Governance

To comply with the AIM Rules for Companies (the “AIM Rules”), the Board has chosen to adhere to the Quoted Companies Alliance’s Corporate Governance Code for small and mid-size quoted companies (as updated in April 2018) (the “QCA Code” or the “Code”). Pursuant to AIM Rule 26 the Company hereby reports on a “comply or explain” basis, with respect to the Code’s principles.

The Board recognises the importance of maintaining appropriately high standards of corporate governance and, where possible, it has put in place governance structures that would be expected in light of the Group’s size, stage of development and resources.

The Company’s governance structures are further governed by the Company’s Articles of Association (“Articles”) together with Relationship Agreements and a Revolving Credit Facility (“RCF”) entered into in October 2020 with the Company’s two largest shareholders, MTL (Luxembourg) S.à r.l. (“MTL Lux”) and Runruno Holdings Limited (“RHL”), as part of the Group debt restructuring.

The Relationship Agreements regulate the relationship between the Company and its two largest shareholders to ensure, amongst other things, that the Group and its business shall be managed for the benefit of the shareholders of the Company as a whole. The relationship agreements grant each shareholder the right to appoint one director, for so long as it (together with its successors or assigns) continues to hold more than 10% of the voting rights of the Company.

The RCF sets out the remuneration payable to directors nominated by the two largest shareholders. Further, the RCF requires the prior consent of both these shareholders (together with its successors or assigns) for the Company to undertake a number of operational decisions.

The Company’s current application of the principles of the QCA Code, and details of where it may not comply with these principles, are detailed below.

Principle 1

PrincipleDisclosure
Establish a strategy and business model which promotes long-term value for shareholdersMetals Exploration Plc is a mineral resources exploration and development company. It owns 100% of the Runruno Gold Project located in the north of the Philippines. It is registered in England and Wales and quoted on the AIM market of the London Stock Exchange with ticker identity MTL. Metals Exploration`s management strategy and corporate plan is to:

  • Provide shareholders with capital growth potential, delivered by developing a mineral project into a profitable mine.
  • Undertake cost-effective and precise exploration on those targets considered most likely to deliver future positive shareholder returns.
  • Respect the indigenous culture of the exploration and development areas and to promote social and economic development for the traditional custodians.
  • Manage the inherent value of its mining properties portfolio by delivering an efficient mining operation.
  • Conduct operations in a safe and environmentally responsible manner to industry best practice standards.
  • Offer employment opportunities to those who live in the project area.
  • Rewarding loyal and dedicated employees who drive the Company’s objectives.
  • Consider acquisition opportunities to foster additional long term capital growth potential.
This Annual Report sets out a number of the key risks and uncertainties that may represent challenges to the successful execution of the Company’s strategy and business model, and how such risks and uncertainties are managed by the Company.

Principle 2

PrincipleDisclosure
Seek to understand and meet shareholder needs and expectationsThe Company has an established programme of engaging openly with its shareholders. Communications occur via its corporate website, the publication of its Annual Report and the Interim Results, trading and other announcements made via a regulatory information service and at its Annual General Meeting and General Meetings where the Board encourages investors to participate, if possible.

The Company’s website contains information on the Company’s business, corporate information and specific disclosures required under the AIM Rules and the QCA Code. Following the announcement of the Company’s full year and half yearly results the Company may make presentations to institutional shareholders, private client brokers and investment analysts, as appropriate. Periodic meetings and site visits may be held with existing and prospective institutional and other investors. Formal feedback from shareholder meetings is provided by the Company’s broker and discussion of this feedback is a standard item on the Board’s agenda.

Over the past year engagement with shareholders has been restricted given the protracted debt negotiation process during which the Company was unable to communicate openly with shareholders due to the application of various rules/regulations.

Principle 3

PrincipleDisclosure
Consider stakeholder and social responsibilities and their implications for long term-successThe Company recognises its responsibility to promote its success for the benefit of all its stakeholders and understands that the business has a responsibility towards its shareholders, employees, partners, customers, funders, suppliers and to the local communities where its projects and operations are based.

The Board is also conscious that the tone and culture that it sets will impact all aspects of the Company and the way its employees behave and operate. The importance of maintaining sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Company has close ongoing relationships with a broad range of stakeholders, monitoring feedback from them and considers such feedback in developing future policy.

The Company undertakes its exploration and mining activities in a manner that seeks to minimise or eliminate negative environmental impacts and that seeks to maximise positive impacts of an environmental nature. As a mining company, the Company ensures proper environmental stewardship on its projects that promotes convergence around common environmental and social standards.

The Company operates a comprehensive health and safety programme to ensure the wellness and security of its employees. The control and eventual elimination of all work related hazards requires a dedicated team effort involving the active participation of all employees. A comprehensive health and safety programme is the primary means for delivering best practices in health and safety management. This programme is regularly updated to incorporate employee’s suggestions, lessons learned from past incidents and new guidelines related to new projects with the aim of identifying areas for further improvement in health and safety management. This results in continuous improvement in the health and safety programme.

Employment opportunities and regular training are offered for local Filipinos, while gender diversity policies are actively followed.

Employee involvement is fundamental in recognising and reporting unsafe conditions and avoiding events that may result in injuries and accidents.

The Group has a dedicated community relations division that is active in developing and assisting with various community social programs with special focus on health, education and infrastructure projects.

Principle 4

PrincipleDisclosure
Embed effective risk management, considering both opportunities and threats, throughout the organisationThe Board is responsible for the Company’s system of internal controls and for reviewing its effectiveness. The system is designed to manage, rather than eliminate, the risk of failure to achieve the execution of the Company’s strategic objectives and business model.

The Board monitors financial controls through the setting and approval of an annual budget and the regular review of key risk areas and monthly management accounts. The management accounts contain a number of indicators that are designed to reduce the possibility of mis-statement in the financial statements.

Each year, on behalf of the Board, the Audit Committee reviews the effectiveness of the Company’s system of internal controls. This is achieved primarily via a comprehensive review of risks which cover both financial and non-financial issues potentially affecting the Group and from discussions with the external auditor. Details of the key risks, and their management, are contained in the Company’s Annual Report.

The Board is not aware of any significant failings or weaknesses in the Company’s existing system of internal controls.

Operational risk management is the driver for how the Group does business and dictates requirements to design, plan and adequately respond to internal and external events. This ensures that proper incident response, and effective monitoring can be implemented to minimise anticipated risks and reduce harm and disruption to people, environment and the Company’s operations.

The health of the Company’s people, and the communities in which it works, has been the Group’s priority in working through the COVID-19 pandemic.

Principle 5

PrincipleDisclosure
Maintain the Board as a well-functioning, balanced team led by the ChairThe purpose of the Board is to ensure that the business is managed for the long-term benefit of all shareholders, whilst at the same time having regard for employees, customers, suppliers and our impact on the environment and the communities in which we operate. The full Board is responsible and accountable to shareholders for the management and success of the Group and for providing effective controls to assess and manage the risks that the Company faces.

The Group’s business is directed by the Board and is managed on a day-to-day basis by the Chief Executive Officer (“CEO”). The Board monitors compliance with the objectives and policies of the Group through monthly performance reporting, budget updates and periodic operational reviews.

The Company is currently led by a Board comprising:
  • An Independent Non-Executive Chairman (David Cather);
  • the CEO (Darren Bowden);
  • an Independent Non-Executive Director (Jeremy Wrathall);
  • a Non-Executive Director (Andrew Chubb);
  •  a Non-Executive Director nominated to the Board by the substantial shareholder MTL Lux (Andrew Stancliffe);
  • a Non-Executive Director nominated to the Board by the substantial shareholder RHL (Guy Walker).
Those directors nominated by shareholders are not independent but have relevant experience from which the Company can benefit. Andrew Chubb is not independent, as he is a partner of the Company’s corporate broker and has recently advised the Company in this role.

After completing the debt restructuring in October 2020 the Company undertook an extended search to recruit suitable experienced professionals to act as Non-Executive Directors of the Company. The recruitment process was completed in April 2021 with the appointment of three Non-Executive Directors.

These three new Board members provide additional mining and corporate industry experience to that already held by the existing Board members. These appointments improve the impartiality of the Board in effective decision making.

The members of the Board as a whole have suitable knowledge of the Company and expertise to discharge their duties and responsibilities effectively. All Directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational. Any Director must declare a conflict of interest in relation to a particular item of business before commencement of discussion on the topic.

The Board’s role is to oversee and manage the Group as responsibly and efficiently as possible. It meets formally at least six times a year, to discuss a broad range of significant matters including vision, strategy, operational performance, funding and financial performance. All significant decisions are made by the Directors with all Directors participating in the key areas of decision-making, including the appointment of new Directors. The Board receives timely information on all material aspects for the Group to enable it to discharge its duties. The CEO provides an appraisal of the current status and short-term plans for operational and development activities. In addition to its fixed meeting schedule the Board convenes restricted agenda meetings on an ad hoc basis. Minutes of the meetings of the Directors are also circulated to the Board for approval.

On appointment Non-Executive Directors warrant to commit sufficient time on the business of the Company to maintain a full understanding of the business which includes visiting the Company’s operations in the Philippines on a regular basis, when possible.

The Board has delegated some of its responsibilities to various Committees, which operate within specific terms of reference which can be found on the Company’s website. In the event of a proposal to appoint a new Director, each Director is given the opportunity to meet the candidate prior to any formal decision being taken. Under the Articles and the RCF new director appointments require the approval of the Company’s two largest shareholders. Due to the small size of the Company no Nomination Committee has been established.

Mr David Cather was appointed as Independent Non-Executive Chairman of the Board of Directors of the Company in April 2021. This appointment has satisfied a requirement of the existing Relationship Agreements between the Company and its two largest shareholders, to move towards an independent board structure over time. The appointment of an independent Chairman also better aligns the Company’s governance to the guidance set out in the QCA Code.

The Chairman has the primary responsibility to deliver the Company’s corporate governance model as decided upon by the Board. The Chairman is supported by an experienced Chief Financial Officer ("CFO") for all financial related matters and an experienced Company Secretary ("CoSec") who assists the Chairman prepare for and run effective Board meetings. The CFO and CoSec advise the Chair and the Board on financial, legal and governance developments.

The Board, in discharging its corporate governance responsibilities, ensures that:
  • the Company is led by an effective Board of Directors which is collectively responsible for the long-term success of the Company;
  • the Board and its Committees have the appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively;
  • the Board establishes formal and transparent arrangements for considering how it applies corporate reporting, risk management, and internal control principles;
  • it maintains an appropriate relationship with the Company's auditors; and
  • there is a dialogue with shareholders based on a mutual understanding of objectives.
The Company has established an Audit Committee comprising the three non-shareholder appointed Non-Executive Directors all of whom have relevant financial experience. The CFO attends audit committee meetings upon the invitation from the members and provides additional support where required. Directors attendance at audit committee meetings held during the year are disclosed in the Annual Report.

The Audit Committee is primarily responsible for:
  • agreeing the scope of and reviewing the results of the audit;
  • deciding auditor’s remuneration and ensuring auditor independence and objectivity;
  • monitoring audit partner tenure;
  • recommending adoption of the annual and interim financial statements of the Company;
  • ensuring the financial records of the Company have been properly maintained; and
  • ensuring the financial statements comply with appropriate accounting standards to give a true and fair view of the Company’s financial position and performance.
The Audit Committee may examine any matters relating to the financial affairs of the Company including but not limited to its annual and interim financial statements and announcements, internal control procedures, accounting procedures and accounting policies.

During the financial year the Audit Committee held two formal meetings in order to approve the issue of the Company’s financial results. In addition a number of informal meetings were held to consider various matters including the financial risks faced by the business and general accounting procedures. The Audit Committee will continue to closely monitor the financial risks faced by the business to progress mitigation of these.

The external Auditors have direct access to the members of the Audit Committee, without presence of the executive management, for independent discussions.

The main purpose of the Remuneration Committee is to determine and agree the framework or broad policy for and approval of terms of service, remuneration and other benefits of the Directors and senior officers. The Remuneration Committee comprises the three non-shareholder appointed Non-Executive Directors. Details of directors’ remuneration are set out in the Annual Report.

When making remuneration decisions the members take into consideration the size and nature of the business and the importance of retaining and motivating management. The Remuneration Committee meets when appropriate.

There was one formal meeting of the Remuneration Committee during the financial year.

In accordance with the Company’s Articles, the Relationship Agreements and the RCF the Non-Executive Directors nominated by the Company’s two largest shareholders are not required to be re-elected at Company Annual General Meetings. Further, their remuneration and terms and conditions of appointment are governed by the Relationship Agreements and the RCF.

The remuneration and terms and conditions of appointment of Non-Executive Directors not nominated by the two largest shareholders is set by the Board and governed by the Articles. In light of the size of the Board, the Directors do not consider it necessary to establish a Nomination Committee. However, this is kept under regular review.

The Board and its various committees receive appropriate and timely information prior to each meeting. A formal agenda is produced for each meeting and board/committee papers are distributed several days before meetings take place. Any director can challenge proposals with decisions being taken after due discussion. Any director can ask for a concern to be noted in the minutes of the meeting which are circulated to all directors. Specific actions arising from meetings are agreed by the Board or relevant committee and then followed up by management.

All relevant directors attended all board and committee meetings during the Company’s last financial year.

Principle 6

PrincipleDisclosure
Ensure that between them the directors have the necessary up-to-date experience, skills and capabilitiesThe current directors of the Company are:
  • David Cather Independent Non-Executive Chairman
  • Darren Bowden, CEO
  • Jeremy Wrathall, Independent Non-Executive Director
  • Andrew Chubb, Non-Executive Director
  • Andrew Stancliffe, Non-Executive Director
  • Guy Walker, Non-Executive Director
The skills and experience of the Board are set out in their biographical details and on the Company’s website.

The recent appointment of three extra Non-Executive Directors has broadened the Board’s range of skills and experience and deepened the capability of the Board to deliver the strategy of the Company for the benefit of its shareholders over the medium to long term. The experience and knowledge of each of the Directors gives them the ability to constructively challenge strategy and to scrutinise performance.

MSP Corporate Services Limited, a professional company secretarial services provider, acts as Company Secretary.

Principle 7

PrincipleDisclosure
Evaluate Board performance based on clear and relevant objectives, seeking continuous improvementThe Board has recognised the recommendation to appoint an independent Chairman and additional Non-Executive Directors to enhance the Board’s performance and to offset any potential imbalance/conflict from having a majority of the Board appointed by the Company’s two largest shareholders. This matter has been addressed and three new Non-Executive Directors were appointed to the Board in April 2021.

The collective performance of the Board is reflected in the success of the business. Evaluation of the performance of the Board, its Committees and individual members has historically been implemented on an on-going and ad hoc basis given the stage of the Company’s development. The Company does not therefore currently comply with Principle 7 however the recent expansion to the number of directors will allow consideration of a formal board evaluation process.

Succession planning is currently the responsibility of the Board as a whole and the establishment of a Nominations Committee is not considered necessary due to the current size of the Board.

Principle 8

PrincipleDisclosure
Promote a corporate culture that is based on ethical values and behavioursThe Board recognises that its decisions will impact the corporate culture of the Group as a whole and that this will affect the performance of the business. The Board is also very conscious that the tone and culture that it sets will greatly impact all aspects of the Group and the way that employees behave and operate. The importance of maintaining sound ethical values and behaviours is crucial to the ability of the Group to successfully achieve its corporate objectives.

The Company seeks to ensure that responsible business practice is fully integrated into the management of all its operations and into the culture of all parts of the Group’s business. It believes that the consistent adoption of responsible business practice is essential for operational excellence, which in turn is expected to ensure the delivery of its core objectives of, inter alia, sustained real growth in future profitability.

In addition, employee involvement is recognised as fundamental in recognising and reporting unsafe conditions and avoiding events that may result in injuries and accidents, which, in turn, as a mining company, the Board considers, to be a fundamental part of recognising and establishing ethical values and behaviours throughout the Group.

Principle 9

PrincipleDisclosure
Maintain Governance structures and processes that are fit for purpose and support good decision making by the BoardThe Company maintains appropriate governance structures and processes according to its current size and complexity, and its stage of development and level of resources.

There is a clear division of responsibility between the Non-Executive Chairman and the CEO. The Chairman is responsible for running the business of the Board and for ensuring appropriate strategic focus and direction. In addition, the Chairman is responsible for the implementation and practice of sound corporate governance.

The CEO is responsible for proposing the strategic focus to the Board, implementing it once it has been approved and overseeing the management of the Group.

The role of Non-Executive Directors includes questioning and challenging the CEO and assisting where possible in developing strategic proposals, reviewing and commenting on the integrity of the Company’s financial reporting systems and the information they provide; recommending appropriate standards of corporate governance; reviewing internal control systems; ensuring that risk management systems are robust and reviewing corporate performance and ensuring that performance is reported to shareholders.

Notwithstanding the above the RCF requires certain operational matters to be pre-approved by the Group’s two largest shareholders. These lending covenants are exceptions to compliance with Principle 9 that are expected to continue until the termination of the RCF.

Principle 10

PrincipleDisclosure
Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholdersThe Company recognises that meaningful engagement with its shareholders is integral to the continued success of the Group. The Company actively engages with its shareholders through meetings, presentations and roadshows, where it is able to without violating any legal restrictions imposed in this regard.

The Board believes that the Annual Report and Accounts, and the Interim Results published at the half-year stage, play an important part in presenting all shareholders with an assessment of the Company’s position and prospects. All regulatory announcements are published on the Company’s website. The Annual General Meeting and General Meetings are an opportunity for shareholders to discuss the Company’s business with the Directors.

The Board is supported by the Audit and Remuneration Committees, each of which has access to such information, resources and advice that it deems necessary, at the Company’s cost, to enable the committee to discharge its duties. These duties are set out in the Terms of Reference of each committee, and each meets as often as is considered necessary.

Further the Board is supported in its dialogue with shareholders by its corporate broker and an investor relations consultancy group.

Date on which this information was last reviewed: 16 May 2021