Annual Report 2011 - Syrah Resources Ltd

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Syrah Resources Limited Notes to the financial statements 30 June 2011 Note 17. Financial instruments Financial risk management objectives The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk. Risk management is carried out by the Board. The policies employed to mitigate risk include identification and analysis of the risk exposure of the consolidated entity appropriate procedures, controls and risk limits. The Board identifies risk and evaluates the effectiveness of its responses. Market risk Foreign currency risk Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the reporting date was as follows: Consolidated Australian dollars Assets Liabilities 2011 2010 2011 2010 $ $ $ $ 337,201 - 484,940 - The consolidated entity had net liabilities denominated in foreign currencies of $147,739 (assets $337,201 less liabilities $484,940) as at 30 June 2011. Based on this exposure, had the Australian dollar weakened by 5%/ strengthened by 5% against these foreign currencies with all other variables held constant, the consolidated entity's profit before tax for the year would have been $7,387 lower/$7,387 higher and equity would have been $7,387 lower/$7,387 higher. Price risk The consolidated entity does not have significant exposure to price risk. Interest rate risk The consolidated entity's only exposure to interest rate risk is in relation to deposits held. Deposits are held with reputable banking financials institutions. 36
Syrah Resources Limited Notes to the financial statements 30 June 2011 Note 17. Financial instruments (continued) As at the reporting date, the consolidated entity had the following variable rate borrowings and interest rate swap contracts outstanding: 2011 2010 Consolidated Cash on hand/deposit Net exposure to cash flow interest rate risk Weighted average interest rate Balance Weighted average interest rate Balance % $ % $ 4.75 1,079,337 3.73 1,769,464 1,079,337 1,769,464 An increase/decrease in interest rates at 30% or 1.43 percentage points would have a favourable/adverse affect on profit before tax of $15,381 per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. Credit risk Credit risk is managed on a consolidated entity basis. Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has minimal exposure to credit risk as its only receivables relate to security deposits, interest receivable and GST refunds due. Liquidity risk Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to pay debts as and when they become due and payable. The consolidated entity manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. The consolidated entity's working capital, being current assets less current liabilities was $1,057,799 at 30 June 2011. During the period the consolidated entity had negative net cash flows of $684,227. Based on the information on going concern, the directors are satisfied that the consolidated entity will have sufficient funds to pay its debts as and when they fall due. Remaining contractual maturities The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated - 2011 Non-derivatives Non-interest bearing Trade payables Other payables Total non-derivatives Weighted average interest rate Remaining contractual maturities 1 year or Between 1 Between 2 less and 2 years and 5 years Over 5 years % $ $ $ $ $ - 97,536 - - - 97,536 - 19,443 - - - 19,443 116,979 - - - 116,979 37
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Annual Report 2011 - Syrah Resources Ltd

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