INDEPENDENCE GROUP NL ANNUAL REPORT 2017

Directors' report 30 June 2017 (continued) Operating and financial review (continued) External factors affecting the Group's results (continued) Other external factors and risks (continued) - Contained metal (tonnes and grades) are estimated annually and published in resource and reserve statements, however actual production in terms of tonnes and grade often vary as the orebody can be complex and inconsistent. - Active underground mining operations can be subjected to varying degrees of seismicity. This natural occurrence can represent significant safety, operational and financial risk. To mitigate this risk substantial amounts of resources and technology are used in an attempt to predict and control seismicity. • Exploration success or otherwise; - Due to the nature of an ever depleting reserve/resource base, the ability to find or replace reserves/resources presents a significant operational risk. • Operating costs including labour markets and productivity; - Labour is one of the main cost drivers in the business and as such can materially impact the profitability of an operation. • Changes in market supply and demand of products; - Any change in supply or demand impacts on the ability to generate revenues and hence the profitability of an operation. • Changes in government taxation legislation; • Changes in health and safety regulations; • Environmental issues and social expectations; and • Assumption of estimates that impact on reported asset and liability values. Significant changes in the state of affairs Significant changes in the state of affairs of the Group during the financial year were as follows: During the current year, the Company conducted a fully underwritten institutional placement (Placement) and raised $250.0 million. The Placement comprised an issue of 66,666,667 new shares in the Company at a price of $3.75 per share (Placement Price). The Company also conducted a non-underwritten Share Purchase Plan (SPP) to facilitate retail shareholder participation of up to $15,000 per eligible shareholder at the Placement Price, subject to an overall cap of $30.0 million (the Placement and SPP together being the Equity Raising). The SPP was oversubscribed, however in recognition of the strong interest in the SPP by eligible retail shareholders, the Company's Board resolved to accept all valid applications without any scale back. The SPP resulted in the issue of an additional 8,388,689 ordinary shares and raised $31.5 million. The Company undertook the Equity Raising to strengthen its balance sheet and to provide greater financial flexibility to fund growth initiatives. Specifically, the Equity Raising provided funding for the remaining development capital expenditure for the Nova Project, reducing the requirement for further drawdown under the Company's existing debt facilities. The Equity Raising also provided additional funds for the payment of residual acquisition costs (stamp duty), funding for debt repayment and general corporate purposes, including working capital. The Company also restructured its existing banking facilities during the period. In July 2015, the Company entered into a syndicated facility agreement (Facility Agreement) with National Australia Bank Limited, Australia and New Zealand Banking Group and Commonwealth Bank of Australia Limited for a $550.0 million unsecured committed term facility. The Facility Agreement comprises: • A $350.0 million amortising term loan facility expiring in September 2020; and • A $200.0 million revolving loan facility expiring in September 2020. Following the Equity Raising discussed above, the Company repaid $71.0 million of the amortising term loan facility and also cancelled a further $79.0 million of the same facility. Following this restructure, the Company has available facilities of: amortising loan facility of $200.0 million, which is fully drawn at balance date; and revolving loan facility of $200.0 million, which is currently undrawn. During the period the Company also completed an off-market takeover of Windward Resources Ltd (Windward). Windward was a listed public company holding a number of tenements within the Fraser Range region. Independence Group NL 11 42 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT 30 JUNE 2017 (continued)