discussion and Analysis; and
  • other announcements lodged with ASX and TSX Venture Exchange.

6.3       Participation at Shareholder 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.

6.4       Electronic Communications
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.

Principle 7. Recognise and Manage Risk

7.1Risk Committee
Recommendation 7.1 is that the Board should establish a committee to oversee risk. The Audit and Risk Management Committee, which has a remit including risk oversight and management responsibilities had its first meeting on 17 July 2014. Section 4.1 details the structure of the Committee and the Charter is available on the Company’s website.

The Audit and Risk Management Committee consists of Brian Moller (independent non-executive director) as Chairman, David Gower (independent non-executive director) and Alec Pismiris (independent non-executive director). All members of the Committee are financially literate and have an understanding of the industries in which the Group operates; full biographies can be found within the Company’s annual report and on the Company’s website. Meeting dates and attendance information for the Committee, is detailed below;

Directors 27/09/2016 10/03/2017
Brian Moller (Chair) 2 2
Alec Pismiris 2 2
David Gower 2 2

The Committee’s primary function as detailed within the Committee’s Charter is to assist the Board in discharging its responsibility to exercise due care diligence and skill in relation to the Company In respect of risk:

  • ensuring the development of an appropriate risk management policy framework that will provide guidance to Management in implementing appropriate risk management practices throughout the Group’s operations, practices and systems and overseeing this framework;
  • developing, and periodically assessing whether, adequate procedures are in place for the review of the Company’s public disclosure of financial information;
  • defining and periodically reviewing risk management as it applies to the Group and clearly identify all stakeholders;
  • ensuring the Committee clearly communicates the Company’s risk appetite (as set by the Board), policies and strategies to Management, employees, contractors and appropriate stakeholders;
  • ensuring that Directors and Management establish a risk aware culture which reflects the Company’s risk policies and appetite;
  • reviewing methods of identifying broad areas of risk and setting parameters or guidelines for business risk reviews;
  • making informed decisions regarding business risk management, internal control systems, business policies and practices and disclosures;
  • considering the processes the Company will employ for evaluating and continually improving the effectiveness of its risk management and internal control processes;
  • considering capital raising, treasury and market trading activities with particular emphasis on risk treatment strategies, products and levels of authorities;
  • considering whether the Group has any material exposure to economic, environmental and social sustainability risks and if it does, how the Company manages those risks;
  • reviewing any incident involving fraud or other breakdown of the Group’s internal controls;
  • reviewing the Group’s insurance program, having regard to the Group’s business and the insurable risks associated with its business; and
  • establishing and maintaining procedures for the receipt, retentions and treatment of complaints received by the Group regarding accounting, internal accounting controls, or auditing matters and maintaining the confidentiality of anonymous submissions by employees of the Group which concern questionable accounting or auditing matters.

7.2       Risk Management Review
Recommendation 7.2 is that the Board or a Committee should review the risk management framework at least annually. During the year, ongoing monitoring, mitigating and reporting on material risks by senior executives, the Audit and Risk Committee and the Board took place in accordance with the processes disclosed.

The Board has established a framework for the management of the Group including a system of internal controls, a business risk management process and the establishment of appropriate ethical standards. The identification and effective management of risk, including calculated risk-taking, is viewed as an essential part of the Group’s approach to creating long-term shareholder value.

Management is responsible for designing, implementing and reporting on the adequacy of the Group’s risk management and internal control system.

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.

The CEO and the CFO have reported and declared in writing to the Board that the Group’s management of its material business risks is effective, as required by Recommendation 7.2.

During the year and up to the date of this statement, management reported either directly, or via the Audit and Risk Management Committee, to the Board on the Group’s key risks and the effectiveness of the Company’s management of those risks.

7.3       Internal Audit Function
Under the Charter of the Audit and Risk Committee, the Committee reviews whether an internal audit function is required. Where there is an internal audit function, the Committee reviews its objectivity and performance. The Charter also states that the Committee will ensure the development of risk management policies and define and periodically review risk management practices.

The Audit and Risk Committee and the Board have determined not to have an internal audit function due to the size of the Company.

The Company’s external auditors are under a half year review and full year audit as required under the Corporations Act 2001. The Audit and Risk Committee have regular meetings and contact with the external auditors during the year and for the review and audits.

7.4       Material Exposure to Risk
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 Group believes that the following operational risks are inherent in the industry in which the Group operates, having regard to the Group’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 Group and are not necessarily an exhaustive list.

Principle 8. Remunerate Fairly and Responsibly

8.1       Remuneration Committee
Recommendation 8.1 is that the Board should establish a remuneration committee. The Board has established a Nomination and Remuneration Committee which reviews annual performance and makes recommendations to the Board in relation to remuneration. The Remuneration Committee is comprised of three directors, David Gower (Chair), Alec Pismiris and Brian Moller, a majority of whom are independent. The Remuneration Committee does not at this time have a Committee Charter in place. The Remuneration Committee met once during the period and all members attended the meeting.

Details of the Group’s remuneration policy are set out in the remuneration report.

8.2       Remuneration Disclosure for Non-Executive and Executive Directors
The remuneration of non-executive directors is determined by the Board as a whole having regard to the level of fees paid to non-executive directors by other companies of similar size in the industry. 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 $200,000 is subject to the approval of shareholders. Further information on directors’ and executives’ remuneration is set out in the directors’ report under the heading Remuneration Report in the Directors’ Report in each year’s Annual Report.

8.3      Equity-based remuneration scheme
Any directors or Aguia personnel participating in equity-based remuneration schemes are prohibited from entering into transactions in associated products which limit the economic risk of their unvested entitlements.