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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
116 Independence Group NL
Notes to the consolidated financial statements
30 June 2015
3 Voluntary change in accounting policy (continued)
(b) Impact on financial statements (continued)
Consolidated statement of cash flows
Exploration and evaluation expenditure that is expensed is included as part of cash flows from operating activities
whereas exploration and evaluation expenditure that is capitalised is included as part of cash flows from investing
activities. This has resulted in additional cash outflows from operating activities of $26,221,000 for the year ended 30
June 2014. This has also resulted in a corresponding reduction of $26,221,000 being reflected in the net cash outflows
from investing activities for the same reporting period.
4 Financial risk management
The Group’s activities expose it to a variety of financial risks; market risk (including currency risk, interest rate risk,
equity price risk and commodity price risk), credit risk and liquidity risk. The Group's overall risk management program
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts, forward
commodity contracts and collar arrangements to hedge certain risk exposures.
Risk management relating to commodity and foreign exchange risk is overseen by management, under policies
approved by the Board of Directors. The Board identifies, evaluates and hedges financial risks in close co-operation
with the Group’s operating units. The Board provides written principles for overall risk management, as well as written
policies covering specific areas, such as mitigating foreign exchange, commodity price, interest rate and credit risks,
use of derivative financial instruments and investing excess liquidity.
(a) Risk exposures and responses
(i)
Foreign currency risk
As the Group’s sales revenues for nickel, copper, zinc, gold and silver are denominated in US dollars ("USD") and the
majority of operating costs are denominated in Australian dollars ("AUD"), the Group’s cash flow is significantly exposed
to movements in the AUD:USD exchange rate. The Group mitigates this risk through the use of derivative instruments,
including, but not limited to, forward contracts and the purchase of AUD call options.
The financial instruments denominated in USD and then converted into the functional currency (i.e. AUD) were as
follows:
2015
$'000
2014
$'000
Financial assets
Cash and cash equivalents
16,971
17,923
Trade and other receivables
15,506
25,054
Derivative financial instruments
4,981
1,809
37,458
44,786
Financial liabilities
Derivative financial instruments
1,622
6,381
1,622
6,381
Net financial assets
35,836
38,405
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 2015 AUD:USD exchange rate of $0.7680 (2014: $0.9420). The remainder of the cash balance
of $104,325,000 (2014: $39,049,000) was held in AUD and therefore not exposed to foreign currency risk.
The trade and other receivables amounts represent the USD denominated trade debtors. All other trade and 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 2015 to movements in
the AUD:USD exchange rate, with all other variables held constant. Sensitivity analysis is calculated using a reasonable
possible change of 1.5% (2014: 1.5%) in the foreign rate in both directions based on the exposure period of the trade
receivables, a 5.0% (2014: 5.0%) variation for derivative contracts and an 18.0% (2014: 3.0%) variation for USD cash
balances in both directions.
Independence Group NL
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