IGO Interactive Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2020 Total facilities Corporate debt facility 57,145 85,716 Contingent instrument facility 1 1,211 1,131 58,356 86,847 Facilities used as at reporting date Corporate debt facility 57,145 85,716 Contingent instrument facility 1,211 1,131 58,356 86,847 1. This facility provides financial backing in relation to non-performance of third party guarantee requirements. (d) Recognition and measurement (i) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs and amortised over the period of the remaining facility. (ii) Borrowing costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed in the period in which they are incurred. 18 Contributed equity (a) Share capital 2020 $'000 2019 $'000 Fully paid issued capital 1,897,126 1,895,855 IGO Limited 34 Notes to the consolidated financial statements 30 June 20 (continued) 18 Contributed equity (continued) (b) Movements in ordinary share capital Details 2020 Number of shares 2020 $'000 2019 Number of shares 2019 $'000 Balance at beginning of financial year 590,477,819 1,895,855 586,923,035 1,879,094 Issue of shares under the Employee Incentive Plan 319,215 1,271 459,376 1,036 Issue of shares on acquisition of Southern Hills Tenements - - 3,095,408 15,725 Balance at end of financial year 590,797,034 1,897,126 590,477,819 1,895,855 (c) Capital management The Board’s policy is to preserve a strong balance sheet so as to maintain investor, creditor and market confidence, and to sustain ongoing and future development of the business. Demonstrating the Company's balance sheet strength are various financing and liquidity ratios, supported by strong EBITDA margins: 2020 2019 Current ratio (times) 6.1 4.4 Debt to equity 3% 5% Underlying EBITDA margin 51% 43% The Group's capital comprises equity, including reserves, and net debt/(cash). As at 30 June 2020 this totalled $1,472,643,000 (2019: $1,586,568,000), a decrease of 7% over 2019. Contributing to this decrease was an ongoing reduction of debt as a result of debt repayments of $28,571,000 during the year and the strong continued cash flow generation during the year from deploying our existing capital. The Company's capital management framework aims to respond to a dynamic commodity and investment cycle. To this end, the goals of the framework are to: • Ensure that the Company's operations are able to generate cash flows safely, at appropriate margins, and according to plan; • Provide a buffer from future potential adverse price movements as a result of the Company operating in a cyclical commodity price environment; • Raise and repay debt and invest in growth and replenish and acquire new assets; and • Raise capital and to repay capital to shareholders by way of dividends or capital returns in accordance with the Company's capital allocation policy. This policy targets the return of between 15 and 25 percent of free cash flow to shareholders with the policy to be reviewed every two years based on financial results, outlook for commodity prices, long-term growth capital requirements for the business and balance sheet strength. None of the Group’s entities are currently subject to externally imposed capital requirements. Notes to the consolidated financial statements 30 June 2020 (continued) 7 Borrowings (co tinued) c Financing arra gements The Group had access to the following financing arrangements at the reporting date: 2020 $'000 2019 $'000 Total facilities Corporate debt facility 57,145 85,716 Contingent instrument facility 1 1,211 1,131 58,356 86,847 Facilities used as at reporting date Corporate debt facility 57,145 85,716 Contingent instrument facility 1,211 1,131 58,356 86,847 1. This facility provides financial backing in relation to non-performance of third party guarantee requirements. (d) Recognition and measurement (i) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognis d in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of lo n f cilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs and amortised over the period of the remaining facility. (ii) Borrowing costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed in the period in which they are incurred. 18 ontributed equity (a) Sh e capital 2020 $'000 2019 $'000 Fully paid issued capital 1,897,126 1,895,855 IGO Limited 34 Notes to the consolidated financial statements 30 June 2020 (continued) 18 Contributed equity (continued) (c) Capital management The Board’s policy is to preserve a strong balance sheet so as to maintain investor, creditor and market confidence, and to sustain ongoing and future development of the business. Demonstrating the Company's balance sheet strength are various financing and liquidity ratios, supported by strong EBITDA margins: 2020 2019 Current ratio (times) 6.2 4.4 Debt to equity 3% 5% Underlying EBITDA margin 52% 43% The Group's capital comprises equity, including reserves, and net debt/(cash). As at 30 June 2020 this totalled $1,472,643,000 (2019: $1,586,568,000), a decrease of 7% over 2019. Contributing to this decrease was an ongoing reduction of debt as a result of debt repayments of $28,571,000 during the year and the strong continued cash flow generation during the year from deploying our existing capital. The Company's capital management framework aims to respond to a dynamic commodity and investment cycle. To this end, the goals of the framework are to: • Ensure that the Company's operations are able to generate cash flows safely, at appropriate margins, and according to plan; • Provide a buffer from future potential adverse price movements as a result of the Company operating in a cyclical commodity price environment; • Raise and repay debt and invest in growth and replenish and acquire new assets; and • Raise capital and to repay capital to shareholders by way of dividends or capital returns in accordance with the Company's capital allocation policy. This policy targets the return of between 15 and 25 percent of free cash flow to shareholders with the policy to be reviewed every two years based on financial results, outlook for commodity prices, long-term growth capital requirements for the business and balance sheet strength. None of the Group’s entities are currently subject to externally imposed capital requirements. There were no changes in the Group’s approach to capital management during the year. (d) Recognition and measurement Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. Every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. 102 — IGO ANNUAL REPORT 2020 IGO ANNUAL REPORT 2020— 103