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Corporate Governance

Principle 7: Recognise and manage risk

A listed entity should establish a sound risk management

framework and periodically review the effectiveness of

that framework.

Identification and management of business risk

The Board is responsible for identifying, monitoring and

reducing the significant areas of potential business and

legal risk of the Company. The Board continually reviews

the risks associated with its exploration activities and also

reviews and monitors the parameters under which such

risks will be managed.

Management, through the Managing Director and CEO,

is responsible for designing, implementing and reporting

on the adequacy of the Company’s risk management and

internal control system. Management reports to the Board

on the Company’s key risks and the extent to which it

believes these risks are being managed. This is performed

on an annual basis or more frequently as required by

the Board.

The Board is responsible for satisfying itself annually,

or more frequently as required, that management has

developed and implemented a sound system of risk

management and internal control. It reviews strategic,

operational and technical risks in conjunction with, and

as a key input to an annual corporate strategy workshop

attended by the Board and senior management. This

workshop reviews the Company's strategic direction in

detail and includes specific focus on the identification

of business risks which could prevent the Company

from achieving its objectives. Management are required

to ensure that appropriate controls and mitigation

strategies are in place to effectively manage those risks.

Compliance and reporting risks and reviewed on an

ongoing basis. The Board oversees the adequacy and

comprehensiveness of risk reporting from management.

The Board receives a written assurance from the CEO and

the Chief Financial Officer (CFO) that to the best of their

knowledge and belief, the declaration provided by them

in accordance with section 295A of the Corporations Act

is founded on a sound system of risk management and

internal control and that the system is operating effectively

in relation to financial reporting risks. The Board notes that

due to its nature, internal control assurance from the CEO

and CFO can only be reasonable rather than absolute.

This is due to such factors as the need for judgement,

the use of testing on a sample basis, the inherent

limitations in internal control and because much of the

evidence available is persuasive rather than conclusive

and therefore is not and cannot be designed to detect

all weaknesses in control procedures.

Risk factors

There are a number of risk factors that may affect the

financial performance of the Company and the value of

an investment in shares issued in the Company. While

some of these risks can be minimised, some are outside

the control of the Company. There are also specific risks

associated with the Company’s business and investment

in the mineral exploration and mining industry and in the

jurisdictions in which it operates including but not limited

to sovereign risks.

Business risks


The business of mineral exploration, project development

and mining, by its nature, contains elements of significant

risk with no guarantee of success.

There is no assurance that exploration on any of the

Company’s projects described in this report, or on any

other projects that may be acquired, will result in the

discovery of a mineral deposit. If there is a discovery,

it may not prove to be economically viable to exploit

the discovery.

General mineral operation risks

The business of the Company may be disrupted by a

variety of risks and hazards, which are beyond the control

of the Company, including sovereign or political risks,

environmental hazards, industrial accidents, technical

failures, labour disputes, unusual or unexpected rock

formations, severe seismic activity, flooding and extended

interruptions due to inclement or hazardous weather

conditions, fire, explosions, customs and port delays.

These risks and hazards could also result in damage

to or destruction of mining facilities, personal injury,

environmental damage, business interruption, monetary

losses and possible legal liability.

Development capital costs

Should the Company be successful with exploration, the

capital cost of the Company’s future mine development

could vary with changes in a variety of factors,

including exchange rates that affect imported capital

equipment prices, geological and technical conditions

encountered during drilling and mine development,

and the construction of new production facilities. A

substantial development cost overrun could have a

material adverse effect on the Company. At the current

stage of development of the Company’s operations, mine

development and production related risks are low but this

is expected to change over the next one to two years.