Nordgold has the systems and policies in place to allow our senior management and Board to control the risks we face, and to help us create and preserve value.
Our senior management is responsible for developing our overall risk strategy and the policies that support it. The Board then reviews and approves our risk strategy and policies.
We have established an internal controls system to manage our risks. This helps the Board ensure that the risks associated with our business are effectively managed. Identifying, evaluating and managing our risks is an ongoing process, as is the development of appropriate internal controls. We promptly address any weaknesses we find in our risk management or internal controls.
In reviewing the effectiveness of our risk management, the Board considers the results of our monitoring and reporting process, and our management's views. The Board also takes account of material changes and trends in the risk profile, and considers whether the control system adequately supports our risk management objectives.
The Board also receives assurance from the Audit Committee, which receives information from regular internal and external audit reports and other reports on financial risk and internal control throughout Nordgold.
Risks
We face a number of risks that are typical of our industry, as well as those relating to our operations and the markets in which we operate. These include, but are not limited to those set out in the tables below.
Risks relating to the mining industry
| Risk | Mitigation |
The market price for gold can change significantly, driven, for example, by inflation expectations, movement in the US dollar, speculation, investment demand and political events.
| We do not hedge the gold price.
|
Our reserves and production could decline materially over time if we fail to acquire and/or develop additional reserves. The cost and outcome of exploration is inherently uncertain.
| We employ highly-experienced geologists and up-to-date exploration techniques, to maximise our chances of successful exploration.
|
We face the costs of complying with, and the risk of changes to, a wide range of laws, government regulations, licences, permits and other approvals.
| Meeting our legal and regulatory obligations is intrinsic to the way we work. We maintain good relationships with governments and other regulatory bodies.
|
Gold mining, and the processes and chemicals we use, can create safety and environmental hazards.
| Protecting the health and safety of our workers and looking after the environment are the highest priorities for Nordgold.
|
Risks relating to our operations
| Risk | Mitigation |
Developing and exploiting gold reserves, converting resources and acquiring machinery and equipment require substantial capital expenditure.
| Nordgold is soundly financed. We monitor our liquidity and carefully manage our cash flow and balance sheet to ensure we have the financial capacity we need.
|
Our business depends significantly on the contributions of a number of key personnel, in particular our senior management team and our team of engineers and geologists.
| Nordgold aims to be a best-in-class employer, offering attractive career opportunities and remuneration.
|
Our business depends on good relations with our employees.
| Nordgold aims to be a best-in-class employer, offering attractive career opportunities and remuneration.
|
The cost of electricity, which is our single largest operating expense, can be unstable.
| We have long-term contracts with suppliers and electricity saving programmes.
|
Risks relating to operating in emerging markets
| Risk | Mitigation |
The legal and tax frameworks in emerging markets are not always fully developed.
| We have proper understanding of tax and statutory legislation, established with the help of our tax, legal and accounting departments.
|
Political and social conflicts, instability, and crime and corruption could create an uncertain operating environment.
| We monitor the political and social situation and political risks insurance development. We have stable and good relationships with local communities and governments.
|
We could be subject to arbitrary government action, challenge of our ownership of assets or review of our licences.
| We would be able to mount an efficient legal defence, with the help of our highly professional legal department and political risks insurance development.
|
Inflation and government efforts to combat it may contribute significantly to economic uncertainty.
| We have strong cost control and continuing operational efficiency programmes.
|