IGO Interactive Annual Report 2019

DIRECTORS’ REPORT 30 JUNE 2019 TROPICANA OPERATION During the year, total material mined during was 35.3M bank cubic metres, which comprised of 14.7 million tonnes of ore (>0.6 grams per tonne Au) and 75.9 million tonnes of waste material. The average grade mined for full grade ore (>0.6 grams per tonne Au) was 1.65 grams per tonne Au for the year. Ore milled was 8.2 million tonnes, which was up 5% on the prior year primarily as a result of the introduction of a second ball mill in December 2018. Mill feed grade and recovery were 2.20 grams per tonne and 89.4% for the year respectively. During the year, the Boston Shaker Underground feasibility study was completed, and approval was given to proceed in March 2019. The development of the underground mine commenced in May 2019, with first gold production expected by September 2020. Revenue from the Tropicana Operation for the period was $278.5 million, up 16% on the previous year as a result of higher production due to higher throughput and milled grade and a higher realised gold price. The Company’s share of gold refined and sold was 154,402 ounces, up 11% on the prior year. Cash costs per ounce produced, which comprises the costs of producing gold at the mine site and includes credit adjustments for waste stripping costs and inventory build and draw costs, were $680 per ounce, while All-in Sustaining Costs (AISC) per ounce sold were $951 per ounce. AISC comprises cash costs and capitalised sustaining deferred waste stripping costs, sustaining exploration costs, sustaining capital and non-cash rehabilitation accretion costs. AISC excludes improvement capital expenditure and greenfields exploration expenditure. The table below outlines the key results and operational statistics during the current and prior year. TROPICANA OPERATION 2019 2018 Total revenue $'000 278,480 240,377 Segment operating profit before tax $'000 97,627 86,292 Total segment assets $'000 314,990 304,341 Total segment liabilities $'000 41,491 36,486 Gold ore mined (>0.6g/t Au) '000 tonnes 14,747 9,568 Gold ore mined (>0.4 and 0.6g/t Au) '000 tonnes 2,464 884 Waste mined '000 tonnes 73,406 76,544 Gold grade mined (>0.6g/t) g/t 1.65 1.88 Ore milled '000 tonnes 8,177 7,781 Gold grade milled g/t 2.2 2.11 Metallurgical recovery % 89.4 88.9 Gold recovered ounces 518,011 469,071 Gold produced ounces 518,172 467,139 Gold refined and sold (IGO share) ounces 154,402 138,748 Cash Costs $ per ounce produced 680 713 All-in Sustaining Costs (AISC)* $ per ounce sold 951 1,061 * All-in Sustaining Costs is a measure derived by the World Gold Council. On 27 June 2013, the Council released a publication outlining definitions of both Cash Costs and All-in Sustaining Costs. EXTERNAL FACTORS AFFECTING THE GROUP’S RESULTS The Group operates in an uncertain economic environment and its performance is dependent upon the result of inexact and incomplete information. As a consequence, the Group’s Board and management monitor these uncertainties and, where possible, mitigate the associated risk of adverse outcomes. The following external factors are all capable of having a material adverse effect on the business and will affect the prospects of the Group for future financial years. COMMODITY PRICES The Group’s operating revenues are sourced from the sale of base metals and precious metals that are priced by external markets and, as the Group is not a price maker with respect to the metals it sells, it is, and will remain, susceptible to adverse price movements. The Group mitigates its exposure to commodity prices through a financial risk management policy in which a percentage of anticipated usage can be hedged. To this end, gold hedging in FY20 represents approximately 53% of the Group’s share of forecast annual gold production. The Company has also initiated diesel hedging in order to protect against increases in oil prices, and as at year end, the Company had hedged approximately 36% of anticipated usage for FY20. IGO ANNUAL REPORT 2019 — 41