Board of Directors

The Board of directors of Exco Resources Ltd. is committed to good corporate governance taking into account the Company's size and activities and has a range of policies and processes in place to ensure the rights of the Company and our Shareholders are protected.

In March 2003, the Australian Securities Exchange Corporate Governance Council published its Principles of Good Corporate Governance and Best Practice Recommendations ("Recommendations"). This document is for guidance purposes, however all listed companies are required to disclose the extent to which they have followed the recommendations, to identify any recommendations that have not been followed and reasons for not doing so. The Company's Board of directors has reviewed the recommendations. In a limited number of instances, the Company may determine not to meet the standard set out in the recommendations, largely due to the recommendation being considered by the Board to be unduly onerous for a company of this size.

This statement outlines the main corporate governance practices in place throughout the financial year, which comply with the Australian Securities Exchange ("ASX") Corporate Governance Council recommendations, unless otherwise stated.

The Company’s Corporate Governance Statement is now structured with reference to the Corporate Governance Council’s principles and recommendations, which are as follows:

• Lay solid foundations for management and oversight
• Structure the board to add value
• Promote ethical and responsible decision making
• Safeguard integrity in financial reporting
• Make timely and balanced disclosure
• Respect the rights of shareholders
• Recognise and manage risk
• Encourage enhanced performance
• Remunerate fairly and responsibly
• Recognise the legitimate interests of stakeholder

Role of the Board

The primary role of the Board of directors is the protection and enhancement of long-term shareholder value.

To fulfil this role, the Board is responsible for the overall corporate governance of the consolidated entity including formulating its strategic direction, approving and monitoring capital expenditure, setting remuneration, appointing, removing and creating succession policies for directors and senior executives, establishing and monitoring the achievement of management's goals and ensuring the integrity of internal control and management information systems. It is also responsible for monitoring financial and other reporting.

Board Processes

The Board has established a framework for the management of the consolidated entity including a system of internal control, a business risk management process and the establishment of appropriate ethical standards.

The Company is engaged in exploration and evaluation of mining interests. The Company is in transition from an explorer to a producer over the next year. The critical skills required by the Board in pursuing the Company's business plan at this relatively early stage of its development are expert geological and exploration and evaluation project management skills together with strong fiscal management skills. In addition, each director is charged with having a thorough understanding of and responsibility for the protection of the rights of the Company and its shareholders.

The Board has these skills (refer to the biographies in the Director's Report) and as the Company's business plan progresses will add new directors as and when complimentary skills are required.

The Board presently comprises three non-executive directors, an executive director and the Managing Director. The Chairman, Mr. Sullivan, is the only independent director at this time as Messrs Burton and Cooke are contracted to provide ongoing consulting work and Mr. Anderson is employed in a full time capacity. All the senior technical and financial personnel are highly qualified and have previously held roles of executive responsibility in much larger organisations.

The directors meet frequently, both formally and informally, to ensure a mutually thorough understanding of the Company's business and all the Company's policies of corporate governance are adhered to. The agenda for meetings is prepared in conjunction with the Chairman, Managing Director and Company Secretary and is circulated in advance.

The term in office held by each director in office at the date of this report is as follows:

Director Education

The consolidated entity has a formal process to educate new directors about the nature of the business, current issues, the corporate strategy and the expectations of the consolidated entity concerning the performance of directors. directors are given access to and encouraged to participate in continuing education opportunities to update and enhance their skills and knowledge.

Independent Professional Advice and Access to Company Information

Each director has the right of access to all relevant company information and to the Company's executives and, subject to prior consultation with the Chairman, may seek independent professional advice from a suitably qualified advisor at the consolidated entity's expense. The director must consult with an advisor suitably qualified in the relevant field and obtain the Chairman's approval of the fee payable for the advice before proceeding with the consultation. A copy of the advice received by the director is made available to all other board members.

Independence

Corporate Governance Council Recommendation 2.1 requires a majority of the Board to be independent directors. The Corporate Governance Council defines independence as being free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of unfettered and independent judgement. In accordance with this definition, the Chairman, Mr B Sullivan, is considered to be independent.

Therefore, as the Board currently consists of only five board members in total, the majority of the Board are not independent. Recommendation 9 states that non-executive directors should not receive options or bonus payments. The Company intends to continue its policy of awarding options or other securities to non-executive directors as it considers this to be a reasonable and appropriate method of assisting in attracting and retaining suitably skilled board members.

Nomination Committee

Recommendation 2.4 requires listed entities to establish a nomination committee. During the year ended 30 June 2008, the Company did not have a separate nomination committee. The duties and responsibilities typically delegated to such a committee are considered to be the responsibility of the full board, given the size and nature of the Company's activities. The Board does not believe that any marked efficiencies or enhancements would be achieved by the creation of a separate nomination committee. The Board has reviewed its policy on nominations and incorporates below its summarised policy.

Factors considered for a new candidate include:

• The skills required for appointment to the Board;
• How differing skills are represented on the Board;
• Processes for the identification of suitable candidates for the Board;
• The time commitment required by a director to effectively discharge duties;
• The number of existing directorships and other commitments that the candidate may have;
• Assessment of the ‘independence’ of the candidate; and
• The extent to which the appointee is likely to work constructively with the existing directors and contribute to the overall effectiveness of the Board.

The following procedure is followed in selecting and appointing a new director:

• Utilise personal networks or external consultants to identify potential candidates;
• Assess appropriateness of candidate with consideration to the above points;
• Determine the terms, conditions, responsibilities and expectations of the new position;
• Non-executive directors should be appointed for specific terms subject to re-election and to the ASX Listing Rules and Corporations Act provisions concerning removal of a director;
• Ultimate decisions about who is elected to the Board are to be made by the shareholders; and
• Ensuring that the new Board member is inducted and that they have every opportunity to increase their knowledge about the company to ensure that they can participate in an effective manner to the Board deliberations.