IGO Annual Report 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2015

Annual Report 2015 125

Notes to the consolidated financial statements

30 June 2015

5 Critical accounting estimates and judgements (continued)

Critical accounting estimates and assumptions (continued)

(ii)

Reserve estimates

Estimates of recoverable quantities of proven and probable reserves include assumptions regarding commodity prices,

exchange rates, discount rates, production and transportation costs for future cash flows. It also requires interpretation

of complex and difficult geological and geophysical models in order to make an assessment of the size, shape, depth

and quality of reserves and their anticipated recoveries. The economic, geological and technical factors used to

estimate reserves may change from period to period. Changes in reported reserves can impact asset carrying values,

the provision for restoration and the recognition of deferred tax assets, due to changes in expected future cash flows.

Reserves are integral to the amount of depreciation, depletion and amortisation charged to the profit or loss and the

calculation of inventory. The Group prepares reserve estimates in accordance with the JORC Code 2012, guidelines

prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian

Institute of Geoscientists and Minerals Council of Australia.

(iii)

Rehabilitation and restoration provisions

The provision for rehabilitation and restoration costs is based on the net present value of the estimated cost of restoring

the environmental disturbance that has occurred up to the reporting date. Significant estimates and assumptions are

made in determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate

liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological

changes, regulatory changes, cost increases as compared to the inflation rates and changes in discount rates. These

uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at

reporting date represents management’s best estimate of the present value of the future rehabilitation costs required.

(iv)

Share-based payments

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity

instruments at the date at which they are granted. The fair value is determined with the assistance of a valuation

software using a trinomial tree method. The related assumptions are detailed in note 31. The accounting estimates and

assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets

and liabilities within the next annual reporting period but may impact expenses and equity.

6 Segment information

(a) Identification of reportable segments

Management has determined the operating segments based on the reports reviewed by the Board that are used to

make strategic decisions. The Group operates in predominantly only one geographic segment (ie. Australia) and has

identified four operating segments, being the Tropicana Gold Project, the Long Nickel Operation which is disclosed

under the nickel mining segment, the Jaguar Operation which is disclosed under the copper and zinc mining segment,

and other regional exploration, scoping studies and feasibility which are disclosed under feasibility and regional

exploration activities.

The Tropicana Gold Project represents the Group’s 30% joint venture interest in the Tropicana Gold Mine. AngloGold

Ashanti Australia Limited is the manager of the project and holds the remaining 70% interest. Programs and budgets

are provided by AngloGold Ashanti Australia Limited and are considered for approval by the Independence Group NL

Board.

The Long Nickel Operation produces primarily nickel, together with copper, from which its revenue is derived. Revenue

derived by the Long Nickel Operation is received from one customer, being BHP Billiton Nickel West Pty Ltd. The

Registered Manager of the Long Nickel Operation is responsible for the budgets and expenditure of the operation,

which includes exploration activities on the mine’s tenure. The Long Nickel Operation and exploration properties are

owned by the Group’s wholly owned subsidiary Independence Long Pty Ltd.

The Jaguar Operation primarily produces copper and zinc concentrate. Revenue is derived from a number of different

customers. The Registered Manager of the Jaguar Operation is responsible for the budgets and expenditure of the

operation, responsibility for ore concentrate sales rests with the General Manager, Operations. The Jaguar Operation

and exploration properties are owned by the Group’s wholly owned subsidiary Independence Jaguar Limited.

The Group’s General Manager, New Business is responsible for budgets and expenditure relating to the Group’s

regional exploration, scoping studies, feasibility studies and new business development. The feasibility and regional

exploration division does not normally derive any income. Should a project generated by the feasibility and regional

exploration division commence generating income or lead to the construction or acquisition of a mining operation, that

operation would then be disaggregated from feasibility and regional exploration and become reportable as a separate

segment.

Independence Group NL