Corporate Governance

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  1. STATEMENT 

1.1 This Corporate Governance Statement sets out the principles and obligations entailed in the governance of Hells Gate Exploration Limited (“HGEL”).  It defines the roles and relationship between the Shareholders, Board of Directors (including Board committees) and management of HGEL. 

2. ROLE OF SHAREHOLDERS 

2.1  The shareholders are responsible for nominating, electing or removing a Director on the Board at the Annual General meetings of HGEL and when a Constitution is ratified there after in accordance with the procedure described in the Constitution. 

2.2  The Shareholder ('s) may express their views on matters concerning HGEL and to vote on other items of business for resolution by shareholders as required by law at the annual general meetings and general meetings of HGEL. 

3. COMMUNICATION WITH SHAREHOLDERS 

3.1  It is the fiduciary duty of the Board and management to perform its disclosure obligations to the Shareholder ('s) and prospective shareholders by communicating widely and promptly HGEL’s state of affairs, including financial and operational performance. 

3.2  The Board and management will communicate with the Shareholder ('s) and prospective shareholders using available communication channels and technology.

4. ROLE OF THE BOARD OF DIRECTORS

4.1  The Board is responsible and accountable to the Shareholders for the overall governance and management of HGEL’s activities and performance. 

4.2  The Board will carry out its objective of maximizing shareholders’ value by performing its functions and responsibilities as outlined in its Charter (“Board Charter”)  which is yet to be ratified.

5 ROLE OF MANAGEMENT

5.1  The Chief Executive Officer (“CEO”) and the management are responsible for managing the day to day operations of HGEL. 

5.2  The CEO and management shall implement HGEL’s strategic objectives/directions and perform such powers, duties, functions and authorities as the Board, from time to time, determines so.

6 INTERNAL AUDIT 

6.1  An internal audit unit is established to assist the Board to manage the governance, risk management, and control processes for HGEL. The internal audit unit is responsible for HGEL Corporate Governance Statement conducting financial reviews and carrying out audits on compliance, performance, systems, forensic, IT and technical areas of HGEL. 

6.2  The internal audit unit provides its audit reports and issues directly to the Board through the Audit Risk & Compliance Committee while reporting to the CEO for administrative purposes. 

7 EXTERNAL AUDITOR 

7.1 The Board will select an appropriately qualified accounting firm to be the External Auditor and will submit the name to the Shareholders for ratification at an Annual General Meeting. The Board shall at an appropriate time appoint an Audit Risk & Compliance Committee that will be responsible for screening and making the recommendation to the Board on the appointment and terms of engagement of the External Auditor. 

7.2  The appointed External Auditor is invited to attend the Annual General Meetings of the Shareholders and is available to answer relevant questions from shareholders. 

7.3  HGEL and the External Auditor, if required, may meet to resolve any identified weaknesses in the internal control systems, accounting or record-keeping deficiencies or concerns to the integrity of the financial data. 

7.4  To maintain independence and integrity of HGEL’s financial performance and record, the appointed External Auditor may not be engaged by HGEL to provide specialist consultancy services relating to financial, strategic and/or taxation matters during the term of appointment. 

7.5 Consistent with the BPS 7/2005 (External Auditors) and policy intention, the external audit function will be rotated at least every five (5) years. 

8  COMPLIANCE 

8.1 The Board’s Audit Risk & Compliance Committee (“BARCC”) is responsible for ensuring that HGEL is in compliance with all legal and regulatory obligations OF HGEL. 

8.2  The BARCC and management are responsible for promptly addressing any prudential issues that may be raised by the regulatory agency. 

9 MARKET DISCLOSURE 

9.1  In the event HGEL goes public it will be HGEL’s fiducial duty  to provide shareholders and the market with timely, direct and equal access to information issued to promote investor confidence in the integrity of HGEL and its securities. 

9.2 HGEL however may not disclose information if:

Ø the information generated is for internal management purposes of HGEL.

Ø the information is a trade secret.

Ø it would be a breach of a law to disclose the information.

Ø the information concerns an incomplete proposal or negotiation. 9.3 The Board and management of HGEL are subject to the disclosure requirements of the Capital Markets Act 2015 if listed on the Port Moresby Stock Exchange. 

10  PURCHASE AND SALE BY DIRECTORS

10.1    In accordance with the Capital Markets Act 2015, Directors are restricted from buying, selling or subscribing for securities in HGEL or any listed companies that HGEL has interest in, if they are in possession of inside information (referred to as Insider Trading Restrictions).

10.2 Directors may only trade in securities of HGEL or any listed companies that HGEL has interest in, subject to foregoing insider trading restrictions. 

11  PURCHASE AND SALE BY MANAGEMENT 

11.1  The Capital Markets Act 2015 also restricts management from buying, selling or subscribing for securities in HGEL or any listed companies that HGEL has interest in, if they are in possession of inside information (referred to as Insider Trading Restrictions). 

11.2 Management may only trade in securities of HGEL or any listed companies that HGEL has interest in, subject to foregoing insider trading restrictions. 

11.3  For purpose of this policy, management includes the CEO, Board Secretary, Chief Executives, Managers, Branch Managers and any staff involved in the preparation of financial records. 

12  ETHICAL BEHAVIOUR 

12.1 HGEL expects Directors and employees at all levels to observe the highest standards of ethical behaviour while being a director or an employee of HGEL. 

12.2 HGEL’s Mission, Vision, Objectives and Values contain principles that will guide all employees in the day to day performance of their individual functions within HGEL. 

12.3  Directors are encouraged to maintain membership of an appropriate Directors Association and will undertake trainings to keep abreast of current trends in Directors’ duties, responsibilities and corporate governance issues. Any new Director appointed to the Board is required to undertake a Directors training. 

13  RISK MANAGEMENT 

13.1  The Board is responsible for the overall risk management of HGEL and will ensure that risks are monitored regularly. 

13.2  The Board has delegated the responsibility of risk management function to the Board Audit Risk and Compliance Charter (BARCC), who shall be responsible for providing regular reports and recommendations to the Board on the risk management activities of HGEL. 

13.3  The management is responsible for risk identification, analysis and evaluation and provide regular reports and recommendation to the BARCC. 

13.4  The Board and management shall provide efficient and effective management within a framework of prudent and effective controls to allow for all risks to be assessed and managed. In particular, the Board and management shall ensure that strategic, operational and financial risks are exposed and that adequate reporting systems and operational and financial internal controls and their associated review functions (e.g. internal audit) are in place to enable such risks are monitored and managed effectively. 

13.5 HGEL has identified and will focus on managing the following major risk areas: 

Ø Production Risk: relates to potential loss of income, disruption of cash flows and increased production costs stemming from mining operations in relation to sub-economic zones or whether caused by a perceived perception of failure to meet expectations by effected communities.

Ø Environmental Risk: potential of failure to comply with Environmental Act 2000 and permit regulations as per Environmental Permit EP-L2B (394)

Ø Interest Rate Risk: chance that an unexpected change in interest rates will negatively affect the value of an investment.

Ø Market Risk: losses in position arising from movement in market prices.

Ø Operational Risk: potential losses stemming from inadequate or failed internal process, people and systems or from external events such as legal and compliance risk, and reputational risk.

14   REVIEW 

14.1  The BARCC shall review this Statement annually and shall recommend all necessary changes to the Board for consideration and adoption. 

15   APPROVAL DATES AND ADOPTION 

15.1  This version and any changes made during the annual reviews shall be adopted by a resolution of the Board of Directors. 

Approval Authority Board of Directors Date Original 

Version Approved 01 December 2020 

Effective Date 01 December 2020 

Date Last Amended 

Policy Sponsor Board Audit, Risk & Compliance Committee Policy Contact Person Chief Risk Officer, Audit, Risk and Compliance Department 

Amendment History 

Version No. 

Conducted by Approved by Date Description of Changes

1. Adopted: By the Board of Directors Hells Gate Exploration Limited.