INDEPENDENCE GROUP NL ANNUAL REPORT 2017

Notes to the consolidated financial statements 30 June 2017 (continued) 21 Financial risk management (continued) (a) Risk exposures and responses (continued) (ii) Commodity price risk The Group’s sales revenues are generated from the sale of nickel, copper, zinc, gold, cobalt and silver. Accordingly, the Group’s revenues, derivatives and trade receivables are exposed to commodity price risk fluctuations, primarily nickel, copper, zinc, silver and gold. Nickel Nickel ore sales have an average price finalisation period of three months until the sale is finalised with the customer. It is the Board’s policy to hedge between 0% and 50% of total nickel production tonnes. Copper and zinc Copper and zinc concentrate sales have an average price finalisation period of up to three months from shipment date. It is the Board’s policy to hedge between 0% and 50% of total copper and zinc production tonnes. Gold It is the Board’s policy to hedge between 0% and 50% of forecast gold production from the Company’s 30% interest in the Tropicana Gold Mine. Diesel fuel It is the Board's policy to hedge up to 75% of forecast diesel fuel usage. Diesel fuel price comprises a number of components, including Singapore gasoil and various other costs such as shipping and insurance. The total of all costs represents the wholesale or Terminal Gate Price (TGP) of diesel. The Group only hedges the Singapore gasoil component of the diesel TGP, which represents approximately 40% of the total diesel price. The markets for base and precious metals are freely traded and can be volatile. As a relatively small producer, the Group has no ability to influence commodity prices. The Group mitigates this risk through derivative instruments, including, but not limited to, quotational period hedging, forward contracts and collar arrangements. At the reporting date, the carrying value of the financial instruments exposed to commodity price movements were as follows: Financial instruments exposed to commodity price movements 2017 $'000 2016 $'000 Financial assets Trade and other receivables 46,742 18,520 Derivative financial instruments - diesel hedging contracts - 1,583 46,742 20,103 Financial liabilities Derivative financial instruments - commodity hedging contracts 910 2,487 Derivative financial instruments - diesel hedging contracts 306 - 1,216 2,487 Net exposure 45,526 17,616 The following table summarises the sensitivity of financial instruments held at 30 June 2017 to movements in the nickel price, with all other variables held constant. Trade receivables valuation uses a sensitivity analysis of 1.5% (2016: 1.5%) and a 20.0% (2016: 20.0%) sensitivity rate is used to value derivative contracts. Impact on post-tax profit Sensitivity of financial instruments to nickel price movements 2017 $'000 2016 $'000 Increase/decrease in nickel prices Increase 465 177 Decrease (465) (177) Independence Group NL 70 100 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017