120 / 164
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
120 Independence Group NL
Notes to the consolidated financial statements
30 June 2015
4 Financial risk management (continued)
(a) Risk exposures and responses (continued)
(iv)
Cash flow and fair value interest rate risk
The Group’s exposure to interest rate risk is the risk that a financial instrument’s value will fluctuate as a result of
changes in market interest rates. At the reporting date, the Group had the following exposure to interest rate risk on
financial instruments:
30 June 2015
30 June 2014
Weighted
average
interest rate
%
Balance
$'000
Weighted
average
interest rate
%
Balance
$'000
Financial assets
Cash and cash equivalents
1.6% 121,296
1.3% 56,972
1.6% 121,296
1.3% 56,972
Financial liabilities
Bank loans
-
-
4.9% 25,000
-
-
4.9% 25,000
Net exposure
1.6%
121,296
(3.6)%
31,972
The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and
the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting
period. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management
personnel and represents management’s assessment of the possible change in interest rates.
Impact on post-tax profit
Sensitivity of interest revenue and expense to interest rate movements
2015
$'000
2014
$'000
Revenue
Interest revenue
Increase 1.0% (2014: 1.0%)
293
243
Decrease 1.0% (2014: 1.0%)
(293)
(243)
-
-
Expense
Interest expense
Increase 0% (2014: 1.0%)
-
(175)
Decrease 0% (2014: 1.0%)
-
175
-
-
The interest rate on the outstanding lease liabilities is fixed for the term of the lease, therefore there is no exposure to
movements in interest rates.
(b) Credit risk
Nickel ore sales
The Group has a concentration of credit risk in that it depends on BHP Billiton Nickel West Pty Ltd for a significant
volume of revenue. During the year ended 30 June 2015 all nickel sales revenue was sourced from this company. The
risk is mitigated in that the agreement relating to sales revenue contains provision for the Group to seek alternative
revenue providers in the event that BHP Billiton Nickel West Pty Ltd is unable to accept supply of the Group’s product
due to a force majeure event. The risk is further mitigated by the receipt of 70% of the value of any months’ sale within a
month of that sale occurring.
Independence Group NL
56