Central Asia Metals

Corporate Governance

Chairman’s Introduction

We see high standards in corporate governance as the key to directing the business to ongoing success. This ethos is fundamental to the Company’s aim of maximising value for shareholders over the long term.

Given the size and nature of Central Asia Metals Plc (“the Company”) or “CAML” the Board has adopted and applies the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies (the “QCA Code”). We place great importance on ensuring there is a strong foundation of governance in place, setting the standard for building success in the business and creating long-term value for our shareholders and other stakeholders.

Our governance framework includes:

  1. A strong independent representation on the Board with four independent Non-Executive Directors.
  2. An Audit Committee consisting of three independent Non-Executive Directors and led by David Swan as its Chairman.
  3. A Remuneration Committee led by Robert Cathery comprising solely independent Non-Executive Directors.
  4. A Nomination Committee with Nick Clarke as its Chairman and five Non-Executive Directors as members.

Although not a QCA Code requirement, we also have a Sustainability Committee, chaired by Roger Davey, comprising both Executive and Non-Executive Directors. We see this as another fundamental area of governance, particularly due to our international operations in developing countries.

The QCA Code consists of ten principles that promote medium to long-term value for shareholders building on the enterprising spirit in which CAML was created and continues to operate today. The ways in which CAML has applied the QCA Code are detailed below and annual updates on our compliance with the QCA Code will be provided.

Nick Clarke
Chairman

Deliver Growth

Principle 1. Establish a strategy and business model which promote long-term value for shareholders

The Board works as a cohesive team paying keen attention to the Company’s purpose and strategy of long-term growth for shareholders.

The Company generates value for its shareholders through the mining and extraction of saleable metal products and through the identification of accretive business development opportunities.

In 2017, the Company’s acquisition of the Sasa zinc and lead mine in North Macedonia saw the Group move into the future as a diversified and low cost base metals producer with operations in two jurisdictions. The principal aim is to enable the Group to continue to offer attractive shareholder returns, although it also continues to invest in the communities with which it works. In 2018, the Company’s focus included the effective integration of the Sasa operation into the business, which the Board believes has been achieved. During the course of the year, the Group has delivered accretive growth through the Sasa acquisition and has also repaid debt of $38.5 million. CAML has now delivered shareholder returns of $162 million since 2012.

The Company is focussed on maintaining low cash costs of operation and undertaking the required capital programmes to maintain metal production at sustainable levels.

At Kounrad, there are approximately 180,000 tonnes of recoverable copper, which should ensure a life of operation beyond 2030. Sasa has probable reserves and inferred resources to support a 20 year life of mine.

A summary of the Company’s strategic objectives can be found on page 9 of the 2018 Annual Report.

Principle 2. Seek to understand and meet shareholder needs and expectations

The Board is cognisant of the expectations of all elements of the Company’s shareholder base.

Whilst most contact with the Company’s institutional investors is with the Executive Directors and the Head of Investor Relations, the other Board members receive reports of views expressed by shareholders. In addition, the other Directors are available to meet with investors where requested. Material information in relation to the Company is made publicly available via the London Stock Exchange’s Regulatory News Service (RNS). The Company recognises that this continuous dialogue and the opportunity to understand the motivations behind voting decisions, as well as receiving ongoing feedback from our shareholders and other stakeholders, plays an important part in ensuring our long-term success.

All shareholders also have the opportunity to attend and ask questions at the Company’s Annual General Meeting.

Principle 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Board seeks to build good relationships with stakeholders including workforce, local communities and governments and continuously aims to understand their needs, interests and expectations.

The Board receives reports of views expressed by shareholders and Directors are willing to meet with shareholders and stakeholders where requested. Feedback is welcomed, considered and where appropriate acted upon.

The Directors meet with shareholders and stakeholders, including workforce representatives, community leaders and government officials where appropriate. Board members are also available to answer shareholder questions at the Annual General Meeting and at other times whenever required.

The Company takes its sustainability very seriously, and has a Sustainability Committee in place. Health and safety, environmental protection and social and community matters including donations to worthy local causes are integrated into the Company’s strategy.

The CAML Board has always considered the Group’s Sustainability Committee responsibilities to be at the core of its activities. These are key to operating an ethical and sustainable business. It was in this context that the Sustainability Committee (formerly ‘CSR Committee’) was established in June 2012.

This Sustainability Committee comprises of Executive and Non-Executive Directors: Roger Davey (Chairman), Nick Clarke and Nigel Robinson from the UK and Nurlan Zhakupov from Kazakhstan. This ensures a full breadth of perspectives are brought to the Committee’s important and varied activities.

The Sustainability Committee considers regular reports in relation to ethical matters, such as, health and safety, environmental matters and local community projects. The Board is in turn updated.

Given the importance that the Board places in this area, the Committee meets on a regular basis throughout the year, usually on the same day as Board meetings.

CAML continues to believe that the health and safety of its employees, protecting the environment in which it operates, and helping to develop the local communities are critically important matters. These areas will continue to receive the appropriate attention from the Sustainability Committee and from the Group as a whole.

For further details on Sustainability Committee activities throughout the year, please see the Sustainability Committee Report on pages 28-31 of the 2018 Annual Report. 

Principle 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board has ultimate responsibility for risk management and, with the assistance of the Audit Committee, identifies and monitors risk.

In addition, Group staff also have a role to play in the implementation of policies and procedures aligned to mitigate and manage risk. The Risk Committee consists of senior staff and is responsible for the development of risk management policies and procedures, the identification, analysis, mitigation and review of the risks to the business. To ensure a consistent approach to risk management, a member of senior management chairs the Risk Committee and reports to the Audit Committee and Board as appropriate.

The criteria against which a risk is assessed has been established by the Group, so that a standardised assessment can be obtained. Risks are assessed against the likelihood of the risk event occurring and the impact and severity of the risk event. Using this assessment, risks are then categorised into a priority level, so that the appropriate actions can be taken.

Further details on how the Board identifies risk and considers its risk tolerance and risk appetite can be found on pages 36-39 of the 2018 Annual Report under ‘Identifying and Managing Risks’.

In conjunction with Risk Management, the Audit Committee also monitors and reviews the effectiveness of the Group’s internal control systems. Key elements within the internal control structure are summarised as follows:

  • The Board and management – the executive members of the Board are responsible for overseeing the day-to-day management of the Company.
  • Budgeting – there is an annual budgeting process whereby budgets for the following financial year are reviewed by the Audit Committee and recommended to the full Board.
  • Long-term forecasts are reviewed by the Board on a regular basis.
  • Management reporting – the financial performance of the Group is monitored against budget on a monthly basis and reported to the Board at each main Board meeting.
  • Operating controls – such controls are in accordance with Group policies and include management authorisation processes.
  • Monitoring – the effectiveness of the system of internal control is monitored regularly through internal reviews and external audits

Maintain a Dynamic Management Framework

Principle 5. Maintain the board as a well-functioning, balanced team led by the chair

The Board of Directors, led by the Chairman, Nick Clarke, manages the Company in making key decisions about strategy, financial planning, investments and its Directors. The Board considers this role as critical to leading the Group to maximise success in its business, and to the Company in delivering value to shareholders and other stakeholders. The Board also recognises that it has a collective responsibility and legal obligation to promote the interests of the Company, including being collectively responsible for defining corporate governance arrangements.

The Chairman leads on governance matters actively seeking input from the Deputy Chairman where appropriate.

CAML has a diverse Board, constituted as follows:

  • Three Executive Directors: Nick Clarke, Nigel Robinson and Gavin Ferrar.
  • Five Non-Executive Directors.
  • Four are considered fully independent: Nigel Hurst-Brown, Robert Cathery, David Swan, and Roger Davey.
  • Nurlan Zhakupov, based in Kazakhstan, has received share awards from the Company and is therefore not considered fully independent.
  • The Board offers a wealth of expertise and wide range of experience in the mining industry, financial and operational aspects of businesses, in public markets and in operating across different geographies around the world.

All Directors devote ample time in order to discharge their duties both at and outside of Board meetings. The Board meets at least four times per year, and at other times where required for specific matters. Details of Directors’ attendance at each of the scheduled meetings of the Board and its Committees for the 2018 financial year can be found in the Board Report on page 44 of the 2018 Annual report

The Board receives comprehensive reports in advance of meetings to ensure matters can be given due consideration. The Board is not dominated by one person or a Group of individuals. The four independent Non-Executive Directors constructively challenge the Executive Directors and the resulting Board debates are always robust and sometimes lively. The open and direct forum for discussion allows debate on an informed basis during the meetings and ensures decisions reached are done so by the Board collectively in alignment with the core values of the Company.

In line with the QCA Code, the Board is supported by Committees, specifically, Audit, Sustainability, Nomination and Remuneration Committees covering four of the areas of the Group’s operation which the Board views as having key importance to the Group’s stakeholders. Each of these Committees has their own terms of reference which provide the necessary authorities for them to operate as they consider appropriate. Each of these Committees reports to the Board and provides great value to its effectiveness.

Principle 6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities

The Board has an appropriate balance of skills and experience ranging from mining operations, public markets skills to accounting and other financial experience.

Biographical details of the Directors on the Board can be found and on pages 42-43 of the 2018 Annual Report.

On appointment to the Board, a new Director receives a comprehensive induction to familiarise themselves with the Company. Directors also have unrestricted access to management and receive briefings from management which enables them to keep abreast of latest developments.

All Directors on the Board also have access to the Company Secretary who acts as secretary of the Board and its Committees, reporting directly to the Chairmen in ensuring appropriate governance procedures are followed.

All Directors are also able to seek advice from the Company’s external advisors if they wish. The roles of the Auditors and Remuneration advisors are explained in more detail in the Audit and Remuneration Committee Reports on pages 46-47 and pages 50-53 respectively of the 2018 Annual Report.

During the year, the Board considered the independence of each Director, including assessment of their character, judgement and business and any other relationships which could materially interfere with the exercise of their judgement. In line with the QCA Code, the independence of each of the Non-Executive Directors who serve on the Board was also reviewed. After full consideration the Board continues to consider Robert Cathery, Roger Davey, Nigel Hurst-Brown and David Swan to be independent Directors.

The Board believes the independent Directors along with the Executive Directors and the other Non-Executive Director, Nurlan Zhakupov, provide an excellent balance of views as well as skills and a depth of experience within the Board.

Principle 7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

In 2018, the Board undertook its first formal evaluation of the Board’s effectiveness, focusing on the Board’s performance and effectiveness and that of its Committees and it will provide a framework to assess Directors’ effectiveness. This evaluation was led by the Chairman facilitated by the Company Secretary.

The evaluation of the Board’s effectiveness commenced with the completion of a comprehensive questionnaire by each Director. The assessment of the Chairman’s performance was led by the Deputy Chairman, Nigel Hurst-Brown. In addition to the Directors, the Company’s Auditors (PwC) provided responses on the performance of the Audit Committee. In line with the QCA Code, the Board’s review of performance was based on clear and relevant objectives, seeking continuous improvement.

The questionnaire was structured to encourage comprehensive responses which were then reported to the Board, on an unattributed basis, covering the following areas:

  • Strategy
  • Shareholders
  • Wider Stakeholder and Social Responsibilities
  • Risk Management
  • Board Dynamics
  • Succession Planning and Talent Development
  • Corporate Culture
  • Communication
  • Board Effectiveness
  • Audit Committee
  • Remuneration Committee
  • Sustainability Committee
  • The Chairman
  • Any other matters Directors wished to raise

The report on the responses received was reviewed and discussed by the Board. The responses in relation to Nick Clarke’s performance as Chairman were provided to Nigel Hurst-Brown as Deputy Chairman to discuss with the other Non-Executive Directors.

The Auditors’ comments were also included in the report to the Board.

As a result of the assessment, areas identified for focus over the coming year included:

  • Continued development of long-term strategy;
  • A two-day meeting involving operational management and including specific strategy review;
  • Ongoing monitoring of risk management; and
  • Succession planning for the Board over the coming years.

The periodical refreshment of the Board is considered regularly and on an ongoing basis.

The Board evaluates its composition and balance of skills and experience. The newly established Nomination Committee will make recommendations to the Board regarding the appointment and re-election of Directors and the membership of the Board’s Committees. The Board continues to be pro-active in the process of succession planning as this is considered a vital part of the Board’s role in the ongoing plans for growth and innovation for the Group. Recent management succession has demonstrated the Group’s success in this area.

Further information in relation to the evaluation of the Board’s effectiveness can be found on page 49 of the 2018 Annual Report.

Principle 8. Promote a corporate culture that is based on ethical values and behaviours

The Board sets the cultural tone which it aims to roll out throughout the Group. The Board promotes a sound corporate culture and is assisted by the Sustainability Committee. The Board encourages open and respectful dialogue which results in the Group working together as a cohesive unit.

Management decisions reflect the Group’s values, culture, policies and procedures wherever appropriate.

Principle 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

As well as the Chairman and two Executive Directors, there are four independent Non-Executive Directors and one Non-Independent Non-Executive Director on the Board. There is an Audit Committee, Nomination Committee, Remuneration Committee and Sustainability Committee. These meet the requirements of an AIM quoted Company. Further details are set out in the Governance Report commencing on page 40 of the 2018 Annual Report.

The Board takes corporate governance very seriously and is committed to ensuring that its procedures are kept up to date and appropriate for a company of its size. The Board reviews its procedures periodically to ensure that they remain appropriate, and evolve as the business grows.

Build Trust

Principle 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

As explained under Principle 2 above, the Board maintains a healthy dialogue with all of its stakeholders. All shareholders also have the opportunity to attend and ask questions at the Company’s Annual General Meeting. In addition, our Head of Investor Relations assists in shareholder interaction at the AGM and at other times. Other stakeholder matters are overseen by a specific Sustainability Committee as described above. Further details of the activities of the Sustainability Committee and of the other Board Committees can be found in the Governance Report commencing on page 40 of the 2018 Annual Report.

Updated: 14 May 2019