IGO Interactive Annual Report 2018

DIRECTORS’ REPORT 30 JUNE 2018 The table below outlines the key results and operational statistics during the current year (11 months only) and prior year. JAGUAR OPERATION 2018 2017 Total revenue $'000 112,136 137,470 Segment operating profit before tax $'000 12,893 33,534 Total segment assets* $'000 - 175,917 Total segment liabilities* $'000 - 25,665 Ore mined tonnes 414,582 444,700 Copper grade % 0.6 1.3 Zinc grade % 7.1 8.3 Silver grade g/t 125 134 Gold grade g/t 0.47 0.52 Ore milled tonnes 411,219 443,485 Metal in concentrate - Copper tonnes 1,695 4,565 - Zinc tonnes 26,159 32,638 - Silver ounces 1,067,400 1,376,521 - Gold ounces 1,226 2,532 Metal payable - Copper tonnes 1,625 4,377 - Zinc tonnes 21,747 27,067 - Silver ounces 736,249 951,182 - Gold ounces 1,136 2,328 Zinc cash costs and royalties** A$/lb total Zn metal payable 1.25 0.76 * Nil at end of FY18 due to divestment. ** Cash costs include credits for copper, silver and gold. 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, where possible, mitigate the associated risk of adverse outcomes. 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 FY19 represents approximately 30% 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, and as at year end, the Company had hedged approximately 16% of anticipated usage for FY19. 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 daily average AUD/USD currency pairs’ strengthened over the FY18 year. A stronger AUD implies a lower 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. IGO ANNUAL REPORT 2018— 41