INDEPENDENCE GROUP NL ANNUAL REPORT 2017

Directors' report 30 June 2017 (continued) Operating and financial review (continued) Cash outflows from investing activities decreased to $273.3 million for the year, compared to $430.4 million in FY16. This primarily comprised of the continued funding of the development of the Nova Operation, with the net project capital expenditure amounting to $165.6 million for the year. However, cash outflows from investing activities were lower than the prior year due to the FY16 year containing a cash payment for the acquisition of Sirius ($202.1 million, net of cash acquired). On 5 October 2016, the Company announced a takeover bid for Windward Resources Ltd, which resulted in cash outflows, net of cash acquired, of $17.6 million. Other movements in cash outflows from investing activities include $14.6 million associated with acquisition of property, plant and equipment, $13.4 million cash outflow in relation to borrowing costs on the syndicated debt facility and $6.0 million paid for other investments. Cash flows from financing activities during the financial year included the successful completion of an equity placement to raise $281.4 million, with associated capital raising costs of $7.5 million. As a result, the Company repaid $71.0 million of debt, reducing the Company’s outstanding debt to $200.0 million, and cancelled a further $79.0 million of its Term Loan Facility. As at 30 June 2017, the Company's facilities comprise $200.0 million in drawn term debt and a $200.0 million revolving credit facility, which remains undrawn at the end of the financial year. The term debt is scheduled to be repayable bi-annually over seven equal instalments commencing in September 2017 and ending September 2020, though the Company retains flexibility to repay debt earlier. During discussions of the operating results of its business, the Group’s Board and management monitor a measure commonly understood as Underlying EBITDA. The Board considers this measure to be important to the Group and investors alike, as it represents a useful proxy to measuring an operation’s cash generating capabilities. Underlying EBITDA is calculated as profit before tax adjusted for finance costs, interest income, asset impairments, retention and redundancy costs, depreciation and amortisation. Underlying EBITDA increased relative to the previous financial year as can be seen in the following chart: Net profit after tax (NPAT) for the year was $17.0 million, compared to a loss of $58.8 million in the previous financial year. The current year gain includes an impairment of the Stockman Project of $17.1 million after tax, resulting from the previously announced sale which is expected to be completed in FY18. In addition, NPAT was also impacted by the recognition of $6.4 million of retention and redundancy costs associated with the less than one year anticipated remaining mine life of the Long Operation. Independence Group NL 5 36 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT 30 JUNE 2017 (continued)