Corporate governance review

The directors are committed to conducting the business of the Group with integrity and fairness and in accordance with good governance practice and the Code of Corporate Practices and Conduct, as set out in the King III report.

The directors have accordingly established mechanisms and policies which are appropriate to the business and risks of the Group and that will ensure the continuous reassessment of the quality of the Group’s corporate governance practices.

The directors have reviewed the King III report and prepared a gap analysis and have implemented a programme to address areas of non-compliance, where Petmin does not comply this has been disclosed and the reasons for non-compliance are explained.

Board of Directors (“Board”)

Composition of the Board

In the year ended 30 June 2011, Petmin is pleased that it made large strides in increasing the number of independent executive directors on the Petmin Board. At 30 June 2011, the Board comprised five executive directors and six non-executive directors. On 12 September 2011, an additional independent non-executive director was appointed. The Company previously regarded all of its non-executive directors as independent, non-executive directors within the meaning of the word “independent” as defined in the Companies Act as amended. However, in terms of the King III definition of independence, three of these directors can no longer be considered independent. With effect from 1 July 2010, Ian Cockerill assumed the role of Executive Chairman. In line with the recommendations of King III, Petmin appointed John Taylor as the Lead Independent Director. The composition of the Board is designed to procure the necessary professional skills and experience required to judge objectively matters of the strategic and business direction of the Group. At a meeting held on 12 September 2011, and as required by King III, Petmin’s board of directors re-elected Ian Cockerill as Executive Chairman.

Directors are subject to retirement by rotation and re-election at the annual general meeting of the shareholders.

Role and function of the Board of directors

There is a clear division of responsibilities at Board level that ensures a balance of power and authority. No one individual has unfettered powers of decision-making.

The Board is responsible for the proper management and ultimate control of the Group. In order to meet this responsibility to members and other stakeholders, the Board is responsible for approving the strategic objectives of the Group, ensuring that the Company correctly carries out its risk responsibilities and that all material risks of the business are identified and managed, validating proposed investment criteria as presented by management, providing guidance for the proper management and ethical behaviour of the businesses of the Group.

The Board meets on a formal basis or via electronic media at least quarterly, with additional meetings convened when circumstances make this necessary. The Group’s overall daily operations are managed and overseen by the executive directors.

Terms of reference for the Board of directors

The board’s responsibility is to (amongst other things):

	ensure that the Group prepares annual budgets and strategic business plans, against which performance is measured;
	ensure that Board committees are nominated from its members; and
	review the scope and adequacy of activities of the Board committees annually in order to evaluate how effectively the committees discharge their responsibilities in terms of statutory and corporate governance requirements, and for compliance with the requirements of the Group’s policies.

Support to the Board

In order to facilitate the discharge of the duties and functions by directors (non-executive directors in particular), the Group will assist directors by arranging:

	visits to and tours of its operations, along with interviews with the responsible executive managers;
	briefing sessions with individual executive directors or senior managers responsible for particular areas of operation;
	consultations with the company secretary for specific enquiries; and
	in the event of a director identifying an area of particular concern or conflict in relation to his/her future conduct as a director, he/she may, after consultation with and through the office of the chief executive officer, and/or the company secretary, seek independent professional advice at the expense of the Group.

Independence of the Board

The Board’s independence is maintained by:

	non-executive directors not holding service contracts and their remuneration not being tied to the financial performance of the Group; and
	all the directors having access to the advice and services of the company secretary and, with prior agreement of the chairman, being entitled to seek independent professional advice on the affairs of the Group at the Group’s expense.

Non-executive directors

The Board has a strong contingent of non-executive directors who bring their diverse experience, insight, and independent judgement to bear on issues of strategy, performance, resources and standards of conduct. For the year ended 30 June 2011, the non-executive directors have no service contracts with the Company and are appointed for specific terms. Recommendation to members for re-appointment is not automatic, but considered individually, based on that person’s contribution. As recommended by King III, the majority of the non-executive directors are independent as defined by King III.

Petmin’s former non-executive chairman, Piet Nel, resigned as a director of Petmin on 28 February 2011 and took up the position as chairman of Petmin’s Technical Advisory Committee and accepted the temporary appointment as employer’s representative at the SamQuarz silica mine. Petmin is pleased to retain Piet’s invaluable knowledge and experience via this advisory body. Petmin extends its thanks to Piet, who guided Petmin through its formative years.

Executive directors

As they are involved with the day-to-day business activities of the Group, the five executive directors are responsible for ensuring that the Board’s strategies are followed and its decisions implemented.

Information on the executive directorate of Petmin is set out below:

Ian Cockerill (57) – BSc (Hons), MSc (DIC)

(Executive Chairman with effect from 1 July 2010)

Ian was appointed a non-executive director of Petmin in October 2007, an executive director with effect from 1 March 2010 and Executive Chairman with effect from 1 July 2010. From June 2008 to December 2009, Ian was the Chief Executive Officer of Anglo Coal. He was President and Chief Executive Officer of Gold Fields Limited from 2002 to 2008, having joined that company as Chief Operating Officer in 1999. During his years at the helm of Gold Fields, the company became a producer of gold in four countries around the globe, concentrating on large, high-quality, long-life assets. Ian’s history with Anglo American dates back to 1981 with various managerial positions held mainly in the Gold and Uranium Division, later AngloGold Limited. Between 1996 and 1999, he was Executive Officer, Business Development and African International Operations for AngloGold. He has more than 36 years’ experience in the global resources industry.

Ian is also Chairman of the “Leadership for Conservation in Africa”, a not for profit initiative in partnership with the South African Parks Board, global business leaders and the IUCN, whose aim is to stimulate conservation and lead sustainable development across the African continent.

He is a well-rounded and seasoned natural resource sector Executive, with extensive global experience in mining operations, project development, M&A, and leadership across a variety of commodities. He has a proven track record of team building, delivery, growth and value accretion.

Lebogang (Lebo) Mogotsi (40)– BCom, MDP (GIBS)

(Deputy Chairman)

Lebo was appointed a non-executive director from January 2004, becoming an executive director and Deputy Chairman of the Company on 30 November 2005. She is responsible for risk management and stakeholder management across the Group. She is also the chairman of the Board’s Transformation Committee. Lebo was an independent non-executive director and Chairman of Merafe Resources Limited (formerly SA Chrome Ltd), a mining company listed on the JSE, for three years until February 2008.

Lebo gained experience in gold beneficiation with AngloGold Ashanti Limited where she held two portfolios: Marketing Manager: Beneficiation, and Executive Assistant to the Executive Director: Marketing.

Lebo has wide ranging experience in managing transformation and empowerment matters. Lebo has built an effective communication network with the various governmental stakeholders to ensure clear communication of Petmin’s delivery in the spirit of the mining charter.

Jan du Preez (46) – MCom, CA (SA)

(Chief Executive Officer)

Jan, who was appointed Chief Executive Officer on 1 February 2006, qualified as a chartered accountant with Deloitte & Touche in 1990 and has a Master of Commerce degree in Financial Management (including the field of mergers and acquisitions). He has been involved as an entrepreneur in various aspects of the mining industry and, among other positions, he was an executive director of JIC Mining (Pty) Ltd (“JIC”) for approximately eight years. JIC was the largest mining services company in South Africa at which time JIC employed approximately 200 000 people. Jan has been part of the Petmin management team since 1992 and has facilitated various BEE transactions in mining and other industries.

Jan is an entrepreneur with a wealth of experience in developing business opportunities and building sustainable management teams.

Bradley Doig (46) – BA, HDip in Company Law, AMP (Harvard)

(Business Development Director – effective 1 July 2011)

Bradley was appointed a non-executive director of Petmin from 30 November 2005, becoming Chief Operating Officer from February 2006 to June 2011. Bradley was appointed Business Development Director on 1 July 2011. He was previously an executive director and Chief Investment Officer of Decorum Capital Partners, the fund manager for the New Africa Mining Fund (“NAMF”). During a 10 year stint with BHP Billiton Limited, Bradley’s experience included international business development and strategy for Samancor Manganese. He also spent time at merchant bank, Dresdner Kleinwort Benson, in the UK and was a group executive of the IQ Business Group.

Bradley is a seasoned deal-maker with experience in identifying and investing in various mining opportunities.

Bruce Philip Tanner (41) – BCom, CA(SA)

(Financial Director)

Bruce was appointed as financial director on 1 July 2009. Bruce joined the Petmin Group in 2005 as Group Financial Manager and CFO and has served on the Petmin Executive Committee since joining the Group.

Bruce obtained a Bachelor of Commerce degree from the University of Cape Town, a BCompt (Hons) degree (CTA) from the University of South Africa (Unisa), and qualified as a chartered accountant whilst serving articles at Deloitte & Touche. He has 13 years of experience in mining finance and administration of which five included involvement in the marketing of coal and copper.

From June 2002 to November 2004, Bruce was the Chief Operating Officer of AfriOre Ltd’s coal operations and Chief Financial Officer of AfriOre Limited. AfriOre is a company which was then listed on the Toronto Stock Exchange and had exploration and mining projects in Africa.

Bruce has experience of mining finance and administration of developmental mining start-ups and of mature operating mines.

Information of the non-executive directorate of Petmin is set out below:

Millard Arnold (64) – BA (Political Science), Juris Doctorate (Appointed 1 March 2011)

Mr Arnold is Group Legal Counsel of Murray and Roberts. He is a senior Fellow of the Gordon Institute of Business Science, a member of the Council of the University of South Africa (UNISA) and a member of the UNISA Foundation. He was previously executive chairman of Black and Veatch Africa and served the government of the United States as its first Minister Counsellor of Commercial Affairs for the South Africa region.

Enrico Greyling (67) – BA (Hons) Business Economics

Enrico is a non-executive director of a number of PSG Group Limited subsidiaries as well as various private companies and is also a director of Venmyn Ltd. Prior to becoming active at the PSG Group, Enrico was a director of FBC Fidelity Bank, which is now part of Nedcor Limited. He also served on the Board of RMB Holdings Limited as an executive prior to its merger with First Rand Limited. For a time, during his career as a banker, he was a board member of the Banking Council of South Africa.

Koosum Kalyan (54) – BCom (Hons) (Appointed 1 March 2011)

Ms Kalyan is chairman of EdgoMerap (Pty) Ltd in London and holds a number of directorships, including Standard Bank Group and the MTN Group. From 2000 to 2008, Ms Kalyan was Senior Business Development Manager: African Exploration Oil and Gas of Shell International Exploration.

Alwyn Martin (73) – BCom, CA (SA)

Alwyn represents Dark Capital (Pty) Ltd and is the former chairman of Vodacom Group (Pty) Ltd and a former Chief Executive of Siemens Telecommunications in South Africa. He currently holds a number of directorships in the private health and financial industries, and is also an independent non-executive director of Trans Hex Group Limited.

Trevor Petersen (55) – BCom (Hons), CA (SA) (Appointed 12 September 2011)

Mr Petersen is a Chartered Accountant and is a former Managing Partner of the Cape Town office of audit firm PricewaterhouseCoopers (“PwC”). He also held the position of Chairman of PwC Western Cape and is the past Chairman of the South African Institute of Chartered Accountants. Mr Petersen has also been a member of the University of Cape Town Council since 2002.

Johannes (Johan) Strijdom (67) – BCom (Hons) in Economics, MBA

An entrepreneur and farmer, Johan was a founding shareholder and director of JIC. He was also a director of Petrex until its sale to EAGC Ventures Limited. Johan is a director of a number of private companies.

John Taylor (64) – BEng (Hons) Metallurgy Head Independent Director

John is a director of Decorum Capital Partners, the fund manager for NAMF and represents NAMF’s interests in his role as a non-executive director of Petmin. He has 29 years’ experience with BHP Billiton as a senior metallurgist. His production experience includes gold, uranium, copper, iron ore, sulphuric acid production, lead and alloys, ferromanganese, silicon metal, zinc and manganese metals. John has extensive experience (as a project director) ranging from feasibility studies (including research and development management) to design, construction, commissioning and operations.

Directors’ remuneration

Details of directors’ remuneration are given in the report of the Remuneration Committee – refer to pages 58 to 61.

Board meetings

The directors have set a framework for financial reporting, with internal and operating controls to ensure reasonable assurance as to timeous reporting of business information, safeguarding of Group assets, compliance with statutory laws and regulations, recording of Group results and general operation in terms of the Group’s standards of business conduct.

The Board is responsible for monitoring the ongoing effectiveness of these controls and operating frameworks. The external auditors have unrestricted access to the chairman of the Board. The minutes of Audit Committee meetings are presented at the next meetings of the Board. There is close communication between the Board and the external auditors. Areas of weakness in control will be brought to the attention of all relevant parties and remedial action will be taken immediately to ensure no loss or misstatement due to the inadequacy of the internal control environment.

The table below sets out the attendance of directors at the Group’s formal Board meetings, held during the year. All directors were actively involved at Board level:

The Petmin Executive Committee is responsible for the implementation of the strategy and budgets as approved by the Board and this committee comprises:

* appointed Business Development Director with effect from 1 July 2011.

Board committees

The Board has delegated certain of its functions to sub-committees. The following committees have been established: Audit and Risk Committee, Remuneration Committee, Transformation Committee and Nomination Committee (which meets as and when required). All the committees act within defined terms of references and meet at least twice per year.

Audit and risk committee

Please refer to pages 56 to 57 for the report of the audit and risk committee

Remuneration committee

Please refer to pages 58 to 61 for the report of the remuneration committee.

Transformation committee

The table below outlines the membership of and functions performed by the transformation committee.

	Committee members		Role of committee		Number of meetings held
	Lebo Mogotsi* Piet Nel Johan Strijdom Bruce Tanner Johan Gloy Davie Coetzee Juanita Allison Neliswa Rampago		To develop framework policies and guidelines for the management of transformation issues including procurement, employment equity, human resource development and retention, and social development matters; To ensure the progressive implementation of these throughout the Petmin group; To provide a forum for discussing transformation issues and presenting key findings to the Board from the on-going monitoring and reporting processes; To develop, implement, monitor and review the group’s progress in terms of transformation and compliance with the Mining Charter and Mineral and Petroleum Resources Development Act (MPRDA); To ensure that there is a disciplined and co-ordinated approach to all transformation and social issues within the group; and To manage the Group’s human resources function and to facilitate the Group’s internal communication processes.		Three

* committee chairperson

Nomination committee

The Board of directors constituted a Board nomination sub-committee in 2010 to restructure the Board and to identify suitable candidates for appointment as non-executive directors. The committee meets as and when required.

The table summarises the role, membership and frequency of meetings of the nomination committee.

	Committee members		Role of committee		Number of meetings held
	Ian Cockerill Lebo Mogotsi Jan du Preez Alwyn Martin Piet Nel		To assist the Board in connection with Board nomination matters; To identify and make recommendations to the Board on all new Board appointments; and To review the composition of Board committees and make recommendations to the Board for committee memberships and fill vacancies as needed		Three

Code of ethics

Led by the Board, the Group subscribes to certain values and ethical practices and these apply throughout the organisation. These values and ethical practices are sustained by the directors’ belief in free and fair dealings in good faith and with respect for the law and regulations.

Petmin’s ethics policy is available on www.petmin.co.za.

Accounting and auditing

The Board places strong emphasis on achieving the highest level of financial management, accounting, and reporting to shareholders. The Board is committed to compliance with International Financial Reporting Standards (IFRSs) and its interpretations adopted by the International Accounting Standards Board (IASB), the AC 500 Standards, and the requirements of the South African Companies Act. It is the directors’ responsibility to prepare financial statements that fairly present:

	the state of affairs as at year-end;
	profit or loss for the year;
	cash flows for the year; and
	non-financial information.

The external auditors observe the highest level of business and professional ethics and their independence is not impaired in any way. The external auditors were given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders and the Board. The directors believe that all representations made to the independent auditors during their audit are valid and appropriate.

The external auditors provide an independent assessment of systems of internal financial control to the extent necessary for the audit, and express an independent opinion on whether the financial statements are fairly presented. The external audit function offers an opinion that the annual financial statements fairly present in all material respects, the financial position of the Group at 30 June 2011. The audit provides reasonable, but not absolute, assurance as to the accuracy of financial disclosures.

The Board set principles that were considered and accepted by the shareholders for using the external auditors for non-audit services.

Communication with stakeholders

The Company is committed to a policy of timeous and effective communication with shareholders and other stakeholders through shareholders’ meetings, the annual financial report and interim financial report. Matters of both financial and non-financial nature are communicated to shareholders in a timeous and transparent fashion.

Share dealings by directors

All dealings by directors are regulated and monitored as required by the listing requirements of the Johannesburg Securities Exchange Limited (“JSE”) and the London Stock Exchange Alternative Investment Market (“AIM”). Details of directors’ shareholdings are provided in the directors’ report in the annual financial statements.

Shareholders’ spread

The information below is extracted from the Computershare report dated 30 June 2011.

*	The non-public shareholders figure includes the following shareholder groupings: directors, who held 124,225,190 ordinary shares; and strategic shareholders (in excess of 10%), who held 136,026,973 ordinary shares. own holdings by group company which held 3,321,059 ordinary shares.

Major shareholders (shareholding in excess of 5%)

Note 1 – 100% held by Paladin Capital Limited a subsidiary of PSG Group Limited