Principle #2: Structure the Board to add Value

Recommendation 2.1: A majority of the Board should be independent directors
Recommendation 2.2: The Chairperson should be an independent director
Recommendation 2.3: The roles of Chairperson and chief executive officer should not be
exercised by the same individual
Recommendation 2.4: The Board should establish a nomination committee
Recommendation 2.5: Provide the information indicated in ASX Guide to Reporting on
Principle 2 in the annual report.
__________________________________________________________________________________

Composition of the Board

The Company recognises the importance of having a board comprising of directors with an appropriate range of backgrounds, skills and experience to suit the Company’s current and future strategies and requirements.

The Company considers that the Board should have at least three directors (minimum required under the Company's Constitution) and strives to have a majority of independent directors but acknowledges that this may not be possible at all times due to the size of the Company.  The number of directors will be maintained at a level which will enable effective spreading of workload and efficient decision making.

The Board determines each director’s independence using the guiding principle that an independent director is independent of management and free of any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgment. 

In applying the guiding principle, the Board will take into consideration the definition in the ASX Principles of Good Corporate Governance and Best Practice Recommendations and appropriate materiality thresholds.

The composition of the Board is determined by the application of the following:

• Persons nominated as non-executive directors shall be expected to have qualifications, experience and expertise of benefit to the Company and to bring an independent view to the Board’s deliberations. Persons nominated as executive directors must be of sufficient stature and security of employment to express independent views on any matter.
  
• The Chairperson should ideally be independent, but in any case be non-executive and be elected by the Board based on his/her suitability for the position.
  
• The roles of Chairperson and Chief Executive Officer should not be held by the same individual. 
  
• All non-executive directors are expected voluntarily to review their membership of the Board from time-to-time taking into account length of service, age, qualifications and expertise relevant to the Company’s then current policy and programme, together with the other criteria considered desirable for composition of a balanced board and the overall interests of the company.
  
• Executive directors shall be expected to retire from the Board on the relinquishment of their executive position with the Company.
  
• Under the Company's Constitution, the minimum number of Directors is three. At each Annual General Meeting, one third of the Directors (excluding the Managing Director) must resign, with Directors resigning by rotation based on the date of their appointment.  Directors resigning by rotation may offer themselves for re-election.

Independence of Directors

The independence of individual directors is assessed regularly by the Board. Directors facilitate this review by providing up to date information regarding their personal circumstances related to the company, external relationships and potential conflicts of interest. Assessment is made having regard to relevant laws, regulations and listing rules as well as the Australian Stock Exchange Corporate Governance Council Principles of Good Corporate Governance and Best Practice Recommendations. The Board’s assessment of the independence of individual directors will be published in the Directors report of annual reports.

Conflict of Interest

In accordance with the Corporations Act 2001 and the Company’s Constitution, Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company.  Where the Board believes a significant conflict exists, the director concerned does not receive the relevant board papers and is not present at the Board meeting whilst the item is considered.  

Nomination Committee / Appointment of New Directors

Because of the size of the Company and the size of the Board, the Directors do not believe it is appropriate to establish a separate Nomination Committee.  Such tasks are undertaken by the full Board in special meetings or sessions as required.

The composition of the Board is reviewed on an annual basis to ensure the Board has the appropriate mix of expertise and experience.  Where a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the services of a new director with particular skills, the Board determines the selection criteria for the position based on the skills deemed necessary for the Board to best carry out its responsibilities and then appoints the most suitable candidate who must stand for election at the next general meeting of shareholders.
 

Principle #3: Promote Ethical and Responsible Decision Making

Recommendation 3.1: Establish a Code of Conduct to guide the Directors, Chief Executive Officer (or equivalent), the Chief Financial Officer (or equivalent) and any other key executives as to:

3.1.1    the practices necessary to maintain confidence in the Company’s integrity, and
3.1.2    the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

Recommendation 3.2: Disclose the policy concerning trading in Company’s Securities by Directors, officers and employees.

Recommendation 3.3: Provide the information indicated in ASX Guide to Reporting on Principle 3 in the annual report.
__________________________________________________________________________________

Code of Conduct

The Board has adopted a Code of Conduct for all directors, officers, and employees and this is attached as Schedule A to this Policy.
 
The Code of Conduct embraces the values of:

• Integrity;
• Excellence; and
• Commercial Discipline.

The Board encourages all stakeholders to report unlawful/unethical behaviour and actively promotes ethical behaviour and protection for those who report potential violations in good faith.

Trading in Extract Securities by Directors, Officers and Employees

The Board has adopted two separate and specific policies in relation to Directors and officers, employees and other potential insiders buying and selling shares. The Trading Policies are attached as Schedule B to this Policy.

Extract Resources Limited – Corporate Governance Policies

ASX Principles of Good Corporate Governance and Best Practice Recommendations

Principle #3 - SCHEDULE A

Extract Resources Limited - Code of Conduct

Integrity

To act with integrity at all times, and towards each other, our customers, our suppliers and our shareholders, we must:

• act honestly and within the spirit as well as the letter of the law.
• obey the law and not take any action or inaction that will or could result in the breach of any law.
• respect the rights and freedoms of each other and not discriminate on the basis of age, sex, race, religion, sexual orientation, political opinion or other personal differences.
• treat our work colleagues, our customers and shareholders with courtesy and respect.
• not disclose any confidential information of Extract, its customers, suppliers or other parties without proper authorisation.
• deal with our customers, suppliers, shareholders and any other parties honestly, fairly and at arms length, and otherwise avoid the possibility of actual or perceived conflicts of interest.
• follow Extract’s internal policies, including corporate governance policies.
• not permit our own personal and/or business and/or financial interests to conflict with our duties to Extract.
• encourage and foster a culture that recognises the importance of professional ethics.

Excellence

To achieve excellence in everything we do, we must:

• work to the highest standard.
• be constantly challenged and challenge each other to continue to drive improvement in our work.
• strive to achieve a vibrant and rewarding work environment.
• take ownership of every task or duty we undertake.
• take responsibility for our own actions.
• optimize processes.
• encourage, maintain and foster a culture that strives for, and rewards, excellence.
• Commercial Discipline
   

In applying commercial discipline in all our work practices we must:

• measure our success in terms of increasing shareholder value.
• appropriately manage risk.
• apply sound principles of financial and business management.

Reporting Wrongdoing

Extract is committed to ensuring that the conduct and behaviour of its employees, executives and directors is in accordance with the key values described above. Extract employees, executives and directors are all required to report any circumstance where they have reasonable grounds for suspecting, and a genuine belief of wrongdoing involving possible:

• fraud;
• corruption;
• breaches of Extract’s internal policies, including corporate governance policies (which include this Code of Conduct); or
• breaches of the law.

Any such occurrences must be reported to the Company Secretary, Managing Director or Chairperson.
 
Extract recognises that its employees, executives and directors must be provided with a work environment in which they feel safe and secure about reporting any such occurrence. Accordingly, Extract is committed to encouraging, maintaining and fostering a culture in which its employees, executives and directors feel that they may report any such instances where they have reasonable grounds, and a genuine belief, that there may have been wrongdoing without fear of reprisal, harassment, discrimination, victimization or future career bias.
 
Any report made will be listened to and investigated. All reports will be treated with the strictest confidence and will only be disclosed to other persons within (or outside) Extract on a “need-to-know” basis. Your involvement will not be mentioned without your consent. You will be provided with regular feedback and the outcome of the investigation (including whether the suspicions and concerns outlined in your report were well-founded, and, where appropriate, whether further action has been taken).

Any report may be made anonymously. However, it must be recognised that anonymity may make the investigation of any report much more difficult. Anonymity can also be very hard to guarantee, as it may be necessary for you to give evidence in either internal or external proceedings, or, the law may otherwise require the formal disclosure of your report. It must also be stressed that Extract will not support the use of this policy as a means of airing or pursuing personal or professional grievances between employees, executives or directors, or for any individuals to make unfounded or malicious allegations. Such conduct would be against the principles set out in this Code of Conduct, and may be considered by Extract as grounds for action against the complainant.

Extract Resources Limited – Corporate Governance Policies

ASX Principles of Good Corporate Governance and Best Practice Recommendations

Principle #3 - SCHEDULE B

Extract Resources Limited – Share Trading Policy

Trading in Extract Securities by Directors, Officers and Employees

The Board has adopted the following policy in relation to Directors, Officers, employees and potential insiders (including such parties as advisors and consultants who have access to, or are involved with confidential information) buying and selling shares:
 
The Director, Officer, employee or potential insider must not deal in Extract’s securities:

• in the four weeks prior to the release of the Company’s half-yearly results, and preliminary final results to the Australian Stock Exchange (ASX), and in the two weeks prior to the annual general meeting of the Company;
  
• when exploration is in progress and its results have not been released, the Chairman will confirm when trading can commence;
  
• where the dealing is of a short-term nature;
  
• where the Director, Officer, employee or potential insider is aware of material information that has not yet been released to the market;
  
• where the dealing by its timing, size or regularity will have the effect or likely effect of bringing the company into disrepute amongst shareholders or potential investors; or
  
• where it is unlawful to do so.

Except where the above applies, there is no objection to dealings 24 hours after the release of the company’s half yearly results, preliminary final results and annual report to the ASX and after the conclusion of the annual general meeting of the Company.
 
Where special or unforeseen circumstances arise, a Director, Officer, employee or potential insider may request approval to deal in the Company’s securities from the Chairman. The Chairman has complete discretion to either approve or not approve the request. The request and the Chairman’s decision should be communicated in writing.
 

Principle #4: Safeguard Integrity in Financial Reporting

Recommendation 4.1: Require the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) to state in writing to the Board that the company’s financial reports present a true and fair view, in all material respects, of the company’s financial condition and operational results and are in accordance with relevant accounting standards.

Recommendation 4.2: The Board should establish an audit committee.

Recommendation 4.3: Structure the audit committee so that it consists of only non-executive directors, a majority of independent directors, an independent chairperson (who is not chairperson of the Board), and at least three members.

Recommendation 4.4: The audit committee shall have a formal charter.

Recommendation 4.5: Provide the information indicated in ASX Guide to Reporting on
Principle 4 in the annual report.
__________________________________________________________________________________

The Board of Directors has a primary responsibility to ensure that:

• The Company presents and publishes accounts which present a true and fair view of its results and financial position;
  
• The accounting methods adopted are appropriate to the Company and consistently applied in accordance with relevant accounting standards and the applicable laws; and
  
• The appointment and performance of the external auditor is appropriately monitored to ensure independence and the serving of the interests of shareholders.

Management Accountability

The Board encourages management accountability for the Company’s financial reports by requiring the Company Accountant (who is responsible for preparing the financial reports) to state in writing to the Board that the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards.

Audit Committee

The Company has established an audit committee to assist in fulfilling its responsibilities under this Principle and the ASX Principles of Good Corporate Governance and Best Practice Recommendations. The operation of the Audit Committee is governed by its Charter, a copy of which is attached as Schedule C to this Policy.

In addition to managements accountability referred to above, the Board either directly or through the delegated authority of the Audit Committee assures integrity of the financial statements by:

(a)        reviewing the Company's statutory financial statements to ensure the reliability of the financial information presented and compliance with current laws, relevant regulations and accounting standards;

(b)        monitoring compliance of the accounting records and procedures, in conjunction with the Company’s auditor, on matters overseen by the Australian Securities and Investments Commission, Australian Stock Exchange Limited ("ASX") and Australian Taxation Office;

(c)        ensuring that management reporting procedures, and the system of internal control, are of a sufficient standard to provide timely, accurate and relevant information as a sound basis for management of the Company’s business;

(d)       reviewing audit reports and management letters to ensure prompt action is taken by the Company's management; and

(e)        When required, nominating the external auditor and at least annually reviewing the external auditor in terms of their independence and performance in relation to the adequacy of the scope and quality of the annual statutory audit and half-year review and the fees charged.

Where appropriate, the Audit Partner responsible for the audit of the Company may be invited to attend Board meetings. 

Extract Resources Limited – Corporate Governance Policies

ASX Principles of Good Corporate Governance and Best Practice Recommendations

Principle #4 - SCHEDULE C

Audit Committee Charter

Objectives:

The main objectives of the Audit Committee include the following:-
 

1. Assisting the Board of Directors to discharge its responsibility to exercise due care, diligence and skill in relation to Extract’s:-
   
   •           reporting of financial information to users of financial reports; 
   •           application of accounting policies;
   •           financial management;
   •           internal control system;
   •           business policies and practices;
   •           effective management of financial risks and the protection of Extract’s assets;
   •           compliance with applicable laws, regulations, standards and best practice guidelines.
   
2. Improving the credibility and objectivity of the accountability process (including financial reporting).
   
3. Providing a formal forum for communication between the Board of Directors and senior financial management.
   
4. Improving the efficiency of the Board of Directors by delegating tasks to the committee and thus allowing more time for issues to be discussed in sufficient depth.
   
5. Improving the effectiveness of the internal and external audit functions and being the forum for improving communication between the Board of Directors and the internal and external auditors where such functions exist.
   
6. Facilitating the maintenance of the independence of the external auditor.
   
7. Providing a structured reporting line for internal audit and facilitating the maintenance of the objectivity of the internal auditor where such function has been established.
8. Improving the quality of internal and external reporting of financial and non-financial information.
   
9. Improving the correlation between related financial and non-financial information and reports

Responsibilities:

The specific responsibilities of the Audit Committee encompass:-

External Reporting

• Considering the appropriateness of Extract’s accounting policies and principles and any changes, as well as the methods of applying them, ensuring that they are in accordance with the stated financial reporting framework.
  Assessing significant estimates and judgments in financial reports by enquiring of management about the process used in making material estimates and judgments and then enquiring of the internal and external auditors the basis for their conclusions on the reasonableness of management’s estimates.
• Reviewing reports of compliance with applicable local and overseas laws.
• Assessing information from internal and external auditors which affects the quality of financial reports.
• Asking the auditor for an independent judgment about the appropriateness, not just the acceptability, of the accounting principles used and the clarity of the financial disclosure practices used or proposed to be used by Extract as put forward by management.
• Reviewing reports of compliance with laws, regulations and other requirements relating to the external reporting by Extract of non-financial information.
• Reviewing documents and reports to regulators and make recommendations to the Board on their approval or amendment.
  •           Reviewing the external auditor’s independence based on the external auditor’s relationships and services with Extract and others.
  •           Assessing the management of non-financial information in documents (both public and internal) to ensure the information does not conflict inappropriately with the financial statements and other documents and assessing internal control systems covering information releases that have the potential to adversely reflect on Extract’s conduct.

Internal Control and Risk Management

•           Assessing the internal processes for determining and managing key risk areas, particularly:
                        o          litigation and claims;
                        o          non-compliance with laws, regulations, standards and best practice
guidelines, including environmental, industrial relations, privacy and similar laws;
o          important judgments and accounting estimates;
                        o          fraud and theft.

•           Addressing the adequacy of Extract’s control structure with management and the internal and external auditors.
•           Evaluating the process Extract has in place for assessing and continuously improving internal controls, particularly those related to areas of significant risk.
•           Assessing whether management has controls in place for unusual types of transactions and/or any potential transactions that may carry more than an acceptable degree of risk.
•           Assessing the adequacy of and compliance with the corporate code of ethical conduct.
•           Meeting periodically with key management, internal and external auditors and compliance staff to understand and discuss Extract’s control environment.

External Audit

•           Making recommendations to the Board on the appointment, remuneration and monitoring of the effectiveness and independence of the external auditor.
•           Reviewing the external auditor’s fee and be satisfied that an effective, comprehensive and complete audit can be conducted for the set fee.
•           At the start of each audit, agreeing the terms of the engagement with the external auditor.
•           Inviting the external auditor to attend Audit Committee meetings to, at least, review the audit plan, discuss audit results and consider the implications of the external audit findings for the control environment
•           Together with the external auditor, reviewing the scope of the external audit (particularly
the identified risk areas) and any additional agreed-upon procedures on a regular and timely basis.
•           Recommending to the Board the extent to which the external auditor may provide non-audit related services.
•           Enquiring of the auditor if there have been any significant disagreements with management irrespective of whether or not they have been resolved.
•           Recommending to the Board whether the financial and non-financial statements should be signed based on the Committee’s assessment of them.
•           Monitoring and critiquing management’s responsiveness to the external auditor’s findings and recommendations.
•           Providing the opportunity for the Committee members to meet with the external auditors without management personnel being present at least once a year.

Internal Audit (if any)

•           Reviewing the internal auditor’s mission, charter and resourcing (including qualifications, skills, experience, funding and equipment).
•           Communicating the Committee’s expectations to the internal auditor in writing.
•           Reviewing and approving the scope of the internal audit plan and work program.
•           Monitoring the progress of the internal audit plan and work program and considering the implications of internal audit findings for the control environment.
•           Monitoring and critiquing management’s responsiveness to internal audit findings and recommendations.
•           Evaluating the process Extract has in place for monitoring and assessing the effectiveness of the internal auditor.
•           Overseeing the co-ordination of the internal auditor with the external auditor.
•           Providing the opportunity for committee members to meet with the internal auditors without management personnel being present at least once a year.

Chairman:

The Board will appoint a non executive member of the Extract board with relevant financial experience as Chairman of the committee.
Chairman’s Tenure:

Two (2) years from the date of appointment subject to annual confirmation by the Board.
 

Committee Composition:

The Chairman, plus two other nominated non-executive directors. Representatives of the external auditor and the internal auditor may attend all meetings. The Managing Director may also attend meetings together with those members of the Extract management team as deemed appropriate by the Chairman.
 

Committee Tenure:
 
Appointments of Directors will be confirmed annually. The term of appointment shall be two (2) years subject to annual confirmation. Where possible the terms of the members shall be staggered so that no more than two-thirds of the members of the Committee shall be reappointment in any given year.

Review of Committee:
 
The Chairman of the Board and the Committee Chairman shall meet at least once annually to discuss the performance of the Committee. The Committee Chairman shall also separately discuss at least once annually with each member of the Committee the performance of the Committee and individual members. The Board (or at its discretion, a Nominating Committee) may further review the operation of the Committee on an annual basis to ensure its compliance with the terms of this Charter.

Meetings:
 
The Committee shall meet at least two (2) times between July 1st in one year and June 30th in the immediately succeeding year with such additional meetings as the Chairman shall decide in order to fulfil its duties. The specific dates of the two formal meetings will be determined by the Chairman and advised to members of the Committee. Further meeting dates shall be determined by the Chairman. Meetings may be face-to-face, or via telephone or video conference as considered appropriate by the Chairman.

In addition, the Chairman should consider calling a meeting of the Committee if requested to do so by a Committee member, the Managing Director or the internal or external auditors.

Quorum:

A Quorum shall be two (2) members including the Chairman.

Access:

The Committee shall have reasonable access to both the internal and external auditors and to senior management of Extract. The Committee shall also have the ability to consult independent experts where they consider it necessary to carry out their duties. The Chief Financial Officer shall have direct access to the Audit Committee on an as needs basis.

Committee Decisions:

Decisions of the Audit Committee made in compliance with its delegated power shall be binding on the Board. Decisions and recommendations otherwise made shall not be binding upon the Board however, should the Board not agree with the Committee to approve the financial statements as presented the Chairman of the Board shall meet with the Committee Chairman to discuss the reasons for the decision.

Reporting:

The Committee, through its Chair, shall formally report at least annually to the Board of Directors at such meeting of the Board as the Board may from time to time determine after consultation with the Committee Chair. In addition the Committee shall report to the Board at its first meeting following a meeting of the Committee by providing a copy of the minutes of the last meeting of the Committee (signed by the Chairman) or, in the absence of minutes, a report of such meeting of the Committee since its last report to the Board or at such other times as the Board shall determine.  A copy of the agenda for each Committee meeting shall be forwarded to the Company Secretary when same is sent to Committee members.

Public Relations:

The Chairman or his/her delegate may as requested by the Board act as spokesperson for the Company in respect to matters within the ambit of its terms of reference and in respect of the work of the Committee generally.

Sub Committee:

The Committee may with the approval or upon direction of the Board of Directors form sub committees, the membership of which may be from amongst its own membership or such other persons as maybe determined from time to time. Such sub-committee to be appointed for such period and upon such terms as the Board of Directors may determine.
 

Sub Committee Terms of Reference:

A sub committee formed pursuant to this Charter shall be governed by terms of reference regulating its work.
 

Principle #5: Make Timely and Balanced Disclosure

Recommendation 5.1: Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance.

Recommendation 5.2: Provide the information indicated in ASX Guide to Reporting on Principle 5 in the annual report.
__________________________________________________________________________________

The Board has a Market Disclosure Policy to ensure the compliance of the Company with the various laws and ASX Listing Rule obligations in relation to disclosure of information to the market. The Managing Director is to ensure that all employees are familiar with and comply with the policy. The Market Disclosure Policy is detailed below.

This Market Disclosure Policy is reviewed at least once each year.

MARKET DISCLOSURE POLICY

Extract is committed to:

(a)        ensuring that shareholders and the market are provided with timely and balanced information about its activities;

(b)        complying with the general and continuous disclosure principles contained in the Australian Stock Exchange Limited (“ASX”) Listing Rules and the Corporations Act 2001; and

(c)        ensuring that all market participants have equal opportunities to receive externally available information issued by Extract.

1.0       Material Information

1.1       All management and staff must inform the Company Secretary of any potentially material information or proposal as soon as practicable after becoming aware of that information.
 
1.2       Information is material if it is likely that the information would influence investors in deciding whether to buy or sell Extract securities.
 
1.3       Material information need not be disclosed if all of the following are satisfied:

(a)        a reasonable person would not expect the information to be disclosed; and

(b)        the information is confidential and the ASX has not formed the view that the information has ceased to be confidential; and

(c)        one of the following applies:

(i)         it would breach the law to disclose the information;
(ii)        the information concerns an incomplete proposal or negotiation;
(iii)       the information comprises matters of supposition or is insufficiently definite to warrant disclosure;
(iv)       the information is generated for internal management purposes; or
(v)        the information is a trade secret.

1.4       Subject to and in accordance with the provisions of ASX Listing Rule 3.1, the Chairperson and Managing Director must immediately notify the market, via an announcement to the ASX, of any information concerning Extract that the Managing Director and/or Chairperson believes a reasonable person would expect to have a material effect on the price or value of Extract securities. The Company Secretary is the Authorised Officer for Listing Rule purposes.

1.5       Extract must not, under any circumstances, disclose material information to the market prior to the ASX releasing the information to the market. If unreleased material information is unintentionally communicated, by Extract or an employee, in any forum, the Managing Director, or in his absence, the Company Secretary, must be advised immediately so the market can be informed.

2.0       False Market

2.1       Leaks, rumours and inadvertent disclosure The Company's general policy is not to respond to reports or rumours about it published by analysts, fund managers or reporters. From time to time, however, it may be necessary to respond to the unauthorised or selective disclosure of information or market rumours concerning the Company, particularly where the information or rumour is having, or likely to have, an impact on the price of the Company's securities. Such an event may trigger an enquiry from the ASX under Listing Rule 3.1B. To ensure a consistent response from the Company to such occurrences, all instances of unauthorised or selective disclosure or rumours should be reported to the Managing Director or Company Secretary as soon as they become known.
 
2.2       Assessment of the Company's response When a matter is reported, the Managing Director or Company Secretary will discuss the significance of the matter and possible disclosure responses with the Chairperson.

2.3       Disclosure of information If the information the subject of the unauthorised or selective disclosure is considered material, or there is a significant market rumour concerning the Company that is having or is likely to have an impact on the price of the Company's securities, the Company Secretary will co-ordinate the development of a disclosure response to ASX.

The Company Secretary will circulate the draft announcement to the Board and relevant management and external advisers for review. Once the review process has been completed, the Company Secretary will disclose the information to ASX.
 
2.4       Referral of enquiries Any queries by ASX, the media, analysts, brokers, shareholders or the public about a market rumour concerning the Company or regarding information that is subject to this Disclosure Policy must be referred to the Managing Director or, in his absence, the Company Secretary.

The only persons authorised to speak to the media or any other person outside the company about market rumours concerning the Company or about information that is subject to this Disclosure Policy are the Chairperson or the Managing Director from time to time.

3.0       Release of reports as required by the Corporations Act and ASX Listing Rules

Extract must lodge, in a timely fashion, the following reports if and as required by the ASX Listing Rules and the Corporations Act 2001:

(a)        the annual report;
(b)        the half yearly report and accounts;
(c)        the preliminary final report;
(d)       the annual audited financial statements;
(e)        the quarterly cash flow report; and
(f)        any other reports required to be lodged under the ASX Listing Rules or the Corporations Act 2001.

The Company will include commentary on its financial results to enhance the clarity and balance of reporting. This commentary will include information needed by an investor to make an informed assessment of the entity’s activities and results.

4.0       Information briefings with analysts
 
4.1       Extract may provide background and technical information in one-on-one briefings with analysts, fund managers, brokers or institutional investors to assist them in their understanding of Extract’s business activities. The Managing Director must review any written presentation material prepared for meetings prior to the meeting to determine whether all information has previously been disclosed to the market or may require disclosure.

4.2       A one-on-one briefing includes any communication between Extract and a broker, analyst, fund manager, or institutional investor including phone calls.

4.3       No previously undisclosed material information may be disclosed at these meetings. If an employee considers that previously undisclosed material information has been disclosed, they must immediately inform the Company Secretary so that the previously undisclosed information can be released to the market.

5.0       Release of information to the public

5.1       Only the Chairperson, the Managing Director, an Executive Director or the Company Secretary are authorised to provide comment about the Company, or speak on behalf of Extract, to the media. Any other employees providing comment on the Company must first obtain the authorisation of the Managing Director or, in his absence, the Chairperson.
 
5.2       Extract employees must not respond to any market speculation or rumours about the Company, unless authorised by the Managing Director or, in his absence, the Chairperson to do so.
 

Principle #6: Respect the Rights of Shareholders

Recommendation 6.1: Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meeting.

Recommendation 6.2: Request the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.
__________________________________________________________________________________

The Company places significant importance on effective communication with shareholders.

Information is communicated to shareholders through the distribution of the annual and half yearly financial reports, quarterly reports on activities, announcements through the Australian Stock Exchange and the media and the Chairman’s address at the annual general meeting.

In addition, news announcements and other information are sent by email to all persons who have requested their name to be added to the email list. If requested, the Company will provide general information by email, facsimile or post.

The Company will, wherever practicable, take advantage of new technologies that provide greater opportunities for more effective communications with shareholders.

Website
 
The Company’s website at www.extractresources.com contains up to date information regarding the operations of the Company, its management, exploration activities and contact details. All announcements made to the Australian Stock Exchange Limited (ASX), financial reports, press releases and other relevant information are available on the website.

Shareholder Meetings

The Company conducts an annual general meeting in accordance with legal and listing requirements.  All directors are requested to be present to answer any shareholder questions.

The Company will ensure that the annual general meeting is held in a manner that enables as many shareholders as possible to attend and encourages effective participation by shareholders. The Notice of Annual General Meeting provides details of the location, time and date of the Meeting, explanatory notes presenting the business to be considered by shareholders and details about any candidate standing for election or re-election as a Director of the Company.  The Company will request that its external auditor attend the Company’s annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.

The chairperson of that meeting will allow a reasonable opportunity for members to ask questions about the company's performance and operations.
 

Principle #7: Recognise and Manage Risk

Recommendation 7.1: The Board or appropriate board committee should establish policies on risk oversight and management.

Recommendation 7.2: The Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) should state to the board in writing that:

7.2.1.the statement given in accordance with best practice recommendation 4.1 (integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and

7.2.2.the company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

Recommendation 7.3: Provide the information indicated in ASX Guide to Reporting on Principle 7 in the annual report.
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Taking and managing risk are central to Extract’s business and to building shareholder value. To do this effectively we need to optimise our level of risk. Our risk approach links our vision and values, objectives and strategies, and procedures and training.

The mining exploration industry has additional risks to those of other businesses.

The Board recognises the following main types of risk:

(i) Market Risk

Market risk is the risk to earnings from changes in market factors such as interest and foreign exchange rates, commodity prices, or our liquidity and funding profiles. A change in the market can impact the price at which the company's shares may trade.

(ii) Managing Growth

Growth of the Company will require preparedness for the deployment of management systems relating to financial monitoring and controls, human resources, corporate compliance, marketing, technical and changes in the competitive landscape. The Company recognises the need to employ qualified people to fill roles within the organisation and believe that such individuals can be attracted to the Company although in the initial phase of the Company's operations, its size may be a limiting factor in being able to attract suitable candidates.
 
(iii) Risks Associated with Future Acquisitions

The Company intends to investigate and consider selective acquisitions of investments or businesses in accordance with the Constitution, the business need and strategic direction of the Company. There are no assurances that the Company will be able to identify suitable acquisition candidates available for sale at reasonable prices, complete any acquisitions or successfully integrate any acquired business into the Company's operations.

(iv) Further Capital

To expand its operations the Company will require additional capital from time to time. The ability of the Company to raise this capital will be affected by, amongst other things, the state of the market, the performance of the Company, the preparedness of investors to invest into the Company and the quality of the opportunity.

(v) Exploration and Mining Risk

Mineral exploration and mining are speculative activities that may be hampered by circumstances beyond the control of Extract.  Profitability depends on successful exploration and/or acquisition of mineral reserves, design and construction of efficient processing facilities, and proficient financial management.

Many of the mining tenements in which Extract has an interest are at the exploration stage only. There can be no assurance that exploration of these tenements, or any other tenements in which Extract may acquire an interest in the future, will result in the discovery of an economic ore deposit.  Even if an apparently viable deposit is identified, there is no guarantee that the deposit can be profitably exploited.

The business of mining and mineral exploration, development and production may be affected by various factors, including failure to achieve predicted grades in exploration and mining, operational and technical difficulties encountered in mining, commissioning and operating plant and equipment, mechanical failure or plant breakdown, unanticipated metallurgical problems which may affect extraction costs, adverse weather conditions, industrial and environmental accidents, industrial disputes, unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment.

(vi) Native Title Risk
 
The access and usage of lands the subject of prospecting, exploration and mining rights may in some instances be or become subject to claim for access and other usage rights from indigenous groups under native title laws and other agreements. The Company will work in all instances mindful of the access rights of all parties and look for solutions and agreements that do not contravene any laws and that enable the best balance for all parties. The Company acknowledges that there is a risk that such solutions are not always able to be achieved or that the Company may need to otherwise alter its mineral access rights and/or offer appropriate compensation. 

The mineral operations and proposed activities of Extract are environmentally sensitive and cannot be carried out without prior approval from and compliance with all requirements of the relevant environmental authorities.  Extract intends to conduct all its activities in a manner that is environmentally responsible and in accordance with all relevant laws.
 
(vii) Legislative Risk
 
Changes in Government regulations and policies may adversely affect the financial performance of Extract.  New regulations or policy may restrict Extract from carrying out some of its existing and proposed activities.

(viii) Competitive Risk
 
Extract is subject to normal competition risks from other parties who are presently in, or in the future will enter, the mining exploration sector in which Extract currently operates.  There is also the potential for increased competition in this market sector.  If this was to occur, it may have a material adverse effect on the operating and financial performance of Extract.

Managing Risk

The Company employs executives and retains consultants each with the requisite experience and qualification to enable the Company to manage the risks to the Company.

Risks to the Company are reviewed at regular Board meetings as necessary and during any reviews of operating and strategic plans.

Internal Control Framework

The Board acknowledges that it is responsible for the overall internal control framework, but recognises that no cost effective internal control system will preclude all errors and irregularities. To assist in discharging this responsibility, the Board has instigated an internal control framework that can be described under two headings:

•           Financial Reporting – Monthly actual results are reported against budgets/forecasts which are revised regularly. The Company reports to shareholders half-yearly.

•           Continuous disclosure – the Company has a policy that all shareholders and investors have equal access to the Company’s information and has procedures to ensure that all price sensitive information is disclosed to the ASX in accordance with the continuous disclosure requirements of the Corporations Act 2001 and ASX Listing Rules. All information provided to the ASX is immediately posted to the Company’s website.  A comprehensive process is in place to identify matters that may have a material effect on the price of the Company’s securities.  The Managing Director and the Company Secretary are responsible for interpreting the Company’s policy and where necessary informing the Board.  The Company Secretary is responsible for all communications with ASX.
 

Principle #8: Encourage Enhanced Performance

Recommendation 8.1: Disclose the process for performance evaluation of the Board and management effectiveness.
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Annual Review

At least once a year the Board and where appropriately delegated the Remuneration Committee meets with the specific purpose of conducting a review of the Board’s composition and performance. The reviews include:

(a)        Determining the appropriate balance of skills and experience required to suit the Company’s current and future strategies;
(b)        Comparing the requirements in (a) above against the skills and experience of current directors and executives;
(c)        Assessing the independence of each director;
(d)       Measuring the contribution and performance of each director based on both measurable and qualitative indicators;
(e)        Assessing any education requirements or opportunities;
(f)        Recommending any changes to Board procedures, Committees or the Board composition;
(g)        Performance of the Managing Director; and
(h)        Performance of the Company Secretary.

Annual Meeting of Non-Executives
 
At least once a year the non-executive directors or where appropriately delegated the Remuneration Committee meet without management present to discuss the following:

(a)        the performance of management in supplying the Board with information in a form, timeframe and quality that enables the board to effectively discharge its duties;
(b)        any particular concerns regarding any or all executive directors; and
(c)        Performance of executive directors.
 

Principle #9: Remunerate Fairly and Responsibly

Recommendation 9.1: Provide disclosure in relation to the Company’s remuneration policies to enable investors to understand (i) the costs and benefits of those policies, and (ii) the link between remuneration paid to directors and key executives and corporate performance.

Recommendation 9.2: The Board should establish a remuneration committee.

Recommendation 9.3: Clearly distinguish the structure of non-executive directors’ remuneration from that of executives.

Recommendation 9.4: Ensure that payment of equity based executive remuneration is made in accordance with thresholds set in Schemes approved by shareholders.

Recommendation 9.5: Provide the information indicated in ASX Guide to Reporting on Principle 9 in the annual report.
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The Board of Directors maintains remuneration policies which are aimed at attracting and retaining a motivated workforce and management team. The intention is to match the outcomes from the remuneration system with the performance of the Company and ultimately the value received by our shareholders on a long-term basis.

As an overall policy, the Company will remunerate in such a way that it:

•           motivates directors and management to pursue the long-term growth and success of the company within an appropriate control framework; and
•           demonstrates a clear relationship between key executive performance and remuneration.

Remuneration Committee

The Company has adopted Recommendation 9.2 and has established a Remuneration Committee the operation of which is governed by its Charter. A copy of the Charter is attached as Schedule D to this Policy.

In addition to this the Board has adopted the following policies for directors and executives remuneration:

Non-executive Directors’ Remuneration

Non-executive directors’ fees are paid within an aggregate limit which is approved by the shareholders from time to time. Currently the aggregate limit for non-executive directors’ fees is A$300,000. At present the Chairman’s remuneration is A$75,000 per annum and each other non-executive director (as at 10 July 2007, there are 3) is paid remuneration of $38,150 per annum. Effective from 1 June 2004, non-Executive Directors will serve in accordance with a standard service contract, drafted by the Company’s legal advisors, which sets out remuneration arrangements. Retirement payments, if any, are agreed to be determined in accordance with the rules set out in the Corporations Act as at the time of the director’s retirement or termination. Non-executive directors are not entitled to receive options under the rules of the Extract Employee Incentive Scheme. Options or other similar benefits granted to any Director are subject to the approval of shareholders at a general meeting.

Executive Remuneration

Senior executives, including Executive Directors, are engaged under the terms of individual employment contracts. Such contracts are based upon standard terms drafted by the Company’s lawyers. Executive Directors do not receive any directors’ fees in addition to their remuneration arrangements. Executive directors are not entitled to receive options under the rules of the Extract Employee Incentive Scheme. The monetary package is divided between a base salary/consulting fee and, for non-directors, an incentive portion if considered appropriate. Base salary/consulting fees are set to reflect the market salary for a position and individual of comparable responsibility and experience. Base salary/consulting fees are regularly compared with the external market by participation in industry salary surveys and during recruitment activities generally. It is the policy of the Company to maintain a competitive salary structure to ensure continued availability of experienced and effective management and staff. The incentive portion is payable based upon attainment of objectives related to the executive’s job responsibilities. The objectives vary, but all are targeted to relate directly to the Company’s business and financial performance and thus to shareholder value. 

Employee Share Option Plan

All employees except for Executive Directors are eligible to participate in the Extract Employee Share Option Plan (the “Plan”), which is to approved by shareholders at the next shareholder meeting. Actual participation is dependent upon the discretion of the Board under the terms of the approved Plan. The Board exercises its discretion to apply vesting and hurdle conditions which are intended to ensure that rewards are available only to employees who contribute to the Company over the medium to long term and that the benefits flowing from the Plan are aligned to value achieved by shareholders.

Disclosure of Directors and Executives Remuneration

In accordance with the Corporations Act and Accounting Standards requirements, full detailed disclosure of directors and executives remuneration is made in Extract’s annual report. Any other transaction with directors are also fully disclosed in the related parties note in the annual report.

In accordance with ASX listing rule 3.1, continuous disclosure is made of any significant employment agreements or termination agreements or payments which may have a material effect on the price or value of Extract securities, or because of its nature, the directors believe disclosure should be made.
 

Principle #10: Recognise the Legitimate Interests of Stakeholders

Recommendation 10.1: Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders.
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Code of Conduct

The Board has adopted a Code of Conduct for all directors, officers, and employees and this is attached as Schedule A to the policy for Priciple#3: Promote Ethical and Responsible Decision Making.

The Code of Conduct embraces the values of:

•           Integrity;
•           Excellence; and
•           Commercial Discipline.

The Board encourages all stakeholders to report unlawful/unethical behaviour and actively promotes ethical behaviour and protection for those who report potential violations in good faith.