CORPORATE GOVERNANCE REPORT - 2011

Northland Resources S.A. is a public limited liability company (société anonyme), domiciled in the Grand Duchy of Luxembourg, and governed by the Luxembourg law of August 10, 1915 on commercial companies, as amended.  Northland Resources S.A. is the parent company, which in turn holds operating subsidiary companies in Sweden and Finland.  The common shares of the Company are listed on the Toronto Stock Exchange (“TSX”) and the Oslo Stock Exchange (“Oslo Børs”).

Northland’s corporate governance is based primarily on Luxembourg corporate law.  Northland’s Articles of Association, which were ratified by the shareholders of the Company at an EGM held January 15, 2010, have been drafted to comply with Luxembourg law.   The Articles determine, among other things, shareholder rights, how general meetings of the shareholders are convened, the role of the Board of Directors and how Board members are appointed.  Because the TSX is the primary listing for the Company’s common shares, the Company must comply with Canadian securities law, and in particular National Policy 101, “Disclosure of Corporate Governance Practices”, and National Policy 201, “Corporate Governance Guidelines”.  The Information Circular that is mailed by the Company to shareholders as part of the AGM materials includes disclosure concerning the Company’s corporate governance practices.  In addition, the Company must adhere to the disclosure provisions of the EU Transparency Directive, as the Company’s common shares trade on the Oslo Børs.  The Company is subject to other relevant laws and guidelines because of its operations in Sweden and Finland.

Organization 2011

Ownership structure

Northland had a total of 224,418,899 common shares issued and outstanding as of December 31, 2011, all of which were fully paid, for a total issued share capital of CAD 22,441,889.90.  The shares have no nominal value and an accounting par value of CAD .10 per share.  The Company has only one class of shares and each share gives the holder one vote and a proportional interest in the Company.  Shareholders must notify the Commission de Surveillance du Secteur Financier in Luxembourg if their shareholding exceeds 5% of the total issued and outstanding common shares of the Company.  As of December 31, 2011, Deans Knight Capital Management Limited and OMERS had each disclosed holdings above 5%. As of year-end, approximately 20% of the shares traded via the TSX and 80% of the shares traded via the Oslo Børs.

Annual General Meeting

The Annual General Meeting (“AGM”) is held at the registered office of the Company in Luxembourg, or at such other place in Luxembourg as may be specified on the meeting notice, on the third Wednesday of May of each year at 10:00 a.m.

Board of Directors

Composition

According to Northland’s Articles of Association, the Company is managed by the Board of Directors, composed of at least 3 members.  The Directors are appointed at the AGM, and their remuneration is determined at the same time.  Directors may be removed at any time by a resolution of an Extraordinary General Meeting (“EGM”).  If the office of a Director becomes vacant, his or her successor may be appointed by the Board, to hold office until the next AGM or EGM.  At the AGM held May 18, 2011, Anders Hvide (Executive Chairman), Tuomo Mäkelä, Stuart Pettifor and Birger Solberg were re-elected to the Board and Matti Kinnunen was elected to the Board.

Renumeration

At the AGM, the remuneration to the non-executive members of the Board was determined at CAD $40,000 per annum, with an additional CAD $10,000 per annum to those Directors serving as Committee Chairs.  The Board also participates in the Company’s incentive stock option program.  A more detailed description of the compensation to the Board of Directors, including stock-based compensation, is detailed in the Company’s Information Circular.

Independence

All the Directors are independent from the Company’s large shareholders (being any shareholder holding more than 5% of the total number of issued and outstanding shares), and all Directors are independent from the Company’s management, except Anders Hvide, who serves as Executive Chairman.  Only independent Directors serve as Committee members.

Board Duties

The Board typically sets four meeting dates to coincide with the review and approval of financial results plus one meeting to follow the AGM, to reinstate the Board and appoint Committee members.  Other meetings are scheduled when circumstances demand.  The meetings are held in person and via conference call.  During fiscal 2011, the Board held 19 meetings.  The Board in turn determines the internal regulations governing the work of the President & CEO, who is responsible for the overall management of the business and affairs of the Company.  The President & CEO maintains a close working relationship with the Executive Chairman.

Committee Memberships

The following Committees have been appointed by the Board.

Audit Committee

The Audit Committee is governed by the Audit Committee Charter , which is reproduced in full in the Company’s Annual Information Form.  The Charter states that the primary function of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing: the financial information to be provided to shareholders and others, the internal control systems and management information systems established by management, the Company’s external audit process and the Company’s compliance with the legal and regulatory requirements with respect to its financial statements.  The Audit Committee makes recommendations to the Board regarding the external auditor and their compensation.  The Audit Committee is responsible for overseeing the work of the external auditor and resolving any disputes between management and the external auditor regarding financial reporting.  The Audit Committee also monitors the Company’s Whistleblower line, which allows the anonymous submission of employee concerns about questionable accounting or auditing matters. The Audit Committee keeps minutes of its meetings, and the resolutions taken are communicated to the other members of the Board.  During 2011, the Audit Committee held 4 meetings.

The members of the Audit Committee are Matti Kinnunen (Chair), Tuomo Mäkelä and Stuart Pettifor.

Compensation Committee

The Compensation Committee assists the Board in discharging its oversight responsibilities relating to compensation, including the compensation of key members of senior management.  The Committee reviews the adequacy and form of compensation and benefits to all executive officers and directors.  The Committee also makes recommendations to the Board regarding the Company’s stock option plan and bonuses.   The Committee reviews management’s reporting on executive compensation as required in public disclosure documents.

The members of the Compensation Committee are Tuomo Mäkelä (Chair), Stuart Pettifor, and Birger Solberg. 

Nomination Committee

The main task of the Nomination Committee is to propose candidates for election to the Board of Directors, including the Chairman.  To date, the Committee has reviewed candidates for Board positions and made recommendations to the Board on these matters.

The members of the Nomination Committee are Birger Solberg (Chair), Tuomo Mäkelä and Stuart Pettifor

EHS Committe

Auditors

On behalf of shareholders and in accordance with current laws and regulations, the external auditors examine the financial statements, group accounts, annual report and administration and management of the Company by the Board of Directors and the President & CEO and CFO.  The auditors are elected at the AGM.  The Company’s auditors are Ernst & Young S.A.  A breakdown of the Auditors fees can be found in the Company’s Annual Information Form.

Corporate Governance Policies

The Board and Management of Northland have put in place a number of policies covering key areas of Corporate Governance and Ethics.  Links to the following policies can be found on our website:

Northland Whistleblower Policy

Northland Code of Business Ethics

Northland Sustainable Development Policy