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Corporate governance and risk management report

The Assore board (the board) is of the opinion that strong corporate governance and risk management not only enhance sustainability of an 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, and which it implements in accordance with the following framework:

  • Installing a risk and control environment within its business entities where management, in conjunction with the necessary support from the Audit and Risk Committee, 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 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 operated in a manner to provide the board with reasonable assurance that appropriate safeguarding of the group’s assets is achieved; and
  • Establishing 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 has determined 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.

Board of directors

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


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

Of the four non-executive directors, Mr Bobby Carpenter was appointed to the board in a non-executive capacity, following his retirement as executive director and deputy chairman in February 2011 after 47 years of service with the group. The other three non-executive directors are independent and hold directorships in other listed and unlisted companies registered in South Africa.

The board evaluates annually the independence of the independent non-executive directors, who are appointed in terms of three-year contracts. In addition to this process, the executive directors review the degree of independence of the independent non-executive directors at each renewal date of their contracts, while the Chief Executive Officer (CEO) also conducts regular discussions with the non-executive directors concerned regarding their continuing independence. As recommended in terms of King III, non-executive directors are not permitted to serve for periods longer than nine years in the aggregate and non-executive directors do not receive any benefits from the company other than their fees for services as directors.


The approach to the remuneration of executive directors is described here in this report, while details of emoluments paid to directors and directors’ interests in shares of the company are disclosed in the “Directors’ report”. None of the executive directors has signed a service agreement with the company which specifies either a paid notice period or an additional compensation obligation on the group in the event of termination. Bonuses are determined based on the results and performance of the group for the year and are reviewed and approved by the Remuneration Committee (refer below). The impact on earnings per share for the year of the bonuses paid to executive directors of Assore was 36 cents (2011: 23 cents), amounting to 0,94% (2011: 0,84%) of earnings per share. Remuneration of directors depends on the size and complexity of operations and level of professional input required by the business environment concerned and has due regard to the calibre of the person required for the position. The level of remuneration is benchmarked against remuneration paid to executives of other listed companies in the resources sector, making use of independent remuneration consultants when considered necessary.

Fees for non-executive directors are reviewed on a regular basis, and are adjusted where necessary taking into account amounts paid to non-executive directors of companies with similar complexity profiles in the South African mining sector, and the degree of skill, time and experience required to discharge their duties. The payment of fees to nonexecutive directors is not dependent on attendance at meetings.

The board acknowledges the requirements of King III for shareholders to pass a non-binding advisory vote on the company’s remuneration policy annually. Directors’ fees are approved by means of special resolution as required by section 66(8) of the Companies Act 2008 (the Companies Act). Details of these procedures and relevant information are set out in the notice to members, which was sent to shareholders registered at the record date, as at 29 October 2012 by separate registered mail.

Election and succession

In accordance with the company’s Memorandum of Incorporation, 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 here. The appointment to the board and the assessment of continued eligibility on the board of directors are made by the executive directors with the oversight of the non-executive directors and in consultation with the board as a whole. Therefore a formal policy appointing board members and a Nomination Committee are unnecessary. This process is deemed most appropriate to the group’s circumstances as described above and to the industry in which it operates, and therefore it is not group policy to ensure that a third of the non-executive directors rotate annually as required by King III.

Appointments to the board in an executive directorship capacity are based on the nominees holding the 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, which includes the necessary exposure to applicable laws, rules, codes and standards. In the event that a director does not possess the necessary knowledge, the group provides the necessary formal and on-the-job training as required. Incoming non-executive directors are fully appraised of the group’s activities and relevant issues. Assore believes that these requirements and processes obviate the necessity for a formalised orientation and mentorship programme for its directors.

Each executive director is understudied by appropriately qualified and experienced alternate directors or senior staff, ensuring sufficient depth in areas that are critical to the continuation of the group’s business activities. Therefore, taking the managerial structure and the current make-up of the board into account, a detailed succession plan is not warranted. The CEO assumes ultimate responsibility for all executive issues, and ensures that issues raised within the group’s various committees and sub-committees (certain of which are set out here in this report and throughout) are addressed by the responsible staff, and further, that these are elevated to the appropriate level when it is apparent that more senior management involvement is necessary. Based on the submission by the Audit and Risk Committee, dispensation was granted by the JSE for the roles of CEO and Financial Director to be combined on condition that the appropriateness of the situation is reviewed and confirmed by the Audit and Risk Committee on an annual basis.


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:

attendance Attended
Desmond Sacco 4 4
EM Southey 4 4
CJ Cory 4 4
PC Crous 4 4
RJ Carpenter 4 4
DJ Ncube* 3 3
WF Urmson 4 4
Dr JC van der Horst# 2 2
* Resigned on 3 May 2011.
# Resigned on 31 December 2011.
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Board and committee performance evaluation

Ongoing evaluation of the board and its various committees does not occur on a formal basis. However, on the back of the involvement of the controlling shareholder, and due to the size of the business, regular interaction occurs between all levels of management to ensure that the various bodies in the Assore group act within their terms of reference. As stated under “Remuneration” (refer above), executive directors are not appointed in terms of contracts, and their services may be terminated in accordance with legal requirements without financial obligations to the group. Documented terms of reference for the board are not required, since all of the directors have substantial business experience at a senior level. The composition of the board as described above has an equal number of executive and non-executive directors, and ensures regular formal and informal interaction to ensure appropriate application of authority in the decision-making process. Since a key aspect of the group’s activities includes marketing and distribution, its reputation 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 and in order to compensate for the resulting lack of formal appraisal of his performance, further insight into the group’s activities is provided to the chairman at regularly convened Excom meetings, which are attended by the executive directors and other senior members of management. The skill set required of directors by the group is determined by the executive. Attendance by external advisers at meetings of the board and its various committees is arranged when considered necessary.

Group boards

The subsidiary and joint-venture companies of the group have properly constituted boards, whose directors operate independently in respect of the affairs of these companies. The board of the holding company respects the fiduciary duties of the directors of these companies, and policies and procedures adopted by these companies are considered by the respective boards prior to their adoption, necessary alteration or rejection.

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Audit and Risk Committee

Years of
service on the
Qualifications committee
EM Southey (Chair) BA, LLB 3
S Mhlarhi* CA(SA)
WF Urmson CA(SA) 2
Dr JC van der Horst# BA, LLD 9
* Appointed on 15 October 2012.
# Resigned on 31 December 2011.

The chairman of the committee reports to the board on its activities at each board meeting. Representatives of the internal and external auditors are also invited to attend all meetings of the committee and, if necessary, have direct access to the chairman of the committee throughout the year. The CEO and Group Accountant, and representatives of the company secretaries 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 and evaluate the quality of their relationship and level of cooperation which they were afforded during the conduct of their activities in the year under review. The committee recommended the acceptance of the integrated annual report 2012 to the board on 19 October 2012.

The terms of reference of the Audit and Risk Committee are documented, have been approved by the board, and are reviewed on an annual basis to ensure they remain appropriate to the activities of the group. The prime objectives of the committee that emanate from its terms of reference, which were applied during the year under review, are to:

  • provide a forum for the management of the external and internal audit functions and the resolution of issues which arise from all external and internal audit activities;
  • make recommendations to the shareholders regarding the appointment of the external auditors;
  • review the activities, services and performance of the external auditors, evaluating their independence and reviewing their overall role and 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 to provide an objective overview of the operational effectiveness of the group’s systems of internal control and reporting;
  • monitor the risk profile as determined by management, and make recommendations on the composition and classification of the risk profile for the group (refer “Risk management” below);
  • obtain representations from management, and make the necessary enquiries from external and internal audit and of management, on any matters under 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 its executives and senior staff (refer “Ethics”).

All of 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 level of knowledge and professional experience pertaining to legislative requirements, financial risks, financial and sustainability reporting and internal controls, applicable to the group. The committee meets at least three times per annum on predetermined dates, with ad hoc meetings convened where necessary, and holds ongoing informal meetings to keep abreast of business developments. During the year under review, the committee met on three occasions with attendance as detailed below:

attendance Attended
EM Southey 3 3
WF Urmson 3 3
Dr JC van der Horst 1 1

Internal audit has adopted its terms of reference from the board, 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 effort is optimised (refer “Risk management” and “Internal audit and internal control” below). 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 and meets with external audit independently in order to exchange views on issues pertaining to internal audit and evaluation of internal controls, as well as issues that may have a bearing on the external audit process and objectives. Internal audit certifies to the board and committee on an annual basis that the internal controls and financial controls respectively have not revealed any significant breakdown in internal controls or any issues that require their attention. 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 of internal and external audit tabled at the meetings of the committee, and having conducted enquiries of the attendees at its meetings, is not aware of any weaknesses in internal controls that have given rise or may give rise 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 comprise the majority of the group’s results, are reviewed and reported on by the external auditors prior to the publication of the group’s interim results. The committee, after due enquiry with external and internal audit, has satisfied itself on the appropriateness of the expertise and adequacy of the finance function and experience of the senior members of management responsible for the financial function to render this process unnecessary.

Social and Ethics Committee

WF Urmson (Chair) CA(SA)
RA Davies CA(SA)
CL Reichardt BSc (Hons), MSc

Section 72(4) of the Companies Act requires that, inter alia, listed companies establish a Social and Ethics Committee (SEC) and the SEC was appointed on 17 October 2012. The functions of the required SEC in terms of the Companies Act have, until its formation and appointment of its membership, been adequately performed by the Audit and Risk Committee. The SEC reports to the board, and the key aspects of its terms of reference include the monitoring of the group’s activities relating to any relevant legislation, other legal requirements or prevailing codes of best practice with regard to matters relating to:

  • social and economic development;
  • good corporate citizenship;
  • the environment, health and public safety, including the impact of the group’s activities and of its products or services;
  • consumer relationships, including the group’s advertising, public relations and compliance with consumer protection laws; and
  • labour and employment.
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Company Secretary

The company has appointed a wholly owned subsidiary, African Mining and Trust Company Limited, as company secretary. The board and senior staff, who are all appropriately qualified, ensure that all applicable provisions of the Companies Act and other regulatory aspects are applied in the affairs and management of the group.

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Remuneration Committee

EM Southey (Chair)
Desmond Sacco
WF Urmson

This committee is chaired by the lead independent director and consists of a majority of independent non-executive directors. Desmond Sacco is appointed as a member of this committee, based on his interest in the company, which the board believes adds to the overall appropriateness of the decisions and policies of the committee. Its terms of reference have been approved by the board and are reviewed annually by the board. Since salaries and bonuses are reviewed on an annual basis, the committee meets formally at least once a year, in addition to ad hoc meetings that may be necessary from time to time. The Chief Executive Officer (CEO) attends meetings of the committee by invitation but is not entitled to vote.

Recommendations on the broad framework and cost of executive remuneration are made annually to the committee for approval. To do so, the committee is required to determine:

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

The remuneration of non-executive directors is determined by the Assore executive, using, inter alia, industry benchmarks, and the remuneration for the year is determined at the Annual General Meeting (AGM) in the previous year.

Remuneration of other employees in the group is determined annually by the executive directors in conjunction with the human resources department and departmental heads, and where necessary, benchmarks remuneration levels with the industry using independent advisers. Due to the sensitivity of remuneration levels, the remuneration of individuals who are not directors is not individually disclosed; however, the total cost of the remuneration of senior employees is disclosed (here), and directors’ remuneration for the current and previous financial year is disclosed here.

Insider trading and closed periods

The group operates a closed period prior to the publication of its interim and final results. During these periods directors, officers and designated persons who may have access to price-sensitive information are precluded 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 during sensitive periods where major transactions are being negotiated and a public announcement is imminent. All employees are required to obtain the written approval of the CEO prior to dealing in the company’s shares at any time during the year.

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Risk management

The board has delegated the assessment and management of the group’s risk profile to the Audit and Risk Committee, which advises the board of unresolved risk management issues. Risk is an inherent feature of business in general, and in the mining industry it is characterised specifically by the remoteness of location of the operations, the physical danger inherent in the day-to-day activities of mining and smelting operations and the volume and complexity of legislative requirements, in particular with regard to environmental management with which this industry has to comply. These risks are compounded by the volatility of exchange rates and commodity prices applicable to the resources sector.

Group risk management is therefore critical to the sustainability of the group and is achieved through the identification and control of all significant business risks by various risk management committees, 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 joint-venture entity, Assmang, are prepared and updated quarterly by a dedicated risk management department, with assistance from specialised external consultants.

For larger business entities, 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 where significant uncontrollable exposures remain.

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 subsidiary companies in the Assore group are included in a comprehensive insurance programme, with an independent valuation of fixed assets occurring every three years.

The board is aware of the inherent risks contained in establishing the size and remaining life of the ore reserves exploited by the group in its current and intended mining operations. All orebodies and mineral reserves are measured and updated annually in accordance with the methodologies described in the “Mineral Resources and Reserves report”, and mining is planned to ensure that optimal utilisation of the mineral resource is effected, taking into account market conditions and customer specifications.

The most prominent financial risks to which the group is exposed, namely fluctuations in exchange rates and international commodity prices in the ferrous metals sector (usually US dollar denominated), are to a large extent outside the board’s direct control and can only be indirectly controlled by timely response to market fluctuations and setting of appropriate business strategies. Refer note 26 to the consolidated financial statements for more detail on financial risks.

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, including failure of information technology systems. Therefore, the group risk management process includes an ongoing review of compliance with relevant legislation and standards in the following areas (refer “Sustainability report”):

  • environmental rehabilitation management;
  • health and safety management;
  • human resource management; and
  • quality of products and management systems.

The board believes that the risk management processes described above are effective in managing the risks to which the group is exposed, and that they are sufficiently flexible to meet the changing needs of the operations and the group’s stakeholders. Further, due to the relatively low staff complement of Assore, employees are informed of the risks relevant to their particular activities within the business, and risk assessments performed indicate that these business risks are managed effectively and mitigated wherever possible.

Details of the risks to which the group is exposed is included here in this report.

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Information technology

The management of information technology (IT) falls within the remit of the CEO who convenes regular meetings with responsible IT staff to address the appropriateness and relevance of the IT infrastructure, information security, the design and maintenance of disaster recovery procedures and related staffing and administrative issues, and engages necessary external advice and consultation when required. Documented terms of reference for IT and information security management systems are not considered necessary at this stage, 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 is reported on to the CEO for attention and action where necessary. The group is currently in the process of adopting an enterprise-wide resource planning system (ERP), which will be used as a partial departure point to develop a charter for IT in the near future. Where appropriate, other members of senior management also attend these meetings to provide the necessary input. External audit conducts an annual review of the application by management of the controls pertaining to the group’s hardware and software, related physical and access controls, and licensing. Where major IT projects are undertaken, eg the ERP referred to above, a steering committee is formed, which ensures that the various aspects and deliverables of the project are scheduled and achieved. Matters of relevance to the business are communicated by the CEO to the Excom or the board where appropriate. Disaster recovery is catered for by means of daily back-ups of electronic information and media, which are physically housed in a building separate from where the IT hardware is located.

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Legal compliance

The board has delegated the responsibility for oversight of legal compliance to the Audit and Risk, and Social and Ethics committees. Suitably qualified consultants have been appointed to ensure that legal compliance is maintained in the areas in which the group operates. Therefore, the CEO has not appointed an individual person responsible for the management of compliance. Since the group’s main activity is the marketing and distribution of the products of the joint venture, Assmang, a competition law compliance programme is in place. The Audit and Risk Committee ensures matters material to the group receive the appropriate attention, and that adequate provision and appropriate disclosure are made for known and determinable exposures. Legal issues specific to the Assore group are also discussed at Audit and Risk Committee meetings, where management is provided with additional guidance where necessary.

Safety, health and environmental (SHE) legal compliance audits are conducted on an ongoing basis for all operations. In addition, high-level compliance reviews are conducted every second year for Assore’s subsidiary operations and reports submitted to the Audit and Risk Committee. In future, these reports will be issued to the Social and Ethics Committee.

The size of the group, as well as the experience of the executive directors and senior management, affords it the opportunity to resolve all disputes, whether of a legal or non-legal nature, based on their respective characteristics. External legal counsel is consulted when considered necessary to ensure the appropriateness of the resolution methods adopted.

Internal audit and internal control

The board, through its appointed Audit and Risk Committee, is accountable 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 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 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 amongst standard items on the agenda of the Excom, 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 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 and Risk Committee meetings and, where areas of new risk are identified, eg 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 day-to-day management processes of the group and senior management who interact with staff at all levels to ensure that high ethical standards commensurate with board expectations are maintained. Issues not addressed by management are addressed by way of oversight by the Social and Ethics Committee (SEC, refer above). Due to the size of the group, the establishment of a documented code of ethics and conduct is not considered necessary. The group has various channels to facilitate effective whistle-blowing procedures. The board believes that management is sufficiently experienced to ensure that the requirements of the group in respect of laws, rules, codes and standards do not expose the group to material risks in this respect. In addition, senior management is closely involved with external legal counsel in unfamiliar and complex areas.