1. Governance of London Mining Plc

London Mining plc (the “Company”) is committed to maintaining high standards of corporate governance.

The Company has adopted a common approach to corporate governance to comply with regulatory obligations associated with its listing on the AIM market of the London Stock Exchange (“AIM”) and the Oslo Axess of the Oslo Stock Exchange (“Oslo Axess”).

Whilst not a mandatory requirement of the Company’s listing on AIM, the Directors have chosen to apply the Combined Code on Corporate Governance published by the UK Financial Reporting Council in June 2008 (the “Combined Code”) to promote good corporate governance, where considered practical for a company of its size and development stage of the mining cycle.

The Directors have also applied section 13.2.2(5) of the Continuing Obligations of Stock Exchange Listed Companies published by the Oslo Stock Exchange. In its application, the Company is exempt from applying the Norwegian Code of Practice for Corporate Governance published on 21 October 2009 (the “Norwegian Code”) on the basis that the Norwegian Code shares common corporate governance themes with the Combined Code.

Adherence to the Combined Code is based on a “comply or explain” principle, whereby companies are expected to comply with the recommendations or explain why they have chosen an alternative approach. Below is a summary of the departures from the Combined Code with an explanation of how the Company’s actual practices contribute to good corporate governance.

2. Combined Code compliance

The Company is required to state how it has applied the principles set out in Section 1 of the Combined Code and which relate to its Directors, remuneration, accountability and audit and relations with shareholders. The Company’s 2009 annual report provides statements to satisfy this obligation.

The Company has scoped out its material investment in its Chinese joint venture for the purpose of these Corporate Governance disclosures as permitted by the Turnbull Guidance on internal controls. The Company and its joint venture partner intends to implement enhanced financial reporting procedures as it prepares the joint venture for a potential listing on the Hong Kong stock exchange.

The Company is in compliance with the provisions of section 1 of the Combined Code as at 31 December 2009 except for:

• Provision A.3.2. The Board does not include at least two independent non-executive Directors*.
• Provision A.4.1, B.2.1, C.3.1. The nomination, remuneration and audit committees do not include at least two independent non-executive Directors*.
• Schedule A, point 1. The Directors are eligible for bonuses which are based on the achievement of specific milestones, the limits of which are not pre-determined in underlying employment contracts. These are determined by the remuneration committee after a detailed appraisal of the Company’s overall performance and achieved milestones during the year. In addition, elements of their bonus arrangements do not include specified performance criteria but are awarded based on individual contribution which is assessed and approved by the remuneration committee.
• Schedule A, point 2. The Combined Code recommends share options and awards should not vest in less than three years.  During 2009 options were granted to Directors and employees which vest in tranches of one, two and three years.  One set of options granted to Graeme Hossie vested on the day of grant.  These options were all granted prior to the Company listing on AIM and under share plans set up before the listing on AIM. 
• Schedule A, point 4. The number of share options and awards to which Directors are entitled to be granted are not subject to specific performance criteria. Awards are based on individual contribution and are assessed and approved by the remuneration committee.
• Schedule A, point 4. The Combined Code recommends that all incentive schemes, including new grants under existing share option schemes, should be subject to challenging performance criteria reflecting the Company’s objectives. However, in 2009, certain share options awarded were subject to no performance conditions other than continued employment as it was considered that for head office employees in particular, it is difficult to set performance targets that are controllable by individuals.  The nature of options is that awards become more in the money as the share price increases, which is considered to be an indirect performance condition in itself. These share options were granted under share plans created before the listing on AIM.

* The nomination committee and the Board is currently considering the appointment of an additional  independent non-executive Director which would resolve non-compliance issues relating to the independence of Directors. See section 4.2 Nomination Committee for further details.

3. The Board of Directors

3.1 Membership

The Board consists of six Directors: two executive Directors and four non-executive Directors including the Chairman. The names, skills, experience and expertise of each Director together with their terms in office are shown in the Board of Directors section of the Company’s website at www.londonmining.co.uk.

3.2 Roles and responsibilities

The main responsibilities of the Board include but are not limited to:

• providing strategic direction for the Company;
• overseeing the Company’s systems of internal control, governance and risk management;
• evaluating the performance of executive management; and
• monitoring and facilitating the operation of the audit, nomination, and remuneration committees.

The Directors have agreed a formal schedule of matters specifically reserved for the Board which can be viewed in the corporate governance section of the Company’s website at www.londonmining.co.uk. These decisions include but are not limited to the approval of the Company’s annual business plan and budget, major changes to the Company’s corporate structure, approval of the Company’s annual report and treasury policy and the approval of major capital expenditure. Responsibility for the day-to-day management of the Company rests with the executive team.

Directors receive timely, regular and appropriate management information to enable them to fulfil their duties and have access to the advice of the Company Secretary. The Board has agreed guidelines for Directors to obtain independent professional advice if they seek it at the Company’s expense.

3.3 Board independence

The Combined Code requires that small companies should have at least two independent non-executive Directors. Three of the Company’s four non-executive Directors, (Dr. Colin Knight, Sir Nicholas Bonsor, Bt Dl and Dr. Hans Schønwandt) are not considered independent by definition of the Combined Code as they hold share options in the Company, which are deemed to affect their independence. In addition Malcolm Groat was also an executive Director of the Company within the last 5 years. These share options which are not considered material in amount, were held prior to the Company listing on the AIM and Oslo Axess and therefore are not considered by the Company to affect their independence. No share options have been granted to non-executive Directors since both listings. The Company considers the appointment of the previous executive finance Director as a non-executive Director enhances the overall strength of the Board and outweighs any perceived compromise to his independence. Of the Board, Sir Nicholas Bonsor, Bt DL is considered independent.

3.4 Board performance

The Board completes a formal annual process to evaluate the effectiveness of Board committees and individual Directors. Each non-executive Director’s performance is appraised personally by the Chairman and, in a meeting chaired by the senior independent non-executive Director, the non-executive Directors assess the Chairman’s performance, taking into consideration the views of executive Directors.
3.5 Election and re-election of Board members

Directors are elected by shareholders at the first annual general meeting after their appointment and, after that, offer themselves for re-election by a vote of shareholders at least once every three years.

3.6 Chairman and chief executive officer

The roles of the Chairman and chief executive officer are separate and the division of their responsibilities has been formally approved by the Board.

The Combined Code recommends that the Chairman should be independent on appointment. The Chairman was independent on appointment but is no longer deemed independent. However the Board is satisfied that the current composition still contributes to good corporate governance for reasons discussed in the section ‘Board independence’.

4. Committees of the Board

The Company has the following Board committees in operation: the audit committee, nomination committee and remuneration committee. These committees are governed by terms of reference which are agreed by the Board and can be viewed in the corporate governance section of the Company’s website at www.londonmining.co.uk. All Board committees are required to report to the Board of Directors.

4.1 Audit committee

The audit committee is chaired Sir Nicholas Bonsor, Bt DL (senior independent non-executive Director) and consists of Dr. Colin Knight and Malcolm Groat as committee members.

Of the committee members, Sir Nicholas Bonsor, Bt DL is considered independent. The Combined Code recommends the composition of the audit committee to include two independent non-executive Directors for small companies. The Company departs from this recommendation but is satisfied that the current composition still contributes to good corporate governance. Malcolm Groat is considered to have recent and relevant financial experience being a former Finance Director of the Company and the committee does include an independent non-executive Director.

The role of the audit committee is to ensure the integrity of financial reporting, review of internal controls and risk management systems, consider the need for and manage the Company’s internal audit function, review with the external auditors of the scope and results of their audit, make recommendations to the Board and shareholders in relation to the appointment, reappointment and removal of the Company’s external auditor and to assess the Company’s arrangements for whistle-blowing and detecting fraud.

In 2009, the audit committee concluded that there was no current need for an internal audit function in the Company. This decision was made by taking into account the size and complexity of the Group’s operations and will be reviewed again by the audit committee in 2010.

The audit committee monitors the relationship with the Company’s external auditors relating to the provision of non-audit services to ensure that auditor objectivity and independence is safeguarded. This is achieved by disclosure of the extent and nature of non-audit services and the prohibition of selected services by the external auditor. The audit committee has considered information pertaining to the balance between fees for audit and non-audit work for the Company in 2009 and concluded that the nature and extent of non-audit fees do not present a threat to the external auditor’s objectivity or independence.
 
There is currently no formal arrangement for whistle-blowing, which the Directors consider appropriate given the Company’s relatively small size.

The appointment of Deloitte LLP as the Group’s external auditors (incumbents since the last tendering process in 2008) is kept under annual review by the audit committee, which conducts a detailed assessment of the effectiveness of the external audit, and if satisfactory the Committee will recommend the reappointment of the audit firm.

The committee’s assessment of the external auditors’ performance and independence underpins its recommendation to the Board to propose to shareholders the re-appointment of Deloitte LLP as auditors until the conclusion of the AGM in 2011. Resolutions to authorise the Board to re-appoint and determine their remuneration will be proposed at the AGM on 30 April 2010.

4.2 Nomination committee

The nomination committee is chaired Dr. Colin Knight and consists of Sir Nicholas Bonsor Bt DL, (senior independent non-executive Director) Malcolm Groat  and Dr. Hans Schønwandt as committee members.

Of the committee members, Sir Nicholas Bonsor, Bt DL is considered independent. The Combined Code recommends the composition of the nomination committee to include a majority of independent non-executive Directors. The Company departs from this recommendation but is satisfied that the current composition still contributes to good corporate governance for the reasons discussed in the section ‘Board independence’.

The main role of the nomination committee is to review regularly the structure, size and composition of the Board and to give consideration to succession planning for Directors and other senior executives. It reviews the leadership needs of the Company, both executive and non-executive and consults with external search consultants as required to fill vacancies as they arise.

The nomination committee also reviews the time required to be committed to Company business by non-executive Directors and assesses whether they are devoting enough time to fulfil their duties.

The non-executive Directors, led by Sir Nicholas Bonsor, Bt DL (senior independent non-executive Director) are responsible for the appointment and performance evaluation of the Chairman, taking into account the views of the executive Directors.

4.3 Remuneration committee

The remuneration committee is chaired by Sir Nicholas Bonsor, Bt DL (senior independent non-executive Director) and consists of Dr. Colin Knight, Malcolm Groat and Dr. Hans Schønwandt as committee members.

Of the committee members, Sir Nicholas Bonsor, Bt DL is considered independent. The Combined Code recommends the composition of the remuneration committee to include two independent non-executive Directors for small companies. The Company departs from this recommendation but is satisfied that the current composition still contributes to good corporate governance for the reasons discussed in the section ‘Board independence’.

The remuneration committee is responsible for establishing and developing the remuneration policy for the Company’s executives and key management and for determining specific remuneration packages for executive Directors. No Director or executive employee is involved in deciding their own remuneration.

The Director’s remuneration report, setting out the Company’s policy on executive remuneration, is set out in the Company’s 2009 annual report. A resolution to approve the remuneration report will be proposed at the forthcoming AGM.

4.4 Board and committee meetings – frequency and attendance

There were no nomination committee meetings as the committee was only formed in November 2009.

4.5  Investment committee

The Group has also formed a separate investment committee to appraise significant acquisition and project expenditure opportunities.

5. Internal controls & risk management

The Board is responsible for establishing and maintaining adequate internal controls and risk management systems to safeguard shareholders’ investment and Company assets.

Internal controls are designed and maintained to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of the Company’s published financial statements in accordance with IFRS. Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance, and may not detect all misstatements whether caused by error or fraud.

The Board have established a process for identifying, evaluating and managing financial, operational and compliance risks that the Company is exposed to. The Board will continue to embed and formalise the Group’s risk management systems and processes during 2010. This process is also managed in conjunction with the Chief Executive Officer and Chief Financial Officer. Details of the Company’s approach to financial risk can be found in note 29 to the consolidated financial statements in the Company’s 2009 annual report. Operational risk is managed at business unit level using a flexible approach to ensure risk management processes can be tailored to meet specific circumstances.

Where appropriate, necessary action has been or is being taken to remedy any weaknesses identified from review of the effectiveness of the Company’s internal control systems.

Details of risks that the Company is exposed to are set out in operating and financial review of the Company’s 2009 annual report.

The Group has performed a review of the Group’s system of internal control. In respect of the recently acquired Chinese joint venture, the Group is continuing to ensure that steps are taken to achieve the standard of internal control expected at all of its operations.

6. Relations with shareholders

The Company is committed to maintaining the highest standards of disclosure ensuring that all investors and potential investors have the same access to high quality, relevant information in an accessible and timely manner to assist them in making informed decisions. The investor relations department manages the flow of information to all investors and potential investors and regular presentations take place at the time of the quarterly, half year and final results as well as during the rest of the year.

Any concerns raised by a shareholder in relation to the Company and its affairs are communicated to the Board.

During 2009, executive management made presentations to potential investors in relation to the Company’s listing on AIM and through its continuous disclosure to investors. The Chairman, senior independent non-executive Director and other non-executive Directors are available to shareholders to discuss any matter they wish to raise.

Copies of announcements to the stock exchanges on which the Company is listed, investor presentations, interim financial reports, the annual report and other relevant information are posted to the Company’s website at www.londonmining.co.uk

Shareholders will have the opportunity at the forthcoming AGM to put questions to the Board, including the Chairmen of the various committees.