IGO Interactive Annual Report 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2019 Notes to the consolidated financial statements 30 June 2019 (continued) 21 Financial risk management (continued) • Risk management: The Group is exposed to commodity and foreign exchange risk which is overseen by management, under policies approved by the Board. Management identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. Financial instruments used by the Group to mitigate these risks include forward exchange contracts, commodity swaps and forward sales agreements. By holding these financial instruments, the Group exposes itself to risk. The Board reviews and agrees the Group's policies for managing each of these risks, which are summarised below: (a) Market risk (i) Foreign currency risk As the Group’s sales revenues for base and precious metals are denominated in United States dollars (USD) and the majority of operating costs are denominated in Australian dollars (AUD), the Group’s cash flow is exposed to movements in the AUD:USD exchange rate. The Group may mitigate this risk through the use of derivative instruments, including, but not limited to, forward contracts denominated in AUD. Financial instruments, including derivative instruments, denominated in USD and then converted into the functional currency (i.e. AUD) were as follows: 2019 $'000 2018 $'000 Financial assets Cash and cash equivalents 1,891 11,578 Trade receivables 24,568 50,858 Net financial assets 26,459 62,436 The cash balance above only represents the cash held in the USD bank accounts at the reporting date and converted into AUD at the 30 June 2019 AUD:USD exchange rate of 0.7013 (2018: 0.7391). The remainder of the cash balance of $346,317,000 (2018: $127,110,000) was held in AUD and therefore not exposed to foreign currency risk. The trade receivables amounts represent the USD denominated trade debtors. All other receivables were denominated in AUD at the reporting date. The following table summarises the Group’s sensitivity of financial instruments held at 30 June 2019 to movements in the AUD:USD exchange rate, with all other variables held constant. Impact on post-tax profit Sensitivity of financial instruments to foreign currency movements 2019 $'000 2018 $'000 Increase/decrease in foreign exchange rate Increase 5.0% (702) (2,605) Decrease 5.0% 961 2,879 (ii) Commodity price risk The Group’s sales revenues are generated from the sale of nickel, copper, cobalt, gold and silver. Accordingly, the Group’s revenues, derivatives and trade receivables are exposed to commodity price risk fluctuations, primarily nickel, copper, cobalt, gold and silver. The markets for base and precious metals are freely traded and can be volatile. As a relatively small producer, the Group has no ability to influence commodity prices. The Group mitigates this risk through derivative instruments, including, but not limited to, quotational period hedging, forward contracts and collar arrangements. Independence Group NL 40 102 — IGO ANNUAL REPORT 2019