OZ Minerals' Corporate Governance

The Board is committed to following the ASX Corporate Governance Council Corporate Governance Principles and Recommendations (ASX Recommendations). The Board and Management regularly review the Company’s policies and practices to ensure that the Company continues to maintain and improve its governance standards following the eight ASX Corporate Governance Principles which are detailed below.

Details of the main policies of corporate governance adopted by the Company and referred to in this statement and the Board Charter are available on the OZ Minerals Corporate Governance page.

PRINCIPLE 1

Lay solid foundations for management and oversight

The Board is responsible for the overall operation and stewardship of the Company and, in particular, is responsible for charting the direction, strategic and financial objectives of the Company as it develops its goals of delivering value to shareholders by growing a quality and competitive world-class mining company. The Board’s Charter sets out the specific powers and responsibilities that have been delegated to the Company’s management team and those that it has reserved for itself.

In accordance with clause 6.5 of its Charter, each year the Board approves the criteria for assessing the performance of the CEO and executive management team.

During the year the Board established key performance indicators for Mr Terry Burgess to reflect the challenges of the organisation. The Board reviewed the Managing Director and CEO’s performance against these performance criteria in December 2010.

In addition, performance reviews of the executive management team are conducted regularly during the year by the Managing Director and CEO, with a formal process conducted once a year involving the Nomination and Remuneration Committee and the Board. The performance of the executive management team is reviewed by comparing performance against agreed measures, examining the effectiveness and quality of the individual, assessing key contributions, identifying areas of potential improvement and assessing whether various expectations of shareholders have been met.

A review of the performance of each member of the executive management team was conducted by the Managing Director and CEO in December 2010 and evaluated by the Nomination and Remuneration Committee and the Board.
Further details of how the Company assesses the performance of the Managing Director and CEO and the executive management team are set out in the Remuneration Report.

PRINCIPLE 2

Structure the Board to add value

Board composition
The Board strives to ensure that it is comprised of a diverse selection of strongly performing individuals of utmost integrity whose complementary skills, experience, qualifications and personal attributes are suited to the Company’s needs.

The Company’s Constitution provides for a minimum of three, and a maximum of 15 Directors.
A profile of each Director, including their skills, experience, relevant expertise, special responsibilities and the date each Director was appointed to and (where applicable) resigned from the Board of the Company is set out in the Directors’ Report.

Independence

In accordance with the Board Charter and the ASX Recommendations, the Board is comprised of a majority of independent Non-Executive Directors (NEDs). The Board has determined that all NEDs, including the Chairman, are independent and free of any relationship which may conflict with the interests of the Company. In order to ensure that any ‘interests’ of a Director in a matter to be considered by the Board are known by each Director, each Director has contracted with the Company to disclose any relationships, duties or interests held that may give rise to a potential conflict. Directors are required to adhere strictly to constraints on their participation and voting in relation to any matters in which they may have an interest. Each Director is required by the Company to declare on an annual basis any related financial interests or details of other interests in the Company. At the beginning of each Board Meeting, Directors are requested to report whether there are any conflicts that other Directors should be aware of.

The Chair

The Chairman, Mr Neil Hamilton, is an independent NED. The Chairman is responsible for the leadership of the Board and to ensure that the Board functions effectively. The Chairman’s role is separate to the duties and responsibilities carried out by the Company’s Managing Director and CEO.

Selection and appointment of Directors

The Board, with the assistance of the Nomination and Remuneration Committee, regularly reviews its membership to ensure that it has the appropriate mix of skills and experience required to meet the needs of the Company. When a Board position becomes vacant or additional Directors are required, external professional advisers are engaged to assist with identifying potential candidates and to ensure that a diverse range of candidates is considered.
Retirement and re-election of Directors

The Company’s current Constitution requires that a minimum of one-third of the Directors (rounded down to the nearest whole number) must stand for re-election at each annual general meeting (AGM) and if necessary Directors must retire by rotation to facilitate this. The Directors to retire under this rule are those who have been a Director the longest period of time since their last election or appointment as a director.

In selecting the Directors to retire by rotation the Board has regard to a number of factors including the optimal composition of the Board with reference to the on-going needs of the Company, the skills and experience of the Directors, their potential conflicts of interests, and the length of time the Directors have held office.
The Company’s Constitution also requires that Directors who have been appointed by the Board must retire and stand for election at the next annual general meeting following their appointment.

A Director must retire in any event at the third AGM since he or she was last elected or re-elected. Retiring Directors may offer themselves for re-election.
The Managing Director and CEO is not subject to retirement by rotation and is not taken into account in determining the number of Directors required to retire by rotation.
Having regard to the above, the Directors who will retire and stand for election at the forthcoming annual general meeting include the Director who has been appointed since the last annual general meeting (Ms. Rebecca McGrath) and the director who has been a director the longest period of time since his last election as a director (Mr Dean Pritchard).

If the shareholders at the forthcoming Annual General Meeting approve the adoption of the proposed new constitution, the one third retirement requirement will be removed as described in the Notice of Annual General Meeting.

Director induction and education

The Company has a process to educate new Directors about the nature of the business, current issues, the corporate strategy and the expectations of the Company concerning the performance of Directors. New Directors receive a letter of appointment which outlines their main responsibilities together with an Induction Pack that provides new Directors with a broad range of information about the Company.

It is the practice of Directors to visit the Company’s mining operations at least once a year and to meet with management to gain a better understanding of the business on a regular basis. This practice was adhered to in 2010.
Independent professional advice and access to Company information

Directors have right of access to all relevant Company information and to the Company’s Executives and, subject to prior consultation with the Chairperson, may seek independent advice from a suitably qualified advisor at the Company’s expense.

Evaluating Board and committee performance

The Board, with the assistance of the Nomination and Remuneration Committee, regularly monitors its performance and the performance of the Directors and Committees throughout the year and conducts a formal review of their performance on an annual basis. This may occur through a process consisting of internal review led by the Chairman, or may in some years, be performed with the assistance of external advisers as considered appropriate.

For the 2010 year, this process was led by the Chairman based on a formal questionnaire and evaluation provided to each Director. The outcomes of the review were discussed and considered by all the Directors and the general conclusion was that the Board and each of its committees were operating well. The Board also reviewed the performance of Mr Pritchard and Ms. McGrath who are standing for election at the May 2011 annual general meeting. In order for the Board to make a recommendation as to their election, the criterion for the evaluation of each Director is their contribution to specific Board objectives, including the following:

setting corporate strategies;
identifying, analysing and ensuring that there are appropriate processes and controls in place to mitigate against and to respond to risks and issues;
monitoring the Company’s progress against its strategic and business objectives;
understanding and analysing the Board papers presented by management and the effectiveness of Directors at meetings; and
use of industry, financial and broad knowledge to add value to the deliberations of the Board.

The Board also formulated recommendations to support their continuous improvement taking into account the feedback from the performance questionnaire circulated to all Directors and the Board’s discussions regarding the responses received.

Board Committees

To facilitate the execution of its responsibilities, the Board’s Committees provide a forum for a more detailed analysis of key issues.

Each Committee is entitled to the resources and information it requires to carry out its duties, including direct access to advisers and employees.

Each Committee reports its deliberations to the following Board Meeting. The current Committees of the Board are the Audit Committee, Sustainability Committee and Nomination and Remuneration Committee. Their membership and functions are set out as follows:

Nomination and remuneration committee

Current Members: Neil Hamilton (Chairman), Brian Jamieson and Paul Dowd.

Changes during 2010: The changes to the composition of the Committee during 2010 were as follows:

Peter Mansell resigned as Chairman on 13 April 2010.
Barry Cusack resigned as a member on 13 April 2010.
Neil Hamilton was appointed as the Chairman on 13 April 2010.
Brian Jamieson was appointed as a member on 13 April 2010.

Function: The Committee assists the Board in discharging its responsibilities in relation to remuneration of executives and NEDs and determining the composition and performance of the Board. Committee duties include:

regularly reviewing the size and composition of the Board and making recommendations to the Board for the appointment and removal of Directors;
ensuring that an effective and up-to-date induction and education program is implemented;
reviewing Board Succession Plans to ensure an appropriate balance of skill, experience and diversity is maintained;
reviewing Executive Management Succession Plans to ensure continuity and flexibility;
reviewing all aspects of remuneration (including base pay, incentive payments and equity awards) and any proposed change to the terms of employment of the Directors, the CEO, executive management team and employees;
regularly reviewing the Company’s remuneration framework to ensure it is linked to the Company’s performance and that it motivates the executive management team to pursue the long term growth of the Company;
establishing and reviewing the Diversity Policy on a regular basis to ensure that the policy reflects relevant corporate governance and legal requirements; and
establishing measurable objectives for achieving gender diversity and monitoring annually both the Company’s objectives and progress in achieving them.

Audit committee

Current Members: Brian Jamieson (Chairman), Dean Pritchard and Charles Lenegan.

Changes during 2010: The changes to the composition of the Committee during 2010 were as follows:

Paul Dowd resigned as a member on 13 April 2010.
Charles Lenegan was appointed as a member on 13 April 2010.

Function: The Audit Committee assists the Board in the effective discharge of its responsibilities in relation to financial reporting and disclosure processes, internal financial controls, funding, financial risk management and the internal and external audit functions.

The Audit Committee reviews the financial statements, accounting policies (including conformance to relevant reporting standards), adequacy of Group policies relating to financial reporting and controls (including compliance with laws, regulations and ethical guidelines) and the annual audit arrangements, both internal and external. It monitors the ability of the Company to fund its activities and reviews all funding strategies of the Group.

The Committee also liaises with the Company’s internal and external auditors, reviews the scope of their activities, reviews their performance and independence and advises the Board on their remuneration, appointment and removal.
The Audit Committee comprises three independent NEDs. The Board has determined that all Committee members have appropriate experience and financial expertise to discharge the responsibilities of the Committee.

Sustainability Committee

Current Members: Dean Pritchard (Chairman), Paul Dowd, Charles Lenegan and Rebecca McGrath.

Changes during 2010: The changes to the composition of the Committee during 2010 were as follows:

Brian Jamieson resigned as a member on 13 April 2010.
Michael Eager was a member until he passed away on 21 September 2010.
Charles Lenegan was appointed as a member on 13 April 2010.
Paul Dowd was appointed as a member on 13 April 2010.
Rebecca McGrath was appointed as a member on 9 November 2010.

Function: The Sustainability Committee’s role is to assist the Board in the effective discharge of its responsibilities in relation to safety, health, environmental and community issues for the OZ Minerals Group, and the oversight of risks relating to these issues.

Details of the number of meetings of the Board and each Committee held during the year, and each Director’s attendance at those meetings are set out in the Directors’ Report.

PRINCIPLE 3

Promote ethical and responsible decision making

The Board and the Company’s employees are expected to uphold the highest levels of integrity and professional behaviour in their relationships with all of the Company’s stakeholders. Below is a summary of the Company’s core codes and policies which apply to Directors and employees. All policies are available on the Company’s website.

Code of Conduct

The Code of Conduct describes standards for appropriate ethical and professional behaviour for all Directors, employees and contractors working for the Company. The Code of Conduct requires all Directors, employees and contractors to conduct business with the highest ethical standards including compliance with the law and to report any interest that may give rise to a conflict of interest. Breaches of the Code of Conduct are taken seriously by the Company and may be reported using the Company’s Whistleblower Program. The Code of Conduct is made available to all employees.

Values

The Company has also implemented a set of values designed to guide the Directors and all employees in their day-to-day dealings with each other, competitors, customers and the community. The values established are Respect, Integrity, Action and Results.

Whistleblower Policy

The Company is committed to ensuring the Company’s employees and contractors can raise concerns regarding illegal conduct or malpractice in good faith without being subject to victimisation, harassment or discriminatory treatment, and to have such concerns properly investigated. The Whistleblower Policy provides a mechanism by which all employees can confidentially report improper or illegal conduct without fear of discrimination. Where the complaint relates to suspected improper or illegal conduct of the Managing Director and CEO or any other member of the Executive Committee, the matter must be reported to the Chairman of the Board and the Chairman of the Audit Committee.

Trading in the Company’s shares

To safeguard against insider trading the Company’s Securities Trading Policy prohibits Directors and employees from trading the Company’s securities if they are aware of any information that would be expected to have a material effect on the price of Company securities.
The policy also establishes the following ‘black out periods’ during which Directors and employees must not trade in the Company’s securities:

14 days immediately before the release of each quarterly activities report i.e. during the months of January, April, July and October; and
31 days immediately before release of half yearly and annual results.

Further it is recognised that Directors and executive management team are more likely to be in possession of price sensitive information. As a result Directors, including the Managing Director and CEO, must notify the Chairman and Company Secretary of any intended trade and confirm that he or she is not in possession of any price sensitive information.

The same notification process applies to executive management team except they must notify the Company Secretary and the Managing Director and CEO.

The policy prohibits executives and employees from entering into any hedging arrangement over unvested securities issued pursuant to any share scheme, performance rights plan or option plan.

The policy also states that Directors, members of the Executive Committee and participants in the OZ Minerals Long Term Incentive Plan must not enter into financial arrangements such as margin loans, stock lending or any other arrangements involving OZ Minerals’ shares (or other securities) where the lender (or other third party) is granted a right to sell (or compel the sale of) all or part of the person’s OZ Minerals shares (or other securities).

During the year the Company updated its Securities Trading Policy having regard to changes to the ASX Listing Rules, which were effective from 1 January 2011. A copy of the revised policy was lodged with the ASX in December 2010. The key changes to the policy included setting out the circumstances in which dealing in OZ Minerals securities will not be considered to be in breach of the policy and the process for obtaining a clearance to trade during a black out period.
The Company discloses to ASX any transaction conducted by the Directors in the Company’s securities in accordance with the ASX Listing Rules.

Diversity Policy

During the year the Company considered its approach to diversity in the context of the new diversity requirements set out in the ASX Recommendations, which are required to be reported on with respect to the 2011 financial year onwards.

The Company believes in creating fair and equal access for employees to all employment opportunities and that a diverse workforce will provide the broadest and most effective talent pool.
Subject to the overriding objective that all appointments be made on the basis of merit, the Company believes that the setting of measurable targets, regular workplace profile analysis and reporting on target progress are critical success factors to achieving the Company’s diversity objectives, particularly in respect of improving the proportion of women employed by the Company.

The targets that have been set out in the OZ Minerals Diversity Policy help measure how diversity is managed and valued including how diversity is integrated into business and workforce planning.
The measurable targets for 2011 are as follows:

at least one female Board Director at all times;
at least 25 percent women in Job Band A, B, C, D, E and F by end of June 2011;
at least one Indigenous Australian in Job Band B (supervisor / degree qualified professional) by end of December 2011; and
where multiple entry level operational roles are being recruited at least one will be reserved for a female applicant (including graduate/apprenticeship/cadetship positions) commencing 1 January 2011.

The Company intends to report on the progress towards these measurable objectives in the 2011 Corporate Governance Statement. Details of the proportion of women in the whole organisation, women in senior executive positions and women on the Board are available in our Sustainability Report, which is available on the OZ Minerals website.

PRINCIPLE 4

Safeguard integrity in financial reporting

Audit Committee
The Board has an Audit Committee to assist the Board to safeguard integrity in financial reporting. The duties and membership details of the Committee are set out in Principle 2 above.

PRINCIPLE 5

Make timely and balanced disclosure

The Company is committed to providing relevant up-to-date information to its shareholders and the broader investment community in accordance with the continuous disclosure requirements under the ASX Listing Rules and the Corporations Act 2001.

The Company has a Continuous Disclosure Policy and Continuous Disclosure Protocols and Procedures, which outline the processes, protocols and procedures for identifying information for disclosure. The policy and the protocols and procedures aim to ensure that timely and accurate information is provided equally to all shareholders and market participants, consistent with the Company’s commitment to its continuous disclosure obligations.

During the year the Board, as part of its regular review of its policies and procedures, approved changes to the Continuous Disclosure Policy and the Continuous Disclosure Protocols and Procedures to update them to take into account recent developments in the law and practices.

PRINCIPLE 6

Respect the rights of shareholders

The Board aims to ensure that shareholders are informed of all information necessary to assess the performance of the Company. To achieve this, the Company has a Shareholder Communication Policy which outlines the process through which the Company will endeavour to ensure timely and accurate information is provided equally to all shareholders.
Information is communicated to shareholders through:

the annual report which is available to all shareholders (in electronic form and, by request, hardcopy);
the release to the ASX and on the Company’s website, of the half yearly financial report, quarterly production and activities reports and other information, including ASX releases in accordance with the Company’s continuous disclosure obligations;
providing information on the Company’s website about the Company, including the Charters that govern the Board and Board Committees, the Company’s key policies, statutory reports and releases to the ASX for the last three years;
providing on the Company’s website on-line access and recordings of presentations and Q&A sessions with analysts following the disclosure of the quarterly production and activities reports and financial reports; and
the release to ASX and the Company’s website of all Company presentations made during briefings conducted with analysts and institutions from time to time.

Shareholders are also encouraged to attend the AGM and use the opportunity to ask questions. Shareholders can also view the AGM via a web cast available on the Company’s website. Questions can be lodged prior to the meeting by completing the relevant form accompanying the notice of meeting. The Company endeavours to respond to the most commonly asked questions. The external auditor attends the meeting and is available to answer questions in relation to the conduct of the audit.

PRINCIPLE 7

Recognise and manage risk

The Board recognises that risk management and robust internal controls are fundamental to sound management, and it is a key responsibility of the Board to review and monitor the principal risks of the Company and its internal compliance and control systems in relation to material business risks. Both the Sustainability Committee and Audit Committee assist the Board in its oversight of the Company’s risk management policy, its internal controls and risk management processes. The Sustainability Committee monitors the Company’s non-financial risks so far as they relate to the environment, health, safety or community related risks. The Audit Committee monitors the Company’s financial risks.

The Audit Committee reviews and assesses the adequacy of the Company’s internal control and financial management systems and accounting and business policies. The Audit Committee is given further assurance on the Company’s financial management systems through the Company’s independent external and internal audit functions.
Management is responsible for the design and implementation of risk management and internal control systems in relation to material business risks. Management ensure that procedures exist to monitor and review risks and, through observation and audit, gain assurance on at least an annual basis that effective controls are implemented and consistently being applied.

Management of Risks

The Company’s approach is to embed risk management into all the Company’s business systems, mining operations and exploration activities. The Company is exposed to numerous risks across its business, most of which are common to the mining industry. The OZ Minerals risk framework is applied to all risk aspects of the Company’s business and is used to identify, assess, evaluate, treat, monitor and communicate risks, using a common methodology. The framework is designed to align with ISO Standard 31000. Risk rankings reflect different types of likelihoods and consequences arising from different types of risks including metrics for Safety and Health, Environment, Community and Government, Reputation, Financial, Production, Organisational Effectiveness, Compliance and Project Management. The Company’s approach to managing these risks is outlined in the Company’s risk management policy, which appears on the Corporate Governance section of our website.

The risk framework is regularly reviewed at least half yearly by the Board and on a quarterly basis by the Executive Committee.

Internal Control Framework

The key controls that the Company has in place to ensure that its risks are managed effectively, to protect the Company’s interests and ensure the integrity of its financial reporting include the following:

a robust planning and budgeting process for delivering a five year strategic plan and annual budgets with at least monthly reporting against performance targets;
a delegations of authority manual that sets out authority levels for expenditure and commitments for different levels of management within the Company, including detailed policies for the management of investment of surplus cash, debt (if any) and foreign currency;
a capital approval process that controls the authorisation of capital expenditure and investments;
appropriate due diligence procedures for acquisitions and divestments; and
regular and timely reporting on safety incidents and actions to improve safety performance.
Internal audit

The Company has an internal audit function that provides assurance that the financial risks of the business are being identified and monitors compliance with the Company’s policies and procedures. The function has been outsourced to Deloitte. The firm conducts internal audit reviews in accordance with an audit plan approved by the Audit Committee. The internal audit plan is formulated following identification of key risks in the areas of financial and information technology controls, compliance with statutory regulations and policy, fraud prevention and detection plus specific services as directed by the Company to ensure an effective control environment. Senior executives are responsible for implementing corrective actions recommended as a result of internal audit reviews. Key findings from internal audit reviews are reported to the Audit Committee. The internal audit function and the Audit Committee have direct access to each other and have the necessary access to management and the right to seek information and explanations.

Management assurance

At the Board meeting to approve the Company’s 2010 full year financial results, the Board received and considered certifications from the CEO and the CFO in relation to the Company’s system of risk oversight and management and compliance with internal controls in relation to financial reporting risks.

The CEO and CFO certifications included declarations in accordance with Section 295A of the Corporations Act 2001 that the financial statements have been prepared in conformity with the accounting standards and that they give a true and fair view, in all material respects, of the financial position and performance of the Company for the 2010 financial year. The CEO and CFO certifications also provided assurances that that the declarations provided in accordance with Section 295A of the Corporations Act 2001 are founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects.

The CEO and CFO declarations and assurances were supported by management certifications, which included management certifications provided by General Managers responsible for the operations and key functions.

Principle 8

Remunerate fairly and responsibly

The Nomination and Remuneration Committee provides recommendations and direction for the Company’s remuneration practices. The Committee ensures that a significant proportion of each Senior Manager’s remuneration is linked to his or her performance and the Company’s performance. Performance reviews are conducted regularly to determine the proportion of remuneration that will be ‘at risk’ for the upcoming year. The Company’s executives participate in a long term incentive program that is linked to the Company’s performance against the Company’s peers in the resources industry. For further details on this see the Remuneration Report within the 2010 Annual Report.

Board remuneration

The total annual remuneration paid to NEDs may not exceed the limit set by the shareholders at an Annual General Meeting (currently $2.7 million). The remuneration of the NEDs is fixed rather than variable.
Further details in relation to Director and executive remuneration are set out in the Remuneration Report within the 2010 Annual Report.