Corporate Governance

Introduction

The Board of BlueRock Diamonds plc (the “Company” or “BlueRock”) fully supports good corporate governance and recognises that it enhances its decision-making processes by improving the success of the Company and increasing shareholder value over the medium to long-term.

BlueRock currently complies with the principles of the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) to the extent that the Directors consider it appropriate, having regard to the Company’s size, board structure, nature of operations and available resources.

The QCA Code identifies ten principles to be followed in order for companies to deliver growth in long term shareholder value, encompassing and efficient, effective and dynamic management framework accompanied by good communication to promote confidence and trust. The sections below set out the ways in which the Company applies the ten principles of the QCA Code in support of the Company’s medium to long-term success, together with any areas of non-compliance.
The 10 principles are as follows:

  1. establish a strategy and business model which promote long-term value for shareholders
  2. seek to understand and meet shareholder needs and expectations
  3. take into account wider stakeholder and social responsibilities and their implications for long-term success
  4.  embed effective risk management, considering both opportunities and threats, throughout the organisation
  5. maintain the board as a well-functioning, balanced team led by the chair
  6. ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
  7. evaluate board performance based on clear and relevant objectives, seeking continuous improvement
  8. promote a corporate culture that is based on ethical values and behaviours
  9. maintain governance structures and processes that are fit for purpose and support good decision-making by the board
  10. communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

The Board of BlueRock Diamonds plc (the “Company” or “BlueRock”) fully supports good corporate governance and recognises that it enhances its decision-making processes by improving the success of the Company and increasing shareholder value over the medium to long-term.

Principle 1

Business Model and Strategy

Our business model is to acquire and develop under exploited mining opportunities in sub-Saharan Africa, initially in South Africa.

Our short to medium term strategy is to concentrate on our existing asset, the Kareevlei Diamond Mine (“Kareevlei”) in the Kimberley region of South Africa, in order to establish its long term profitability. This will involve developing a multi-pit mining operation to maximise volume, grade and de-risk this key aspect of the business . To date KV1 and KV2 have been opened up and test mining completed on KV5. Management will complete an “economic life of mine assessment on all 5 pipes in 2020 with the objective to setting a long term life of mine plan to fully exploit the resource.

Once we have achieved our short to medium term strategy , we will seek to expand our operations at Kareevlei, and in due course consider other mining opportunities.

Our expertise is in open cast mining and processing and we intend to continue to concentrate our activities on open cast mining although in the longer term, if economically advantageous, we may consider expanding our operations beyond open cast mining. We are unlikely to expand our operation into alluvial diamond mining.

Principle 2

Understanding Shareholder Needs and Expectations

The Board is committed to maintaining good communications and having a constructive dialogue with both its institutional and private shareholders.
The Executive Chairman and Finance Director are principally responsible for shareholder liaison and have regular dialogue with investors in order to develop an understanding of their views.

The Company encourages all shareholders to attend its Annual General Meeting where they can meet and question the Directors and express ideas or concerns. In addition, the Company regularly invites shareholders to submit questions to and participate in shareholder calls and video interviews via Interactive Investor, both of which are available on the Company’s website. The Directors undertake presentations and roadshows to institutional investors as appropriate. In addition, shareholder communication is answered, where possible or appropriate, by Directors or the Company’s Financial PR advisors, St Brides Partners, or the Company’s broker, SP Angel.

Principle 3

Stakeholder and Social Responsibilities

The Board recognises that the Company’s continued growth and long-term success is largely reliant on its relations with its stakeholders, both internal (employees and shareholders) and external (customers, suppliers, business partners and advisors etc.).

The Company maintains a regular dialogue with all of its stakeholders, including suppliers of key materials and services and its regulator in South Africa, the Department for Mineral Resources.

The Company works closely with its advisors to ensure it operates in conformity of its listing regulations as well as the social, legal, religious and cultural requirements of the countries in which it operates.

As a Company, we take our corporate social responsibilities very seriously, particularly as we operate in area of high unemployment. The Company employs a dedicated person to fulfil its social responsibility policies which involve supporting facilities that improve the quality of life of the community local to our mine. The Board is fully supportive of the assistance the Company provides to the local community.

Principle 4

Risk Management

As a business operating in an emerging market there is clearly an elevated risk which is balanced by potentially greater rewards. The Board is mindful of and monitors both its corporate risks and mining risk which are set out in the Company’s most recent Annual Report.

Currently, we operate only one mine but, if and when the Company opens up additional mines, it will monitor mining risk on a mine by mine basis as each mine will present its own unique risks. Mining risks are categorised by both probability and impact and appropriate measures identified to monitor and mitigate any potential impact are monitored through the life cycle of the mine as existing risks change and new risks appear. Mining risks and mitigation are a key part of regular discussions in management meetings.

The Company’s corporate risks, risk monitoring, and risk management procedures are regularly reviewed by the Board and updated as necessary. The risk report is set out in the most recent Annual Report.

Principles 5

Board Structure

The PLC Board contains a balance of Executive and Non-Executive Directors, including an Executive Chairman who is responsible for dealing with the strategic direction and long-term success of the Company. The Board consider that is appropriate to have an Executive Director serving as the Chair, as this is expected to be temporary, and will change on the appointment of a Chief Executive Officer. The Board meets at least every two months or at any other time deemed necessary for the good management of the business and at a location agreed between the Board members. The Board currently consists of one Non-Executive directors and three Executive directors. Tim Leslie is the sole independent Non-Executive Director. It is the Board's intention to revert to a Non-Executive Chairman and appoint an additional independent Non-Executive Director in due course.

As announced on 16 May 2019, Teichmann Company Limited (“TCL”), an investment company controlled by trusts connected with the owners of BlueRock’s strategic partner, Teichmann Group, retains a right to appoint a non-executive director to the Board whilst it maintains a holding over 10%. TCL currently hold approximately 25% of the Company and have indicated that at this juncture, they do not intend to take up this right. If and when Teichmann exercise their right, the appointee will not be fully independent of the Company due to TCL's substantial shareholding, however will be considered to be independent of the executive team.
TCL has entered into a Relationship Agreement with the Company which, among other matters, governs Teichmann's ability to make changes to the Company's board composition.

The CEO role is currently carried out by the Executive Chairman and the Company will appoint a CEO when the Board considers necessary.
The Executve Board members consist of the Chairman, the Finance Director and the Chief Operating Officer. The Chief Operating Officer is also CEO of the Company's subsidiary, Kareevlei Mining Pty Limited.

Non-Executive Directors are required to commit to up to 4 days a month. The Executive Chairman and the Finance director are required to commit to up to 10 days a month. The monthly commitment varies depending upon the demands of the company.
In 2018 the board held 11 formal board meetings. The Audit committee met twice in the period to which all committee members were in attendance. The remuneration committee met once in the year at which all committee members were present.

In 2019 the Board held 11 formal Board meetings. The Audit committee met twice in the period to which all committee members were in audience. The remuneration committee met twice in the year at which all committee members were present, however given the size of the company, a number of remuneration and audit committee matters are covered in the course of normal Board meetings.

Principle 6

Board Composition and Experience

The Company operates in a complex and challenging technological and geographical area and the Board is mindful that in order to deal effectively with the challenges of the business and to maximise its growth opportunities it has to incorporate a broad range of skills and diversity.

The Board considers that all directors have the relevant professional and technical skills to ensure that they are able to fulfil their duties. Mike Houston, Executive Chairman has extensive experience in the natural resources sector having been Chairman and CEO of Zimplats Holdings (ASX) and CEO of Shanta Gold (AIM), Tim Leslie has operated in the financial sector for many years and is a FCA regulated person, and David Facey is a Fellow of the Institute of Chartered Accountants and has many years of investment banking experience and is also CEO and CFO of Tri-Star Resources plc (AIM). In addition, Gus Simbanegavi is a mining engineer and has extensive experience of working in mining operations in South Africa and Zimbabwe. Gus' experience encompasses both small and large scale mining operations invluding extensive open cast mining. The Directors note the need to keep their experience, skills and knowledge up to date and note that the addition of another Non-Executive Director which is expected in due course, will further add strength and objectivity to the Board.

The current composition of the Board may be found in the most recent Annual Report.

The Board and its committees also seek external expertise and advice when required in particular from specialist mining and engineering consultants.

Principle 7

Board Evaluation

The Board considers evaluation of its performance and that of its committees and individual directors to be an integral part of corporate governance to ensure it has the necessary skills, experience and abilities to fulfil its responsibilities. The goal of the Board evaluation process is to identify and address opportunities for improving the performance of the board and to solicit honest, genuine and constructive feedback.

The Board considers the evaluation process is best carried out internally given the Company’s current size, however the Board will keep this under review and may consider independent external evaluation reviews in due course as the Company grows.

A Board performance evaluation was carried out in Q3 2019. The results of the evaluation were good, with no major issues indentified, but it was felt that there were areas which could be improved, particularly in formalising reporting and risk assessment. As a result, new measures have been put in place.

The Board as a whole, or in part as appropriate, undertakes the evaluation process aided by the Chairman, CEO and independent Non-Executive Director or external advisors as necessary. The Chairman is responsible in ensuring the evaluation process is ‘fit for purpose’, as well as dealing with matters raised during the process. The Chairman will keep under review the frequency, scope and mechanisms for the evaluation process and amend the process as required.

Where deficiencies are identified these are addressed in a constructive manner. Where necessary individual Directors are offered mentoring and training. If deficiencies are identified within the Board as a whole, then changes or additions to the Board will be considered in conjunction with the Nominations Committee.
The evaluation process is focused on the improvement of Board performance, through open and constructive dialogue and the development and implementation of action plans. The Board will report on its evaluation and actions in its next Annual Report.

Succession planning is a vital task for boards and the management of succession planning represents a key measure of the effectiveness of the Board and a key responsibility of both the Nominations Committee and wider Board.

Principle 8

Corporate Culture

The Board recognises that a corporate culture based on sound ethical values and behaviours is an asset and provides competitive advantages. The Company is mindful that respect of individual cultures is critical to corporate success and endeavours to conduct its business in an ethical, professional and responsible manner, treating our employees, customers, suppliers and partners with equal courtesy and respect at all times. The Company is also committed to providing a safe environment for its staff and all other parties for which the Company has a legal or moral responsibility in this area.

In order to ensure that these values are continually applied and adopted, the Board seeks to recruit the best talent available and create a diverse talent pool.
The Board has implemented a code for Directors' and employees' dealings in securities which it considers to be appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation.

Principle 9

Governance Structure

The Board sets the Company’s strategic aims and ensures that necessary resources are in place in order for the Company to meet its objectives. All members of the Board take collective responsibility for the performance of the Company and all decisions are taken in the interests of the Company. Whilst the PLC Board has delegated the operational management of the Company via the Operational Board to the Executive Directors and other senior management, there are detailed specific matters subject to decision by the PLC Board of Directors. These include acquisitions and disposals, joint ventures and investments, projects of a capital nature and all significant contracts. The Non-Executive Director has a particular responsibility to constructively challenge the strategy proposed by the Executive Directors; to scrutinise and challenge performance; to ensure appropriate remuneration and that succession planning arrangements are in place in relation to Executive Directors and other senior members of the management team. The senior executives enjoy open access to the Non-Executive Director. As noted above, the Company is looking to appoint an additional Non-Executive Director in due course.

The Chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role. The Chairman with the assistance of the Chief Executive Officer sets the Board’s agenda and ensures that adequate time is available for discussion of all agenda items, in particular strategic issues.
The Chairman promotes a culture of openness and debate by facilitating the effective contribution of Non-Executive Directors in particular and ensuring constructive relations between Executive and Non-Executive Directors. The Chairman is also responsible for ensuring that the directors receive accurate, timely and clear information.

Given the current absence of a CEO, the Chairman is also responsible for running the business, implementing the decisions and policies of the Board and for the overall operational performance of the Company and ensuring the Company’s communication with shareholders is timely, informative and accurate with due regard to commercial sensitivity and regulatory requirements.

The Finance Director is responsible for the Company’s finances and the operations and technical requirements of the Company. The role of Company Secretary is undertaken by the Finance Director. The CEO of Kareevlei is responsible for the day to day running of the Company's main asset, Kareevlei and is also COO of the Company.

Although not on the board, the CEO of Kareevlei is responsible for the day to day running of the Company’s main asset, Kareevlei.

Non-Executive Directors are appointed not only to provide independent oversight and constructive challenge to the Executive Directors but also chosen to provide strategic advice and guidance. This is particularly important given the Company operates overseas in challenging markets.

All directors are able to allocate sufficient time to the Company to discharge their duties. There is a rigorous and transparent procedure for the appointment of new directors to the Board. The search for Board candidates is conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board.

The Board is responsible for ensuring that a sound system of internal control exists to safeguard shareholders’ interests and the Company’s assets. It is responsible for the regular review of the effectiveness of the systems of internal control. Internal controls are designed to manage rather than eliminate risk and therefore even the most effective system cannot provide assurance that each and every risk, present and future, has been addressed. The key features of the system that operated during the year are described below.

The Board has established the following committees to assist with oversight and governance:

Audit Committee

The Audit Committee consists of Tim Leslie (chair) and will be augmented by the TCL appointee or another Non-Executive Director in due course, once appointed to the Board. It oversees and reviews the Company’s financial reporting and internal control processes, its relationship with external auditors and the conduct of the audit process together with its process for ensuring compliance with laws, regulations and corporate governance. It is composed entirely of non-executive directors but other individuals such as the Company’s CFO, Chairman and COO may be invited to attend all or any part of any meeting when deemed appropriate. The Company’s external auditors will be invited to attend meetings of the Committee on a regular basis.

There is currently no internal audit function in view of the size of the Company, although this is kept under annual review.

The Audit Committee has been involved with the planning of the audits for each financial year and has discussed the audit findings with the Company's external auditors.

Remuneration Committee

The Remuneration Committee consists of Tim Leslie (chair) and will be augmented by the TCL appointee or another Non-Executive Director in due course, once appointed to the Board. The Remuneration Committee is responsible for establishing a formal and transparent procedure for developing policy on executive remuneration and to set the remuneration packages of individual Directors. This includes agreeing with the Board the framework for remuneration of the Executive Chairman and CFO and such other members of the executive management of the Company as it is designated to consider. It is furthermore responsible for determining the total individual remuneration packages of each Director including, where appropriate, bonuses, incentive payments and share options.

The Committee’s policy is to provide a remuneration package which will attract and retain Directors and management with the ability and experience required to manage the Company and to provide superior long-term performance. It is the aim of the Committee to reward Directors competitively and on the broad principle that their remuneration should be in line with the remuneration paid to senior management of comparable companies. In addition to paying fees in cash, fees have been paid also in shares and share options as a method of preserving cash within the business.

Nomination Committee

The Nominations Committee comprises Tim Leslie (chairman) and will be augmented by the TCL appointee, or another Non-Executive Director in due course, once appointed to the Board. The Nominations Committee leads the process for Board Appointments and is responsible for review of the board size, structure and composition (both executive and non-executive) including any potential new applicants to ensure the board contains the right balance of skills, knowledge and experience to manage and grow the business. The Nominations Committee will make recommendations to the Board on any proposed or suggested changes to the Board with a view on the leadership needs of the business including succession planning.

Principle 10

Stakeholder Communication

The Board is committed to maintaining good communication and having constructive dialogue with all of its stakeholders, including shareholders, providing them with access to information to enable them to come to informed decisions about the Company. The Investors section of the Company’s website provides all required regulatory information as well as additional information shareholders may find helpful including: information on Board members, advisors and significant shareholdings, a historical list of the Company’s Announcements, its corporate governance information, the Company’s publications including historic annual reports and notices of annual general meetings, together with share price information.

Results of shareholder meetings and details of votes cast will be publicly announced through the regulatory system and displayed on the Company’s website with suitable explanations of any actions undertaken as a result of any significant votes against resolutions.

Last updated on 19 February 2020.