As Chairman of the Board of Directors of URU, I am pleased to present the Corporate Governance Statement of the Company. My role as Chairman is to lead the board and to oversee its function and direction with overall responsibility for implementing an appropriate corporate governance regime at the Company, until such time as a full-time candidate is appointed. The Board recognises the importance of effective corporate governance and the need to communicate this to shareholders and other stakeholders. Accordingly, this statement sets out the key features of the URU governance policy and structures and explains how we seek to ensure that this provides a framework for creating sustainable growth over the medium to long term.
The Company has formally adopted the Quoted Companies Alliance Corporate Governance (“QCA Code”). The Board considers that the Group complies with the QCA Code so far as it is practicable having regard to the size, nature and current stage of development of the Company. The Board recognises that the Company does not fully comply with all 10 principles and general provisions of the QCA Code but does use it as a benchmark in assessing its corporate governance standards. Areas of non-compliance are disclosed in the text below. Details of the Company’s compliance with the QCA code can be found below and in the Corporate Governance section of the Company’s website at www.urumetals.com.
ONE Advisory Limited has been contracted to assist the Company with compliance with applicable rules, regulations and obligations governing its operation, governance matters and with Market Abuse Regulations (“MAR”) compliance. ONE Advisory Limited assists with the Company’s application of the QCA Code and amendments in relation to AIM Rule 26.
Jay Vieira, Chairman
17th December 2020
Reviewed 27th July 2022
The QCA Code sets out 10 principles that should be applied. These are listed below together with a short explanation of how the Company applies each of the principles and where it departs from these principles:
Business Model and Strategy
The Board has concluded that the highest medium and long-term value can be delivered to its shareholders by the adoption of a single strategy for the Company:
URU Metals’ mission is to identify and invest in quality mineral exploration and development projects to become a leading mineral exploration and development company.
In the immediate future, URU will endeavour to achieve its vision by continuing to explore and develop its flagship Zebedelia Nickel Property. The Company will continue to look for additional acquisition and/or investment opportunities as they arise.
The key pillars of our strategy are:
- Advancing the Company’s 100% owned Zebedelia project. URU Metals plans to delineate a compliant mineral resource estimate. The Company will then look to advance the project through feasibility studies and into production and cash flow generation; and
- Strategic Investments. Where appropriate, URU Metals will act as an active investor and will strive to advance corporate actions that deliver value–adding outcomes (for example, project development to increase company valuation or to achieve a listing).
The Company has other projects and assets it continues to develop. At this stage however, due to the early nature of such projects, these are considered non-core (and so are not detailed in the key pillars of the strategy above) as the Company’s resources are primarily focussed on Zebedelia.
The Company operates in an inherently high risk and heavily regulated sector and this is reflected in the principal risks and uncertainties identified in the Company’s annual report (for the year ended 31 March 2020 and historically). In executing the Company’s strategy and operational plans, management will typically confront a range of day-to-day challenges associated with these risks and uncertainties and will seek to deploy the identified mitigation steps to manage these risks as they manifest themselves. These key challenges, as well as mitigating actions the Board takes to secure a long-term future for the Company, can be found in the Risk Management Section below.
Further details of the Company’s strategy and business model can be found in the Company’s 2020 Annual Report, which is available to access on the Company’s website here.
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communication and having a constructive dialogue with its shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting, save for where restrictions on movement in respect of Covid-19 prohibit same. Investors also have access to Annual Reports, Regulatory News Service announcements and other information on the Company though its website, www.urumetals.com. As further detailed under Principle Five, following the Governance Review, the Board is currently undertaking a search and selection process – as well as speaking to potential candidates within the Board’s own network – to identify a new independent Non-executive Director to join the Board. The Board cannot predict the outcome of such process, or when a suitable candidate will be identified, but will endeavour to appoint a UK-based director. The Board believes that such a figure will assist the Company in communicating with shareholders and improving accessibility.
As part of the Governance Review in 2019, the Company instructed UK legal counsel, in conjunction with BVI advisers, to update the Company’s memorandum and articles of association, and introduce certain obligations on the Company to make it more accountable to shareholders, and more effective in the way it communicates with them. The new Memorandum and Articles adopted changes including (but not limited to):
- A requirement for the Company to hold an annual general meeting once in each calendar year;
- A requirement for each Director to stand for re-election (i) at the AGM in the year of their respective election, or (ii) if already appointed, in the first year after the Memorandum and Articles are adopted, and thereafter not less than every three year;
- Protection consistent with Rule 9 of the UK City Code on Takeovers and Mergers to prevent shareholders (and parties acting in concert with such parties) from acquiring, without consent, an interest in shares of the Company equal to or greater than 30 per cent.; and
- Capping the right of the Company to issue unlimited new shares for cash other than on a pre-emptive basis (the exact thresholds for standing authorities remain to be determined and agreed between the board and advisers and a further announcement in this regard will be made in due course).
The Board believes the changes outlined above enables the Company to further satisfy our shareholders’ needs and expectations by providing more opportunities to engage with the governance of the Company.
Considering wider stakeholder and social responsibilities
The Board recognises that the long-term success of the Company is reliant upon the efforts of the employees of the Company and its contractors, suppliers, regulators and other stakeholders. The Board has put in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships.
The Board has identified URU’s stakeholders to include employees and consultants working for the Company, the local communities in countries in which it operates, local governments, suppliers, customers and partners. The Company’s CEO contacts these stakeholders regularly in order to gain their feedback on URU’s operations. Any concerns raised are communicated to the Board and dealt with appropriately.
For example, senior level employees of the Company participate in a structured Company-wide annual assessment process which is designed to ensure that there is an open and confidential dialogue to help ensure successful two-way communication with agreement on goals, targets and aspirations of the employee and the Company. These feedback processes help to ensure that the Company can respond to new issues and opportunities that arise to further the success of employees and the Company. The Company has close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company. In relation to its local employees and contractors in South Africa the Company seeks to adopt industry best practice in relation to its industrial relations and working environment, communicating this to local management and partners on the ground at site. Following the Governance Review, the Company identified the need for a Project Manager based in South Africa to properly communicate and implement the Company’s policies, and provide the records and data needed by the Company to demonstrate its policies are not only adopted, but are being followed in all circumstances. A search and selection process in relation to the appointment of this individual is being commenced and I hope a further announcement in this regard can be made shortly.
As further detailed under Principle Five, following the Governance Review the Board is currently undertaking a search and selection process – as well as speaking to potential candidates within the Board’s own network – to identify a new independent Non-Executive Director to join the Board. The Board cannot predict the outcome of such process, or when a suitable candidate will be identified, but will endeavour to appoint a UK-based director. The Board believes that such a figure will assist the Company in communicating with advisers, and also provide scrutiny in relation to the Company’s key relationships with partners and suppliers, including but not limited to the Company’s partners and operating team working on the development of the Zebedelia project.
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the risk management objectives and policies to the Audit Committee.
In addition to its other roles and responsibilities, the Audit Committee is responsible to the Board for ensuring that procedures are in place and are being implemented effectively to identify, evaluate and manage the significant risks faced by the Company. The risk assessment matrix below sets out those risks and identifies their ownership and the controls that are in place. This matrix is updated as changes arise in the nature of risks or the controls that are implemented to mitigate them. The Audit Committee reviews the risk matrix and the effectiveness of scenario testing on a regular basis. The following principal risks and controls to mitigate them, have been identified:
Principal Risks and Uncertainties
URU Metals is exposed to a number of risks and uncertainties that could have a material financial, operational and reputational impact on its long-term performance and on the Company’s ability to develop its project portfolio. The risks that management has assessed as “high” are summarised below.
|Strategic||Mineral Reserve and Resource estimates||Mineral Reserves and Mineral Resources estimates are based on several assumptions, including geological, mining, metallurgical and other factors. There can be no assurance that the anticipated tonnages or grades will be achieved. This is particularly the case at exploration–stage projects.||Mineral Reserves and Mineral Resources will be prepared to internationally recognized code compliant standards by Qualified Persons under NI 43–101 requirements.|
|License transfers||The timing of transfer of mineral licenses can be uncertain and regulatory approval cannot be foreseen.||At current time, management is working on the licenses’ eventual transfer and the Company is in compliance with all regulatory requirements.|
|Financial||Commodity Prices||URU Metals’ financial performance is dependent upon the price of nickel. Adverse movement in commodity prices could have a material impact on operations.||The Board monitors commodity prices and potential impacts on cash flow, project development and the ability of the Company to raise necessary capital. Capital expenditure plans are aligned to prevailing and anticipated market conditions. By targeting projects with resources that fall within the highest grade quartile and lowest cost quartile of producers, the exposure to low commodity prices is somewhat mitigated.|
|Costs and capital expenditure||The Company is exposed to ongoing expenditure obligations resulting from its project development activities in South Africa.||Management conducts cash flow analyses and reduces capital expenditure requirements wherever possible. If necessary, project scopes are adjusted or in some cases deferred to preserve capital.|
|Liquidity||URU Metals needs to finance its ongoing development and growth, which exposes the Company to liquidity risk. If the Company is not able to obtain sufficient financial resources, it may not be able to raise sufficient funds to develop projects, acquire additional assets or meet its ongoing financial needs.||Management monitors liquidity and exploration expenditure. The Board strives to ensure liquidity through timely corporate actions, if and when required.|
|Operational||Project Execution||The inability to develop near–and longer– term capital projects will impact on URU Metals’ strategic objectives and affect its ability to meet growth and production objectives.||The Company will review its project portfolio on a regular basis and utilises relevant data, such as code compliant Mineral Reserve and Mineral Resource estimates, to guide development priorities. A balanced portfolio will reduce risks associated with a specific project or commodity. The Company will also make use of experienced contract and consultant personnel with relevant experience in project execution.|
|Personnel||Management||Loss of key management personnel can impact on the Company’s strategic and operational functionality.||The Company seeks to provide competitive salary arrangements to attract and retain the services of these personnel members.|
|Skills Availability||Skills shortages have been a feature of exploration across the board. The inability to attract suitably skilled individuals in the vicinity of URU Metals’ operations can impact on the quality and efficiency of the work performed.||Management has implemented retention strategies, including competitive compensation packages, as and when required. The Company also makes use of experienced contract and consultant personnel with relevant experience in project execution.|
|Health and Safety||The mining and resource processing sectors are inherently hazardous. Failure to adopt high levels of safety management can result in a number of negative outcomes, including bodily harm to employees and contractors, and damage to the Company’s reputation.||URU Metals takes the health and safety of all those who work for and with the Company very seriously. Measures are based on the principles outlined in the Prospectors and Developers of Canada’s e3 program.|
|Environmental||Remediation||Unforeseen environmental degradation resulting from the Company’s operational activities may result in liability and/or the requirement to undertake extensive remedial clean up actions.||All operational models take environmental responsibilities into account. Third parties are contracted as required to identify environmental risks and mitigation measures.|
|External||Political, Legal and Regulatory Development||URU Metals may be affected by political or regulatory developments in the countries and jurisdictions in which it operates, including changes to fiscal and other regulatory measures.||URU focuses on project development in stable, mining–friendly countries, and liaises with governments on aspects of its operations on a regular basis. URU monitors the political landscape to keep abreast of likely changes in regulatory policies, and adjusts its asset mix accordingly.|
|External||Community Relations||Disputes regarding land claims, objections to mining may arise with local communities, causing disruption to projects or operations.||URU Metals is committed to the establishment of close working relationships with communities in the areas in which it operates. URU consults with local stakeholders, identifying them prior to the onset of activities. URU will work with stakeholders to define the way in which the Company’s operations will positively impact local communities. URU engages experiences personnel to assist with local community relations.|
The Directors have established procedures, as represented by this statement, for the purpose of providing a system of internal control, including the Audit Committee mentioned above. An internal audit function is not considered necessary or practical due to the size of the Company and the close day to day control exercised by the Executive directors. However, the Board will continue to monitor the need for an internal audit function. The Board works closely with and has regular ongoing dialogue with the Company financial controller and has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems.
A Well Functioning Board of Directors
As at the date hereof, the Board comprises myself Jay Vieira, as independent Non-executive Chairman; CEO John Zorbas; and, Non-executive Director Kyle Appleby, who is not considered to be independent. Biographical details of the current Directors are set out within Principle Six below. All the Directors including the Executive Directors are considered to be part time but are expected to provide as much time to the Company as is required, however, as CEO, John Zorbas is employed on a full time basis. [The Company recognises the long term need for a permanent Chairperson to be appointed (at which time I will return to my role as a Non-Executive Director) and has commenced a search and selection process – through third parties and within the Board’s own network – to identify such a candidate (further details of this are set out in relation to Principle Five).
The Board meets at least six times per annum. It has established an Audit Committee and a Remuneration & Nominations Committee, particulars of which appear hereafter. Non-executive Directors are considered to be part time but are expected to provide as much time to the Company as is required. The Board considers that this is appropriate given the Company’s current stage of operations. It shall continue to monitor the need to match resources to its operational performance and costs and the matter will be kept under review going forward. Jay Vieira is considered an independent Director. The Board notes that the QCA recommends a balance between Executive and Non-executive Directors and recommends that there be at least two independent Non-Executives. As detailed in relation to Principle Five, the Company is working to identify candidates who may join as an additional independent director and will make a further announcement in this regard in due course.
Attendance at Board and Committee Meetings
The Company shall report annually on the number of Board and committee meetings held during the year and the attendance record of individual Directors. To date in the current financial year the Directors have a 100% record of attendance at such meetings. In order to be efficient, the Directors meet formally and informally both in person and by telephone. Therein the new financial year (starting 1 April 2020) there have been at least bi-monthly meetings of the Board. The volume and frequency of such meetings is expected to continue at this rate.
Appropriate Skills, Experience and Capabilities of the Directors
The Board currently consists of three Directors. The administrative functions of the Company are carried out internally, by experienced Executive assistants working with the Executive team. The finance function is handled internally. The Company believes that the current balance of skills on the Board as a whole, reflects a very broad range of commercial and professional skills across geographies and industries and each of the Directors has experience in public markets.
The Board recognises that it currently has limited diversity and this will form a part of any future recruitment consideration.
The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal or informal.
ONE Advisory Limited assists with ensuring that Board procedures are followed and that the Company complies with all applicable rules, regulations and obligations governing its operation, as well as helping the Chairman maintain excellent standards of corporate governance. ONE Advisory also provides additional Company Secretarial support and assistance with MAR complianceIn order to keep Director skillsets up to date, the Board uses third parties to advise the Directors of their responsibilities, including receiving advice from the Company’s external lawyers. The Board proposes to introduce a facility for Directors to receive training on relevant developments on a more regular basis. The Board reviews the appropriateness and opportunity for continuing professional development in order to keep each Director’s skillset up to date . In addition to their general Board responsibilities, Non-executive Directors are encouraged to be involved in specific workshops or meetings, in line with their individual areas of expertise. The Board shall review annually the appropriateness and opportunity for continuing professional development, whether formal or informal.
Board of Directors
Independent Non-Executive Chairman
Mr Vieira is Vice President, Corporate and Legal Affairs at Distinct Infrastructure Group Inc. Previously, from 2006 to 2016, he was a partner with the law firm of Fogler, Rubinoff LLP, Toronto, Ontario, where he focussed on securities and corporate finance. Mr. Vieira is a member of the Canadian and Ontario bar associations and the Law Society of Upper Canada. He was admitted to the Ontario bar in 1999 after obtaining his LL.B. from the University of Windsor Law School. Mr. Vieira holds a B.A. (Hons.) in Humanities from McMaster University.
Chief Executive Officer
Mr. John Zorbas is a resource entrepreneur with a proven track record in the metals exploration and development industry. He has held senior advisory positions in various facets of business including operations, marketing, sales, strategic planning and structured finance. Mr. Zorbas has been the Company’s CEO since 2 June 2014. He was appointed Non-Executive Chairman of Management Resource Solutions PLC in April 2017. In addition he is the CEO and Director of Captor Capital Corp. He also served as the President of MGM Productions Group Inc., as well as Director of both ZorCorp Capital Holdings and Starline Capital Holdings Infrastructure Fund. He served as the Chief Executive Officer and a Director of Monchhichi PLC (former: Mercom Capital PLC) until 23 December 2016. Mr. Zorbas also served as a Director of Millennial Esports Corp. until 20 October 2016 and Stratton Capital Corp. He is a founding shareholder of Asian Coast Development Ltd. Mr Zorbas holds an Honours Bachelors in Economics from the University of Toronto.
Mr. Kyle Appleby, CA, CPA, has over 16 years’ experience in public accounting and has been providing Chief Financial Officer and other financial accounting and compliance services to both public and private companies since 2007. He is a member in good standing of the Canadian Institute of Chartered Accountants and the Institute of Chartered Accountants of Ontario. He obtained his Chartered Accountant designation in 2001. Mr. Appleby graduated from York University with a Bachelor of Arts in Economics.
Evaluation of Board Performance
Internal evaluation of the Board, the Committees and individual Directors is undertaken on an annual basis in the form of peer appraisal, and discussions to determine the effectiveness and performance of the Board as well as the Directors’ continued independence take place to ensure that:
– their contribution is relevant and effective;
– that they are committed; and
– where relevant, they have maintained their independence.
The results and recommendations that come out of the appraisals for the directors shall identify the key corporate and financial targets that are relevant to each Director and their personal targets in terms of career development and training. Progress against previous targets shall also be assessed where relevant.
The Company intends to continually review the performance of the team as a unit to ensure that the members of the Board collectively function in an efficient manner, as well as reviewing the effectiveness of each Committee.
The Directors consider that the Company and Board are not yet of a sufficient size for a full Board evaluation to make commercial and practical sense. Therefore, the Board accepts that the Company does not comply with this aspect of the QCA Code. However, during Board meetings the Directors are welcome to discuss any areas where they feel a change would be beneficial for the Company, and the Company Secretary remains on hand to provide impartial advice. The need for a formal Board evaluation will be kept under review as the Board and Group develops.
The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that employees behave. The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Company’s operations. These values are enshrined in the written policies and working practices throughout the Company. An open culture is encouraged within the Group, with regular communications to staff regarding progress and feedback regularly sought. The Executive team regularly monitors the Group’s cultural environment and seeks to address any concerns than may arise, escalating these to Board level as necessary. The Group is committed to providing a safe environment for its staff and all other parties for which the Group has a legal or moral responsibility in this area. The Company has adopted Health & Safety policies at all its project sites in line with industry best standards.
A large part of the Company’s activities is centred upon what needs to be an open and respectful dialogue with employees, consultants, clients and other stakeholders, including shareholders. Pressure from different groups, to provide more finance, technical support, to deliver results, work faster, shout more loudly, make the culture of the Company key to its success – being consistent over a period of time, adopting a methodical approach in the face of pressure to behave differently. The Company is conservative – believing long-term shareholder value will only be achieved by technical results and deep understanding of the resource projects the Company invests in or operates, informing decisions regarding future expenditure. It is a fine balance but one the Company strives to get right.
Maintenance of Governance Structures and Processes
The Board is committed to, and ultimately responsible for, high standards of corporate governance, and has chosen to adopt the QCA Code. The Board reviews the Company’s corporate governance arrangements regularly and expect them to evolve over time, in line with the Company’s growth. The Board delegates responsibilities to Committees and individuals as it sees fit.
The Chairman’s principal responsibilities are to ensure that the Company and its Board are acting in the best interests of shareholders. His leadership of the Board is undertaken in a manner which ensures that the Board retains integrity and effectiveness, including creating the right Board dynamic and ensuring that all important matters, in particular strategic decisions, receive adequate time and attention at Board meetings.
The Chairman and the other Non-executive Director are tasked with constructively challenging the decisions of the CEO, and satisfying themselves that the systems of business risk management and internal financial controls are robust.
The CEO has, through powers delegated by the Board, the responsibility for leadership of the management team in the execution of the Group’s corporate strategies and for the day-to-day management of the business. The CEO is also the principle contact for liaison with shareholders and all other stakeholders.
Ultimate authority for all aspects of the Company’s activities rests with the Board, the respective responsibilities of the Chairman, CEO arising as a consequence of delegation by the Board. The Board has adopted appropriate delegations of authority which set out matters which are reserved for Board decision-making. As an independent Non-executive Chairman I am responsible for the effectiveness of the Board, while management of the Company’s business and primary contact with shareholders has been delegated by the Board to the CEO.
The Audit Committee comprises of Jay Viera and Kyle Appleby (chair). This Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported. It receives reports from the Executive management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee shall meet not less than twice in each financial year and it has unrestricted access to the Company’s auditors. In the financial year ended 31 March 2020 the Audit Committee met twice in compliance with the Committee’s terms of reference.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee comprises Kyle Appleby and Jay Vieira (chair). The Remuneration and Nomination Committee (previously two separate committees) meets as and when necessary. It keeps under review the skill requirements of the Board and the knowledge, experience, length of service and performance of the Directors. It also reviews their external interests with a view to identifying any actual, perceived or potential conflicts of interests, including the time available to commit to their duties to the Group. It sets and reviews the scale and structure of the Executive Directors’ remuneration packages, including share options and the terms of the service contracts. The remuneration and the terms and conditions of the Non-Executive Directors are determined by the CEO with due regard to the interests of the shareholders and the performance of the Group. The Committee also makes recommendations to the Board concerning the allocation of share options to employees.
The Committee also monitors the independence of each Non-Executive Director and makes recommendations concerning such to the Board. The results of these reviews are important when the Board considers succession planning and the re-election and reappointment of directors. Members of the Committee take no part in any discussions concerning their own circumstances.
The Committee is also responsible for keeping under review the senior management team of the organisation to ensuring the continued ability of the organisation to compete effectively in the marketplace.
The Board has adopted guidelines for the appointment of Non-Executive Directors which have been in place and have been observed throughout the year. These provide for the orderly and constructive succession and rotation of the Non-Executive Directors insofar as the Non-Executive Directors will be appointed for an initial term of three years and may, at the Board’s discretion believing it to be in the best interests of the Company, be appointed for subsequent terms.
The Chairman and Board continue to monitor and evolve the Company’s corporate governance structures and processes, and maintain that these will evolve over time, in line with the Company’s growth and development.
The Board is committed to maintaining effective communication and having constructive dialogue with its shareholders. The Company intends to have close ongoing relationships with its private shareholders, institutional shareholders and analysts, and for them to have the opportunity to discuss issues and provide feedback at meetings with the Company.
Whilst all shareholders are normally encouraged to attend the Company’s Annual General Meeting, due to the restrictions on movement as a result of the ongoing Covid-19 pandemic, the 2020 AGM will be held as a closed meeting in accordance with government regulations. As such, shareholders are encouraged to submit any questions to the Board by email in advance of the AGM to ensure there is opportunity for stakeholder engagement. Shareholders are strongly encouraged to appoint the Chair of the Meeting to be his/her proxy at the Meeting given that shareholders are not permitted to attend. The Board already discloses the result of general meetings (GM) by way of announcements and on its website. In order to improve transparency, the Board has committed to publishing proxy voting results on its website in future. The Board maintains that, if there is a resolution passed as a GM with 20% votes against, the Company will seek to understand the reason for the result and, where appropriate, take suitable action.
Investors also have access to current information on the Company’s website, www.urumetals.com, which is kept up to date and contains details of relevant developments, publications and presentations, as well as historic annual reports and other governance-related material, including notices of all general meetings over the last five years. The Company intends to, subject to the necessary formalities, move to electronic communications with shareholders in order to maximise efficiency.
Going forward the Company intends to include reports from the Audit and Remuneration Committees in its Annual Report.