Governance

Governance

Governance practices and ethical conduct are fundamental to how Erdene operates its business and are embedded in the culture and operations of the company

Erdene is committed to promoting ethical conduct in the operation of its business. The company understands that to be truly effective, its governance practices and ethical conduct must be embedded in the culture and operations of the company. This philosophy is captured in written policies and procedures, which play an integral role in assuring Erdene maintains its standards. These policies and procedures have been adopted by the Board of Directors, and are intended to ensure the integrity of company performance. Erdene’s officers and employees are required to perform each of their duties with integrity, and in compliance with the rules which govern the company’s business.

The following describes the company’s system of corporate governance.

Board Mandate

The Board shall remain committed to ensuring the long-term viability and profitability of the company, as well as the well-being of its employees and of the communities in which it operates. The Board of Directors is responsible for the stewardship of Erdene through the appropriate supervision of the business and management of the company. This mandate is accomplished directly and through five committees, the Audit Committee, the Compensation Committee, the Corporate Governance and Disclosure Policy Committee, the Pre-Clearance Committee and the Technical Committee.

The strategic planning and business objectives developed by Erdene’s management are submitted to and reviewed by the full Board of Directors, both on a formal annual basis and on an ongoing basis through regular interim reports from management. The full Board also reviews and approves the annual financial statements, annual report, annual budget, management proxy information circulars, material press releases, decisions as to material acquisitions not within the budget, and the grant of stock options.

Given the size and relative stability of the company’s Board of Directors, there is no formal program for the orientation and education of new recruits to the Board. Erdene does, however, ensure that all new directors receive a complete package outlining the securities law obligations and restrictions on Board members and the company, as well as a copy of all of its policies.

The Board meets a minimum of four times a year and more frequently if required.

Independence from Management

Three of the Board’s five directors are “independent” within the meaning of applicable securities legislation. An independent director is defined to be a director who has no direct or indirect relationship with the Corporation which could, in the view of the Board, be reasonably expected to interfere with the exercise of a member’s independent judgment.

The Board is satisfied that it maintains adequate and appropriate independence from management. All directors, each of whom has considerable business experience, are expected and encouraged to exercise their independent judgment. To facilitate this, all of the members of the Compensation Committee, the Audit Committee and the Corporate Governance and Disclosure Policy Committee are unrelated directors.

Establishment of Board Committees

There are five standing Committees of the Board; the Audit Committee, the Compensation Committee, the Corporate Governance and Disclosure Policy Committee, the Pre-Clearance Committee and the Technical Committee. The Board may, from time to time, establish ad hoc committees to address special business issues.

The Audit Committee presently consists of three directors, John Byrne, William B. Burton and Phillip Webster, all of whom are independent of management. The Audit Committee is responsible to monitor the company’s accounting and financial reporting processes and the systems in place to manage the principal operational risks faced by Erdene, including internal control and management information systems. This committee is responsible for reviewing and approving the interim consolidated financial statements and for reviewing and recommending the annual consolidated financial statements to the Board of Directors for approval. The Audit Committee is also responsible to renew and appraise the audit efforts of the Corporation’s external auditor. All of the members of the Audit Committee are expected to have the ability to read and understand a balance sheet, an income statement and a cash flow statement. At least one member is required to have the ability to analyze and interpret a full set of financial statements including the notes attached thereto in accordance with Canadian generally accepted accounting principles. The Audit Committee meets a minimum of four times a year.

View the Company’s Audit Committee Charter here.

The Compensation Committee presently consists of three directors, Phillip Webster, William B. Burton and John P. Byrne. The mandate of this committee is to review the performance, compensation and succession planning of the executive officers of Erdene and to ensure the proper administration of the company’s Incentive Stock Option Plan. This committee is also responsible for reviewing and recommending all executive benefits plans and executive prerequisites for approval by the Board of Directors. The Compensation Committee meets twice a year.

View the Company’s Compensation Committee Charter here.

The Corporate Governance and Disclosure Policy Committee presently consists of three directors, John Byrne, William B. Burton and Philip Webster. This committee oversees all regulatory disclosure requirements and the company’s disclosure practices, including its Insider Trading Policy. This committee is responsible to ensure that appropriate systems, processes and controls for disclosure are in place and to review all news releases and core disclosure documents before their release or filing.

View the Company’s Compensation Committee Charter here.

The responsibility for proposing new nominees to the Board and for assessing directors on an ongoing basis is assumed by the full Board of Directors and every director is entitled to bring the matter to the Board. While it is open to any one director to propose new nominees to the Board for consideration by the Board as a whole, the Corporate Governance and Disclosure Policy Committee reviews the qualifications of candidates for Board membership and the slate of candidates for directors to be nominated for election by Shareholders at annual general meetings of Shareholders. The Corporate Governance and Disclosure Policy Committee meets a minimum of four times a year.

The Pre-Clearance Committee presently consists of two directors, Peter Akerley and J. C. (Chris) Cowan. This committee is responsible for pre-clearing trades in the company’s securities by the officers and directors of Erdene, and members of their families who reside with them, in accordance with the company’s Pre-Clearance Policy.

The Technical Committee presently consists of two directors, Peter Akerley and J. C. (Chris) Cowan who individually have extensive experience in mining and minerals exploration. This committee will assist management in identifying and reviewing any acquisitions, joint ventures or similar opportunities prior to review by the full board. This committee will meet as opportunities present themselves.

Code of Ethics and Business Conduct

The Company and all its subsidiaries are committed to maintaining a high standard of legal and ethical business conduct.

View the full the Company’s Code of Ethics and Business Conduct Policy here.

Disclosure Policy

The Board and Management of Erdene are committed to open, full and fair communications with investors, which is reflected in its formal, written Disclosure Policy. The objective of the Disclosure Policy is to ensure that communications to the investing public about the company are:

  • Timely, factual and accurate; and
  • Broadly disseminated in accordance with all legal and regulatory requirements

The Disclosure Policy extends to all directors, officers and employees of the company, all those authorized to speak on behalf of Erdene and all other insiders.

Communication Policy

Receiving shareholder feedback and dealing with shareholder concerns is a priority for Erdene. In order to ensure adequate communication between the company and its shareholders, Erdene:

  • Regularly issues news releases on corporate activities;
  • Maintains a comprehensive website which is updated regularly, and
  • Has an employee who is responsible for receiving shareholder calls and ensuring that any shareholder concerns are placed before Management for its consideration.

Whistleblower Policy

The Company has also adopted a stand-alone Whistleblower Policy, overseen by the Audit Committee and in coordination with the Corporate Governance and Policy Disclosure Committee. The Whistleblower Policy is designed to ensure all employees will be made to feel comfortable and safe in anonymously reporting any improprieties, regardless of the level at which they may be committed.

View the full Whistleblower Policy here. To contact the Company, please visit the Contact page.

Performance of the Board of Directors

Without convening a special meeting for this purpose, the Board shall periodically perform an assessment exercise addressing its effectiveness, with input from Management. Board remuneration is to be divulged in all Proxy Solicitation Circulars to be sent to Shareholders prior to meetings.

Majority Voting Policy

The board of directors (“Board”) of Erdene Resource Development Corp. (the “Corporation”) believes that each of its members should carry the confidence and support of its shareholders and is committed to upholding high standards in corporate governance.

Forms of proxy for the vote at a shareholders’ meeting where directors are to be elected will enable the shareholder to vote in favour of, or to withhold from voting for, each nominee on an individual basis. At the meeting, the chair of the meeting will call for a vote by a ballot and the scrutineer will record, with respect to each nominee the number of shares voted in his or her favour and the number of shares withheld from voting. Prior to receiving the scrutineer’s report on the ballot, the chair of the meeting may announce the vote result based on the number of proxies received by the Corporation. At the conclusion of the meeting, the Corporation shall issue a news release providing detailed disclosure of the voting results for the election of directors.

In an uncontested election of directors of the Corporation, each director should be elected by the vote of a majority of the shares represented in person or by proxy at any shareholder’s meeting for the election of directors. Accordingly, if any nominee for director receives a greater number of votes “withheld” from his or her election than votes “for” such election, that director shall promptly tender his or her resignation to the chair of the Board following the meeting. The resignation will be effective when accepted by the Board. In this policy, an “uncontested election” means an election where the number of nominees for director equals the number of directors to be elected.

The Corporation’s corporate governance committee (the “Committee”) shall consider the offer of resignation and recommend to the Board whether or not to accept it. Any director who tenders his or her resignation may not participate in the deliberations of either the Committee or the Board. In its deliberations, the Committee will consider any stated reasons why shareholders “withheld” votes from the election of that director, the length of service and the qualifications of the director, the director’s contributions to the Corporation, the effect such resignation may have on the Corporation’s ability to comply with any applicable governance rules and policies and the dynamics of the Board, and any other factors that the Committee considers relevant.

The Board shall act on the Committee’s recommendation within 90 days following the applicable meeting and announce its decision via news release, after considering the factors considered by the Committee and any other factors that the Board considers relevant. A copy of the news release and advice of the Board’s decision shall be sent to the Toronto Stock Exchange. The Board expects to accept the resignation except in situations where extenuating circumstances would warrant the director to continue to serve on the Board. However, if the Board declines to accept the resignation, it should include in the news release the reasons for its decision.

If a resignation is accepted, the Board may, subject to any corporate law restrictions and the Corporation’s constating documents, (i) leave any resulting vacancy unfilled until the next annual general meeting, (ii) appoint a new director to fill the vacancy created by the resignation who the Board considers will have the confidence of shareholders or (iii) call a special meeting of shareholders at which there will be presented a management slate to fill the vacant position or positions.

If a director does not tender his or her resignation in accordance with this policy, the Board shall not re-nominate that director at the next election.

Adopted by the Board of Directors of Erdene Resource Development Corp. effective April 18, 2013, amended March 6, 2017.

Advanced Notice Policy

ERDENE RESOURCE DEVELOPMENT CORP. (“CORPORATION”)

AMENDMENT TO BY-LAW NO. 1

By-law No. 1 of the Corporation is hereby amended effective April 18, 2013 by adding the following Section 10A, subject to confirmation by the shareholders of the Corporation at the next meeting of shareholders:

NOMINATIONS OF DIRECTORS

10A.

(a) Nomination Procedures. Subject to the Act and the Articles of the Corporation, nominee will not be eligible for election as director of the Corporation unless such nomination is made in accordance with the following procedures. Nominations of persons for election to the Board may be made at any annual meeting of shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called is the election of directors:

(i) by or at the direction of the Board, including pursuant to a notice of meeting;

(ii) by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of the shareholders made in accordance with the provisions of the Act; or

(iii) by any person (a “Nominating Shareholder”) who:

a. at the close of business on the date of the giving of the notice provided for below in this Section 10A and on the record date for notice of such meeting, is entered in the securities register as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting; and

b. complies with the notice procedures set forth below in this Section 10A.

(b) Timely Notice. In addition to any other applicable requirements, for a nomination to be made by a Nominating Shareholder, the Nominating Shareholder must have given timely notice thereof in proper written form to the secretary of the Corporation at the head office of the Corporation.

(i) in the case of an annual meeting of shareholders, not less than 30 nor more than 65 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date (the “Notice Date”) on which the first public announcement of the date of the annual meeting was made, notice by the Nominating Shareholder may be made not later than the close of business on the tenth (10th) day following the Notice Date; and

(ii) in the case of a special meeting (which is not also an annual meeting) of shareholders called for the purpose of electing directors (whether or not called for other purposes), not later than the close of business on the fifteenth (15th) day following the day on which the first public announcement of the date of the special meeting of shareholders was made.

In no event shall any adjournment or postponement of a meeting of shareholders or the announcement thereof commence a new time period for the giving of a Nominating Shareholder’s notice as described above.

(d) Proper Form of Timely Notice. To be in proper written form, a Nominating Shareholder’s notice to the secretary of the Corporation must set forth:

(i) as to each person whom the Nominating Shareholder proposes to nominate for election as a director:

a. the name, age, business address and residential address of the person;

b. the principal occupation or employment of the person;

c. the class or series and number of shares in the capital of the Corporation which are controlled or which are owned beneficially or of record by the person as of the record date for the meeting of shareholders (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; and

d. any other information relating to the person that would be required to be disclosed in a dissident’s proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws (as defined below); and

(ii) as to the Nominating Shareholder, any proxy, contract, arrangement, understanding or relationship pursuant to which such Nominating Shareholder has a right to vote any shares of the Corporation and any other information relating to such Nominating Shareholder that would be required to be made in a dissident’s proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws (as defined below).

The Corporation may require any proposed nominee to furnish such other information, including a written consent to act, as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such proposed nominee.

(e) Eligibility for Nomination as a Director. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this Section 10A; provided, however, that nothing in this Section 10A shall be deemed to preclude discussion by a shareholder (as distinct from the nomination of directors) at a meeting of shareholders of any matter in respect of which it would have been entitled to submit a proposal pursuant to the provisions of the Act. The chair of the meeting of shareholders shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in the foregoing provisions and, if any proposed nomination is, not in compliance with such foregoing provisions, to declare that such defective nomination shall be disregarded.

(f) Terms. For purposes of this Section 10A:

(i) “public announcement” shall mean disclosure in a news release reported by a national news service in Canada, or in a document publicly filed by the Corporation under its profile on the System of Electronic Document Analysis and Retrieval at www.sedar.com; and

(ii) “Applicable Securities Laws” means the applicable securities legislation of each relevant province and territory of Canada, as amended from time to time, the rules, regulations and forms made or promulgated under any such statute and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities commission and similar regulatory authority of each province and territory of Canada.

(g) Delivery of Notice. Notwithstanding any other provision of this by-law, notice given to the secretary of the Corporation pursuant to this Section 10A may only be given by personal delivery, facsimile transmission or by email (at such email address as stipulated from time to time by the secretary of the Corporation for purposes of this notice), and shall be deemed to have been given and made only at the time it is served by personal delivery, email (at the aforesaid address) or sent by facsimile transmission (provided that receipt of confirmation of such transmission has been received) to the secretary at the address of the head office of the Corporation; provided that if such delivery or electronic communication is made on a day that is a not a business day or later than 5:00 p.m. (Halifax time) on a day that is a business day, then such delivery or electronic communication shall be deemed to have been made on the subsequent day that is a business day.

(h) Board Discretion. Notwithstanding the foregoing, the Board may, in its sole discretion, waive any requirement in this Section 10A.

All terms contained in this amendment that are defined in By-law No. 1 of the Corporation, as the same may be amended from time to time, shall, for all purposes hereof, have the meanings given to such terms in By-law No. 1.

Evolution of Practices

The corporate governance practices described above are subject to changes as Erdene evolves. The Board shall remain sensitive to corporate governance issues and shall continuously seek to set up the necessary measures, control mechanisms and structures to ensure an effective discharge of its responsibilities without creating additional overhead costs and reducing the return on Shareholders’ equity. The Board of Directors recognizes that the company’s existing corporate governance practices do not fully comply with all of the TSX Guidelines. The Board of Directors is committed to complying in all respects with the TSX Guidelines as the company grows in size and when the TSX Guidelines become appropriate for Erdene to adopt entirely.

Business and Affairs of Erdene


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