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Corporate governance report

 
The Assore board believes that strong corporate governance not only enhances sustainable control of an organisation, but is essential to preserving organisational reputation, investor confidence, access to capital, when required and sustainable employee motivation.

The group subscribes in all its activities to a policy of best practice in business management and corporate governance for South African companies, which it implements in accordance with the following three-dimensional framework:

  • Installing a risk and control environment within its business entities where management is responsible for identifying, quantifying and managing risks to achieve the organisation’s objectives on a sustainable basis.
  • Creating a process which provides executive management, through the Audit Committee, with assurance over the adequacy of internal control within the organisation, ie that the risk and control environment in place is appropriate for the business concerned and is working as intended.
  • Establishing a challenge process to identify the effectiveness of both the risk management environment and the assurance processes.This is generally the role of the internal audit function and other independent technical assurance specialists used on a consultancy basis.


The company’s shares are listed on the JSE Limited which requires that all listed companies comply with the Code of Corporate Practices as set out in the King Report on Corporate Governance.The King Report was originally issued in November 1994 and updated in March 2002 as the “King II Report”.The objective of the King Reports is to formulate recommendations for the maintenance and improvement of standards of corporate governance in South African companies in accordance with international best practice.The company is in the process of assessing the impact of a revised King Code and Report on Governance for South Africa (“King III”) on its governance structures. King III replaces King II on 1 March 2010.


The group’s practices are compliant with all the material requirements of the King II Report and ongoing consideration is given to those peripheral practices recommended in this report which have not yet been implemented by the group. Where it is not possible or it is impractical for the group to comply with the recommendations, the instances are referred to in this report and mention is made of the alternative procedures which the board has agreed to implement.

BOARD OF DIRECTORS

The directors are committed to the principles of corporate discipline, transparency, independence, accountability, responsibility, fairness and social responsibility.

Composition

The Assore board has a unitary structure comprising eight directors, four of which are executive and four non-executive.

Of the four non-executive directors, Mr Cyril Ramaphosa represents the Shanduka Group which is one of Assore’s black economic empowerment partners.The other three non-executive directors are regarded as independent and hold directorships in other listed and unlisted companies registered in South Africa.

The non-executive directors do not receive any benefits from the company other than their fee for services as directors, which, in the case of the director representing Shanduka, are paid over to his employer.


The four executive directors are Messrs Desmond Sacco (Chairman), R J Carpenter (Deputy Chairman), C J Cory (Chief Executive Officer) and P C Crous (Group Technical Director) and each of these executives is also on the board of joint-venture company,Assmang.

Remuneration

Details of emoluments paid to directors and directors’ interests in shares of the company are disclosed in the directors’ report on pages 53 and 54 respectively, and none of the executive directors has signed a contract of service with the company which specify either a paid notice period or additional compensation in the event of termination.

Election

In accordance with the company’s Articles of Association, all directors are subject to retirement by rotation and re-election by shareholders at least once every three years. In addition, all directors are subject to re-election by shareholders at the first Annual General Meeting following their initial appointment. A brief curriculum vitae of each director is set out on pages 8 and 9 of this report.

Meetings

The board meets at least four times per annum on predetermined dates with additional meetings convened when considered necessary.The board met on four occasions in the year under review and attendance at these meetings was as follows:

     Possible      Attended   
            
Desmond Sacco      4      3   
R J Carpenter      4      4   
C J Cory      4      4   
P C Crous      4      4   
B M Hawksworth      4      4   
P N Boynton      2      2   
M C Ramaphosa      4      1   
E M Southey      2      1   
Dr J C van der Horst   4      4   
            
Audit Committee             
B M Hawksworth (Chair)    Dr J C van der Horst   
E M Southey               

Currently, the Audit Committee is a subcommittee of the board and the Chairman of the Audit Committee reports on activities of the committee at each board meeting. Representatives of the internal and external auditors are also invited to attend the regular meetings of the committee and, if necessary, have direct access to the Chairman of the committee throughout the year.

The Audit Committee was established in terms of a charter approved by the board which, inter alia, sets responsibilities and is reviewed on an annual basis to ensure it remains appropriate to the activities of the group.

All of the members of the Audit Committee, including the Chairman (who will make himself available to take questions at the Annual General Meeting), are non-executive directors and the committee meets at least three times per annum.The prime objectives of the Audit Committee are to:

  • monitor the efficiency and effectiveness of the group’s internal control environment;
  • review and approve the drafts of financial reports prior to their issue, and recommend same to the board;
  • consider the appropriateness of the group’s accounting policies; and
  • provide a forum for the management of the external and internal audit functions and the resolution of issues which arise from audit activities.


All internal audit work is undertaken based on programmes prepared in accordance with an ongoing risk evaluation process which ensures that the focus of the audit effort is optimised (refer to Risk Management and Internal Audit and Internal Control below).

Remuneration Committee
   
B M Hawksworth (Chair)  Desmond Sacco
Dr J C van der Horst E M Southey

The majority of the members are non-executive directors, including the Chairman, and the committee meets at least once a year for the annual salary review which the Chief Executive Officer attends by invitation. Recommendations on the broad framework and cost of executive remuneration are made annually to the board for approval and, in order to do so, the committee is required to determine:

  • the group’s general policy on executive remuneration;
  • specific remuneration packages for executive directors; and
  • where necessary, criteria to assess the required performance of executive directors.


The remuneration of non-executive directors is determined by the Assore executive and, in terms of the Articles of Association, requires approval at a shareholders’ meeting. Remuneration of other employees in the group is determined annually by the executive directors in conjunction with the human resources department.

Insider trading and closed periods

The group operates a closed period prior to the publication of its interim and final results. During this period directors, officers and designated persons who may have access to price-sensitive information are precluded from dealing in the shares of the group.The closed period extends from the first day of the month following the end of a financial reporting period and expires on the day on which the interim or final results are published.Where appropriate, dealing is also restricted during sensitive periods where major transactions are being negotiated and a public announcement is imminent.

RISK MANAGEMENT

Risk is an everpresent feature of business in general. It is exacerbated in the mining industry as a result of the remote locations of operations, the physical danger inherent in the day-to-day activities of mining and smelting operations and the volume and complexity of legislation with which these industries have to comply.The most prominent financial risks to which the group is exposed, namely fluctuations in exchange rates and world commodity prices, are to a large extent outside of the board’s direct control and can only be indirectly controlled by timeous response to market fluctuations and setting appropriate business strategies.

Group risk management is achieved through the identification and control of all significant business risks, including operational risks, which could adversely affect the achievements of the group’s business objectives. Risk is managed at group level through the appointment of various risk management committees, which comprise representatives from senior management.The committees report to the board of directors through the Audit Committee. An independent formalised process of identifying, recording and reviewing the management of major risk exposures has been implemented, assisted by specialised external consultants, where required. Independent risk engineering consultants grade each operation against international risk standards for fire, security, engineering, commercial crime, contingency planning and mining, as well as environmental risk to monitor whether current practices meet the set criteria and are being maintained.The Risk Management Committees are also responsible for ensuring that appropriate financial and insurance mechanisms are integrated into the risk plan and the group is protected against catastrophic risk, including failure of IT systems. In addition, the group risk management process includes ongoing review of compliance with legislation in the areas of:

  • environmental rehabilitation management;
  • health and safety management; and
  • human resource management.

This review is undertaken in conjunction with independent, specialist consultants and subjected to regular compliance audits. Reports emanating from these independent reviews are tabled at the Audit Committee, which monitors progress and raises unresolved issues at board level for resolution.

INTERNAL AUDIT AND INTERNAL CONTROL

The board, through its appointed Audit Committee, is accountable for the implementation of appropriate internal controls, which are reviewed regularly for efficiency and effectiveness.These controls are designed to manage the risk of failure, and provide reasonable assurance that there is an adequate system of internal control in place. As with all management systems, the assurance provided is not absolute and the risk of failure cannot be eliminated entirely. The internal audit functions at the various operations in the group have been outsourced to the respective special services divisions of recognised professional auditing firms. Internal auditors monitor the operation of the internal control systems and, after discussion with management, report findings and recommendations to the Audit Committee. Corrective action is taken to address control deficiencies as and when they are identified. Nothing has come to the attention of the board to indicate that any material breakdown in the effective functioning of controls, procedures and systems has occurred during the year under review.

Representatives of the internal audit team are invited to attend Audit Committee meetings and, where areas of new risk are identified, eg initiation of capital projects or new systems of internal control, separate independent investigations take place on an ad-hoc basis in addition to the programmed reviews referred to above.