The Assore board (the board) is of the opinion that strong corporate governance and risk management not only enhance sustainability of the organisation but are essential to preserving organisational reputation, investor confidence, access to capital when required and sustainable employee motivation.
The group subscribes in all its activities to principles of best practice in business management and corporate governance for South African companies, as set out in the King III Report, which it implements in accordance with the following framework:
- Establishing a risk and control environment within each of its business entities where management, in conjunction with the necessary support from the Audit and Risk, and Social and Ethics committees, is responsible for identifying, quantifying and managing risks related to the achievement of the organisation’s objectives on a sustainable basis. The process of quantification takes into account qualitative aspects in addition to their potential financial impact.
- Creating a process which provides the board, through the Audit and Risk, and Social and Ethics committees, with assurance regarding the adequacy of internal control within the organisation, ie that the risk and control environment in place is appropriate for the business concerned and that the business is operated in a manner which provides the board with reasonable assurance that appropriate safeguarding.
- Implementing a formalised review 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, which requires all listed companies to comply with the Code of Corporate Practices as set out in the King Report on Corporate Governance (King III). Management reviews business practice across the group on an ongoing basis and ensures wherever possible that the group is substantially compliant with all the material requirements of King III. Where it is not practical for the group to adopt these requirements, relevant comment is provided and reference is made in this report to the alternative procedures which the board has adopted in each instance to compensate for not applying the requirements of King III. The group’s application of King III has been assessed and rated by the Institute of Directors as AAA – Highest Application (2014: AAA), utilising its Governance Assessment Instrument. The detailed governance register is located on the group’s website, under the “About us” tab.
Board of directors
The directors are committed to the principles of corporate discipline, transparency, independence, accountability, responsibility, fairness and social responsibility.
The Assore board comprises nine directors, of whom five are independent
Election and succession
Appointments to the board in an executive directorship capacity are based on the nominees holding appropriate professional qualifications and having had substantial exposure to business as a whole, and in particular in the mining industry, in senior managerial roles and/or related professional practice, including knowledge of applicable legislation, rules, codes and standards. Incoming
In accordance with the company’s Memorandum of Incorporation (MoI), all
Each executive director is understudied by appropriately qualified and experienced senior staff members, ensuring sufficient depth of expertise in areas that are critical to the continuation of the group’s business activities. Therefore, taking the managerial structure and the current
The board meets at least four times per annum on predetermined dates, with meetings convened on an ad hoc basis when considered necessary. The board met four times in the year under review and attendance at these meetings is tabled below:
|BH van Aswegen||4||4|
|^||Resigned 15 June 2015.|
|#||Appointed 2 February 2015.|
Board and committee performance evaluation
Ongoing evaluation of the board and its various committees does not occur on a formal basis. However, due to the fact that the Chairman represents the controlling shareholder, and due to the structure of the management of the business, regular interaction occurs between all levels of management to ensure that the various structures in the Assore group act in accordance with their terms of reference. As stated in “Remuneration”, executive directors are not appointed in terms of contracts, and their services may be terminated in accordance with legal requirements without exposing the group to
The composition and size of the board as described above enables regular formal and informal interaction between directors to ensure appropriate application of authority in the
A key aspect of the group’s activities includes marketing and distribution. As a result the reputation of and relationships with its customers, together with all other stakeholders, is assessed in all of the board’s actions and not in isolation. The Chairman is appointed by the controlling shareholder in Assore. Further insight into the group’s activities is provided to the Chairman at regularly convened Executive Committee meetings, which are attended by the executive directors and other senior members of management. The skills set required of executive directors of other group companies is determined by the Assore executive. Attendance by external advisers at meetings of the board and its various committees is arranged when considered necessary.
The subsidiary and
Audit and Risk Committee
The committee meets at least three times per annum on predetermined dates, with meetings convened to consider significant issues when considered necessary. The committee met three times in the year under review and attendance at these meetings is tabled below:
|EM Southey (Chair)||3||3|
|*||Meeting date changed at short notice.|
The chairman of the committee reports on its activities at each board meeting. Representatives of the internal and external auditors are invited to attend all meetings of the committee and, if necessary, have access in private to the chairman of the committee throughout the year. The CEO, Group Accountant and representatives of the Company Secretary attend all meetings by invitation. Internal and external auditors meet with members of the committee at least once annually without members of management being present in order to discuss the quality of their relationship and evaluate the level of cooperation which they were afforded during the conduct of their activities in the year under review. The committee recommended the approval of the integrated annual report for 2015 to the board on 19 October 2015.
The terms of reference of the Audit and Risk Committee are documented, have been approved by the board, and are reviewed periodically to ensure they remain appropriate to the activities of the group. The prime objectives of the committee that emanate from its terms of reference and which were applied during the year under review, are to:
- monitor the risk profile as compiled by internal audit and agreed to with management and make recommendations on the composition and classification of the risk profile for the group (refer “Risk management”);
- integrate the activities of assurance providers so that all risks are identified and appropriate mitigation steps are taken;
- provide a forum for management and representatives of the external and internal audit functions to resolve issues which arise from all external and internal audit activities;
- make recommendations to the board regarding the appointment of the external auditors;
- review the activities, services and performance of the external auditors, evaluate their independence and review their overall role and the appropriateness of fees charged;
- review and approve the annual financial statements, interim reports and related disclosures and other significant announcements made by the group, making the necessary recommendations to the board;
- consider the appropriateness of the group’s accounting policies;
- monitor and supervise the effective functioning of the internal audit function (refer “Internal audit and internal control”) to ensure that the roles of both internal and external audit are clear in order to provide an objective overview of the operational effectiveness of the group’s systems of internal control and reporting;
- receive and consider feedback on issues relevant to the committee raised at meetings of the Social and Ethics Committee (refer “Social and Ethics Committee”);
- obtain representations from management, and make the necessary enquiries from external and internal audit and of management, on any matters which are the subject of litigation, ensure compliance with material aspects of legislation and create awareness of pending changes to legislation (refer “Legal compliance”); and
- monitor the ethical tone of the group through discussion with its executives and senior staff (refer “Ethics”).
All the members of the committee, including the chairman (who will make himself available to take questions at the Annual General Meeting) are independent non- executive directors, who collectively possess the appropriate professional and business experience pertaining to legislative requirements, financial risks, financial and sustainability reporting, and internal controls applicable to the group.
Internal audit has adopted its terms of reference from the Audit and Risk Committee, and all internal audit work is undertaken based on the ongoing risk assessment process which is presented annually by internal audit to the Audit and Risk Committee, to ensure that the focus of the internal audit activities are optimised and integrated with the external audit function (refer “Risk management” and “Internal audit and internal control”). The internal audit function of Assore is outsourced, and the responsible senior executive on the engagement has direct access to the chairman of the committee.
Independent meetings are conducted with external audit in order to exchange respective views on the risk environment to which the group is exposed, as well as on issues that may have a bearing on the external audit process and internal audit objectives based on fieldwork performed by them. Internal audit provides assurance to the board and the committee on an annual basis that the internal and financial controls have not revealed any significant breakdown or any issues that require the attention of the committee. The committee, having due regard to materiality and the inherent nature of the business, is satisfied that the internal controls were effective, and operated as designed for the period under review. In addition, the committee, having reviewed the reports tabled by internal and external audit at its meetings, and having invited enquiries of the attendees at its meetings, is not aware of any breakdowns of internal controls or corporate governance that resulted in, or could lead to, material financial losses, fraud or material errors during the year under review.
The committee does not consider a formal audit review of the interim results necessary, as the interim results of Assmang, which generate the majority of the group’s earnings, are reviewed and reported on by its external auditors in terms of ISRE 2410 – Review of Interim Financial Information Performed by its Independent Auditor of the Entity, prior to the publication of the group’s interim results. The committee, after due enquiry of external and internal audit, has satisfied itself as to the appropriateness of the expertise, the adequacy of the finance function and the experience of the senior members of management responsible for the financial function.
Social and Ethics Committee
In accordance with its documented terms of reference approved by the board, the committee is required to meet at least twice per annum on predetermined dates. The committee met twice during the year and attendance at these meetings is tabled below:
|WF Urmson (Chair)||2||2|
|BH van Aswegen||2||2|
|*||Appointment effective 1 October 2015.|
The Social and Ethics Committee (SEC) reports to the board and provides feedback on issues raised at its meetings to the board and to the Audit and Risk Committee for consideration where relevant. The key aspects of its terms of reference include the monitoring of the group’s activities relating to any relevant legislation relating to the group’s activities or prevailing codes of best practice with regard to matters relevant to:
- its corporate strategy and any changes that may be necessary from time to time;
- social and economic development of communities within the vicinities of the group’s operations;
- maintenance of good corporate citizenship credentials;
- environmental, health and public safety issues at all its operations, including the impact of the group’s activities and of its products or services on the environment;
- consumer relationships, including the group’s advertising, public relations and compliance with all legislation relating to the group’s activities; and
- labour and employment including working conditions and employee development
The company has appointed a wholly owned subsidiary, African Mining and Trust Company Limited (AMT), as company secretary (refer here). The board and senior staff of that company, who are all appropriately qualified, ensure that all applicable provisions of the Companies Act are applied in the affairs and management of the group. The board of directors of AMT includes an adequate number of persons with professional qualifications to ensure that an appropriate level of independence is maintained and that its affairs are conducted on an
Insider trading and closed periods
The group declares a closed period applicable to all members of staff in relation to dealing in Assore shares prior to the publication of its interim and final results. During these periods directors, officers and staff are prohibited from dealing in the shares of the company. 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 where a public announcement is imminent and includes information considered to be price sensitive.
All directors and staff are required to obtain the written approval of the CEO prior to dealing in the company’s shares at any time during the year. Any dealings by the CEO in Assore shares require the approval of the lead independent director. Due to the significance of the group’s involvement in Assmang, as well as Assmang’s bearing on the results of Assore’s
The board has delegated the assessment and management of the group’s risk profile, which is compiled by the internal audit function, to the Audit and Risk Committee, which advises the board of any unresolved risk management issues. Risk is an inherent feature of business in general, and in the mining and smelting industries it is characterised specifically by the remoteness of location of the operations, the physical danger inherent in the
Management of group risk is therefore critical to the sustainability of the group and is achieved through the identification and control by various risk management committees of all risks, including operational risks, which could adversely affect the achievements of the group’s business objectives. Risk assessments are ongoing, and risk registers for all significant operations in the
For larger business entities in the group, 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. Input is obtained from various risk management committees comprising representatives from senior management. On completion and review of these processes, insurance cover is acquired on insurable risks where considered appropriate. In addition to these processes, other risks deemed relevant to the Assore group are presented to the Audit and Risk Committee, which is given the opportunity to comment and provide input on the assessments which are tabled. The assets of the group are included in a comprehensive insurance programme, with an independent valuation of fixed assets occurring every three years.
The respective risk management committees are also responsible for ensuring that appropriate financial and insurance mechanisms are integrated into the risk plan and that the group is protected against catastrophic risk. Therefore, the group risk management process includes an ongoing review of compliance with relevant legislation and standards in the following areas (refer “Group sustainability performance”):
- Environmental rehabilitation management.
- Health and safety management.
- Human resource management.
- Quality of products and management systems.
Details of the principal risks to which the group is exposed are included here in this report.
The management of information technology (IT) falls within the remit of the CEO who chairs regular meetings of the IT Steering Committee (IT Steerco). The IT Steerco consists of responsible IT staff, as well as staff responsible for finance and major IT projects. The purpose of the IT Steerco is to address the appropriateness and relevance of the IT infrastructure, monitor and further the progress of major IT projects, information security, the design and maintenance of disaster recovery procedures and related staffing and administrative issues, and the IT Steerco engages necessary external advice and consultation when required. Matters of relevance to the business are communicated by the CEO to the Excom, the Audit and Risk Committee or the board, where appropriate. Documented terms of reference for the IT Steerco are not considered necessary, given the degree of involvement by the CEO and senior management on an ongoing basis in these issues. In addition, the IT systems are subjected to a detailed annual external audit, which are reported on to the Audit and Risk Committee for attention and action where necessary. Disaster recovery is catered for by means of daily
The board has delegated the responsibility for oversight of legal compliance to the Social and Ethics Committee, from which management receives any guidance deemed necessary for the fields appropriate to its respective terms of reference. Suitably qualified consultants have been appointed to ensure that legal compliance is maintained in the business sectors in which the group operates. Accordingly, the CEO has not appointed an individual person responsible for the management of compliance. Due to the importance attached to compliance with competition law requirements, the group operates a competition law compliance programme and has ensured that all senior staff members are familiar with the requirements of the Competition Act. The Audit and Risk Committee ensures that matters containing significant levels of risk material to the group receive the appropriate attention, and that adequate provision and appropriate disclosure are made for known and determinable exposures.
Safety, health and environmental (SHE) legal compliance audits are conducted on an ongoing basis for all operations. In addition, a
The size of the group, as well as the experience of the executive directors and senior management, affords management the opportunity to resolve disputes in these areas. External legal counsel is consulted when considered necessary to ensure the appropriateness of the methods adopted to resolve issues.
Internal audit and internal control
The board, through its Audit and Risk Committee, is responsible for ensuring the implementation of appropriate internal controls, which are reviewed regularly for efficiency and effectiveness, taking Into account the risk profile of the group (refer here). These controls are designed to manage the risk of failure and provide reasonable assurance that there are adequate systems of internal control and appropriate corporate governance procedures in place. As with all management systems, the assurance which is provided is not absolute and the risk of failure cannot be eliminated entirely. Internal auditors monitor the operation of the internal control systems and governance processes and, after discussion with management, report findings and recommendations to the Audit and Risk Committee. Corrective action is taken to address control deficiencies as and when they are identified. Since material issues of compliance are among standard items on the agenda of the Audit and Risk Committee, and minutes of these meetings are made available to internal audit, the group does not extend an invitation to the head of internal audit to attend Excom meetings; however, access to the chairman of the Audit and Risk Committee is available throughout the year. Nothing has come to the attention of the Audit and Risk Committee or the board to indicate that any material breakdown in the effective functioning of internal controls or corporate governance procedures has occurred during the year under review.
Representatives of the internal audit team are invited to attend Audit and Risk Committee meetings and, where areas of new risk are identified, such as initiation of capital projects or new systems of internal control or IT systems implementation, separate independent investigations take place on an ad hoc basis in addition to the programmed reviews referred to above.
Ethical issues are managed by way of executive involvement in