National Instrument 58-101, Disclosure of Corporate Governance Practices,requires all companies to provide certain annual disclosure of their corporate governance practices with respect to the corporate governance guidelines (the “Guidelines”) adopted in National Policy 58-201. These Guidelines are not prescriptive, but have been used by the Company in adopting its corporate governance practices. The Company’s approach to corporate governance is set out below.
The Guidelines suggest that the board of directors of every listed company should be constituted with a majority of individuals who qualify as “independent” directors under MI 52-110, which provides that a director is independent if he or she has no direct or indirect “material relationship” with the Company. Currently three are “inside” or management directors and accordingly such persons are not considered to be “independent” within the meaning of MI 52-110. The two other directors are considered by the Board to be “independent” within the meaning of MI 52-110.
Mr. Harold F. Herron is currently the chairperson of the Company’s board of directors.
The following directors of the Company are directors of other reporting issuers:
- Mark T. Brown is a director of Garibaldi Resources Corp., Orphan Boy Resources Inc., Portal Resources Ltd., Rare Element Resources Ltd., Strategem Capital Corp., Ameriplas Holdings Ltd., Mediterranean Resources Ltd., SYMC Resources Ltd., Tarsis Capital Corp. and Rockhaven Resources Ltd.
- M. Norman Anderson is a director of Hudbay Minerals Inc., Anatolia Minerals Development Limited, Rare Element Resources Ltd. and Buenaventura Mining Co. Inc..
- Harold F. Herron is a director of Crested Corp. and U.S. Energy Corp.
- John L. Larsen is a director of Crested Corp. and U.S. Energy Corp.
- Allen S. Winters is a director of U.S. Moly Corp.
The Board does not have any formal policies with respect to the orientation of new directors nor does it take any measures to provide continuing education for the directors. At this stage of the Company’s development the Board does not feel it necessary to have such policies or programs in place.
To date, the Board has not adopted a formal written Code of Business Conduct and Ethics. However, the current limited size of the Company’s operations, and the small number of officers and consultants, allow the Board to monitor on an ongoing basis the activities of management and to ensure that the highest standard of ethical conduct is maintained. As the Company grows in size and scope, the Board anticipates that it will formulate and implement a formal Code of Business Conduct and Ethics.
The Board does not have a formal process in place with respect to the appointment of new directors. The Board expects that when the time comes to appoint new directors to the Board that the nominees would be recruited by the current Board members, and the recruitment process would involve both formal and informal discussions among Board members and the CEO. The Board monitors, but does not formally assess, the performance of individual Board members and their contributions.
The Board does not, at present, have a formal process in place for assessing the effectiveness of the Board as a whole, its committees or individual directors, but will consider implementing one in the future should circumstances warrant. Based on the Company’s size, its stage of development and the limited number of individuals on the Board, the Board considers a formal assessment process to be inappropriate at this time.
The Company does not currently have any Compensation, Nominating and Corporate Governance Committee. The quantity and quality of the Board compensation is reviewed on an annual basis by the Board. At present, the Board is satisfied that the current compensation arrangements, which currently consist solely of incentive stock options, adequately reflect the responsibilities and risks involved in being an effective director of the Company.
Other Board Committees
At the present time, the only standing committee is the Audit Committee. As the Company grows, and its operations and management structure became more complex, the Board expects it will constitute additional formal standing committees, such as a Compensation Committee, and will ensure that such committees are governed by written charters and are composed of at least a majority of independent directors.
The Company is required to have an audit committee comprised of not less than three directors, a majority of whom are not officers, control persons or employees of the Company or an affiliate of the Company. The Company's current audit committee consists of Mark T. Brown, M. Norman Anderson and John L. Larsen.
Based on their business and educational experiences, each audit committee member has a reasonable understanding of the accounting principles used by the Company; an ability to assess the general application of such principles in connection of the accounting for estimates, accruals and reserves; experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more individuals engaged in such activities; an understanding of internal controls and procedures for financial reporting.
Multilateral Instrument 52-110 Audit Committees, (“MI 52-110”) provides that a member of an audit committee is “independent” if the member has no direct or indirect material relationship with the Company, which could, in the view of the Company’s board of directors, reasonably interfere with the exercise of the member’s independent judgment.
Two of the three members of the Company’s audit committee are independent as that term is defined. Only John L. Larsen is not independent. As a Venture Issuer, the Company is not required to have a majority of independent directors on its audit committee.
MI 52-110 provides that an individual is “financially literate” if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.
All of the directors of the Company are financially literate as that term is defined.
Since the commencement of the Company’s most recently completed financial year, the audit committee of the Company has not made any recommendations to nominate or compensate an external auditor which were not adopted by the board of directors of the Company.
