Although Bougainville Copper Limited (BCL) is registered in PNG and is subject to PNG company law it is listed on the Australian Stock Exchange (ASX) and is subject to ASX listing rules. The ASX recently issued new corporate governance guidelines. These are not mandatory rules in the sense that each recommendation must be followed but listed companies must report against them and explain why any recommendation is not followed. The Annual Report (2003) has a statement in compliance with those guidelines. It needs to be borne in mind that BCL does not have any employees of its own, but is managed under an agreement with a Rio Tinto service company.

The guidelines, in part, assume the listed entity has employees and a management structure different to that of BCL. In many instances BCL adopts the standards and policies of its parent company, Rio Tinto Limited.

Detail of the Rio Tinto policies can be obtained from its website, www.riotinto.com .

Principles

The corporate governance framework of Bougainville Copper Limited

Lay Solid Foundations for Management and Oversight

•  Recognise and publish the respective roles and responsibilities of board and management

The Board is responsible to ensure that Bougainville Copper Limited (BCL) is managed in a way that meets the objectives of all its shareholders , while paying proper regard to he interests of external stakeholders. The Directors are committed to high standards of corporate governance.

The Directors are aware of the valuable contribution made to the company by its major shareholder Rio Tinto Limited (RTL) in terms of policies and practices. Notwithstanding this, the Directors acknowledge that they must, and do act in the best interests of all shareholders.

Structure the Board to Add Value

•  Have a board of an effective composition and size to adequately discharge its responsibilities and duties.

The BCL Board currently consists of five directors. The Board has instituted a Charter and will review its suitability on an annual basis.

Promote Ethical and Responsible Decision Making

•  Actively promote ethical and responsible decision-making.

In carrying out its responsibilities and powers, the BCL Board at all times recognises its over-riding responsibility to act honestly, fairly, diligently and in accordance with the law in serving the interests of the Company's shareholders and employees and the community. The BCL adopt RTL Code of Practice – The Way We Work .

The Directors approve strategy and business plans and monitor the performance of the Company against these plans. The Directors also monitor compliance with policies prescribed by the Board in areas such as health and safety, environment, business ethics, internal control and risk management. These policies are designed to ensure that BCL meets or exceeds the regulatory requirements governing its operations.

Safeguard Integrity in Financial Reporting

•  Have a structure to independently verify and safeguard the integrity of Bougainville Copper Limited financial reporting.

The BCL Board is aware that related party transactions must be considered carefully, and these are vetted by the independent Directors on the Audit Committee . The Committee provides a formal structure for reviewing BCL's financial statements, accounting policies, control systems, risk management practices and liaising with the external and internal auditors. Directors associated with the relevant related party do not vote on transactions involving the related party.

Make Timely and Balanced Disclosure

•  Promote timely and balanced disclosure of all material matters regarding Bougainville Copper Limited.

BCL will make full and timely disclosure to its shareholders and the market in accordance with its legal and regulatory obligations. The Chief Executive and Company Secretary will be responsible for such disclosures and will immediately advise the Board of any such disclosures.

A summary of the policies and procedures designed to guide compliance with this rule will be made publicly available on the BCL website in a clearly marked corporate governance section. This information will be mailed out to shareholders who do not have access to the internet.

Respect the Rights of Shareholders

•  Respect the rights of shareholders and facilitate the effective exercise of those rights.

An explanation of the communication methods and a list of documents that are publicly available on request are included on this web site and in the Annual Report . The auditor currently attends the Annual General Meeting (AGM), where shareholders are invited to question him on audit matters.

Important issues will be mailed out to shareholders, who do not have access to the internet.

Recognise and Manage Risk

•  Establish a sound system of internal control and risk oversight and management.

BCL has in place a range of policies and procedures to manage the risks associated with its operating activities. The Directors are responsible for the Group's system of internal control and for reviewing its effectiveness in providing shareholders with a return on their investments that is consistent with a responsible assessment and mitigation of risks. This includes reviewing financial, operational and compliance controls, and risk management procedures. These policies have been adopted by the Board to ensure that potential business risks are identified and appropriate action taken.

The management of risk is an integral part of the responsibility of both the Board and Management and is carried out through an integrated risk management assurance process. BCL benefits from the knowledge, policies and practices adopted by RTL to manage its diverse business activities covering a variety of commodities and operation locations. The Board, having reviewed and adopted them as appropriate for the Company, acknowledges that BCL has agreed to comply with all relevant RTL health, safety and environment policies and believes there are considerable advantages.

Encourage Enhanced Performance

•  Include a structure to review and encourage enhanced board and management effectiveness.

Qualification for Board membership is related to the mix of skills and knowledge that the Board considers will best serve the interests of BCL and all of its shareholders. Decisions relating to appointment of Directors are made by the full Board. Directors appointed by the Board are required by BCL's Constitution to submit themselves for election by shareholders at the Annual General Meeting following their appointment. There is no share ownership qualification for appointment as a Director. As yet the Board has not established a nomination committee.

Directors are subject to retirement by rotation in accordance with BCL's Constitution, but may offer themselves for re-election. The person holding the position of Managing Director is not subject to retirement by rotation while holding that position.

The Board does not currently have a formal process for Board performance evaluation. This matter is currently under review by the Board.

Remunerate Fairly and Responsibly

•  Include a mechanism designed to ensure that the level and composition of remuneration is sufficient and reasonable and its relationship to corporate and individual performance is defined.

BCL has no employees of its own. The Company's day-to-day management is conducted pursuant to the Service Agreement with Rio Tinto Services Limited. Remuneration of senior executives providing management services to BCL under the Agreement is administered by Rio Tinto in conformance with Rio Tinto Limited senior management remuneration systems. The Board considers that application of Rio Tinto's Remuneration Policy complies with these recommendations. Any remuneration matters are dealt with at Board level.

Shareholders in a General Meeting determine the maximum limit for Directors' remuneration. Within that allowance the remuneration of Directors is generally determined by the full Board after taking into account data on market remuneration levels. During 2003 there was no increase in Directors remuneration. Neither the

Managing Director nor the PNG Government nominated director receives directors' fees. Details of Directors' remuneration and superannuation are set out in the financial statements of the Annual Report. There are no executive based share schemes provided by BCL.

Recognise the Legal Rights of Stakeholders

•  Recognise obligations to stakeholders as established by law.

BCL has adopted RTL's Code of Conduct and statement of business practice, The Way We Work . All employees of RTL providing services to BCL are required to maintain high standards of ethical behaviour in the execution of their duties and comply with all applicable laws and regulations applicable to the Company. RTL has a confidential whistleblower program known as ‘Speak-Out'. Employees of RTL engaged in BCL business are encouraged to report any unethical or illegal practices through this process.

BCL makes full and timely disclosures to its shareholders and the market in accordance with its legal and regulatory obligations. Established systems are in place to ensure compliance. The Managing Director and Company Secretary are responsible for such disclosures.

The Board informs shareholders and others of all major developments and complies with its continuous disclosure requirements. Any material information is announced to the Stock Exchange in accordance with the Listing Rules.

The Company has under development a more comprehensive communication strategy to achieve more effective communications with its stakeholders. The external auditor attends the annual general meeting to answer shareholder questions.

Information on Corporate Governance can be found in the Annual Report.

AUDIT

Bougainville Copper Limited (BCL) being a Papua New Guinea registered company, the Audit Committee reviews compliance with PNG law, and the requirements of the Australian Stock Exchange (ASX) and other regulatory requirements.

CHARTER

Scope and Authority

The primary function of the Audit Committee is to assist the Boards of Directors in fulfilling their responsibilities by reviewing:

• The financial information that will be provided to shareholders and the public.
• The systems of internal financial controls that the Boards and management have established.
• The Company's auditing, accounting and financial reporting processes.

In carrying out its responsibilities the Committee has full authority to investigate all matters that fall within the terms of reference of this Charter. Accordingly, the Committee may:

• Obtain independent professional advice in the satisfaction of its duties at the cost of the Company.
• Have such direct access to the resources of the Company or the Rio Tinto Group as it may reasonably require including the external and internal auditors.

Composition

The Audit Committee shall comprise three or more non-executive directors, at least two of whom shall be independent. The Board will determine each director's independence having regard to any past and present relationships with the Company or the Rio Tinto Group, which, in the opinion of the Board, could influence the director's judgment.

All members of the Committee shall have a working knowledge of basic finance and accounting practices. At least one member of the Committee will have accounting or related financial management expertise, as determined by the Board.

A quorum will comprise any two independent directors.

The Committee may invite members of the management team to attend the meetings and to provide information as necessary.

Meetings

The Committee shall meet not less than four times a year or more frequently as circumstances require. Audit Committee minutes will be confirmed at the following meeting of the Committee and tabled as soon as practicable at a meeting of the Board.

The Company's senior financial management, and external auditors shall be available on request to attend all meetings.

As part of its responsibility to foster open communication, the Committee should meet with management and the external auditors, at least annually, to discuss any matters that are best dealt with privately.

Responsibilities

The Board and the external auditors are accountable to shareholders. The Audit Committee is accountable to the Board. The Internal Auditor is accountable to the Audit Committee and to senior financial management.

To fulfill its responsibilities the Committee shall:

Charter

• Review and, if appropriate, update this Charter at least annually.  

Financial Reporting and Internal Financial Controls

• Review with management and the external auditors the Company's financial statements, stock exchange and media releases in respect of each half year and full year.
• Review with management and the external auditors the accounting policies and practices adopted by the company and their compliance with accounting standards, stock exchange listing rules and relevant legislation.
• Discuss with management and the external auditors management's choice of accounting principles and material judgments, including whether they are aggressive or conservative and whether they are common or minority practices.
• Recommend to the Board that the annual financial statements reviewed by the Committee (or the Chairman representing the Committee for this purpose) be included in the Company's Annual Report.
• Review the regular reports prepared on the effectiveness of the Rio Tinto Group's internal financial controls as the relate to BCL.

External Auditors

• Recommend to the Board the external auditors to be proposed to shareholders.
• Review with the external auditors the planned scope of their audit and subsequently their audit findings including any internal control recommendations.
• Periodically consult with the external auditors out of the presence of management about the quality of the Group's accounting principles, material judgments and any other matters that the Committee deems appropriate.
• Review the performance of the external auditors.
• Review and approve the fees and other compensation to be paid to the external auditors.
• Ensure that the external auditors submit a written statement outlining all of its professional relationships with the Group including the provision of services that may affect their objectivity or independence.
• Review and discuss with the external auditors all significant relationships they have with the company to determine their independence.

Other Matters

The Committee shall also perform any other activities consistent with this

Charter that the Committee or Boards deem appropriate. This will include but not be limited to:

• Review of the Group's insurance cover.

MEMBERS

The Audit Committee is appointed by the Board and comprises three non-executive Directors of whom two are independent. The Committee provides a formal structure for reviewing Bougainville Copper Limited's (BCL) financial statements, accounting policies, control systems, risk management practices and liaising with the external and internal auditors. The Committee advises the Board of any matters that might have a significant impact on the financial condition of Bougainville Copper Limited and has the authority to investigate any matters within the terms of reference, having full access to the information and resources of BCL to fulfil its function.

B R Alexander

Age 61 FAIB FAICD

Forty years with Westpac Banking Corporation including five years as Chief Executive, Pacific Regional Banking and Chairman, Westpac Bank (PNG) Limited

(1994-1999)

Former President, Australia PNG Business Council

Former Chairman, AESOP Business Volunteers

Chairman Hunter Olive Co-operative Limited

Appointed director of Bougainville Copper Limited May, 1999

John Leahy

University Qualifications in law and has been admitted to practice in Australia (NSW) and Papua New Guinea.

More than 18 Years senior tax experience in Papua New Guinea holding such positions as:

• AusAID Expert advisor to the Department of Finance (PNG)
• Assistant Collector of Taxes, Internal Revenue Commission (PNG)
• Managing Partner of PriceWaterhouseCoopers (PNG)

Previous appointments have included:

• Chairman, Bougainville Economic Development Task Force
• President, Australia Papua New Guinea Business Council (PNG)
• Member, National Working Group on Removing Impediments to Business and Investment in PNG
• Secretary, PNG Chamber of Commerce and Industry

Appointed director of Bougainville Copper Limited February, 2007