INDEPENDENCE GROUP NL ANNUAL REPORT 2017

93 Carrying Value of Nova Mine Properties Key audit matter How the matter was addressed in our audit At 30 June 2017 the carrying value of Mine Properties was $1.61bn (2016: $1.47bn), as disclosed in Note 14. Included in the mine properties is the carrying value of the Nova mine asset of $1.36bn. During the year the Group identified indicators of possible impairment relating to the Nova mine asset due to volatility in the nickel price. As a result the Group undertook an impairment assessment on the Nova mine asset and the Group concluded that the mine asset was not impaired. When an impairment assessment is performed, there are significant judgements made in relation to assumptions, such as: · Long term nickel, copper and cobalt pricing; · Reserves estimates; · Production and processing volumes; · Operating costs: · Foreign exchange rates and inflation rates; and · Discount rate. The assessment of carrying value of Nova mine asset requires management to make significant accounting judgements and estimates in producing the impairment model used for determining whether the Nova mine asset requires impairment. We evaluated management’s impairment model for the Nova mine asset by critically challenging the key estimates and assumptions used by management in arriving at their assessment. Our work included but was not limited to the following procedures: · Benchmarking and analysing management’s commodity price assumptions against external market information and trends, to determine whether a significant change would impact the value of the asset; · Challenging the appropriateness of management’s ore reserves estimate by assessing the significant assumptions, methods and source data used by management in estimating ore reserves, in conjunction with our independent auditor’s experts; · Evaluating forecasted production and processing volumes against the Board approved mine plan and the forecast operating costs in conjunction with our independent auditor’s experts; · Challenging the appropriateness of management’s discount rate used in the impairment model in conjunction with our internal valuation experts; and · Challenging management’s sensitivity assessment by performing our own sensitivity analysis in respect of the key assumptions to indicate if there would be a significant change to the value of the asset. We assessed the adequacy of related disclosures in Note 14 to the financial statements. IGO ANNUAL REPORT 2017— 123