Petra Diamonds Limited Sustainability Report 201213STRATEGY AND GOVERNANCEStrategy and GovernanceDeveloping our approachStrategy and GovernancePetra's strategy is to structure and plan our operations to ensure that all stakeholders receive maximum benefit from our presence.Sustainability strategyPetra is committed to the responsible development of its assets, to the benefit of all stakeholders.From its beginnings as an exploration company with a market capitalisation of less than £10 million, we have built Petra into the largest listed diamond mining company on the London Stock Exchange, with a diamond resource in excess of 300 million carats, production of 2.2 million carats in FY 2012 and a market capitalisation of approximately £600 million.This growth has been achieved through the acquisition of operational diamond mines in both South Africa and Tanzania, and in the process long-term futures have been secured for these assets. The five important mines acquired by the Company are: $ Koffiefontein, acquired July 2007;$ Cullinan, acquired July 2008;$ Williamson, acquired February 2009;$ Kimberley Underground, acquired May 2010; and$ Finsch, acquired September 2011.Petra's strategy is to structure and plan our operations to ensure that all stakeholders receive maximum benefit from our presence.GovernancePrior to Petra's step-up to the Main Market of the London Stock Exchange in December 2011, we reviewed the governance standards and processes across the Company to better address international best practice standards, including those of the UK Corporate Governance Code. Petra's Board currently consists of three Executive Directors, the Non-Executive Chairman and three independent Non-Executive Directors, including the nominated Senior Independent Non-Executive Director. Our governance policies are set out in detail in the 2012 Corporate Governance Statement of our 2012 Annual Report, which is available to download on the following link: http://www.petradiamonds.com/about-us/corporate-governance. Ultimately, the role of the Board is to protect and enhance shareholder value. To fulfil this role, the Board:$ provides leadership of the Company within a framework of prudent and effective controls which enable risk to be assessed and managed; $ sets the Company's strategic aims, ensures that the necessary financial and human resources are in place for the Company to meet its objectives and reviews management performance; $ develops and promotes its collective vision of the Company's purpose, culture, values and the behaviours it wishes to promote in conducting business and ensures that its obligations to its shareholders and others are understood and met; and$ carries out all duties with due regard for true sustainability and the long-term success of the Company.To assist in the execution of the Company's strategy, the Board has established an Executive Committee to manage the Company on a day-to-day basis. In addition, Petra currently has the following primary committees: the Audit Committee, the Remuneration Committee, the Nomination Committee and the HSSE Committee. The purpose of these committees is to delegate responsibility to Directors with specific skills and knowledge and to facilitate the Board's overall role.HSSE CommitteeAs a rapidly growing organisation created through the bolt-on acquisition of a number of different assets, we are now developing an overarching hierarchy of Group-level policies to guide and enhance the policies we already have in place at an operational level. In November 2011, we formed the dedicated Group HSSE committee ("the Committee") with the mandate to formulate and recommend to the Board the Group's policies and strategies on all relevant health, safety, social and environmental issues as they affect the Group's operations. The Committee is also tasked with ensuring that the Board is cognisant of, and takes account of, mining corporate social responsibility best practice. The full charter of the Committee is available on the following page of our website: http://www.petradiamonds.com/sustainability/hsse-committee. The Committee is chaired by Johan Dippenaar, CEO of Petra, and is comprised of members of Petra's Senior Management team. It reports SUMMARY$ Prior to Petra's step-up to the Main Market of the London Stock Exchange in December 2011, we reviewed the governance standards and processes across the Company$ As a rapidly growing organisation, we are now developing an overarching hierarchy of Group-level policies to guide and enhance the policies we already have in place$ We are committed to ensuring that all stakeholders are made aware of the Company's current and future operations and recognise the benefits which result from such operations $ We will only ever sell diamonds that have been mined from Petra-owned operations, thereby providing assurance that 100% of our production is certified as 'conflict-free'
Petra Diamonds Limited Sustainability Report 201214STRATEGY AND GOVERNANCEStrategy and GovernanceDeveloping our approach continuedHSSE Committee continuedto the Board and meets formally at least twice a year, or more as required. As it was formed part way through the financial year, only one meeting was held in FY 2012.During FY 2012, the Committee began a process of reviewing existing sustainability policies across the Group, prior to the development of a series of strategic policies to ensure consistent and improving standards across all our operations. A number of new Group policies are now being developed to further improve on the existing polices in place and these are expected to provide consistency of standards across all Petra operations.The Committee is also leading a progressive improvement in our reporting of sustainability matters in order to increase transparency and disclosure in line with evolving best practice and reflecting the growing maturity of the Company. As part of this process we have this year set out a number of KPIs for sustainability reporting. In some cases, comparative data from previous years for selected KPIs was unavailable, either because this is the first year Petra has collected data or because of significant improvements to the methods for collecting data implemented during FY 2012.Risk managementThe Board is responsible for the Group's system of internal control and for reviewing its effectiveness. The Group has not established a separate Risk Committee. Instead, the Board, as part of its usual role and through direct involvement in the management of the Group's operations, ensures risks are identified, assessed and appropriately managed. The sustainability risks considered to be most material to the Group are categorised in the areas of Health and Safety, Governance and Ethics, Community Relations, Employees and Environment - see the schematic on page 16 which sets out the sustainability areas considered to be most material to the Group.Incidents or infringements are classified as minor, moderate or major. Major incidents are those which are deemed material to the Group's performance as a whole. Should such a major incident occur, then there is a clear line of communication to ensure that the matter is reported to the highest governance body immediately, as follows:RemunerationPetra's remuneration packages are weighted towards performance pay linked to Petra's strategic goals and targets, including matters pertaining to sustainability, and take into account best practice developments applied in a manner which is appropriate for Petra's industry and specific circumstances.OUR STRATEGIC OBJECTIVESPERFORMANCE MEASURES FOR INCENTIVESHow does Petra's remuneration strategy link with its corporate strategy?INCREASE OUTPUTOPTIMISE RECOVERIESDRIVE EFFICIENCIESFOCUS ON PRODUCTIONSteadily growing annual productionImproving operating marginsCulture of effective cost controlMAXIMISE RETURNSProduction$ Project delivery and carat production are at the core of Petra's strategy. These measures are therefore fully embedded in the performance measurement framework.Expansion project delivery$ Progress is measured as part of the short-term bonus, and the long-term share awards include stretching targets supporting Petra's long-term ambitions.Profit and costs$ Petra remains focuses on managing costs and profitability. Profit and cost measures form part of the annual bonus metrics.HSSE$ Health, safety, social and environment measures are explicitly included as part of the annual bonus framework, reflecting Petra's commitment to corporate responsibility.Total shareholder return$ Share awards are linked to value created for shareholders by measuring both relative and absolute total shareholder return ("TSR").FOCUS ON SAFETY AND SUSTAINABILITYSITEPERSONNEL SENIOR MANAGEMENTEXECUTIVETEAMTHEBOARD