Mineral Resources : MRL Remuneration Policy and Corporate Governance

ASX ANNOUNCEMENT

1 November 2017

Remuneration Policy and Corporate Governance

Dear Shareholder,

As we approach the 2017 Annual General Meeting (AGM), we have elected to clearly set out the Board's approach to remuneration policy as well as our commitment to ensuring shareholder interests are protected and served at all times.

The Board takes its custodial role of shareholder interests seriously. We consider the governances practices we have employed to protect these interests are both first class and effective as evidenced by historical returns delivered to the Company's shareholders.

Over the last 11 years of MRL being a listed company, the key management personnel of the Company, which includes founding shareholder and managing director, Chris Ellison, have successfully managed the business through challenging commodity cycles and a volatile global economic environment.

Since listing in 2006, the skills, experience and dedication of the Company's key management personnel have been directly responsible for:

1. the Company's market capitalisation increasing from approximately A$100 million to almost A$3.5 billion today;

2. the Company's share price increasing from $0.90 to $18.44 per share at market close on 26 October 2017;

3. in addition to the $17.54 increase in share price, delivering $3.72 in dividends per share; and

4. delivering total shareholder returns of $21.26 per share and a compound annual growth rate of 31%.

Notwithstanding this creation of exceptional shareholder value, the shareholders voted overwhelmingly against the Company's 2016 remuneration report. This was particularly disappointing given it was a vote against the remuneration structure of the same key management who had delivered exemplary business performance and shareholder value creation over the past decade.

It was not lost on the Board that this "first strike" was received at a time when the prevalence of proxy advisors had reached historical highs.

In response to the "first strike", the Board engaged in considerable stakeholder consultation. This process established that many proxy advisors adopt a scoring system that compares a company's remuneration structure against a pre-determined matrix of benchmarks and measures. These systems then produce a score which in turn determines whether the proxy advisor recommends a vote in support of or against a company's remuneration report. Such a rigid system assumes that a "one size fits all" method of assessment is an acceptable and

1 Sleat Road, Applecross, Western Australia 6153. Locked Bag 3, Canning Bridge, Applecross, Western Australia 6153

P [phone] F [phone] W www.mineralresources.com.au

Mineral Resources Limited | ABN 33 118 549 910 | ACN 118 549 910

valid way of evaluating the effectiveness of a remuneration structure to protect shareholder interests. Such systems completely disregard previous company performance as well as the uniqueness of the subject company. They are also unable to accommodate a remuneration structure that fails to "tick the boxes" of the proxy advisor system notwithstanding it has also unequivocally established its effectiveness in aligning the interests of key management personnel interests with those of shareholders by motivating year on year delivery of exceptional returns on capital and shareholder value creation.

A decision to invest in Mineral Resources must be made on the clear premise that the business operates a unique model that has successfully generated significant shareholder wealth over the long term and through the full range of business cycles. The Board has established and implemented a set of structured principles for remuneration oversight that recognises this uniqueness.

We unashamedly accept that our remuneration structure will not tick all the boxes the inflexible systems used by proxy advisors require be ticked in order to recommend a supporting vote. We say unashamedly because we are supremely confident this same remuneration structure sets the foundation for the ongoing generation of considerable shareholder wealth over the long term.

We have attached to this letter a further expanded explanation of our Board selection, structure and operating philosophy for your consideration and we seek your support for the proposed resolutions set out in the notice of meeting mailed to you recently.

We look forward to the Annual General Meeting on 22 November 2017 in Perth that will provide us with the opportunity to discuss with you the future direction of the Company and our plans for further developing the business over the long term.

Should you have any questions or comments in relation to these issues or the Company in general, please do not hesitate to contact the Company Secretary, Bruce Goulds or me.

Yours Sincerely,

James McClements

Lead Independent Director

Board and Committee Structure

The MRL Board is an independent board. Four of our six directors are classified as independent using the standard corporate criteria. To illustrate this, we have set out below the key tests commonly used to decide whether a director is independent and whether each of our non-executive directors comply with this criterion.

From the analysis, Mr Kelvin Flynn, Mr James McClements, Mr Tim Roberts and Ms Xi Xi are all confirmed to be independent directors.

Name	Peter Wade	Chris Ellison	Kelvin Flynn	James McClement s	Tim Roberts	Xi Xi
Position	Non- executive Chairman	Managing Director	Independent NED	Lead Independent NED	Independent NED	Independent NED
Classification	Non- Independent	Non- Independent	Independent	Independent	Independent	Independent
The director has not within the last three years been employed by the Company in an executive capacity, or been a director after ceasing to hold any such employment.
The director has not within the last three years been a principal or employee of a material professional adviser or material consultant to the corporate group.
The director is not a material supplier/customer of the corporate group (or an executive or associate of a material supplier/customer).
The director does not have a material contractual relationship with the corporate group.
The director is free from any other interest and any business or other relationship with the corporate group.

On this basis, the Board recommends shareholders vote in favour of the re-election / election of Mr Kelvin Flynn, Mr Tim Roberts and Ms Xi Xi as listed in the Notice of Meeting.

Lead Independent Non-Executive Director

We have a situation where the Chairman (Peter Wade) is classified as a non-independent director. Peter, who was the previous Managing Director of the Company for six (6) years, and was the logical and unanimous choice to chair the Board on his retirement from executive duty. He is accordingly seen as an Associated Director although for all intents and purposes he is a fully independent member of the Board.

The Board, several years ago, determined that, to comply with corporate and legislative governance practices, it needed to nominate and introduce James McClements as a Lead Independent non-executive director. This engagement had the effect of strengthening Board performance and oversight of the Company and facilitates significant support to the board Chairman.

Committee Structure

The Board operates a conventional committee system to manage its various governance and compliance obligations on behalf of shareholders. Structurally, membership of committees consists of only independent non- executive directors, chaired by an independent director. We believe this is the most appropriate method of fulfilling this oversight role

On 11 September 2017 the Board appointed Ms Xi Xi to improve our understanding of Asian commodity markets and culture, with an emphasis on China. Details of Xi Xi's skills and experience are included in the 2017 Annual Report.

The board of MRL endorses the broadening of skills and diversity within the board structure and the appointment of Ms Xi Xi, we believe, meets the dual focus of expanding board diversity while enhancing the knowledge of the board around its key market. We will continue to review the board composition and structure to satisfy the ongoing growth of the company

The appointment of Ms Xi Xi followed an extensive search which is in line with our overriding principle that all MRL appointees, Board and executive, should be the best person for the job and provide a range of skills that will support our value add for our investors.

Following the appointment of our newest Director, the following committees are in place:

Director	Classification of the Director	Audit Committee (Including Risk Management)	Nomination Committee	Remuneration Committee
K. Flynn	Independent	Chair	Chair	Member
J. McClements	Independent	Member	Chair
T. Roberts	Independent	Member	Member
Xi Xi	independent		Member	Member

Managin g Director's re munera tion package re view

The remuneration package of MRL's managing director (MD) has historically lagged the packages of managing directors of the Company's peer companies. As such, he has essentially been underpaid which is not an outcome that has been aligned with the Company's strong long term growth performance.

The managing director has previously declined to accept parts of his STI and LTI entitlements which has perpetuated the discrepancy in his remuneration in comparison with his peers. Notwithstanding the large increase in Fixed Annual Remuneration (FAR) for the 2017 year, the actual 5 year compound annual growth rate for the period 2012-2017 has been 8%. Over this same period MRL had a 30% CAGR in EBITDA and 43% CAGR in TSR. Appropriately, the Board engaged the services of an independent remuneration consultant to undertake an extensive review of executive pay from an independently selected peer grouping for comparative purposes with the intention of "right sizing" the Managing Director's remuneration in order to reflect the considerable value that Chris Ellison brings to the company through the combination of his unique skillset, experience and his entrepreneurial focus on managing this unique company through the various business cycles.

Using the results of this analysis, the Board concluded that the managing director's remuneration package for 2017 should be structured to provide a total remuneration (including the face value of the 2017 LTI award) equivalent to the to the top decile of the