2021 Annual Report

Notes to the consolidated financial statements 30 June 2021 (continued) 22 Financial risk management (continued) (b) Credit risk (continued) The maximum exposure to credit risk at the reporting date was as follows: 2021 $'000 2020 $'000 Financial assets Cash and cash equivalents 528,514 510,312 Trade receivables 78,513 46,595 Other receivables 859 19,315 Financial assets at fair value through profit or loss 110,944 107,759 Derivative financial instruments 2,751 348 721,581 684,329 (i) Impairment of financial assets The Group has two types of financial assets that are subject to the expected credit loss model: • trade receivables, and • other receivables and financial assets. While cash and cash equivalents are also subject to the impairment requirements of AASB 9, no impairment loss has been identified. Trade receivables The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the Group based on recent sales experience, historical collection rates, the impact of the COVID-19 pandemic and forward-looking information that is available. The allowance for expected credit losses is calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower. The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit history. Nickel, copper and cobalt concentrate sales Credit risk arising from sales to customers is managed by contracts that stipulate a provisional payment of between 90% and 100% of the estimated value of each sale. Provisional payments are predominantly made via an unconditional and irrevocable letter of credit, governed by the laws of Western Australia, or alternatively via direct payment from the customer, and are expected to be received within a few business days of the sale. Final payment is dependent on the quotation period of the respective purchase contract, and is also made via an irrevocable letter of credit or direct payment from the customer. Due to the large size of concentrate shipments, there are a relatively small number of transactions each month and therefore each transaction and receivable balance is actively managed on an ongoing basis, with attention to timing of customer payments and imposed credit limits. The resulting exposure to impairment losses is not considered significant, despite the impact of the COVID-19 pandemic. Other receivables and financial assets The Group recognises a loss allowance for expected credit losses on other financial assets which are either measured at amortised cost, fair value through profit or loss or fair value through other comprehensive income. The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. IGO Limited 46 Notes to The Consolidated Financial Statements 30 June 2021 IGO ANNUAL REPORT 2021 — 115