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Introduction

The ordinary shares of Patagonia Gold PLC (the “Company”) have been traded on the London Stock Exchange’s Alternative Investment Market (AIM) since March 2003. Despite the Company not previously being required to make an annual statement to shareholders regarding its approach to corporate governance, the Company’s Board has fully supported good corporate governance and has voluntarily disclosed to shareholders information about its governance practices.

patagonia-landscape

During the 2018 financial year, AIM Rule 26 changed requiring companies listed on AIM to disclose on their websites which recognised corporate governance code they apply and details of how that code is complied with.

The Board formally adopted the QCA Corporate Governance Code (the “QCA Code”) on 27 September 2018. An explanation of how the QCA Code is applied and how compliance with its principles will promote the success of the Company is set out below, together with any areas of non-compliance.

Further corporate governance disclosures will be included in the Company’s Annual Report for the year ending 31 December 2018 (the “2018 Annual Report”).

Role of the Chairman

The Board as a whole is responsible for effective corporate governance. As Chairman of the Board, I have overall responsibility for the corporate governance arrangements of the Company in addition to ensuring that corporate governance arrangements are fully adopted within the Company.

In addition, my role as Chairman is to lead and supervise the Board, ensuring its smooth running and the effective contribution of all Board members, and to ensure that the Board has control of the business.

Strategy and business model

In our Annual Report for the year ended 31 December 2017 (the “2017 Annual Report”), the Chief Executive Officer’s Review and Strategic Report set out the Company’s business model, strategy, key markets and principal risks. A copy of the 2017 Annual Report is available here.

The 2018 Annual Report will include additional information relating to the Company’s purpose, business model and strategy, as well as key challenges in the execution of the Company’s strategy.

Relations with shareholders

The Chief Executive Officer is responsible for shareholder liaison and has regular dialogue with institutional investors/shareholders in order to develop an understanding of their views.

The Company maintains effective contact with principal shareholders and welcomes communications from private investors. Shareholders are encouraged to attend the Annual General Meeting, at which time there is an opportunity for discussion with members of the Board. Annual Reports are included on the Company’s website and press releases together with other information about the Company are available here.

The Board believes that its current approach to shareholder engagement is successful. During the 2017 financial year, meetings to present the FY17 interim and annual results were held with all major investors.

Stakeholder and social responsibilities

The Board considers its key stakeholders to include:

  • workforce – our people are our most important resource. They know and share the same values, care of the environment and responsibility for work, guaranteeing performance of tasks in a sustainable fashion and ensuring compliance with the company´s goals. In return the Company seeks to provide an environment for workers and their families where they feel safe, supported, motivated and properly rewarded;
  • suppliers – we aim to use local suppliers and to build strong relationships with them based on trust, understanding and respect;
  • customers – good relationships with our customers are important for the success of our business;
  • local communities – we aim to hire local personnel and local contractors where possible.

The Company provides an email address for feedback from the workforce, contractors and other stakeholders. In addition, the Company:

  • holds regular meetings with main suppliers and formal assessment made at least once a year;
  • surveys main customers at least once a year; and
  • maintains a social media presence in order to understand the sentiment of and obtain feedback from our stakeholders.

The Company is fully aware of its responsibilities towards the environment, its employees and existing social structures and is strongly committed to best industry practice, the safety of its workers and the communities where it operates. The Company guarantees that all exploration and production works are performed in compliance with the labour, mining and environmental laws in force, ensuring a safe and healthy working environment for its employees.

Mindful of its duty to respect institutions, local culture, communities and their history, the Company works to improve the educational services and the infrastructure of the regions impacted by its activities. It interacts with all stakeholders, working together to achieve a sustainable future and to secure better prospects for the communities when it finally concludes its production activities.

The Company is also committed to managing the environmental and social impact of the mining operations in which it is invested in a responsible and sensitive manner. All businesses are part of wider society and have a duty, responsibility and capability to make a positive contribution towards the communities in which they operate.

The Company recognises that the efficient operation of its business depends on the support of local authorities and the welfare of the communities as a whole and seeks to provide significant and sustainable benefits through its presence.

Risk Management

The Directors are responsible for establishing and maintaining the Company’s system of internal control and reviewing its effectiveness. Pages 15 and 16 of the 2017 Annual Report set out the Company’s approach to risk management and lists those risks which are considered to have a serious adverse impact on the Company’s performance.

Site visits are made as required both by certain Directors and senior management. In this way the key risk areas can be monitored effectively and specialist expertise applied in a timely and productive manner.

Page 23 of the 2017 Annual Report includes additional information about the Company’s internal control system.

The Board

The Board is responsible for managing the Company which includes the comprehensive review of both management and technical reports, the monitoring of foreign exchange and interest rate fluctuations, environmental considerations, government and fiscal policy issues, employment and information technology requirements and cash control procedures.

The Board is comprised of the Chairman, the Chief Executive Officer and two Non-executive Directors. The Board considers the Non-executive Directors to be independent.

The Company has established an Audit Committee, a Remuneration Committee and a Nomination Committee. Details of these committees are disclosed on page 23 of the 2017 Annual Report.

The 2018 Annual Report will include the time commitment of, and the number of Board and Committee meetings attended by, the Directors.

Directors

The Board has an appropriate balance of skills and experience, as well as an appropriate balance of personal qualities and capabilities. Page 3 of the 2017 Annual Report identifies each Director and explains their experience and employment history.

All Board members have access at all times to sufficient information about the business to enable them to fully discharge their duties. Also, procedures exist covering the circumstances under which the Directors may need to obtain independent professional advice at the Company’s expense.

The 2018 Annual Report will include information about how the skillsets of the Directors remain up to date as well as information relating to external advisers.

Board performance

The Board continually reflects on its performance and aims to identify areas for improvement where such areas exist.

The Board has not yet undertaken a formal review of its performance but has undertaken to complete an informal review during the 2019 financial year. Details of the review, its findings and the resulting actions agreed by the Board will be published in the 2019 Annual Report.

Ethical values and behaviours

The Board is committed to ensuring the highest legal and ethical standards and acknowledges its responsibilities in relation to corporate governance.

The Board will review the culture within the Company during the 2019 financial year and provide an update to shareholders in the 2019 Annual Report.

Governance structure and processes

Delivering growth and long-term shareholder value with effective and efficient decision-making is of high importance to the Board.

There is a clear division of responsibilities between the Chairman, who is responsible for supervising the Board, and the Chief Executive Officer, who is responsible for managing the Company on the Board’s behalf.

The Company has established an Audit Committee, a Remuneration Committee and a Nomination Committee. These committees meet at least three times a year. Details of the committees are disclosed on page 23 of the 2017 Annual Report.

Other than the adoption of the QCA Code in 27 September 2018 and the changes in governance arrangements arising from its adoption, there have been no other significant changes in governance arrangements both during and after the year ended 31 December 2017. There are no current plans to make any further amendments to the Company’s governance framework.

Carlos J. Miguens
Chairman
28 September 2018

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