CORPORATE GOVERNANCE

As a listed company on the Australian Stock Exchange Limited (ASX), the Company must comply with the ASX Listing Rules and report on its main corporate governance practices by reference to the best practice recommendations of the ASX Corporate Governance Council (Recommendations).

Recommendation 1.1 - Formalise and disclose the functions reserved to the Board and those delegated to management

The Board of Directors has been charged by shareholders with overseeing the affairs of the Company to ensure that they are conducted appropriately and in the interests of all shareholders. The Board defines the strategic goals and objectives of the Company, as well as broad issues of policy and establishes an appropriate framework of corporate governance within which Board members and management must operate. The Board is responsible for ensuring the maintenance of corporate governance policies and procedures in accordance with prevailing best practices.

Management is charged with the day to day running and administration of the Company consistent with the objectives and policies set down by the Board. The Chairman & Managing Director is directly accountable to the Board for the performance of the management team.

Recommendation 2.1 - A majority of the Board should be independent Directors

The majority of the Board are independent Non-Executive Directors. The Board of Directors is currently comprised of the Chairman & Managing Director (Garry G. Lowder), an Executive Director (Russell M. D. Meares) and three independent Non-Executive Directors (Peter W. Hopkins, Warren J. Staude and Denis M. O’Neill).

The composition of the Board is subject to periodic review.

Recommendation 2.2 & 2.3 - The Chairperson should be an independent Director and the roles of Chairperson and Chief Executive Officer should not be exercised by the same individual

Dr. Garry Lowder is the Chairman & Managing Director. Dr. Garry Lowder and associates represent the second largest shareholder of the Company holding 6.9% of ordinary shares on issue and 15.1% of options on issue. Accordingly the Chairman is not an independent Director and the roles of the Chairperson and the Chief Executive Officer are not separated. Dr. Lowder was a founding shareholder of the Company and contributed to the funding of the operations of the Company during its formative years prior to its listing on the Australian Stock Exchange. Furthermore, Dr. Lowder has been, and continues to be, an integral part of the Company’s management primarily engaged in the task of achieving the Company’s goal of discovering economic deposits of gold, silver and base metals in eastern Australia.

Recommendation 2.4 - The Board should establish a Nomination Committee

The Board has not established a Nomination Committee to date. Where a vacancy arises or it is considered appropriate to vary the size of the Board of Directors, the Board reviews its composition and the qualifications and experience of candidates. Directors are selected on the basis of their specialist skills and business background so as to provide an appropriate mix of skills, perspective and business experience.

Directors are not appointed for a fixed term but are, except for the Managing Director, subject to re-election by shareholders at least every three years in accordance with the Constitution of the Company.

The Directors' terms of appointment are governed by the Constitution of the Company. A Director appointed to fill a casual vacancy, or as an addition to the Board, only holds office until the next general meeting of members and must then retire.

After providing for the foregoing, one-third of the remaining Directors (excluding the Managing Director) must retire at each annual general meeting of members. All Directors of the Company have direct access to the management of the Company and, where necessary, to external advisers.

Recommendation 3.1 - Establish a code of conduct to guide the Directors, the Managing Director, the Chief Executive Officer and any other key executives as to:

3.1.1 the practices necessary to maintain confidence in the Company's integrity; and
3.1.2 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

The Company has adopted both a Directors’ Code of Conduct and a general Code of Conduct that applies to Directors, employees and contractors of the Company.

The Directors’ Code of Conduct requires that Directors must at all times act honestly, in good faith and in the best interests of the Company as a whole and comply with the spirit, as well as the letter, of the law.

Directors must not make improper use of information acquired as a Director and must not place themselves in a position of conflict. Where conflict arises Directors are required to consult with the Chairman and fully and frankly inform the Board.

The Code of Conduct stipulates that the Company will not allow any person to be disadvantaged in honestly reporting any breach of this code of conduct to senior management or any director.

Recommendation 3.2 - Disclose the policy concerning trading in Company securities by Directors, officers and employees.

The Company maintains a policy which requires that Directors, officers and employees of the Company not engage in any dealings in the shares of the Company without giving prior notice to the Company including details of the type and date of dealing, number of securities, parties and price.

In addition Directors, officers and employees shall not engage in any dealings in shares of the Company during the period two weeks prior to and within 24 hours after the date of the announcement of the Company's annual or half year results or any quarterly activities report, or at any time while in the possession of inside information.

Recommendation 4.1 - Require the Managing Director and the Chief Financial Officer to state in writing to the Board that the Company's financial reports present a true and fair view, in all material respects, of the Company's financial condition and operational results and are in accordance with relevant accounting standards.

At this stage the Company's financial statements are prepared by an external accountant who confirms to the Audit Committee in writing that the Company's financial reports present a true and fair view, in all material respects, of the Company's financial condition and operational results and are in accordance with relevant accounting standards. The Chairman & Managing Director reviews and approves the financial statements before they are submitted to the Audit Committee and also confirms in writing to the Board that the Company's financial reports present a true and fair view, in all material respects, of the Company's financial condition and operational results.

Recommendation 4.2 - The Board should establish an Audit Committee

The Board has established an Audit Committee which is responsible for ensuring compliance with all appropriate accounting standards and the integrity of related reporting obligations.

The Committee is also responsible for reviewing the Company's internal financial controls, and for maintaining open lines of communication between the Board and the external auditors independently of management.

All Audit Committee deliberations are routinely reported to the full Board at the earliest opportunity and any action taken or proposal made is submitted to the full Board for ratification or approval and implementation.

Recommendation 4.3 - Structure the Audit Committee so that it consists of;
- only non-executive directors
- a majority of independent directors
- an independent chairperson, who is not chairperson of the Board
- at least three members

The Company has established an Audit Committee which comprises two independent Non-Executive Directors (Peter Hopkins and Warren Staude). Their qualifications, expertise and experience are set out in the Directors' Report. Other Directors and external auditors may be invited to attend Audit Committee meetings at the discretion of the Audit Committee.

The number of Audit Committee meetings attended by each of the members is set out in the Directors' Report.

Recommendation 4.4 - The Audit Committee should have a formal charter

The Company has a formal Audit Committee Charter which has been as approved by the Board of Directors.

Recommendation 5.1 - Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance

The Company has adopted a Continuous Disclosure Policy which details policies and procedures relating to compliance with ASX Listing Rules requirements relating to disclosure.

The Company, its Directors and staff are acutely aware of the ASX’s continuous disclosure requirements and operate in an environment where strong emphasis is placed on full and appropriate disclosure to the market.

The Chairman & Managing Director is responsible for interpreting and monitoring the Company’s disclosure policy and where necessary informing the Board. The Company Secretary is primarily responsible for all communications with the ASX.

Recommendation 6.1 - Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings.

Information is communicated to the members through compliance with ASX Listing Rules and the Corporations Act 2001, by way of announcements to the ASX, media releases, the Annual Report, Half-Yearly Report, the Annual General Meeting and other meetings that may be called to obtain approval for Board recommendations. The Company maintains a website which provides a description of the Company's projects and all material announcements released to the ASX. The Company’s website provides a facility to register for email distribution of ASX announcements. In addition the website offers an enquiry facility through which questions may be directed to the Company. In addition the Company communicates regularly with its shareholders by providing them with copies of all material announcements to the Australian Stock Exchange.

Recommendation 6.2 - Request the external auditor to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor's report.

The Company’s practice is to invite its external accountant and the external auditor to attend all Annual General Meetings to answer questions regarding the company’s financial statements and the conduct of the audit.

Recommendation 7.1 - The Board or relevant Board Committee should establish policies on risk oversight and management.

The Company has adopted a Risk Management Statement which provides an overview of the Company’s risk management policies and its compliance and control systems.

There are inherent risks associated with exploration. The Board continuously reviews the activities of the Company to identify key business and operational risks and, where possible, will implement policies and procedures to address such risks.

The Board is provided with regular reporting on the management of operations and the financial condition of the Company aimed at ensuring that risks are identified, assessed and appropriately managed as and when they arise.

Management and staff of the Company are required to ensure that Occupational Health and Safety practices and Environmental practices are of the highest standard.

Recommendation 7.2 - The Managing Director and the Chief Financial Officer should state to the Board in writing that:
7.2.1 the statement given in accordance with best practice Recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies of the Board; and

7.2.2 the Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

The Company does not presently employ a Chief Financial Officer given the limited size and nature of its activities. The Chairman & Managing Director addresses these areas to the extent that they are relevant to the Company in a statement in writing to the Board.

Recommendation 8.1 - Disclose the process for performance evaluation of the Board, its Committees and individual Directors, and key executives.

The Company has adopted a Performance Evaluation Statement which provides an overview of the Company’s approach to performance evaluation of the Board, its Committees, individual Directors and key executives.

The Board is responsible for evaluating its performance under the direction of the Chairman with reference to the achievement of corporate objectives. Board Committees review their performance on an annual basis

The Chairman & Managing Director evaluates the performance of key executives on a regular basis.

Recommendation 9.1 - Provide disclosure in relation to the Company's remuneration policies to enable investors to understand (i) the costs and benefits of those policies and (ii) the link between remuneration paid to Directors and key executives and corporate performance.

Recommendation 9.2 - The Board should establish a Remuneration Committee

The Board does not consider it appropriate to establish a Remuneration Committee at the present time as the company has only a limited number of employees. A significant proportion of the Company's operations are carried out by independent consultants or contractors as required.

The full Board of Directors establishes and reviews the remuneration for the Chairman & Managing Director and any executive Directors. The Chairman & Managing Director establishes and reviews the remuneration of employees.

Recommendation 9.3 - Clearly distinguish the structure of Non-Executive Director's remuneration from that of executives.

The full Board of Directors reviews the remuneration of Non-Executive Directors which must be within the aggregate amount approved for such remuneration by shareholders. Non-Executive Directors received remuneration of $13,240 each in the 2004-05 Financial Year (plus statutory superannuation). There are no arrangements for payment of retirement benefits to Non-Executive Directors.

Recommendation 10.1 - Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders.

The Company has adopted a Code of Conduct which requires its Directors, employees and contractors to observe the highest standards of behaviour and business ethics in respect of its operations and that they not engage in deceptive or misleading conduct.

The Code of Conduct requires all Directors, employees and contractors to:

• maintain a safe and healthy work environment;
  
• treat all persons with respect and dignity and not discriminate on the basis of sex, race, religion, politics, age or other personal differences;
  
• achieve compatibility between our operations and the maintenance of the environment, assess and monitor the environmental effects of our activities as well as rehabilitate the environment affected by our operations;
  
• recognise and have regard to cultural heritage and have regard for local communities in which the Company operates as well as encourage and support community interests;
  
• ensure that there is a culture that encourages behaviour and a methodology for implementing processes to ensure the safety and health of employees and contractors and communities near any site of operation.
  

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