Axiom Mining 2015 Annual Report

Corporate Governance

AXIOM MINING LIMITED ANNUAL REPORT 2015 22

Sovereign risk and foreign operations There are risks associated with operating internationally. There can be no guarantee that the government regulations in Australia, Hong Kong, Vietnam or Solomon Islands, in particular in relation to foreign investment, repatriation of foreign currency, taxation and the regulation of the mineral exploration and mining industry, will not be amended in the future to the detriment of the Company’s business. Costs of compliance with laws and regulations in Australia, Hong Kong, Vietnam and Solomon Islands may vary from current estimates. The Company undertakes its activities in Vietnam and in Solomon Islands in conjunction with other local partners. There can be no guarantee that the Company will be able to enter into commercially satisfactory arrangements with other local partners for any future operations in Vietnam and/or Solomon Islands. The Company is incorporated in Hong Kong; changes in Hong Kong laws may have an adverse effect on non-Hong Kong holders of shares. Reporting requirements of the Company in Hong Kong may impose onerous obligations on the Company. The Company also currently operates in Vietnam in maintenance mode. As the Company awaits clarity in Vietnam mining legislation, exploration activities have been wound down. The Company currently maintains a small office with minimal staff. The Solomon Islands economy and political environment remains fragile. The Company is currently involved in litigation in respect of the Prospecting Licence and Registered Lease it was granted on Isabel Island and whilst the Company is confident that its rights will be upheld, this cannot be guaranteed. Currency and exchange rate risk Movements in currency exchange rates can be volatile. The Company’s expenditure obligations in Vietnam are incurred predominantly in US dollars (USD) and Vietnamese dong (VND), in the Solomon Islands in Solomon Bolona dollars (SBD) and in Australia in Australian dollars (AUD). Currency risk may result in an exchange rate loss or gain to the Company, depending on the value movement between currencies. The Company has prepared its accounts denominated in AUD. For ASX reporting purposes, quarterly statements and accounts are provided in AUD. The return on equity and any dividends for Australian Shareholders may be exposed to fluctuations and volatility of the exchange rates among USD, AUD, SBD, and VND.

Environmental regulations The Company’s operations and projects are subject to the law and regulations of the jurisdictions in which it operates relating to environmental matters. Although the Company endeavours to comply in all material respects with all applicable environmental laws and regulations, there are risks inherent in its activities, which could expose the Company to liability. The Company may require, and has obtained or will obtain, approvals from all relevant authorities to undertake prescribed exploration or mining activities. Failure to maintain such approvals may prevent the Company from undertaking such activities. The Company is unable to predict the effect of additional environmental laws and regulations that may be adopted in the future, including whether such laws or regulations would materially increase the Company’s cost of doing business or affect its operations in any area. There can be no assurance that the implementation of new environmental laws and regulations or stricter enforcement policies would not oblige the Company to incur expenses and investments which could have a material adverse effect on the Company’s business, financial condition or operational results. The cost and complexity of complying with applicable environmental laws and regulations in any relevant jurisdiction may prevent the Company from being able to develop mineral deposits. Insurance The Company intends to maintain adequate insurance over its operations within ranges of coverage that the Company understands to be consistent with industry practice and having regard to the nature of activities being conducted. However, insurance of all risks with mineral exploration, project development and production is not always possible. Accordingly, the Company may not be insured against all possible losses, either because of unavailability of cover or because the premiums may be excessive relative to benefits that would accrue.