CORPORATE GOVERNANCE STATEMENT

This Corporate Governance Statement sets out the Company’s current position with regards to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (3rd Edition, 2014) (Principles and Recommendations).

While the Principles and Recommendations are not mandatory, the Company is required to disclose the extent to which it complies with the Principles and Recommendations.

ASX BEST PRACTICE RECOMMENDATIONS

Item ASX Best Practice Recommendation Comment
Principle 1: Lay a solid foundation for management and oversight
1.1 A listed entity should disclose:

(a) the respective roles and responsibilities of its board and management; and
(b) those matters expressly reservedto the board and those delegated tomanagement

The Corporate Governance Policy includes a Board Charter, which outlines the specific responsibilities of the board and senior management, and outlines those matters expressly reserved to the board and those delegated to management. Please refer to the website www.lankagraphite.com to obtain a copy of the Board Charter.
1.2 A listed entity should:

(a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and
(b) provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.

The Nomination and Remuneration Policy adopted by the board sets out the process for screening proposed directors and providing security holders with material information regarding whether or not to elect or re-elect a director. Please refer to the website www.lankagraphite.com to obtain a copy of the Nomination and Remuneration Policy.
1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. The Company’s officers and management have all entered into service contracts which outline the responsibilities of each of the company’s officers and of management personnel when performing their roles for the Company.
1.4 The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board. The Board Charter provides that the secretary shall be accountable directly to the board in this respect.
1.5 The company should have a diversity policy…. The Company has adopted a Diversity Policy.

The Company has achieved an appropriate level of gender diversity in accordance with its Diversity Policy.

There are currently:

–        Two female (of four) directors on the Board; and
–        one female (of two) senior executives.

The Company intends to maintain a diverse mix of gender among its Directors and executives.

Please refer to the website www.lankagraphite.com to obtain a copy of the Diversity Policy.

1.6 A listed entity should have a process for periodically evaluating the performance of the board, its committees and individual directors. The Company has a process of periodic evaluation and disclosure for the board, its committees and individual directors, as included in its Board Charter.  Due the recent re-structure of the Company a Board review did not occur during the 2015 financial year.  The Board intends to conduct a Board review in 2016.
1.7 A listed entity should have a process for periodically evaluating the performance of its senior executives. The Company has a process of periodic evaluation and disclosure for senior executives, as included in its Board Charter. Due the recent re-structure of the Company and acquisition of a operating business, a review of senior executives did not occur during the 2015 financial year, the Board intends to conduct a review of senior executives in 2016.
Principle 2: Structure the board to add value
2.1 The Board should have a nomination committee…

If it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively.

The Board is responsible for the nomination and selection of directors. Given the size of the Company and the nature of its operations, the Board does not believe it to be appropriate to establish a nomination committee at this time. The composition of the Board, its performance and the appointment of new Directors will be reviewed periodically by the Board, taking advice from external advisers where considered appropriate. The Board has implemented a Nomination and Remuneration Policy, which is available on the website www.lankagraphite.com.
2.2 A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership. The Board has established a Diversity Policy in accordance with the 2014 Amendments to the ASX Corporate Governance Principles and Recommendations, and will endeavour to provide for appointments to the Board and Company in accordance with this Policy as the Company develops and grows.   The Board has evaluated the current mix of skills and experience held by current directors and is satisfied with the current Board composition. The Board does not believe it is necessary to develop a formal Board skills matrix at this stage.
2.3 A listed entity should disclose the identity of independent directors, and the length of service of such directors. Two of the Company’s four directors Directors are independent, being Alison Coutts and Alex Cowie.
2.4 A majority of the board of a listed entity should be independent directors The Company considers that two of the Directors being independent is appropriate for a company of its size.
2.5 The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. The roles of the Chairman and the CEO are not exercised by the same person.  Jitto Arulamaplam is the Company’s Executive Chairman and he is not an independent director.  The Board believes it is appropriate to have the Chairman engaged in an executive capacity at this critical stage of the Company’s development.
2.6 A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively. The Nomination Committee shall induct new directors and ensure that Board members have access to continuing education to update their skills and knowledge.
Principle 3: Act ethically and responsibly
3.1 A listed entity should have a code of conduct for its directors, senior executives and employees. The Board has established a Code of Conduct for the Board and Management. The Code of Conduct is available on the websitewww.lankagraphite.com.

The Board is committed to meeting their responsibilities under the Constitution andCorporations Act 2001 (Cth) when carrying out their functions as company officers.

Principle 4: Safeguard integrity in corporate reporting
4.1 The Board should have an audit committee…. The Company has established an Audit and Risk Committee and has adopted a Charter for the Audit and Risk Committee, which is available on the website www.lankagraphite.com.

The Committee consists of two non-executive independent directors, being Allison Coutts (Chair) and Alex Cowie and one executive director, Jitto Arulampalam.  Due to the size of the Company and the Board, the Board believes the presence of two non-executive and independent directors is sufficient.

Meetings of the Committee are chaired by a non-executive independent director, Alison Coutts. The Company recognises that it is appropriate that the Committee be chaired by an independent chair who is not chair of the Board.

4.2 The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. The CEO and CFO have provided the Board with a declaration in accordance with recommendation 4.2.
4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. The Company’s external auditor attends each annual general meeting and is available to answer any questions with regard to the conduct of the audit and their report.

Prior approval of the Board must be gained for non-audit work to be performed by the external auditor.  There are qualitative limits on this non-audit work to ensure that the independence of the auditor is maintained.

There is also a requirement that the audit partner responsible for the audit not perform in that role for more than five years.

Principle 5: Make timely and balanced disclosure
5.1 Company should have a written policy for complying with its continuous disclosure obligations under the Listing Rules The Company has adopted a Communication and Disclosure Policy to ensure compliance with the ASX Listing Rules disclosure requirements.  The Communication and Disclosure Policy is available on the website www.lankagraphite.com.
Principle 6:  Respect the rights of security holders
6.1 A listed entity should provide information about itself and its governance to investors via its website. The Board has adopted a Communications and Disclosure Policy, and as part of this policy, will ensure that all relevant announcements and documents are published on the Company’s website in a prompt fashion.
6.2 A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors. The Board intends to actively engage with security holders at the AGM, meeting with them upon request and responding to any enquiries they may make from time to time.
6.3 A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders The Board is committed to ensuring that the Company’s shareholders receive information relating to the Company on a timely basis and shall endeavour to keep shareholders well informed of all material developments of the Company.
6.4 A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. The Company provides this option to security holders.
Principle 7: Recognise and manage risk
7.1 The board of a listed entity should have a committee or committees to oversee risk… The Company has established an Audit and Risk Committee, which shall be responsible for monitoring, identifying and managing risks, and ensuring that these risk identification and management procedures are implemented and followed.

Detail of the composition of the Audit and Risk Committee is set out under Principle 4.

The Audit and Risk Committee has adopted a Charter, which is available on the website www.lankagraphite.com.

7.2 The board or a committee of the board should review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound. Pursuant to the Audit and Risk Committee Charter, the Audit and Risk Committee is responsible for periodically reviewing the Company’s risk management framework (at least annually) and disclosing, in relation to each reporting period, whether such a review has taken place, and carrying out any processes or procedures required by the Company’s Risk Management Policy as amended from time to time.  A review of the Company’s risk management framework occurs during the 2015 financial year.
7.3 The Company should disclose if it has an internal audit function, how the function is structured and what role it performs. The Company does not have an internal audit function.  Pursuant to the Audit and Risk Committee Charter, the Audit and Risk Committee will be responsible for reviewing and amending where necessary internal financial and audit controls and accountability mechanisms, reviewing the results of audits, and ensuring the independence, objectivity and competency of internal and external auditors and audit processes and the separation of internal and external audit functions.
7.4 A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. As a mining exploration company, the Company is materially exposed to economic, environmental and social sustainability risks. The Company has adopted a Risk Management Policy to assist with management of these risks, which is available on the website www.lankagraphite.com.
Principle 8: Remunerate fairly and responsibly
8.1 The board of a listed entity should have a remuneration committee….

If it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive.

The Company has not established a separate Remuneration and Nomination Committee.

Given the size of the Board and the Company’s current operations as at the date of adoption of this Policy, it is considered that no efficiencies or other benefits would be gained by establishing a separate Remuneration and Nomination Committee.

Prior to establishment of the Remuneration and Nomination Committee, the full Board will oversee matters usually the responsibility of a Remuneration and Nomination Committee.

Upon establishment, the Remuneration and Nomination Committee will be composed of three members.  It will, where possible, consist of a majority of independent directors and be chaired by a person who is not Chairman of the Board.

8.2 A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives. The Board is responsible for the Company’s remuneration policy and has adopted a Nomination and Remuneration Policy which outlines the processes by which the Board shall review officer and management remuneration.
8.3 An entity with an equity based remuneration scheme should have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme. Participants in equity based remuneration schemes are not permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme.

For further information about the Company’s corporate governance policies, and to obtain copies of these policies, please refer to the Company’s website http://www.lankagraphite.com/.