Harmanis hits out at insto's interference in Jubilee management

Jubilee Mines executive chairman Kerry Harmanis has told Australia's institutional investors to butt out of management issues, claiming that studies show entrepeneurial companies that fail some new corporate governance tests produce better results for investors.

In a version of his chairman's AGM address today released to the market, Mr Harmanis said interference in everything from the role of the chairman to rosters on mines was bogging down management of the successful nickel miner.

"In my view, and in the Jubilee experience, corporate governance models and other forms of interference have become too onerous, bog down management, restrict entrepreneurial spirit and ultimately create inefficiencies," he said.

"This team here is running the show and running it well.

"I stand by our own record and challenge the idea that so called poor Corporate Governance leads to poor performance and increased business risk.

"This team strongly supports a focussed approach leading to high margins, and generous shareholder returns. If you don't like it, it's a free world - please feel free to invest in another company and accept the returns and growth they have.

"Meanwhile, please don't tell us how to run our business. We don't tell you how to run yours."

Below is a full version on Mr Harmanis' address:

JUBILEE MINES NL, ANNUAL GENERAL MEETING, CHAIRMAN'S ADDRESS:

- Welcome to Jubilee's 18th Annual General Meeting.

- Jubilee's 18th year as a listed company continued and built upon previous years' operational, exploration and financial successes.

- The year also saw another strong share market performance and our continued focus on returns to shareholders. In this regard we can be truly proud that Jubilee has achieved an average annualised Total Shareholder Return (TSR) over the past 5 years of 55%. In 2005, we achieved a TSR of 89%. This placed us as the top company by way of shareholder return in the BRW survey of September 2005.

- Jubilee continued its strong financial performance with an after tax profit of $75.5 million, after taking into account a 'paper' provision of $14.7 million against the carrying values of our listed investments (predominantly Falcon Minerals Ltd).

- We also continued fully franked full year dividend payments totalling 45 cents.

- Between mid-2000 when operations at Cosmos commenced and June 30 this year, Jubilee has generated gross sales revenue of over $869 million and net profits after tax of $266 million, representing total earnings per share of $2.15 per share.

- From these substantial earnings, $1.33 per share has been returned to shareholders by way of dividends representing a dividend payout ratio of around 62% of profits.

- Our share price has continued its strong performance throughout the past year enabling us to grow our market capitalisation, at one stage, to in excess of $1 billion which places us as one of the largest listed companies in Western Australia.

- Also during the year we won recognition in a number of areas - Digger of the Year at the Diggers & Dealers Conference (for the 2nd year), and Discovery of the Year by the NSW Conference for Excellence in Exploration and Mining. We were also rated by Forbes Asia Magazine in October 2005 as one of the top 200 companies in Asia/Australia under $1 billion US.

- This market confidence and recognition reflects the continuing strong nickel market, the quality of our key asset, the Cosmos Nickel belt, and our operational and financial performance.

- Our continued belief in exploration as our primary means of growth has been very successful and was rewarded with the discovery of the two new high grade massive sulphide nickel deposits, Prospero and Tapinos, earlier this year. Our resource inventory base now totals 85,000 high grade nickel tonnes and 270,000 low grade nickel tonnes and is growing. These secure Jubilee's long term future as a profitable nickel producer.

- Being fast on our feet, within twelve months of discovery of Prospero and Tapinos we have already commenced their development with a box-cut now complete and the underground decline access to the deposits well underway. We should be able to commence mining at Tapinos in late 2006/early 2007 and Prospero in late 2007. We have named the decline at Prospero-Tapinos as the "Helene" decline after my late mother, who despite her best efforts to make a gentleman out of me, finally supported my departure from Law into exploration and mining.

- Also during the year, assessment of the substantial Anomaly 1 deposit continued with various studies being undertaken. This work is continuing and provides Jubilee with an exciting large scale development opportunity into the future.

- Jubilee remains well placed to continue to benefit from the strong market conditions, focused on continued growth and shareholder value and returns. As part of this there will be more high quality discoveries by this time next year as well as substantial movement forward in our developments.

- More recently the nickel price forecasts for the next few quarters have been downgraded due to weakness in stainless steel production and other factors - this has had an effect on our share price. Nonetheless, we will always be one of the most profitable nickel producers and believe that over the medium to longer term, nickel will be relatively strong compared to historical price levels.

- I would now like to turn to the topical matter of corporate governance.

- Jubilee has provided some of the best returns to shareholders in Australia over the past few years (achieving a five year annualised TSR of 55%), yet is sometimes criticised as a company with poor corporate governance processes, mainly due to the fact that some of our directors are deemed non independent in that they consulted to the Company within the last three years and that I am Executive Chairman.

- I acknowledge there is a need to protect all interested parties from unnecessary risk and that, particularly in large and complex companies, an argument can be made for a healthy tension to exist between management and non-executive directors. However, in an entrepreneurial and quick footed company like Jubilee, or other small to medium sized companies, the strict corporate governance models do not often fit and can be unrealistic, overbearing and counter-productive to maximising shareholder returns.

- A recent independent study by the Sydney Business School at the University of Wollongong found that firms regarded as having poor corporate governance standards had delivered investors 5 to 13% higher returns each year than the benchmark stock index.

- Also, a survey that I read in the London Financial Times whilst on a plane in Europe recently demonstrated that companies lead by Executive Chairpersons as against non-executives, were between 4 to 5% more profitable overall.

- In parallel with this, the current level of interference by investors, small and large, who without responsibility, attempt to manage and pressure companies rather than just leaving them (who hold 'hands on' knowledge of the particular Company's history, assets and business) to simply 'get on and do it' will damage shareholder returns in due course. Management of public companies is not in any way the role of shareholders, however large or small. This interference is against the corporate stewardship principle, and is not conducive to good business practices and ultimately maximising shareholder returns.

- We seem to have arrived at a point where investors and other interested bystanders (including institutions, particularly Australian Institutions and lobby groups) are pressuring management by providing numerous suggestions for us on management of the Company, including

1) benefits to employees;

2) environmental management;

3) advice as to (Kerry Harmanis') shareholding in Jubilee Mines NL;

4) recommendations on Board composition and remuneration;

5) executive packages;

6) work rosters;

7) hedging and other treasury aspects;

8) rewriting of ASX and other public announcements; and

9) operational matters and the like.

- If we were to analyse and adopt all or most of the myriad of recommendation, we would be unable to actually manage the Company properly.

- In my view, and in the Jubilee experience, corporate governance models and other forms of interference have become too onerous, bog down management, restrict entrepreneurial spirit and ultimately create inefficiencies. As the Forbes Asia Magazine of October 31 2005 stated in referring to the best companies under $1 billion US "Their heady growth and profitability figures validate the managerial and entrepreneurial savvy of their top executives." Do we really want to stop or impede this, because no amount of rules will catch any more of life's crooks, nor create perfect business decisions nor remove all business risk?

- In summary, I would say this: This team here is running the show and running it well. I stand by our own record and challenge the idea that so called poor Corporate Governance leads to poor performance and increased business risk. This team strongly supports a focussed approach leading to high margins, and generous shareholder returns. If you don't like it, it's a free world - please feel free to invest in another company and accept the returns and growth they have. Meanwhile, please don't tell us how to run our business. We don't tell you how to run yours.

- Turning to the more specific matters, today's business includes resolutions on the Directors' and Executives Remuneration Report, the renewal of the long standing employee option scheme (as required by the ASX Listing Rules) and the proposed issue of an option package to a non-executive director, Gary Pearce.

- Most people will know that the retention of human capital is a significant challenge for all companies involved in the mining industry at present. With this in mind and after three months of hard work by Board and management we designed an employee benefit package that would modestly reward our staff and give them some token ownership in the Company, whilst building in incentives for the future - all to retain our good people and a lot of intellectual knowledge.

- The employee option scheme forms part of our general workforce's remuneration package and has assisted us in keeping staff turnover at some of the lowest levels in the mining industry. Directors and senior executives are not part of this package. This is for our workers.

- Remember that shareholders have had, and will continue to have, a wonderful feed from the table with Jubilee and this is in part largely due to our workers. Employee share ownership is designed to ensure maximum shareholder benefits are continued.

- Finally, consistent with our practice of the past two years, it is proposed to issue an option package to a non-executive director. This time Gary Pearce. If approved, this will complete the process of providing all of our non-executive directors with options and an incentive to work hard for and remain with the Company.

- Such options packages are designed to enable companies such as Jubilee, which place much higher demands on their non-executive directors in terms of input and advice on day-to-day basis (as compared with large companies), to attract and retain suitably qualified independent directors.

- Gary has been a valuable contributor to the Jubilee team over the past year, and has been a key part of the Company's growth and success. His options are staggered and well out of the money. I am a total believer in modest option packages for non-executives and again challenge the corporate governance models in this regard. Just remember these Directors, all of them, have strongly endorsed and supported generous returns to shareholders. Do we want to change this?

- To show you how silly the system is - some people including Australian Institutions, have opposed Phil Lockyer's reappointment on the basis that he is not technically independent because he dared to work as a consultant to JBM some two years ago, and before he was a Director. This man is a gem of a find for all shareholders. His qualifications and experience in the mining industry are second to none, and he has added tremendous value for all of us. Again I challenge the corporate governance model in this regard.

- An opportunity will be provided for discussion on all these issues during the formal business of the meeting.

- Having said this, let's not forget during the meeting how far Jubilee has come, what a great year we have just had and what an exciting year and overall future we can look forward to.

At the conclusion of the formal part of today's meeting I will briefly talk about our excellent financial and operating performance, our plans for the sustainability of this performance well into the future. Peter Langworthy, our General Manager Exploration, will talk to you about the exciting and in particular exploration programs for new nickel deposits in our highly prospective tenement packagesareas.