Corporate Governance

Hazelwood has adopted systems of control and accountability as the basis for the administration of corporate governance. The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company’s needs. To the extent they are applicable, the Company has adopted the Ten Essential Corporate Governance Principles and Best Practice Recommendations ("Recommendations") as published by ASX Corporate Governance Council.

In accordance with the recommendations of the ASX, information published on the Company’s website includes charters (for the board and its sub-committees), codes of conduct and other policies and procedures relating to the board and its responsibilities.

As the Company’s activities develop in size, nature and scope, the size of the Board and the implementation of additional corporate governance structures will be given further consideration.

The Board sets out below its "if not, why not" report in relation to those matters of corporate governance where the Company’s practices depart from the Recommendations.

Principle 2 Recommendation 2.2
The Chairman does not satisfy the test of independence as set out in Box 2.1 of the ASX Principles of Good Corporate Governance and Best Practice Recommendations Independence ("Independence Test").

Whilst the Board recognises the importance of independence in decision making, it does not comply with best practice recommendation 2.2 as Mark McAuliffe, the current Chairman, does not satisfy paragraphs 2 and 3 of the Independence Test, that is he has an executive role in the Company and he is a principal of a material professional advisor. The Board believes that Mark McAuliffe is the most appropriate person for the position as Chairman because of his industry experience and pivotal role in preparing the Company for listing. The Board has appointed Ian Richer to act as a lead independent director, and the Board believes this will enable the Board to act independently in the event any conflict arises which would make it inappropriate for Mark McAuliffe to act in the capacity of Chairman.

Principle 2 Recommendation 2.3
The roles of Chairman and Managing Director are exercised by Mark McAuliffe, which is not in compliance with best practice recommendation 2.3. While the Board recognises the importance of the need for the division of responsibilities between the Chairman and the Managing Director, it considers the existing structure provides unified leadership important to a newly incorporated company with early stage exploration projects. Mr McAuliffe’s dual role makes him responsible (along with the whole Board) for determining strategic direction of the Company as well as having primary responsibility for day to day management. At present this dual role assists the Company to run in a cost effective and efficient manner.

The Board intends to re-consider the duality of Mark McAuliffe‘s role and the merits of appointing a new Managing Director as the Company evolves and increases its operations.

Principle 2 Recommendation 2.4
There is no nomination committee. The Board considers those matters and issues arising that would usually fall to a nomination committee. The Board considers that no efficiencies or other benefits would be gained by establishing a separate nomination committee.

Principle 8 Recommendation 8.1
During the reporting period there was no performance evaluation of the Board, its committees and individual directors.

The current Board has only been in place since 9 March 2006 and did not conduct a performance evaluation during the Reporting Period. It is proposed the Chairman will conduct a review in the 2007 financial year.

Principle 9 Recommendation 9.2
There is no separate remuneration committee.

Due to the small size and structure of the Board, a separate remuneration committee is not considered to add any efficiency to the process of determining the levels of remuneration for the directors and key executives. The Board considers that it is more appropriate to set aside time at Board meetings each year to specifically address matters that would ordinarily fall to a remuneration committee. When considering matters of remuneration, the Board functions in accordance with the Remuneration Committee Charter which was adopted on 17 July 2006.

In addition, all matters of remuneration will continue to be determined in accordance with Corporations Act requirements, especially in respect of related party transactions.