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 Corporate Social Responsibility 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

Nigel Hurst-Brown
Deputy Chairman

Deliver Growth

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

The Board work 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.

Our 2017 acquisition of the Sasa zinc and lead mine in Macedonia saw us move into the future as a diversified and low cost base metals producer with operations in two jurisdictions. This enables us to continue to invest in the communities in which we work, and to continue offering attractive shareholder returns.

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.

The Company is focussed on maintaining low cash costs of operation and undertaking the required capital programmes to maintain metal production at sustainable levels. The Company welcomed 700 new employees to Sasa and continues to learn about the needs of the community in order to understand how to improve local economies and support social initiatives.

Our investment in Kounrad and its low cost copper production has over the years enabled us to employ 350 people at our operation, support the local community in which we operate and return $144 million in dividends and share buy backs to our investors.

A summary of the Company’s strategic objectives can be found on pages 10-11 of the 2017 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 Corporate Social Responsibility (“CSR”) very seriously, and has a CSR 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 CSR 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 our CSR Committee was established in June 2012.

This CSR 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 CSR 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 our employees, protecting the environment in which we operate, and helping to develop the local communities are critically important matters. These areas will continue to receive the appropriate attention from the CSR Committee and from the Group as a whole.

For further details on our CSR activities throughout the year, please see our CSR Report on pages 32-39 of the 2017 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, the CFO 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.

Further details on how the Board identifies risk and considers its risk tolerance and risk appetite can be found on pages 40-41 of the 2017 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 Board is responsible for overseeing the day-to-day management of the Company which is undertaken by the Chairman supported by the Executive Directors.
• Budgeting – there is an annual budgeting process whereby budgets for the following financial year are reviewed by the 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 is updated by periodic re-forecasts.
• 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 our 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.

We have 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.
• Our Board offers a wealth of expertise and experience in the mining industry, financial and operational aspects of businesses, 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 will be included in 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, CSR, 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 44-45 of the 2017 Annual Report.

On appointment to the Board, all Directors receive an 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 48-49 and pages 50-52 respectively of the 2017 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 this to provide an excellent balance of views as well as skills and a depth of experience within the Board for the future.

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

A description of the Board evaluation process which is currently underway will be provided once this has concluded in the 2018 Annual Report. The evaluation, led by the Chairman with the assistance of the Company Secretary is focusing on the Board’s performance and effectiveness and that of its Committees and will provide a framework to assess Directors’ effectiveness.

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.

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 Corporate Social Responsibility 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 CSR Committee. These meet the requirements of an AIM quoted Company. Further details are set out in the Governance Report commencing on page 42 of the 2017 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 CSR Committee as described above. Further details of the activities of the CSR Committee and of the other Board Committees can be found in the Governance Report commencing on page 42 of the 2017 Annual Report.

Updated: 27 September 2018.