Corporate Governance

Maintaining the highest standards of corporate governance in the context of the stage, size and complexity of any company, together with robust systems of internal control are fundamental building blocks for any business.

The Financial Reporting Council published an update to the UK Corporate Governance Code for accounting periods beginning on or after 1 January 2019. In September 2018, the Board resolved to adopt the Code with immediate effect.

The UK Corporate Governance Code is widely recognised to set the highest standards of corporate governance and is written to accommodate very large companies as well as much smaller ones.

The Board, led by the Chairman Dennis Edmonds, monitors its compliance with the UK Corporate Governance Code at least annually and have satisfied themselves that appropriate governance structures, policies and procedures are in place. Opportunities for training are available to each of the Company’s directors.

All directors have access to the services of the Company Secretary who is responsible for advising the board on all governance matters. Both the appointment and removal of the company secretary are matters for the whole board.

The provisions of the UK Corporate Governance Code that the Company does not comply with are:

These items are further described in the relevant sections below.

The UK Corporate Governance Code makes specific references to disclosures required to be made in the Company’s Annual Report and these disclosures will be made in the Company’s Annual Report for the year ended 31 December 2018.

Board leadership and company purpose

The Company explains its application of principles A to E in Chapter 1 of the UK Corporate Governance Code within:

Value generation and preservation

Alien Metals’ objective is to create a portfolio of mining projects in jurisdictions with an established mining community, stable political background, and where strong operational controls can be assured.

The group has operated in Mexico for over ten years during which time it has established long-term relationships with local government, communities, and key stakeholders. Alien Metals’ geological experts assess and identify projects for potential mineralisation. Wherever possible, the projects are acquired on a low-cost option basis whilst preliminary exploration is undertaken to assess the merits of further work.

Where preliminary studies evidence sufficient mineralisation, increasingly comprehensive studies will be undertaken with a view to delineating a compliant mineral resource estimate in readiness of potential sale of the asset to a producing mining company, at which time a significant premium over its acquisition and development cost may be justified.

Over the long-term, the Company seeks to create value by acquiring mining rights, demonstrating the presence of mineralisation and thereby significantly increasing the value of those mining rights.

As the Company does not expect to generate operating revenues in the short term, it is dependent upon the financial support of new or existing investors and it is believed that companies that are well-governed enjoy a lower cost of capital which, all things being equal, should translate to greater business success.

The risks to the business are set out in the “principal risks” section on Pages 14 to 19 of the Company’s Annual Report for the year ended 31 December 2017.

Relations with shareholders

The Executive Chairman welcomes major shareholders to discuss the Company’s strategy and governance, including, on the appointment of key board appointments. The Chairman reports to the Board as a whole, on the views of major shareholders.

All investors are encouraged and welcomed at the Company’s Annual General Meeting and any other General Meetings that are held throughout the year, at which there is opportunity to pose questions to the directors.

Culture and employees

At present the Company has few employees and its culture therefore exists principally in the boardroom and amongst any contractors. In the UK, all contractors report directly to the Company Secretary. Overseas, all contractors report directly to the country manager. Both the Company Secretary and the country manager report to the Executive Chairman. It is considered that the board is well positioned to ensure that policy, practices and behaviour throughout the business is aligned with the Company’s purpose, values and strategy. In the event that the Board had any concerns, it would require the Company Secretary or country manager to take remedial action.

The Board is confident it understands the needs of its employees and that all employees feel able to speak openly to the Chairman, or any of the other directors. If for any reason, an employee feels unable to raise concerns in this way, the Company’s whistleblowing policy sets out the process for raising concerns, and how to do so anonymously. In addition, employees are provided details of the charity, Public Concern at Work, who will provide free and confidential advice.

In view of the small number of company employees, the Board has considered there to be no need or benefit gained by appointing a director from the workforce, creating a formal workforce advisory panel, or designating a non-executive director to engage with the workforce.

Conflicts of interest

All Directors have duties under the BVI Business Companies Act to act with care, diligence and skill, in the best interests of the Company.

Certain directors and officers of the Company may also serve as directors and/or officers of, or have investments in other companies involved in mineral exploration and development and consequently there is the potential for conflicts of interest.

Conflicts of interest can arise amongst shareholders, especially where one shareholder, or a small group of shareholders, has a significant stake in the Company. The directors should not to allow this to compromise or override their independent judgement, especially in the context of acting fairly as between members of the Company.

In the event a conflict of interest should arise, each individual so conflicted is required to disclose the conflict in accordance with Article 16 of the Company’s Articles of Association in order that it can be considered and approved if appropriate. No director may vote on any matter in which he or she may be deemed to be interested.

On an ongoing basis, each director is responsible for informing the Company Secretary of any new actual or potential conflicts that may arise or if there are any changes in circumstances that may affect an authorisation previously given. Even when provided with authorisation, a director is not absolved from his or her statutory duties.

The Board recognise the importance of the remuneration structure supporting its strategy and reinforcing the culture of the organization and the Company will be reporting further on the activities of the Nomination & Remuneration Committee in its annual reports commencing with the annual report for the year ended 31 December 2018 as required by provision 41 of the UK Corporate Governance Code.

Division of responsibilities

The Company explains its application of principles F to I in Chapter 2 of the UK Corporate Governance Code within:

Historically, the Chairman of the Company was responsible for the leadership of the Board and ensuring its effectiveness and the Chief Executive was responsible for the performance of the Company, together with the Chairman. Following the Board changes in May 2018 and as the Company had limited operational activity, the Board determined the cost of hiring a replacement was not warranted and the responsibilities could be adequately discharged between the Executive Chairman and the Company Secretary. A schedule setting out the division of responsibilities between the Chairman and CEO remains in place to maintain clarity on the expected division of those responsibilities; this schedule is available on the company’s website, www.alienmetals.com/about-us/corporate-governance.

The need for the appointment of a CEO will be kept under constant review.

Independent directors

At least half the Board, excluding the Chairman, comprises independent non-executive directors who provide a balance of skills and experience, and who are responsible for providing constructive challenge to and assistance in, developing proposals on strategy.

James Cable is deemed an independent director. He has acted as a director of the Company for more than nine years, which can in some circumstances be seen to impair a director’s independence, however, the Board recognises significant value of having a director familiar with the history of the Company and the Board consider Mr Cable to be independent in character and judgement. The non-executive directors participate in the Company’s share option plan; the extent of their participation is not considered to impact their independence. Each of James Cable and Chris Gordon is therefore deemed independent.

Senior Independent Director

The role of a Senior Independent Director is to provide a sounding board for the Chairman and serve as an intermediary for the other directors and shareholders. In addition, a senior independent director would be expected to meet the other non-executive directors without the Chairman present, to appraise his performance.

There are presently only two non-executive directors, each of whom, as well as the Company Secretary, is available as a sounding board to the Chairman and to serve as an intermediary for shareholders. The Company Secretary would also available to serve as an intermediary for any of the directors in the event it should be required.

In view of the above, the absence of the appointment of a Senior Independent Director is not considered by the Board to impede its effective operation.

Board meeting attendance

As the Board is comprised of only three directors, frequent contact between the directors enables decisions to be taken quickly and effectively using written resolution procedures rather than physical board meetings. The Board meets formally when required.

Operation of the board

All directors are required to allocate sufficient time to the Company to discharge their responsibilities effectively. In any decision-making, the directors are required to exercise their judgement in determining the likely impact of each decision as to the likelihood of promoting the success of the company for the benefit of its members as a whole. In doing so, the directors consider whether the decision is likely to promote the success of the company for the benefit of its members as a whole, having regard for (amongst other matters):

Directors are expected to have a thorough knowledge of their duties as directors and as such, the Board expects that although the Company is not incorporated under, or subject to, the UK Companies Act 2006, the directors take all relevant matters into consideration when making decisions.

The Chairman is ultimately responsible for ensuring that each board decision is taken having sufficient information on and with all due discussion of, each of the aforementioned items as is relevant to such decision.

The Company has a schedule of matters reserved for its own decision and two committees comprised entirely of non-executive directors: the Audit Committee and the Nomination & Remuneration Committee. Each committee has formally delegated responsibilities by way of terms of reference.

The process for the evaluation of the performance of the Board, committees and individual directors is described below.

Composition, succession and evaluation

The Company explains its application of principles J to L in Chapter 3 of the UK Corporate Governance Code within:

Board Committees

The Board of Directors has two standing committees:

The Company Secretary is Secretary to each Committee and attends all meetings.

The Board considers that each of the Committees has an appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively. The members of each Committee are identified on the Company’s website at www.alienmetals.uk/about-us/directors.

Annual board evaluation

The Chairman continuously considers the performance of the Board, its committees and of individual directors, and provides feedback when appropriate. Similarly, the Chairman invites feedback in the same manner from the Non-Executive Directors and the Company Secretary. The small size of the board provides for open and honest communication between the directors and, whilst a formal process brings its own merits, the Nomination & Remuneration Committee consider the time and costs involved in carrying out a formal process, especially one that is externally facilitated, cannot be justified for the Company at this stage in its development.

The undertaking of a formal annual board assessment will be kept under review as the Company grows in size.

The Company will be reporting on the activities of the Nomination & Remuneration Committee in its annual reports commencing with the annual report for the year ended 31 December 2018.

Succession planning will be considered periodically by the Board as a whole, although as the current board was only constituted in May 2018, the current Board is focused on successfully executing the Company’s growth strategy in the short term.

Audit, risk and internal control

The Company explains its application of principles M to O in Chapter 4 of the UK Corporate Governance Code within:

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Company’s management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the Committee reviews and discusses the audited consolidated financial statements and the notes to them with Company management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The Committee is governed by terms of reference, which are available on the Company’s website. The Audit Committee’s terms of reference require it to review its own terms of reference once a year; they were last amended on 28 September 2018.

Independence of the external auditor

RSM UK Audit LLP was appointed by the Company during 2018.

The independence of the auditor is considered by the Audit Committee each year. In assessing the auditor’s independence, the Audit Committee consider:

Audit and non-audit fees are disclosed in note 4 to the financial statements, on page 36 of the Company’s 2017 Annual Report.

The Audit Committee considers the nature and value (in the context of the audit fee) of any non-audit services on the auditor’s independence, and is required to give its prior approval of any such non-audit services.

Effectiveness of the external audit process

In considering the effectiveness of the external audit process, the Audit Committee consider:

Internal audit function

The Audit Committee considers annually whether there is a need for an audit committee and makes a recommendation to the Board if a change is considered to be appropriate. The Company’s operations are small in scale, the Company’s organisational structure is flat, and the cost of an internal audit function is not justified at present.

Remuneration

The Company explains its application of principles P to R in Chapter 5 of the UK Corporate Governance Code within:

The Board of Directors has established a Nomination & Remuneration Committee (“N&R Committee”) because at the time so doing, the size of the Board dictated that the members of each of a Nomination Committee and Remuneration Committee would be the same and until such time as there is a significant increase in the size of the Board, this combined approach is consistent with an efficient governance framework.

In respect of nominations activities, the N&R Committee makes recommendations to the Board as to the appropriate structure, size and composition (including the skills, knowledge, experience and diversity) of the Board and is responsible for identifying and nominating suitable candidates to fill Board vacancies.

The N&R Committee is also responsible for recommending the remuneration policy to the Board, determining the remuneration of the directors and senior executives, ensuring that remuneration is reported correctly, and reviewing the results of any assessment of the effectiveness of the Board.

The N&R Committee meets as required each year to review the performance of the executive directors and to determine their respective compensation.

The N&R Committee is governed by terms of reference, which are available on the Company’s website. The N&R Committee’s terms of reference require it to review its own terms of reference once a year.

During the year, Dennis Edmonds was appointed as Executive Chairman of the Company and Chris Gordon joined the Board as an independent non-executive director. Tony Williams and Jim Williams resigned as Executive Chairman and CEO, respectively, in May 2018. Tom Bailey and Jim Crombie resigned as non-executive directors in June 2018.

Messrs Edmonds and Gordon received an award of share options to ensure there was a strong link between their contribution to the Company and their reward. As their appointments came about at the same time as the private placing of shares in May 2018, the potential significant investor was consulted as to the appropriateness of the remuneration structure.

The Board is not aware that the workforce has any particular desire to engage in the discussion of remuneration policy and how executive remuneration aligns with wider company pay policy. The Board will make appropriate provision should it appear that this is not the case or the situation changes.

The members of the Nomination & Remuneration Committee have the necessary experience of executive compensation matters relevant to their responsibilities as members of such a committee by virtue of their respective professions, contacts within the minerals industry as well as experience in the broader business community. In addition, each member of the Nomination & Remuneration Committee keeps abreast on a regular basis of trends and developments affecting executive compensation. Accordingly, it is considered that the Nomination & Remuneration Committee has sufficient experience and knowledge to set appropriate levels of compensation. Neither the Company nor the Nomination & Remuneration Committee engaged independent consultants to evaluate the levels of compensation during the year ended 31 December 2018.

The recommendations of the Nomination & Remuneration Committee are submitted to the independent members of the Board of Directors for consideration and approval.

Remuneration policy

The Company’s remuneration policy is intended to support the Company’s long-term strategy and sustainable success in a manner consistent with the Company’s purpose and values, attracting and retaining the highest quality of directors and senior executives. The remuneration policy is to:

The remuneration policy does not require post-employment shareholding requirements. Share options ordinarily lapse upon the resignation of the option holder.

The scale and structure of the remuneration and compensation packages of directors is set taking into account time commitment, comparatives, risks and responsibilities, to ensure that the amount of compensation adequately reflects the individual’s previous performance, achievements, experience, responsibilities and risks of the office or position held, and in the context of the Company’s risk profile, to ensure they do not encourage excessive risk taking on the part of the recipient of such compensation.

As the Company is at an early stage of development, the use of traditional performance standards, such as corporate profitability, is not considered by the Nomination & Remuneration Committee to be appropriate in the evaluation of corporate or directors’ performance. Discretionary bonuses may be paid to aid staff retention and reward performance.

The Board considers that the remuneration policy has operated as intended in terms of company performance and quantum.

The Company provides executive directors with base salaries which represent their minimum compensation for services rendered during the financial year. The base salaries of directors and senior executives depend on the scope of their experience, responsibilities, and performance. A description of the material terms of each director’s contract is provided under “Terms of Directors’ Employment, Termination and Change of Control Benefits” below.

The N&R Committee has considered the risk implications of the Company’s compensation policies and practices and has concluded that there is no appreciable risk associated with such policies and practices since such policies and practices do not have the potential of encouraging an executive officer or other applicable individual to take on any undue risk or to otherwise expose the Company to inappropriate or excessive risks. Furthermore, although the Company does not have in place any specific prohibitions preventing executives from purchasing financial instruments, including prepaid variable forward contracts, equity swaps, collars, or units of exchange funds that are designed to hedge or offset a decrease in market value of options or other equity securities of the Company granted in compensation or held directly or indirectly, by the director, the Company is unaware of the purchase of any such financial instruments by any director.

The Company does not anticipate making any significant changes to its compensation policies and practices during 2019.

Share Option Plan and Option-Based Awards

The Company currently has two discretionary share option plans: an Unapproved option plan as amended and restated, effective as of 1 December 2006 (the “Unapproved Plan”), and the EMI share option plan (“Approved Plan”) which was adopted by the Board on 3 February 2018, and which provides for the award of share options under HMRC’s approved Enterprise Management Incentive scheme, the Company Share Option Plan, as well as Unapproved share options.

The Unapproved Plan was established to encourage ownership of the Common Shares of the Company by directors, officers, employees of the Company and its subsidiaries, and other service providers responsible for the management and profitable growth of the Company’s business and to advance the interests of the Company by providing additional incentive for such persons and to enable the Company and its subsidiaries to attract and retain valued directors, officers, employees and other service providers. In February 2018, the Board resolved that no further options would be granted under the Unapproved Plan and succeeded it with the Approved Plan.

Historically, options were allocated as approved by the Board of Directors on the recommendation of the Nomination & Remuneration Committee. Option awards were reviewed periodically and took into account previous option grants, changes in executive positions and overall contribution to the Company.

The Approved Plan provides that the maximum number of shares which may be reserved and set aside for issue under it, is 10% of the Company’s issued share capital at the date of grant. The aggregate number of shares which may be reserved for issuance to any one person under the Share Option Plan and which are subject to outstanding options granted under a prior plan, must not exceed 5% of the issued shares (determined at the date the option was granted), in a 12 month period.

The Company’s non-executive directors participate in the Unapproved Plan because the Board considers that the holding of options helps align the interests of the non-executive directors with shareholders by incentivising their decision making with a view to providing growth in the Company’s share price. The Company’s long term success will be dependent upon raising additional finance in future; aligning the interests of all directors and senior executives with shareholders incentivises all concerned to achieve the best possible price for such placings and to minimise undue dilution of interests.

The Company will be reporting on the activities of the Nomination & Remuneration Committee in its annual reports commencing with the annual report for the year ended 31 December 2018.


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