BISICHI MINING PLC ANNUAL REPORT 2017

Financial statements Notes to the financial statements
21. FINANCIAL INSTRUMENTS
Total financial assets and liabilities
The group’s financial assets and liabilities are as follows, representing both the fair value and the carrying value:
Loans and
receivables
£’000
Financial
Liabilities
measured at
amortised cost
£’000
Available
for sale
investments
£’000
Cash and cash equivalents 5,327 - - 5,327 2,444
Current available for sale investments - - 1,050 1,050 781
Non-current available for sale investments - - 51 51 32
Trade and other receivables 6,323 - - 6,323 6,830
Bank borrowings and overdraft - (7,160) - (7,160) (9,234)
Finance leases - (152) - (152) (181)
Other liabilities - (7,152) - (7,152) (6,735)
11,650 (14,464) 1,101 (1,713) (6,063)
Available for sale investments are held at fair value and fall under level 1 of the fair value hierarchy into which fair value measurements are recognised
in accordance with the levels set out in IFRS 7. The comparative figures for 2016 fall under the same category of financial instrument as 2017.
The carrying amount of short term (less than 12 months) trade receivable and other liabilities approximate their fair values. The fair value of noncurrent
borrowings in note 19 approximates its carrying value and was determined under level 2 of the fair value hierarchy and is estimated by
discounting the future contractual cash flows at the current market interest rates for UK borrowings and for the South African overdraft facility. The fair
value of the finance lease liabilities in note 30 approximates its carrying value and was determined under level 2 of the fair value hierarchy and is
estimated by discounting the future contractual cash flows at the current market interest rates.
Treasury policy
Although no derivative transactions were entered into during the current and prior year, the group may use derivative transactions such as interest
rate swaps and forward exchange contracts as necessary in order to help manage the financial risks arising from the group’s activities. The main risks
arising from the group’s financing structure are interest rate risk, liquidity risk, market risk, credit risk, currency risk and commodity price risk. There
have been no changes during the year of the main risks arising from the group’s finance structure. The policies for managing each of these risks and
the principal effects of these policies on the results are summarised below.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or cashflows associated with the instrument will fluctuate due to changes in market
interest rates. Interest rate risk arises from interest bearing financial assets and liabilities that the group uses. Treasury activities take place under
procedures and policies approved and monitored by the Board to minimise the financial risk faced by the group. Interest bearing assets comprise
cash and cash equivalents which are considered to be short-term liquid assets and loans to joint ventures. Interest bearing borrowings comprise
bank loans, bank overdrafts and variable rate finance lease obligations. The rates of interest vary based on LIBOR in the UK and PRIME in South
Africa.
As at 31 December 2017, with other variables unchanged, a 1% increase or decrease in interest rates, on investments and borrowings whose
interest rates are not fixed, would respectively change the profit/loss for the year by £82,000 (2016: £56,000). The effect on equity of this change
would be an equivalent decrease or increase for the year of £82,000 (2016: £56,000).
Liquidity risk
The group’s policy is to minimise refinancing risk. Efficient treasury management and strict credit control minimise the costs and risks associated with
this policy which ensures that funds are available to meet commitments as they fall due. As at year end the group held borrowing facilities in the UK in
Bisichi Mining PLC and in South Africa in Black Wattle Colliery (Pty) Ltd.
2017
£’000
2016
£’000
Bisichi Mining PLC
79