2021 Annual Report

Notes to the consolidated financial statements 30 June 2021 (continued) Risk This section of the notes includes information on the Group's exposure to various risks and shows how these could affect the Group's financial position and performance. 21 Derivatives The Group has the following derivative financial instruments in the following line items in the consolidated balance sheet: 2021 $'000 2020 $'000 Current assets Diesel hedging contracts - cash flow hedges 2,751 64 2,751 64 Non-current assets Diesel hedging contracts - cash flow hedges - 284 - 284 (a) Instruments used by the Group Derivative financial instruments may be used by the Group in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates, commodity prices and diesel prices. The derivative financial instruments are classified as held for trading and accounted for at fair value through profit or loss unless they are designated as cash flow hedges. The Group's accounting policy for its cash flow hedges is set out below. The fair value of the derivative instruments at the reporting date is reflected in current and non-current assets and liabilities in the balance sheet and is calculated by comparing the contracted rate to the market rates for derivatives with the same length of maturity. Refer to note 22 and below for details of the diesel fuel risk being mitigated by the Group’s derivative instruments as at 30 June 2021 and 30 June 2020. Diesel Hedges The Group held various commodity forward hedging contracts at 30 June 2021 and 30 June 2020 to reduce the exposure to future increases in the price of the Singapore gasoil component of landed diesel fuel cost. The following table details the Singapore gasoil 10ppm hedging contracts outstanding at the reporting date: Litres of oil ('000) Weighted average price (AUD/litre) Fair value 2021 2020 2021 2020 2021 $'000 2020 $'000 0 - 6 months 6,299 11,514 0.42 0.44 1,528 (11) 6 -12 months 6,068 15,954 0.45 0.45 1,223 75 1 - 2 years - 7,144 - - - 284 Total 12,367 34,612 0.43 0.45 2,751 348 (b) Recognition and measurement Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: • hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or IGO Limited 41 Notes to The Consolidated Financial Statements 30 June 2021 110 — IGO ANNUAL REPORT 2021