Corporate Governance

In July 2005 the Quoted Companies Alliance (QCA) published Corporate Governance Guidelines for AIM-listed companies. In July 2006 the Company's board agreed to adopt these guidelines with which it has been in full compliance throughout the year.

The board remains accountable to the Company's shareholders for good corporate governance and continues to strive for the highest standards.

Board of directors

The Company supports the concept of an effective board leading and controlling the Company. The board is responsible for approving Company policy and strategy. It meets at least every three months and is supplied with appropriate and timely information. The directors are free to seek any further information they consider necessary. All directors have access to advice from the company secretary and independent professionals at the Company's expense. Training is available for new directors and other directors as necessary. A number of the Group's key strategic and operational decisions are reserved exclusively for the decision of the board.

The board currently consists of one executive director (Mike Norris), who holds a key operational position in the Company and six non-executive directors, who bring a breadth of experience and knowledge, all of whom are independent of management and any business or other relationship which could interfere with the exercise of their independent judgement. The board's make up provides a balance whereby the board's decision making cannot be dominated by an individual or small group. The Chairman of the board is N G McNair Scott. The board has named R A Pilkington as the senior independent non-executive director.

It is noted that the QCA takes the view that independence of action is likely to be lost the longer a director serves on the board. The period of nine years has been put forward by the QCA as the time by which independence may be deemed to be compromised. The directors of the Company take the view that the breadth of experience of the six non-executive directors, their knowledge of the Company after a significant period of service, and their detachment from the day to day issues within the Company provide a sufficiently strong and experienced balance with the executive members of the board.

This breadth of experience, allied to the management information provided by the Company, enables the non-executive board members to assess and advise the executives on the major risks faced by the Company. In view of this the board continues to believe that shareholders should regard all the Company's non-executive directors as independent.

In keeping with the provisions of the QCA the directors of the Company acknowledge that a number of the non-executive directors have served for a period that exceeds nine years. Therefore N G McNair Scott and R A Pilkington continue to offer themselves for re-election to the board on an annual basis.

Board performance

The board conducted a formal process to evaluate its effectiveness and that of the board committees and individual directors. Each director's performance was appraised by the Chairman reflecting input from the other directors: the senior non-executive director appraised the Chairman's performance on the same basis. This evaluation process takes place annually and aims to cover board dynamics, board capability, board process, board structure, corporate governance, strategic clarity and alignment and the performance of individual directors.

Board meetings

In addition to ad hoc meetings arranged to discuss particular transactions and events and the AGM, the full board met on six occasions during the last financial year. During the same period, the Audit Committee met on two occasions, the Remuneration Committee on one occasion and the Nomination committee on one occasion.

Nomination committee

The Nomination Committee meets at least once per year to select and recommend to the board suitable candidates for both executive and non-executive appointments to the board. The committee reviewed the annual performance appraisals of all the board members during the year. The membership of the committee comprises N G McNair Scott (Chairman), H Arnet and R A Pilkington.

Remuneration committee

The Remuneration Committee reviews the performance of the executive directors and sets the scale and structure of their remuneration on the basis of their service agreements with due regard to the interests of the shareholders and the performance of the Group. The Remuneration Committee also makes recommendations to the board concerning employee incentives, including the allocation of share issues to employees. Directors of the Group are not permitted to participate in discussions or decisions of the committee concerning their own remuneration. The membership of the committee comprises N G McNair Scott (Chairman), R A Pilkington, M J Donoghue, and H Arnet.

Audit committee

The committee is chaired by N G McNair Scott (Chairman) and consist of R A Pilkington, M J Donoghue, and H Arnet.

The Audit Committee meets at least twice a year and provides a forum for reporting by the Company's external auditors. Meetings are also attended, by invitation, by other members of senior management as appropriate. The Audit Committee is responsible for reviewing a wide range of financial matters including the status of the Company as a going concern and the half-year and annual financial statements prior to their submission to the board. The Audit Committee keeps under review whether an internal audit function would add value to the Company, and also the extent of non-audit services supplied by the external auditors to the Company.

Auditors

A resolution to re-appoint Grant Thornton UK LLP as auditors was passed at the Company’s most recent AGM in June 2010.

Service contracts

No director has any service contracts, consultancy agreements or other such arrangements with a notice period in excess of one year.

Going concern

After making enquiries and considering the matters referred to in the financial review and the basis of the financial statements' preparation, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.

Non-audit services

The board is satisfied that the provision of non-audit services, including the role of Nominated Adviser by Ambrian Partners is compatible with the general standard of independence for auditors and does not give rise to any conflict of interest. The board keeps its non-audit advisers under continual review.

Internal control

The board is responsible for maintaining a sound system of internal control to safeguard shareholders' investment and the Company's assets. Such a system is designed to manage, but not eliminate, the risk of failure to achieve business objectives. There are inherent limitations in any control system and, accordingly, even the most effective system can provide only reasonable, and not absolute, assurance against material misstatement or loss.

In accordance with the guidance of the Turnbull Committee on Internal Control, an ongoing process has been established for identifying, evaluating and managing risks faced by the Company. This process includes the following:

• Key risks and the impact of these to the Group's business are reviewed and considered by the directors;
• The board reviews these key risks as part of the budget approval process;
• Executive directors visit each operation regularly, when these key risks are reviewed and actions taken as necessary;
• Control procedures have been communicated to operations' management who review local procedures for Group compliance;
• The head office finance function will visit each operation at least twice a year to review local financial controls and compliance with Group procedures and report to the board;
• The Group has a comprehensive system for financial reporting. The board approves the annual budget and five year forecast. Monthly results are reported against budgets and variances analysed. Great importance is placed on the monitoring and control of cash flows, and cash forecasts are reported to the board on a weekly basis;
• As part of the year end external audit, management have requested the local auditors of each operation, including the head office in London, to prepare a management letter on their findings on the internal financial controls. This is reported to and reviewed by the Audit Committee;
• The external auditors periodically carry out a review of the head office's internal financial controls and report to management and the Audit Committee;
• The board has to approve all long-term currency, commodity and interest rate hedging, along with all capital investment projects and debt facilities; and
• The Chairman and the executive directors meet on a regular basis to discuss the management of the Group and review any business action risks. Minutes of these meetings are circulated to all members of the board.

Risks and uncertainties

The principal risks facing the Group are those relating to the volatility of the gold market, reliance on the expertise of the key Group personnel, as well as risks connected with uncertainties of the political, fiscal and legal systems of the countries in which the Group operates, including taxation and currency fluctuations.

The board and senior management regularly monitor and report on all areas of risk, through formal reports on a monthly basis as well as through ad-hoc communications. Senior management regularly visits operations to understand site-specific risks as well as to assess local political, fiscal andlegal risks. In this regard, the Group maintains a strict policy of compliance with local laws and regulations, and community issues (including health and safety, community development, and environmental responsibility) are at the forefront of strategic and operational decision-making.

Employees

Regular meetings are held with employee representatives to discuss strategies and the financial position of the Group and their own business units. The Group is committed to provide equal opportunity for individuals in all aspects of employment.

Relations with shareholders

The Company values the views of its shareholders and recognises their interest in the Company's strategy and performance, board membership and quality of management. It therefore holds regular meetings with, and presents to, its institutional and private shareholders to discuss its objectives. The Company also regularly meets, with the help of its brokers, institutions that do not currently hold shares in the Company, to inform them of its objectives.

The AGM is used to communicate with institutional and private investors and they are encouraged to participate. The Chairman of the Audit, Remuneration and Nomination Committees is available to answer questions. Separate resolutions are proposed on each issue so that they can be given proper consideration and there is a resolution to approve the Annual Report and Accounts, and to approve the report on directors' remuneration. The Company counts all proxy votes and will indicate the level of proxies lodged on each resolution, after it has been dealt with by a show of hands.

The Company has engaged the services of Buchanan Communications to help in its financial public relations strategy.