Lundin Mining Corporation

Corporate Governance


Lundin Mining's reputation as a good corporate citizen is important to our long-term success in creating shareholder value. We understand the priority our stakeholders place on sustainability issues and have developed corporate governance processes to underwrite our commitments in this area.

As a publicly listed company, Lundin Mining has adopted a Code of Conduct and an Ethical Values Policy. This Code is posted on our website (www.lundinmining.com) and makes reference to related guidelines of the Canadian Securities Administrators.

Board of Directors

The Board of Directors ("the Board") is primarily responsible for supervising the management of the Company's business and affairs. The Board's chairman, together with the lead director, are responsible for the management, development and effective performance of the Board, for monitoring the Company's development through regular contact with the President and CEO, and for ensuring that the Board regularly receives reports concerning the development of the Company's business and operations, including progress in respect of profits, liquidity and significant contractual matters. All business transactions with individuals, corporations or other entities that could potentially, directly or indirectly, be considered to be a related party, must be approved by the Board of Directors regardless of the amount involved. Furthermore, Lundin Mining maintains a whistleblower system to facilitate anonymous reporting of any potential improprieties to further ensure the Company is run properly.

Of the eight directors of the Company, six are independent according to the criteria set out in National Instrument 58-101 - Disclosure of Corporate Governance Practices, National Policy 58-201 - Corporate Governance Guidelines and National Instrument 52-110 - Audit Committees.

Audit Committee

The Audit Committee is comprised of three Board members, each of whom is independent of the Company. The Audit Committee oversees the accounting and financial reporting processes of the Corporation and its subsidiaries on behalf of the Board, and oversees all audits and external reviews of financial statements. The Audit Committee also has general oversight responsibility for the Company's internal controls and accounting and auditing activities. The Audit Committee meets a minimum of four times a year.

Human Resources/Compensation Committee

The Human Resources/Compensation Committee is comprised of three non-executive members of the Board. The Human Resources/Compensation Committee is responsible for administering the Company's executive compensation program and implements and oversees human resources and compensation policies approved by the Board. The Committee meets not less than annually.

Corporate Governance and Nominating CommitteeThe Corporate Governance and Nominating Committee is comprised of three non-executive Board members and assists the Board in identifying qualified individuals for Board membership. The Committee develops and implements corporate governance guidelines, and reports annually to the Company's shareholders on the Company's corporate governance.

Health, Safety, Environment and Community Committee

The Health, Safety, Environment and Community Committee is comprised of three Board members, a majority of whom are non-executive Board members. This Committee assists the Board in its oversight of health, safety, environment and community risks, the Company's performance in relation to health, safety, environmental and community matters, and compliance with applicable legal and regulatory requirements. The Committee meets four times a year and receives reports from the CEO and Vice President HSEC on the performance of the Company's operations.

Business Ethics


At Lundin Mining, there have been no reported incidents of corruption. In 2008, Lundin Mining underwent a full Sarbanes-Oxley audit through which all business units were analyzed for risks related to corruption. As a matter of company policy, Lundin Mining will make no illegal payments of any kind, directly or indirectly, from corporate funds or assets. Even the appearance of impropriety in dealing with public officials is unacceptable. Any participation, whether directly or indirectly, in any bribes, kickbacks, indirect contributions or similar payments is expressly forbidden, whether or not they might further the business interests of the Company. Employees are additionally required to avoid all situations in which their personal interests conflict or might conflict with their duties to the Company or with the economic interest of the Company. During 2010, Lundin Mining made no financial or in-kind contributions to political parties, politicians, or related institutions in any of the jurisdictions in which we operate.

We have not been subject to any legal actions or fines for anticompetitive behavior, anti-trust, or monopoly practices. We have also not been involved in any related international arbitration cases.

External Commitments


In keeping with the Government of Canada's Corporate Social Responsibility Strategy for the Canadian International Extractives Sector, Lundin Mining is supportive of global initiatives that address a wide range of corporate responsibility related issues. These include the OECD Guidelines on Multinational Enterprises, the Global Reporting Initiative; the Voluntary Principles on Security and Human Rights; and the IFC Performance Standards on Social and Environmental Sustainability.

Membership


The Company maintains membership in Euromines, the International Lead Association and, through Zinkgruvan Mine, membership in SveMin. These associations enable the Company to stay abreast of regulatory and other developments, and, where appropriate, to ensure the voice of the industry and Company is heard in the development of regulations and sharing of best practices.

Risk Assessment and Issues Management


Risk assessment is fundamentally important to our business and operations. Health, Safety, HSEC risk assessments are required throughout the life cycle of our operations, starting with environmental impact assessments for new projects and ending with assessment and management of potential risks associated with mine closure.

Sites conduct regular risk assessments of their activities and these are considered in implementing safe systems of work at our workplaces and in developing corporate HSEC procedures as part of our HSEC Management System.

The most significant potential environmental risks associated with our operations are tailings dam failure and groundwater contamination. These risks are managed to provide a high level of safety through the establishment and implementation of strictly followed site procedures. The risk of tailings dam failure is further reduced by ensuring dams are well designed and built. The performance of the dams and tailings areas is monitored through regular inspections, audits as part of a Tailings Management System and technical dam safety reviews conducted by outside specialist consultants.

In our mining operations, the principal safety concerns are related to stope failure, localized underground seismic events or falls of ground in our underground mines and high wall failure in the open pit. These risks are managed through rock mechanics assessments, which permit us to predict areas where problems might be encountered and the selection of mining methods
appropriate to the ground conditions encountered. Other potential safety risks that have been identified include incidents involving explosives and incidents involving heavy equipment. These risks are reduced through strict adherence to safety procedures and operator training.

The Company maintains an HSEC Issues Management Process to identify emerging concerns that could adversely affect the business, including changes in laws and regulations. One of the more important emerging issues is climate change, which has significantly impacted water management on site and may affect our ability to access the water required for our processes.

One of the more significant regulatory issues being followed is a proposed change in European legislation regarding the disposal of mercury, which is a contaminant in some concentrates. While the form EU rulemaking may take is still not clear, there will most likely be higher costs for the smelters to dispose of the mercury in secure facilities. The smelters will in turn pass on these costs to the mines through penalties or may reject some high mercury concentrates.

Health, Safety, Environment and Community Management System


Lundin Mining is committed to high standards of corporate responsibility and continues to develop company-wide operating policies, reporting systems and governance structures that enable us to maintain such standards. Our vision of corporate responsibility is premised on ten guiding principles which are incorporated into our Health, Safety, Environment and
Community Policy (see p. 12).

The HSEC Policy is put into effect through the implementation of a HSEC Management System across the Company. Lundin Mining Corporation's Health, Safety, Environment and Community (HSEC) Management System formalizes the Company's approach to HSEC management and is formulated to achieve consistently high standards across all sites owned or operated by the Company. It also clearly sets out expectations for HSEC management for joint ventures. The Management System describes how the Company's sites will comply with the Company's corporate values and commitments.



The Management System exists to:
  • Ensure that sound management practices and processes are in place in sites across the Company with the aim of achieving high standards of HSEC performance.
  • Describe and formalize the expectations of the Company with respect to HSEC management.
  • Provide a systematic approach to the identification of HSEC issues and ensure that a system of risk identification and risk management is in place.
  • Provide a framework for personal, site and corporate HSEC accountability and leadership and provide a systematic approach for the attainment of corporate HSEC objectives.
  • Establish processes to ensure conformity with the Company's HSEC Policies and Standards and review processes to confirm that these continue to be relevant and add value to the business.
  • Provide a structure to drive continuing improvement of HSEC programs and performance.


Lundin Mining's Health, Safety, Environment and Community Policy


Lundin Mining is committed to achieving a safe, productive and healthy work environment. We will uphold the values of human rights and seek to create sustainable value for employees, business partners and the communities in which we work. It is our fundamental policy to conduct our business responsibly and in a manner designed to protect our employees, adjacent communities and the natural environment.

Specific goals for Lundin Mining activities are:
  1. Comply with legal requirements as a minimum and go beyond those requirements where necessary to comply with our fundamental policy.
  2. Assess the potential safety, health and environmental effects of our activities and integrate these considerations into our planning, operational decisions and processes.
  3. Design, develop and operate our facilities with a view to minimizing any negative environmental impact of our operations; providing efficient use of energy, water and other resources; reducing or preventing pollution, limiting waste generation and disposal; and where waste must be disposed of, doing so responsibly.
  4. Progressively rehabilitate areas no longer required for efficient operation using sound practical methods, taking into account ecological values and land-use aspects.
  5. Strive for continuous improvement in our health, safety and environmental performance through the development of objectives and targets, and the monitoring and review of that performance.
  6. Engage with our employees, contractors, the community, regulators & other interested parties in relation to safety, health and environmental aspects of our business.
  7. Advise and train our employees and contractors as necessary to meet our safety, health and environmental undertakings.
  8. Establish accountability of employees, especially managers, for safety, health and environmental performance.
  9. Regularly review our performance and publically report our progress.