IGO Interactive Annual Report 2018

Notes to the consolidated financial statements 30 June 2018 (continued) 21 Financial risk management (continued) (a) Risk exposures and responses (continued) (iv) Cash flow and fair value interest rate risk The Group’s exposure to interest rate risk is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates. At the reporting date, the Group had the following exposure to interest rate risk on financial instruments: 30 June 2018 30 June 2017 Weighted average interest rate % Balance $'000 Weighted average interest rate % Balance $'000 Financial assets Cash and cash equivalents 1.5% 138,688 2.1% 35,763 1.5% 138,688 2.1% 35,763 Financial liabilities Bank loans 3.8% 142,858 3.9% 200,000 3.8% 142,858 3.9% 200,000 The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. Impact on post-tax profit Sensitivity of interest revenue and expense to interest rate movements 2018 $'000 2017 $'000 Interest revenue Increase 1.0% (2017: 1.0%) 957 192 Decrease 1.0% (2017: 1.0%) (957) (192) Interest expense Increase 1.0% (2017: 1.0%) (1,000) (1,400) Decrease 1.0% (2017: 1.0%) 1,000 1,400 (b) Credit risk Gold bullion sales Credit risk arising from the sale of gold bullion to the Company's customer is low as the payment by the customer (being The Perth Mint Australia) is guaranteed under statute by the Western Australian State Government. In addition, sales are made to high credit quality financial institutions, hence credit risk arising from these transactions is considered to be low. Nickel, copper and zinc concentrate sales Credit risk arising from sales to customers is managed by contracts that stipulate a provisional payment of between 90% and 100% of the estimated value of each sale. Provisional payments are made via an unconditional and irrevocable letter of credit, governed by the laws of Western Australia, and are expected to be received within a few business days. Title to the concentrate does not pass to the buyer until this provisional payment is received by the Group. Final payment is dependent on the quotation period of the respective purchase contract, and is also made via an irrevocable letter of credit. Due to the large size of concentrate shipments, there are a relatively small number of transactions each month and therefore each transaction and receivable balance is actively managed on an ongoing basis, with attention to timing of customer payments and imposed credit limits. The resulting exposure to bad debts is not considered significant. Independence Group NL 42 106 — IGO ANNUAL REPORT 2018 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2018