80 2022 ANNUAL REPORT Notes to the CONSOLIDATED FINANCIAL STATEMENTS for the year ended 30 June 2022 (cont.) 32 FINANCIAL RISK MANAGEMENT (cont.) MARKET RISK Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and commodity prices will affect the consolidated entity income or the value of its holdings of financial instruments. Changes in the market gold price will affect the derivative valuation at each reporting date. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Hedge accounting The Group’s risk management policy is to hedge gold sales in local currency as and when appropriate, subject to the terms of the Syndicated Facility Agreement. At 30 June 2022 there were commitments over future sales of gold from the King of the Hills operation (refer to note 26). These are accounted for using the “own use” exemption and are not regarded as financial instruments. Gold price sensitivity Derivative financial instruments valued using valuations models with inputs such as forward gold prices, are sensitive to gold price fluctuations. Currently there are no derivative financial instruments because the Group accounts for gold hedges using the “own use” exemption (2021: nil). An increase of 10% or decrease of 10% in the average gold price for the year would have increased/(decreased) equity and profit or loss by the amounts shown below: Profit or loss Equity CONSOLIDATED 10% increase $’000 10% decrease $’000 10% increase $’000 10% decrease $’000 30 June 2022 Gold sales revenue 16,246 (16,246) 16,246 (16,246) 30 June 2021 Gold sales revenue 17,094 (17,094) 17,094 (17,094) CURRENCY RISK The consolidated entity is exposed to currency risk on investments and purchases that are denominated in a currency other than the respective functional currencies of the subsidiaries within the consolidated entity being Australian Dollar (A$) and Philippine Pesos. The currencies in which these transactions primarily are denominated are United States dollars (US$). The consolidated entity has not entered into any derivative financial instruments to hedge such transactions. The Company’s investments in its subsidiaries are not hedged as those currency positions are considered to be long term in nature. INTEREST RATE RISK The consolidated entity is exposed to interest rate risk, primarily on its borrowings and on its cash and cash equivalents. This is the risk that a financial instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments. The consolidated entity does not currently use derivatives to mitigate these exposures. For cash and cash equivalents, the consolidated entity adopts a policy of ensuring that any excess cash is utilised to pay down long term debt under the terms of the Syndicated Facility Agreement. At the reporting date the interest rate profile of the consolidated entity’s interest-bearing financial instruments was: CONSOLIDATED Carrying amount 2022 2021 $’000 $’000 Cash and cash equivalents 32,526 17,415 Restricted cash 7,500 20,500 Security deposits 8,177 8,306 Borrowings (172,270) - (124,067) 46,221
RkJQdWJsaXNoZXIy MjE2NDg3