Page 121 - Sundance Resources Ltd Annual Report 2013

NOTES TO THE
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2013
Note 28. FINANCIAL INSTRUMENTS
Financial risk management objectives and policies
The Group’s principal financial instruments comprise cash and short-term deposits. The Group has various other
financial assets and liabilities such as trade receivables, trade payables and convertible notes, which arise directly
from its operating and financing activities. The Group’s policy is that no trading in financial instruments shall be
undertaken. The main risks arising from the Group’s financial instruments are interest rate risk, credit risk, capital
risk, foreign currency risk and liquidity risk. The Board reviews each of these risks on a regular basis.
Credit risk
The Group’s maximum exposures to credit risk, without taking into account the value of any collateral obtained
at balance date, in relation to each class of recognised financial asset is the carrying amount of those assets as
indicated in the balance sheet. Credit risk on unrecognised financial instruments refers to the potential financial loss
to the Group that may result from counter parties failing to meet their contractual obligations. The Group manages
their counterparty credit risk by limiting transactions to only those counterparties of sound credit worthiness and by
ensuring a diversified number of counterparties, avoiding undue exposure to any single counterparty. The Group did
not face any significant credit exposures at balance date (other than intercompany balances).
Foreign currency risk
As a result of significant investment operations in Africa, the Group’s balance sheet can be affected significantly
by movements in the XAF/A$ exchange rates. The Group also has exposure to movements in US$/A$ exchange
rates under two drilling contracts it has in place. Both contracts have termination clauses which allow early release
from contractual commitments thereby mitigating the overall exposure under these contracts. The Group does not
currently hedge this exposure.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the
reporting date is as follows:
Liabilities Assets
2013
$
2012
$
2013
$
2012
$
Euro (EUR) 14 129,876 63,166 57,886
US Dollars (USD) 49,629 5,099 1,621 1,630
Central African Franc (XAF) 403,480 996,925 470,404 158,043
South African Rand (ZAR) 16,713 - 51 57
GB Pound (GBP) 5,820 - 88 -
The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian Dollar against the
relevant foreign currencies. 10% is the sensitivity rate assessed by management as the possible change in foreign
exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items
and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis
includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is
in a currency other than the currency of the lender or the borrower. A positive number below indicates an increase
in profit and other equity where the Australian dollar strengthens 10% against the relevant currency. For a 10%
weakening of the Australian dollar against the relevant currency, there would be a comparable impact on the loss
and other equity, and the balances below would be negative. Due to the nature of foreign currency denominated
assets and liabilities, the figures below will only impact the loss, there would be no effect on other equity.
SUNDANCE RESOURCES LIMITED ANNUAL REPORT 2013 119