INDEPENDENCE GROUP NL ANNUAL REPORT 2017

Directors' report 30 June 2017 (continued) Operating and financial review (continued) Operations (continued) Nova Operation (continued) Based on current Ore Reserves, the Nova mine is currently anticipated to have an initial life of approximately 10 years. External factors affecting the Group's results The Group operates in an uncertain economic environment and its performance is dependent upon the result of inexact and incomplete information. As a consequence, the Group’s Board and management monitor these uncertainties and mitigate the associated risk of adverse outcomes where possible. The following external factors are all capable of having a material adverse effect on the business and will affect the prospects of the Group for future financial years. Commodity prices The Group’s operating revenues are sourced from the sale of base metals and precious metals that are priced by the London Metals Exchange and, as the Group is not a price maker with respect to the metals it sells, it is, and will remain, susceptible to adverse price movements. The Group mitigates its exposure to commodity prices through a financial risk management policy in which a percentage of anticipated usage can be hedged. To this end, gold hedging in FY18 and FY19 represents approximately 42% and 30% respectively of the Group's share of forecast annual gold production. The Company has also initiated diesel hedging in order to protect against increases in oil prices. As at year end, the Company had hedged approximately 75% and 19% of anticipated usage for FY18 and FY19 respectively. Exchange rates The Group is exposed to exchange rate risk on sales denominated in United States dollars (USD) whilst its Australian dollar (AUD) functional currency is the currency of payment to the majority of its suppliers and employees. The monthly average AUD/USD currency pair strengthened from 0.7272 for the 2016 financial year to 0.7544 for the year ended 30 June 2017. A weaker AUD implies a higher AUD receipt of sales denominated in USD. The Group’s policy is to mitigate adverse foreign exchange risk by transacting commodity hedges in AUD equivalent terms where possible. Downstream processing markets The price of sea freight, smelting and refining charges are market driven and vary throughout the year. These also impact on the Group’s overall profitability. Interest rates Interest rate movements affect both returns on funds on deposit as well as the cost of borrowings. Furthermore, AUD and USD interest rate differentials are intimately related to movements in the AUD/USD exchange rate. Native Title With regard to tenements in which the Group has an existing interest in, or will acquire an interest in the future, it is the case that there are areas over which Native Title rights exist, or may be found to exist, which may preclude or delay exploration, development or production activities. The Company engages suitably qualified personnel to assist with the management of its exposure to native title risks, including appropriate legal and community relations experts. These risks are discussed in more detail in the Company's Sustainability Report which can be found on the Company's website. Exposure to economic, environmental and social sustainability risks The Group has material exposure to economic, environmental and social sustainability risks, including changes in environmental regulatory legislation. The Group employs suitably qualified personnel to assist with the management of its exposure to environmental and social sustainability risks, including appropriate health and safety personnel, as well as heritage and environmental experts. These risks are discussed in more detail in the Company's Sustainability Report which can be found on the Company's website. Other external factors and risks • Operational performance including uncertain mine grades, seismicity ground support conditions, grade control, in fill resource drilling, mill performance and experience of the workforce; Independence Group NL 10 IGO ANNUAL REPORT 2017— 41 DIRECTORS’ REPORT 30 JUNE 2017 (continued)