Corporate Governance

The Board of Directors of Avesoro Resources Inc. ( the “Board”) is accountable to the shareholders for the corporate governance of the Company. Avesoro Resources Inc. operates in an effective and efficient way, with integrity and with due regard for the interests of all stakeholders.

Quoted Companies Alliance Corporate Governance Code

National Instrument 58-101 and The Quoted Companies Alliance Corporate Governance Code (2018) (the “QCA Code”)

The Board recognises the importance of good corporate governance and is subject, among other laws and regulations, to instruments published by relevant Canadian securities regulators. One such instrument, NI 58-101, prescribes certain disclosure by the Company of its corporate governance practices and NP 58-201, provides non-prescriptive guidelines on corporate governance practices for reporting issuers such as the Company.

The Company has adopted corporate governance practices and procedures consistent with the relevant Canadian corporate governance standards appropriate for a publicly listed company. In particular, the Company has adopted a corporate code of conduct and mandate for its Board. It has also established and properly constituted an Audit Committee, a Corporate Governance and Risk Management Committee and a Remuneration and Nomination Committee to assist the Board in fulfilling its responsibilities for governing the Company.

The Board has adopted a Share Dealing and Insider Trading Policy to which all Directors, officers and employees are subject. The policy is designed to ensure that it contains appropriate provisions for a company whose shares are admitted to trading on AIM.

In addition to the prescriptive requirements of NI 58-101, the Company has also chosen to apply the QCA Code. The QCA Code was developed by the Quoted Companies Alliance (the “QCA”), the independent membership organisation that champions the interests of small to mid-size quoted companies, in consultation with a number of significant institutional small company investors, as a suitable corporate governance code applicable to AIM companies.

To see how we address the key governance principles defined in the QCA Code please refer to the below table.

THE PRINCIPLES OF THE QCA CODE

DELIVER GROWTH

QCA Code Principle

Application

What we do and why

1. Establish a strategy and business model which promote long-term value for shareholders

The board must be able to express a shared view of the company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.

The Group’s strategy is explained fully within the Annual Information Form filed annually under Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and in the Management Discussion and Analysis released each quarter in accordance with our reporting obligations.

 

Our strategy is set out at https://avesoro.com/corporate/strategy/ and is to become a premier mid-tier West African gold producer and developer by

· Focusing on resource definition and conversion to expand mineral reserves and extend the mine lives at New Liberty, Youga and Balogo whilst increasing production and significantly improving free cash flow; and

· Growth through maximizing upside potential at operating mines and opportunistic and accretive M&A activity.

2. Seek to understand and meet shareholder needs and expectations

Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.

 

The board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.

The Company remains committed to listening and communicating openly with its shareholders to ensure that its strategy, business model and performance are clearly understood. Understanding what analysts and investors think about us and, in turn, helping these audiences understand our business, is a key part of driving our business forward and we actively seek dialogue with the market. We do so via investor roadshows, attending conferences and our regular reporting.

 

The Board recognises the Annual General Meeting (“AGM”) as an important opportunity to meet shareholders. The Directors are available to listen to the views of shareholders informally immediately following the AGM.

 

The AGM is the main forum for dialogue with retail shareholders and the Board. The notice of AGM is sent to shareholders at least 21 days before the meeting. The Executive Directors routinely attend the AGM and are available to answer questions raised by shareholders. In accordance with the QCA Code the board has resolved to meet with shareholders and understand their reasons for voting should any resolution receive more than 20% of votes against. For each vote, the number of proxy votes received for, against and withheld is announced at the meeting. The results of the AGM are subsequently published on the Company’s corporate website.

 

The Company also has a social media account (Twitter) through which it disseminates news to shareholders and interested parties.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company’s stakeholders and understand their needs, interests and expectations.

 

Where matters that relate to the company’s impact on society, the communities within which it operates or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model.

 

Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.

The Board is regularly updated on wider stakeholders engagement feedback to ensure it remains abreast of their insights into the issues that matter most to them and our business, which enables the Board to understand and consider these issues in decision-making. Our major debt providers are kept up to date with developments and provide regular feedback.

 

Aside from our shareholders, suppliers and customers, our employees are one of our most important stakeholder groups and the Board closely monitors any feedback it receives from employees to ensure alignment of interests.

 

The Company encourages employees to meet with managers with regard to business strategies and operations, and holds regular safety meetings at all of its sites.

 

The Group encourages feedback from our customers.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.

 

Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).

The Company regularly identifies the risks inherent in its business through effective communication between site managers and its executive team. The Company details the material risks to its business, how these are mitigated and the change in the identified risk in each Annual Information Form which is available on SEDAR. These are of course reviewed annually.

 

The Board considers risk to the business at Board meetings and through the Corporate Governance and Risk Management Committee which reports to the Board.

 

Both the Board and senior managers are responsible for reviewing and evaluating risk and the Executive Directors meet at least monthly to review ongoing trading performance, discuss budgets and forecasts, and new risks associated with ongoing trading.

MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK

QCA Code Principle

Application

What we do and why

5. Maintain the board as a well- functioning, balanced team led by the chair

The board members have a collective responsibility and legal obligation to promote the interests of the company, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board.

 

The board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.

 

The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non- executive directors. Independence is a board judgement.

 

The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.

 

Directors must commit the time necessary to fulfil their roles.

The Board comprises the Non-Executive Chairman, two Executive Directors and three Non-Executive Directors. The three Non-Executive Directors are considered independent which is sufficient for a company of our size. Furthermore, the Board considers the Non-Executive Directors bring an independent judgment to bear.

 

The Company acknowledges that its Non-Executive Chairman is not independent for the purposes of the QCA Code and notes that therefore the Chairman does not “lead” the board. This role is fulfilled by the Non-Executive leading director of the Board who is independent as further detailed below. Nevertheless, the Chairman’s interest in and support of the Company has been crucial to its prosperity. His influence is mitigated by the preponderance of independent oversight on the board.

 

The Board is accordingly satisfied that it has a suitable balance between independence on the one hand, and knowledge of the Company on the other, to enable it to discharge its duties and responsibilities effectively. All Directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational. The Board intend to continue to assess and monitor the Company’s requirements in this regard, and expect to review the situation on an ongoing basis.

 

All Directors receive regular and timely information relating to the Group’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings. In addition, minutes of the meetings of the Directors are circulated to the Board for approval.

 

The Board has a formal schedule of matters reserved to it and is supported by the Audit Committee, Corporate Governance and Risk Management Committee and Remuneration and Nomination Committee. The Committees’ charters are available at https://avesoro.com/corporate/company-policies/.

 

The Board’s role is to oversee and manage the Group, in as a responsible and efficient manner as possible. Broadly, the Board focuses on four key areas: (1) establishing vision, mission and values; (2) setting strategy and structure; (3) delegating to management; and (4) exercising accountability to shareholders and being responsible to relevant stakeholders.

 

The Board further believes that it functions independently of management. To enhance its ability to act independently of management, the Board reviews its procedures from time to time to ensure that it can function independently of management. Mr. Owen, the non-executive leading director of the Board, is an independent director and provides leadership to the other independent directors, as required. If and when conflicts arise on the Board, interested parties are precluded from voting on matters in which they may have an interest.

6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition.

 

The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board.

 

As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change.

The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, including in the areas of gold mining, finance, capital markets, innovation and international trade. All Directors receive regular and timely information on the Group’s operational and financial performance and they are also encouraged to visit the Company’s project sites as appropriate. The Board members receive regular updates at Board meetings regarding developments in the exploration and mining industry, the state of the Company’s projects, and the political situation in the countries in which the Company operates.

 

Responsibility for identifying new candidates to join the Board belongs to the Board as a whole and the Remuneration and Nomination Committee. In connection with the nomination or appointment of individuals as directors, the Board and the Remuneration and Nomination Committee consider: (i) the competencies and skills necessary for the Board, as a whole, to possess; (ii) the competencies and skills necessary for each director to possess; (iii) the competencies and skills that each new director nominee will bring to the Company; and (iv) whether or not each new director nominee can devote sufficient time and resources to his or her duties as a member of the Board.

 

The Company has also adopted a diversity policy (the “Diversity Policy”) which recognizes the benefits of creating and maintaining diversity throughout the Company that makes use of exposure to different perspectives, including skills, experience, gender and ethnic background. The Diversity Policy is designed to support the Company’s commitment to ensuring a diverse mix of skills and talent exists among directors, officers and employees, to enhance Company performance. The Diversity Policy not only focuses on the best quality individuals for the position, but also encourages representation of women at the Board level, in senior management and across the whole organization. A copy of the Diversity Policy is available at https://avesoro.com/corporate/company-policies/.

 

Independent advice

All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense. In addition, the Directors have direct access to the advice and services of the Chief Financial Officer and the Company’s internal and external legal advisers.

7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors.

 

The board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.

 

It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable.

The Board does not conduct any formal evaluation of the performance and effectiveness of the members of the Board, the Board as a whole or any committee of the Board. However, the Corporate Governance and Risk Management Committee is responsible for assessing, at least annually, the composition and effectiveness of the Board as a whole, its committees and the contribution of individual directors. Where appropriate, the Corporate Governance Committee is responsible for making recommendations that sitting directors be removed or not re-appointed. In connection with the re-election of directors and the identification of any new nominees, the Corporate Governance Committee reviews annually the qualification of existing directors.

8. Promote a corporate culture that is based on ethical values and behaviours

The board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

 

The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company.

 

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.

 

The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.

The Group supports the growing awareness of social, environmental and ethical matters when considering business practices. The Group undertakes CSR projects at each of its sites to ensure that its operations benefit the local communities. The Group continually monitors its local relations to ensure that it has adopted best practices for their benefit.

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:

• size and complexity; and

• capacity, appetite and tolerance for risk.

 

The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.

The Company continually evaluates its governance structures and through the committees detailed above analyses the best procedures to achieve its vision for the benefit of all stakeholders.

BUILD TRUST

QCA Code Principle

Application

What we do and why

10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company.

 

In particular, appropriate communication and reporting structure should exist between the board and all constituent parts of its shareholder base. This will assist:

  • the communication of shareholders’ views to the board; and
  • the shareholders’ understanding of the unique circumstances and constraints faced by the company.

 

It should be clear where these communication practices are described (annual report or website).

The Company’s major shareholder is represented on its board and accordingly maintains an open dialogue on an ongoing basis. The Company is also committed to providing regular updates to all shareholders and other stakeholders through its quarterly reporting and regulatory announcements. The Company also attends many conferences throughout the year and interested parties are invited to open a dialogue with the Company either directly or via its PR advisers all of whose details are available on the Company’s website.

This disclosure was last reviewed and updated on 27 September 2018

Board of Directors

The duties and responsibilities of the Board are to:

(a) provide entrepreneurial leadership of the Company within a framework of prudent and effective controls which enable risks to be identified, assessed, managed and mitigated;

(b) set and approve the Company’s strategy and objectives, operating plans, key transactions, material contracts and budgets;

(c) ensure that the necessary financial and human resources are in place for the Company to meet its objectives and review management performance;

(d) set the Company’s values and standards and ensure that its obligations to its shareholders and others are understood and met;

(e) ensure stewardship in the financial affairs of the Company; and

(f) ensure effective communication as it relates to the Company and its business with all stakeholders, including shareholders, employees, the public and other interested parties.

Although the Board does not have a written mandate, in the discharge of its responsibilities, the Board will oversee and review directly or through its committees, the following matters:

(a) the strategic planning process of the company;

(b) an annual operating and capital budget and a business plan for the Company;

(c) identification of the principal risks to the Company’s business and ensuring the implementation of appropriate systems to manage these risks;

(d) succession planning, including appointing, training and monitoring senior management; and

(e) a communications policy for the Company to facilitate communications with investors and other interested parties.

The Board also has the mandate to assess the effectiveness of the Board as a whole and the contribution of individual directors.

Composition of the Board

The Board is currently comprised of Messrs. Gűnal, Umurhan, Erye, Netherway, Martin and Owen. All of the Company’s current directors are considered “independent” (as that term is defined in NI 58-101), other than Mr. Umurhan and Mr Eyre as they are the Chief Executive Officer and Chief Financial Officer of the Company respectively.

The Board believes that it functions independently of management. To enhance its ability to act independently of management, the Board reviews its procedures from time to time to ensure that it can function independently of management. The Board and/or independent directors meet, as necessary, without management and/or non-independent directors present. Mr. Netherway, a non-executive of the Board, is an independent director and provides leadership to the other independent directors, as required. If and when conflicts arise on the Board, interested parties are to be precluded from voting on matters in which they may have an interest.

The following table details the Board members and the committees that deal with the Group’s affairs:

 

Directors Title Date Appointed Committees
Mehmet Nazif Gűnal Chairman & director Jul 15, 2016  
Serhan Umurhan CEO & director Jul 15, 2016  
Geoff Eyre CFO & director Jul 15, 2016  
David Netherway Non-executive director Feb 1, 2011 AC, CGRMC, RNC
Jean Guy Martin Non-executive director Jun 6, 2011 AC, CGRMC, RNC
Loudon Owen Non-executive director May 7, 2014 AC, CGRMC, RNC

Audit Committee (AC)

An Audit Committee for Avesoro Resources Inc. has been established and is comprised of Jean Guy Martin (Chairman) David Netherway and Loudon Owen each of whom is a non-executive director of the Company. The Audit Committee is responsible for: (i) ensuring that the Company’s management has designed and implemented an effective system of internal financial controls; (ii) reviewing and reporting on the integrity of the consolidated financial statements of the Company and related financial information; (iii) reviewing the Company’s compliance with regulatory and statutory requirements as they relate to financial statements, taxation matters and disclosure of financial information; (iv) monitoring the independence of the external auditors; and (v) performing such other duties and responsibilities as may be consistent with its charter. In performing its duties, the Audit Committee will maintain effective working relationships with the other members of the Board, management and the external auditors of the Company. To perform his role effectively, each Audit Committee member has obtained an understanding of the responsibilities of Audit Committee membership as well as the Company’s business, operations and risks.

The Audit Committee Charter is available here.

Corporate Governance and Risk Management Committee (CGRMC)

The Corporate Governance and Risk Management Committee for Avesoro Resources Inc. has been established and is comprised of Loudon Owen(Chairman), David Netherway and Jean-Guy Martin each of whom is a non-executive director of the Company. The primary duties and responsibilities of the Corporate Governance and Risk Management Committee are expected to include: (i) developing the Company’s approach to corporate governance issues; (ii) evaluating the efficiency of the Board, its committees and their respective chairmen, and each director; (iii) developing the Company’s approach to risk management issues and (iv) performing such other duties and responsibilities as may be consistent with its charter. The Corporate Governance and Risk Management Committee will also assist the Board in fulfilling its responsibilities with respect to recruitment, evaluation, compensation and succession planning for senior management and other employees.

Being the relevant corporate governance standards in Canada, the Company will comply with the Governance and Risk Management Committee Charter and will be subject to the requirements of National Instrument 58-101- Disclosure of Corporate Governance Practices and may voluntarily adhere to National Policy 58-201-Corporate Governance Guidelines.

The Governance and Risk Management Committee Charter is available here.

Remuneration and Nomination Committee (RNC)

A Remuneration and Nomination Committee for Avesoro Resources Inc. has been established and is comprised of David Netherway (Chairman), Jean-Guy Martin and Loudon Owen each of whom is a non-executive director of the Company. The Remuneration and Nomination Committee will be responsible for: (i) setting the compensation of the Company’s executive officers; (ii) overseeing the Company’s equity-based plans; (iii) reviewing and making recommendations to the Board regarding directors’ compensation, including setting key performance indicators for performance based rewards; (iv) reviewing the composition of the Board and ensuring that the Board has an appropriate mix of skills, diversity and experience to properly fulfill its responsibilities; (v) considering nominations for potential candidates to act as directors of the Company; and (vi) performing such other duties and responsibilities as may be consistent with its charter, which is being reviewed.

The Remuneration and Nomination Committee Charter is available here.

Internal Controls

The directors are responsible for establishing and maintaining the Company’s internal controls and for reviewing their effectiveness. Financial, operational and compliance procedures are designed to safeguard the Company’s assets and are regularly reviewed by the Board. The internal control system is an ongoing process for identifying, evaluating and managing the significant risks faced by the company. It can only provide reasonable and not absolute assurance against material misstatement or loss. The directors are satisfied that the existing controls are adequate and effective with regard to the size of the Company and the stage of its development.

Communication with Shareholders

The Board recognises that it is accountable to shareholders for the performance and activities of the Company. The Board attaches great importance to maintaining good relations with its shareholders and promotes direct communication wherever possible. Market-sensitive information is released to all shareholders concurrently in line with stock exchange rules. The Company is listed on the Toronto (TSX; Ticker: ASO) and London (AIM; Ticker: ASO) stock exchanges. Additional information about the Company may be found on SEDAR at www.sedar.com.

UK City Code on Takeovers and Mergers

The Company is not subject to the UK City Code on Takeovers and Mergers, as it does not have a registered office in the United Kingdom, Channel Islands or the Isle of Man. The Company is subject to the relevant provisions of Canadian Securities laws in relation to takeovers.