IGO Interactive Annual Report 2018

Notes to the consolidated financial statements 30 June 2018 (continued) 21 Financial risk management (continued) • Risk management: The Group is exposed to commodity and foreign exchange risk which is overseen by management, under policies approved by the Board of Directors. Management identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. Financial instruments used by the Group to mitigate these risks include forward exchange contracts, commodity swaps and forward sales agreements. By holding these financial instruments, the Group exposes itself to risk. The Board reviews and agrees the Group's policies for managing each of these risks, which are summarised below: (a) Risk exposures and responses (i) Foreign currency risk As the Group’s sales revenues for base and precious metals are denominated in United States dollars (USD) and the majority of operating costs are denominated in Australian dollars (AUD), the Group’s cash flow is significantly exposed to movements in the AUD:USD exchange rate. The Group mitigates this risk through the use of derivative instruments, including, but not limited to, forward contracts denominated in AUD. Financial instruments, including derivative instruments, denominated in USD and then converted into the functional currency (i.e. AUD) were as follows: 2018 $'000 2017 $'000 Financial assets Cash and cash equivalents 11,578 8,162 Trade and other receivables 50,858 50,047 Derivative financial instruments - 657 62,436 58,866 Financial liabilities Derivative financial instruments - 910 - 910 Net financial assets 62,436 57,956 The cash balance above only represents the cash held in the USD bank accounts at the reporting date and converted into AUD at the 30 June 2018 AUD:USD exchange rate of 0.7391 (2017: 0.7692). The remainder of the cash balance of $127,110,000 (2017: $27,601,000) was held in AUD and therefore not exposed to foreign currency risk. The trade and other receivables amounts represent the USD denominated trade debtors. All other trade and other receivables were denominated in AUD at the reporting date. The following table summarises the Group’s sensitivity of financial instruments held at 30 June 2018 to movements in the AUD:USD exchange rate, with all other variables held constant. Impact on post-tax profit Impact on other components of equity Sensitivity of financial instruments to foreign currency movements 2018 $'000 2017 $'000 2018 $'000 2017 $'000 Increase/decrease in foreign exchange rate Increase 5.0% (2,605) (1,934) - 494 Decrease 5.0% 2,879 2,138 - (546) Independence Group NL 39 IGO ANNUAL REPORT 2018— 103 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2018