102 / 128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
100 Independence Group NL
Notes to the consolidated financial statements
30 June 2016
(continued)
21 Financial risk management (continued)
(a) Risk exposures and responses (continued)
(iv)
Cash flow and fair value interest rate risk (continued)
Impact on post-tax profit
Sensitivity of interest revenue and expense to interest rate movements
2016
$'000
2015
$'000
Interest revenue
Increase 1.0% (2015: 1.0%)
276
804
Decrease 1.0% (2015: 1.0%)
(276)
(804)
Interest expense
Increase 1.0% (2015: 1.0%)
(1,897)
-
Decrease 1.0% (2015: 1.0%)
1,897
-
(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 (BHPB Nickel West)
for a significant volume of revenue. During the year ended 30 June 2016 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 BHPB Nickel West 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.
Copper and zinc concentrate sales
Credit risk arising from sales to customers is managed by contracts that stipulate a provisional payment of at least 90%
of the estimated value of each sale. This is generally paid promptly after vessel loading. Title to the concentrate does
not pass to the buyer until this provisional payment is received by the Group.
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 bad debts is not considered significant.
Gold bullion sales
Credit risk arising from the sale of gold bullion to the Company's customer is low as the payment by the customer (being
The Perth Mint Australia) is guaranteed under statute by the Western Australian State Government. In addition, sales
are made to high credit quality financial institutions, hence credit risk arising from these transactions is considered to be
low.
The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit
history.
Other
In respect of financial assets and derivative financial instruments, the Group's exposure to credit risk arises from
potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
Exposure at the reporting date is addressed below. The Group does not hold any credit derivatives to offset its credit
exposure.
Derivative counterparties and cash transactions are restricted to high credit quality financial institutions.
The maximum exposure to credit risk at the reporting date was as follows:
Independence Group NL
72