IGO Annual Report 2017 | Quarterlytics

Plain-text annual report

I G O A N N U A L R E P O R T 2 0 1 7 I N D E P E N D E N C E G R O U P N L A B N 4 6 0 9 2 7 8 6 3 0 4 VENTURE FORWARD ANNUAL REPORT 2017 WE ARE CREATING LONG-TERM VALUE FOR OUR SHAREHOLDERS, OUR PEOPLE AND OUR COMMUNITY THIS IS IGO WHO WE ARE Independence Group NL (IGO or the Company) is a leading ASX listed diversified mining, development and exploration company, with a portfolio of high quality gold and base metals mining operations in Western Australia and a growing pipeline of belt scale greenfields exploration projects. The Company’s 100% wholly- owned assets include the world class Nova nickel- copper-cobalt operation, the Jaguar zinc-copper-silver operation and the Long nickel operation. IGO also produces gold from its 30% interest in the Tropicana Gold Mine, a Joint Venture with AngloGold Ashanti. THE IGO PURPOSE IGO’s purpose is the creation of long-term shareholder value through discovery, acquisitions, development and operation of high- margin, long-life mining projects diversified by commodity and geography. THE IGO WAY IGO strives to be a partner and employer of choice to all stakeholders including shareholders, traditional landowners, government, local communities and our employees. IGO has a great team of people focused on optimising and maximising the value generated by the business. The way we do business is behaviours and values driven; the “The IGO Way”. CONTENTS 02 04 06 08 10 12 14 18 20 21 22 23 31 127 128 129 130 Chairman & CEO’s Message Board Profile Results Summary Our People and Safety Community and Sustainability Operational Scorecard & Outlook Nova Operation Tropicana Operation Jaguar Operation Long Operation Regional Exploration & Development Mineral Resources & Ore Reserves Financial Report Additional ASX Information Shareholder Reporting Timetable Glossary of Terms Company Directory COMPANY VALUES SUSTAINABILITY Putting health and safety first, being environmentally responsible, and supporting our communities. ACCOUNTABILITY Taking ownership for what we do and responsibility for others. TEAMWORK Working together to achieve shared goals. INTEGRITY Doing what is right and doing what we say we will do. DILIGENCE Careful and persistent effort. RESPECT Valuing the views of others and accepting people for who they are. IGO ANNUAL REPORT 2017 — 01 02 — IGO ANNUAL REPORT 2017 CHAIRMAN & CEO’S MESSAGE PETER BRADFORD MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER PETER BILBE CHAIRMAN VENTURE FORWARD On behalf of the Board of Directors, we are pleased to present the 2017 IGO Annual Report. The 2017 Financial Year (FY17) was one of significant advancement for IGO as we venture forward in pursuit of creating long-term value for all stakeholders. We do so with purpose and a genuine passion. The most notable achievement over the past year has been the successful ramp up of mining and processing operations at our world-class Nova nickel-copper- cobalt mine, which is expected to reach nameplate capacity in the September 2017 quarter. Furthermore, we are seeing positive outcomes with the Long Island Study and making good progress in identifying how to unlock additional value from the Tropicana Mineral Resource through improved mining efficiencies and lower unit mining costs. In parallel to the Long Island Study, and the continued implementation of operational excellence initiatives, several other exciting work programs and studies are continuing to further unlock value. We feel we have made good progress over FY17 and are now in the unique position of being a significant ASX-listed diversified mining company with long-life, high-margin assets. Thank you to all of our employees, suppliers and contractors, as well as to our host communities and the Traditional Owners of the lands on which we operate for your ongoing support. We believe that a strong viable company is not only one that effectively manages its assets but also ensures that it invests in its people and that the value generated by our business is shared equally among all stakeholders. We also thank our shareholders for their ongoing support of the IGO Board and management team. We look forward to the 2018 Financial Year as we venture forward in our efforts to building on today’s achievements with a view to IGO becoming Australia’s leading diversified mining company. Long and Tropicana also finished FY17 in a strong position, with metal production and cash costs better than guidance for both operations. At Jaguar, good progress was made in identifying opportunities to optimise and maximise the existing operation while progressing multiple value enhancement projects that will provide optionality for the business. IGO finished FY17 in a good financial position with a strong balance sheet, low debt and increased revenue and net cash flow. Cash at the end of FY17 was A$36 million. As contingency, we have access to an undrawn A$200 million revolving credit facility, with no current or expected need for any new funding in FY18. Funding for Nova was supplemented by a successful A$274 million equity issue in July 2016. Supplementing revenue from our four operations, the Company also anticipates receiving approximately $A32 million of cash payments over the fifteen months following the completion of the sale of the Stockman Project to CopperChem, expected later this year. IGO remains committed to the creation of long-term shareholder value through the discovery, development and operation of a quality portfolio of assets with scale, longevity and geographical focus. The ramp up of exploration work around the Nova Project and across the Fraser Range continues as we see real potential for another major discovery. We have also had encouraging early results from the Lake Mackay exploration project in the Northern Territory. IGO ANNUAL REPORT 2017 — 03 PETER BILBE PETER BRADFORD DEBRA BAKKER BOARD PROFILE NON-EXECUTIVE CHAIRMAN MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER NON-EXECUTIVE DIRECTOR Age 67 B.Eng. (Mining) (Hons), MAusIMM Age 59 B.AppSc., FAusIMM, MSMME Age 51 MAppFin., BBus. (FinAcc), GradDip FINSIA, MAICD TERM OF OFFICE TERM OF OFFICE TERM OF OFFICE Mr. Bilbe was appointed as Non-executive Director in March 2009 and Non- executive Chairman in July 2011. BOARD COMMITTEES Audit (Member) Nomination & Governance (Chair) Remuneration (Member) Sustainability & Risk (Member) EXPERIENCE Mr. Bilbe is a mining engineer with over 40 years’ Australian and international mining experience in gold, base metals and iron ore at the operational, managerial and board levels. Mr. Bilbe has held senior positions at Northern Iron, Sihayo Gold, Norseman Gold Mines, Mount Gibson, Aztec Resources, Portman, Aurora Gold and Kalgoorlie Consolidated Gold Mines. OTHER CURRENT DIRECTORSHIPS Intermin Resources Limited. FORMER DIRECTORSHIPS IN THE LAST 3 YEARS Northern Iron Limited. Mr. Bradford was appointed as Managing Director and Chief Executive Officer in March 2014. BOARD COMMITTEES Nomination & Governance (Member) Sustainability & Risk (Member) EXPERIENCE Mr. Bradford is a senior executive and a qualified metallurgist with over 35 years’ experience in gold and base metals mining operations, exploration and development and has held senior positions internationally and within Australia. Mr. Bradford is a graduate of the WA School of Mines and is the Vice President of the Association of Mining and Exploration Companies Inc (AMEC). OTHER CURRENT DIRECTORSHIPS None. FORMER DIRECTORSHIPS IN THE LAST 3 YEARS Asanko Gold Inc. Ms. Bakker was appointed to the Board of Directors in December 2016. BOARD COMMITTEES Audit (Member) Nomination & Governance (Member) Remuneration (Member) Sustainability & Risk (Member) EXPERIENCE Ms. Bakker is an experienced financier and deal maker with significant international experience and over 25 years’ experience in the resources industry. Ms. Bakker established the natural resources team for Commonwealth Bank of Australia and held a number of senior roles over a 10- year period culminating as Executive Manager, Head of Mining and Metals Origination. Ms. Bakker has also held senior roles with Standard Bank London Group and Barclays Capital and is currently the Western Australian Representative for Auramet Trading LLC, a New York based metals trading firm. OTHER CURRENT DIRECTORSHIPS Access Housing Australia. FORMER DIRECTORSHIPS IN THE LAST 3 YEARS None. 04 — IGO ANNUAL REPORT 2017 PETER BUCK GEOFFREY CLIFFORD KEITH SPENCE NEIL WARBURTON NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR Age 68 M.Sc. (Geology), MAusIMM Age 67 B.Bus., FCPA, FGIA, FAICD Age 63 BSc. (Geophysics) (Hons) Age 61 Assoc. MinEng WASM, MAusIMM, FAICD TERM OF OFFICE TERM OF OFFICE TERM OF OFFICE TERM OF OFFICE Mr. Buck was appointed as Non-executive Director in October 2014. Mr. Clifford was appointed as Non-executive Director in December 2012. Mr. Spence was appointed as Non-executive Director in December 2014. Mr. Warburton was appointed as Non-executive Director in October 2015. BOARD COMMITTEES Audit (Member) BOARD COMMITTEES Audit (Chair) BOARD COMMITTEES Audit (Member) Nomination & Governance (Member) Nomination & Governance (Member) Nomination & Governance (Member) Remuneration (Chair) Remuneration (Member) Remuneration (Member) Sustainability & Risk (Member) Sustainability & Risk (Member) Sustainability & Risk (Chair) BOARD COMMITTEES Nomination & Governance (Member) Remuneration (Member) Sustainability & Risk (Member) EXPERIENCE EXPERIENCE EXPERIENCE EXPERIENCE Mr. Buck is a geologist with over 40 years’ experience in the mineral exploration and mining industry and was directly involved with the discovery and development of a number of mineral deposits in Australia, Africa and Brazil. Mr. Buck has worked with WMC Resources, Forrestania Gold and LionOre in executive management and director positions, and was managing director of Breakaway Resources. He has been a non-executive director of Gallery Gold Ltd and PMI Gold. Mr. Buck is also a board member of the Centre for Exploration Targeting at the University of Western Australia and Curtin University. Mr. Clifford has more than 35 years’ experience in senior accounting, finance, administration and company secretarial roles in the mining, retail and wholesale industries. Mr. Clifford has held non-executive directorships at Centaurus Metals, Fox Resources, Aztec Resources and Atlas Iron. From 2008 until 2011 he was non-executive chairman of Atlas Iron. Mr. Clifford was company secretary and GM Admin of Portman Limited from 1997 to 2005. OTHER CURRENT DIRECTORSHIPS Saracen Mineral Holdings (non-executive chairman). OTHER CURRENT DIRECTORSHIPS FORMER DIRECTORSHIPS IN THE LAST 3 YEARS Antipa Minerals Limited. None. Mr. Spence has over 30 years’ experience in the oil and gas industry including 18 years with Shell and 14 years with Woodside where during that time he held executive positions including chief operating officer and acting chief executive officer. Mr. Spence chairs the Board of the Industry Advisory Board of the Australian Centre for Energy and Process Training. OTHER CURRENT DIRECTORSHIPS Base Resources Limited (non-executive chairman), Oil Search Limited and Murray & Roberts Holdings Limited. FORMER DIRECTORSHIPS IN THE LAST 3 YEARS Clough Limited (non- executive chairman) and Geodynamics Limited. Mr. Warburton is a qualified mining engineer with more than 37 years’ experience in gold and nickel development and mining. He was previously the chief executive officer of Barminco Limited and managing director of Coolgardie Gold. Neil Warburton is also a Member of the WA School of Mines Alumni Council. OTHER CURRENT DIRECTORSHIPS Australian Mines Limited and Flinders Mines Limited. FORMER DIRECTORSHIPS IN THE LAST 3 YEARS Sirius Resources NL, Peninsular Energy Limited, Namibian Copper Limited and Red Mountain Mining Ltd (non-executive chairman). FORMER DIRECTORSHIPS IN THE LAST 3 YEARS None. IGO ANNUAL REPORT 2017 — 05 RESULTS SUMMARY HIGHLIGHTS IGO finished FY17 in a position of strength with cash of A$36M and debt of A$200M. Cash flows during FY17 included A$166M to complete the Nova construction which has been designated commercially operational from July 2017. In July 2016, the Company raised net A$274M in equity to secure additional funding for this construction, as well as to repay A$71M in debt. The Company’s gearing (represented by debt / equity) fell as a result from 19% to 12%. Cash flow from operating activities was A$77M, and Underlying EBITDA for FY17 increased 9% to A$151M, with margin over revenue increasing to 35%. Net profit after tax of A$17M included an after-tax impairment expense of the Stockman project of A$17M. The year ahead promises to be exciting as Nova ramps up to nameplate production, value enhancement programs are advanced at Jaguar and Tropicana and IGO’s exploration teams accelerate significant exploration initiatives within the Fraser Range, Jaguar and Lake Mackay regions. FY17 FINANCIAL SUMMARY SHARE OWNERSHIP1 HIGHLIGHTS Total revenue and other income Underlying EBITDA1 Profit (Loss) after tax Net cash flow from operating activities Free cash flow1 Total assets Cash Marketable securities Total liabilities Shareholders’ equity Net tangible assets per share ($ per share) Dividends per share – fully franked (cents) FY17 $M FY16 $M FY15 $M 422 151 17 78 417 138 (59) 102 (113) 2,208 (328) 2,007 36 15 476 1,733 $2.95 2.0 46 5 552 1,456 $2.85 2.0 499 213 77 202 116 820 121 16 155 665 $2.84 8.5 Australia USA UK & ROE ROW 60% 26% 9% 5% Mark Creasy 17% FIL 10% T Rowe Price 8% CBA 5% INSTITUTIONAL SHAREHOLDING Domestic International INSTITUTIONAL VS. RETAIL (AND OTHER) Institutional Retail & Other 40% 60% 22% 78% 1 See Notes to Glossary of Terms for definitions 1 As at 31 August 2017 06 — IGO ANNUAL REPORT 2017 KEY ACHIEVEMENTS FOR THE YEAR IGO’S LTIFR OF 1.69 PER MILLION MAN-HOURS TO 30 JUNE 2017 IS ONE OF THE BEST EVER ACHIEVED SUCCESSFUL COMPLETION OF EQUITY PLACEMENT RAISING A$274M IN THE SEPTEMBER 2016 QUARTER FIRST PRODUCTION OF NICKEL AND COPPER CONCENTRATES AT NOVA ON 26 OCTOBER 2016 CONSOLIDATION OF FRASER RANGE THROUGHOUT FY17 RESULTING IN ~12,000KM2 OF TENURE TROPICANA EXPANSION PROJECT COMPLETED WITH A 7.5MTPA ANNUALISED PROCESSING THROUGHOUT RATE ACHIEVED AGREEMENT TO DIVEST THE STOCKMAN COPPER-ZINC PROJECT TO COPPERCHEM LIMITED FOR TOTAL CONSIDERATION OF A$47.2 MILLION IGO HISTORICAL PAYABLE METAL GOLD (oz) ZINC (t) NICKEL (t) COPPER (t) 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - FY 13 14 15 16 17 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - FY 13 14 15 16 17 SHARE PRICE PERFORMANCE 1 A$/SHARE A$/share MAX: $4.88 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - FY MIN: $2.86 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - FY 13 14 15 16 17 13 14 15 16 17 Volume (M) VOLUME (M) 6.00 6.00 5.00 5.00 4.00 4.00 3.00 3.00 2.00 2.00 1.00 1.00 – - 6 1 - p e S - 8 0 SEP 16 6 1 - t c O - 8 0 OCT 16 6 1 - v o N - 8 0 NOV 16 6 1 - c e D DEC 16 - 8 0 7 1 - n a J - 8 0 JAN 17 7 1 - b e F - 8 0 FEB 17 7 1 - r a M - 8 0 MAR 17 7 1 - r p A - 8 0 APR 17 7 1 - y a M - 8 0 MAY 17 7 1 - n u J - 8 0 JUN 17 7 1 - l u J - 8 0 JUL 17 7 1 - g u A - 8 0 AUG 17 14.00 14.00 12.00 12.00 10.00 10.00 8.00 8.00 6.00 6.00 4.00 4.00 2.00 2.00 – - Share Price Volume 1 As at market close 8 September 2017 7 1 - p e S - 8 0 SEP 17 IGO ANNUAL REPORT 2017 — 07 OUR PEOPLE The ‘IGO Way’ is about encouraging and promoting behaviors among our people that are driven by our shared company values. Creating a strong shared culture will enable IGO to pursue our operational strategic plan and achieve our purpose. IGO remains a proud Western Australian employer and in FY17 we increased our total workforce to approximately 450 direct employees across all operations and our Perth corporate office. Over the past year, we further implemented our strategy to build internal capacity and capability to support our long- term growth aspirations. BUILDING CAPACITY AND CULTURE During FY17, we implemented a frontline management program across the business, based on Certificate IV in Leadership and Management. IGO regards this business-wide focus on professional learning and development as a critical element to the continued definition and development of IGO’s culture; the “IGO Way”. EMPLOYEE ENGAGEMENT An inaugural annual employee engagement survey was conducted in FY17 and generated encouraging results. A key finding was that the majority of our employees speak positively about the organisation and would recommend IGO as a place to work. There are also areas for improvement including ensuring our people have the necessary resources available, family friendly rosters, improving our corporate communications and brand reputation. IGO is actively working through the results to identify and action areas where change is required. DIVERSITY As of 30 June 2017, IGO’s overall workforce gender ratio was 80% male and 20% female. This slight decrease from FY16 (during which 21.3% of our workforce was female) is the direct result of a trade and technical role recruitment campaign undertaken for Nova which again highlighted the universally low female participation in such professions. IGO remains firmly committed to diversity within our business and will continue to improve our gender ratio through the active encouragement of female graduates and apprentices to join our business. In FY17, IGO also conducted our fourth Workplace Gender Equality Report, which is available for viewing on our website www.igo.com.au. ABORIGINAL EMPLOYMENT IGO has continued to make progress with our Aboriginal employment program, which provides support and training for Aboriginal people in roles within both IGO and our major contractors. This effort has seen some success but has not been without its challenges; circumstances that reinforce our view that education is the key to improving the socio- economic standing of our host communities. Our Aboriginal employment and traineeships have been well supported in FY17 and is a clear demonstration of our commitment to support the creation of education, employment and business opportunities for Aboriginal people, many of whom are Traditional Owners on the lands where IGO operates. INVESTING IN THE FUTURE OF MINING IGO is committed to identifying opportunities to encourage and develop excellence in Science, Technology, Engineering and Maths (STEM) streams with students of all ages, genders 08 — IGO ANNUAL REPORT 2017 KEEPING OUR PEOPLE SAFE IGO had no fatalities or serious disabling injuries during FY17. There were 32 injuries that required medical treatment or resulted in people being assigned to alternate duties (FY16: 33). IGO’s lost-time injury frequency rate (LTIFR) for FY17 was 1.69 injuries per million hours. This result compares favorably with the most recently published averages for the WA metalliferous surface mining sector and the metalliferous underground mining sector at 2.0 and 2.7 respectively. Tropicana’s LTIFR, which is not included in IGO’s statistics, for the FY17 was 0.46. In addition to actual safety outcomes, IGO is focused on the potential outcomes; the ‘near- misses’. In FY17, there were 12 incidents where there was the credible potential for a fatality. Whilst each of these events resulted in either no injury or a minor injury, the potential outcome was acknowledged and our business practices were changed to minimise exposure to the hazards involved in the future. IGO acknowledges that the injuries and ‘near- miss’ incidents have a wider impact causing distress not just to the individual, but to their families and workmates. In FY18, IGO will continue its ongoing program to improve safety behaviours, our systems of work, and our workplaces with the goal of minimising the risk of harm to our employees. For further information on IGO’s safety performance and improvement programs, please refer to the 2017 Sustainability Report, which will be released in October 2017. IGO ANNUAL REPORT 2017 — 09 and ethnicities. Our Graduate, Vacation and Apprenticeship programs continue to receive strong support with a record number of applicants across all disciplines. In FY17, we employed graduates in the disciplines of Geology, Mining Engineering, Finance, Occupational Health and Safety and Environmental Science. In FY17, we established the Independence Group Scholarship in conjunction with Curtin University to be awarded annually to a second- year student who demonstrates academic achievement and financial need. We also participated in the “Get into Resources” program for secondary students and hosted primary students to our mine sites to introduce them to the range of possibilities for career choices in the mining sector. In FY18, IGO intends to expand our programs in the belief that these are essential to building our succession plans and the resilience of our organisation, along with the sustainability of the Resources sector more broadly. COMMUNITY IGO and its employees are proud of the contributions made over the past year to a wide range of local and regional programs. Our employees also provide in-kind assistance through the donation of their time and resources for community events and initiatives. IGO has a long-term commitment to support communities close to our operations; our host communities. We regularly consult with key community groups and individual stakeholders to both address matters that may be of concern and explore opportunities where IGO can offer assistance. IGO makes donations to our host communities in accordance with our publicly stated Corporate Giving Standard. Our corporate giving is focused on three main areas: • Support and improvement of educational outcomes for the children in our host communities; • Support and improvement of the health and well-being of our host community members; and • Enhancement, protection or rehabilitation of the environment local to our host communities. During FY17 IGO received and supported over 60 applications, some of which included: • Supporting the Ngadju Dancers to attend the National Indigenous Dance Rites Competition at the Sydney Opera House in October 2016; • The Kambalda Cultural and Arts Group; TEACH LEARN GROW (TLG) • The Girls Academy Program at both the Kalgoorlie-Boulder and Esperance Senior High Schools; • Norseman District High School’s Leadership Program; • The Leonora Art Prize; • Kalgoorlie Christmas in the Park; • Ronald McDonald House; • Leonora/Kambalda Football Club; • The Ngadju Rangers; • Kambalda Mens Shed; • Goldfields Girl; • Leonora Golden Gift; • Goldfields Disabled Sports; and • Millennium Kids. IGO’s total Corporate Giving spend in FY17 was A$288,817. In addition, IGO contributed A$15,000 to the WA Mining Club Scholarship program for Geology and Aboriginal scholarships and A$150,000 to the Curtin Scholarship Endowment. During FY17, our biggest donation recipient was an organisation called Teach Learn Grow. TLG is a not-for-profit charity that addresses educational inequity by providing rural and Indigenous Western Australian students with free one-on-one tuition and mentoring. The TLG vision is for every West Australian child to have equal opportunities in education, regardless of background, location or circumstance and overcome poverty and disadvantage through education. TLG is a youth led organisation in which university students give up their vacation time to spend one or two weeks, twice a year, in rural and remote schools throughout WA. IGO has been a proud supporter of TLG since 2012, and during that time the partnership has grown with IGO adding schools to the Rural Tutoring Program as our WA footprint has expanded. The schools that currently form part of the TLG-IGO Rural Tutoring Program include: • East Kalgoorlie Primary School; • Coolgardie Primary School; 10 — IGO ANNUAL REPORT 2017 SUSTAINABILITY In FY17, IGO experienced no material environmental incidents. Further, we successfully completed several improvement projects including the clean-up of the historic Teutonic Bore equipment ‘grave yard’ at our Jaguar operation. We also completed our comprehensive triennial reviews of mine closure planning at two of our three operations, and the associated public consultation. On a more general note, in FY17, IGO improved a broad range of business processes related to governance, occupational health and safety management, environmental management, community engagement and Traditional Owner participation. Having implemented a set of universal Safety Standards in FY16, work continues to establish a set of Environmental Standards that will see our business do more than just comply with the law; we are intent on being leaders. Our Long Operation is nearing the end of its operating life; (at least in its current configuration), with operations expected to be suspended in latter half of FY18. IGO has extensively engaged the workforce and the host community at Kambalda about this transition. IGO fully understands the impacts of such change and has taken various steps to mitigate the impacts. We are also pleased to report that IGO is in the process of completing its third Sustainability Report covering the FY17 reporting period. This report will be available on our website at www.igo.com.au at the end of October 2017. IGO ANNUAL REPORT 2017 — 11 • Leonora District High School; • Norseman District High School; and • Nulsen Primary School (Esperance). In the five years that IGO have been a part of TLG , the TLG- IGO Rural Tutoring Program has provided over 15,000 hours of free one-on-one tuition, through 350 tutors to 800 students which has resulted in: • 87% of students have significantly improved their mathematics outcome; • 72% of students have improved their attitude towards school; and • 33% of the volunteer tutors now considering teaching as a career option. Concurrently, feedback from the school principals has been overwhelmingly positive with 100% of them observing an: • Improvement in mathematics ability; • Increase in enthusiasm for school; • Increase in their students’ self-confidence; and • Increase in student attendance rates. OPERATIONAL SCORECARD AND OUTLOOK MINING OPERATION UOM FY17 GUIDANCE RANGE FY17 RESULTS FY18 GUIDANCE RANGE Nickel in concentrate Copper in concentrate Cobalt in concentrate Cash cost (payable)(2) Net Project capex (cash basis)(3) Sustaining capex(2) Development capex(2) Exploration expenditure Gold produced (100% basis) Gold sold (IGO’s 30% share) Cash cost All-in Sustaining Costs Sustaining capex (30%) Improvement capex (30%)(4) Capitalised waste stripping (30%)(4) Exploration expenditure (30%) Nickel (contained metal) Cash cost (payable) Sustaining capex Development capex Exploration expenditure Redundancy payments Zinc in concentrate Copper in concentrate Cash cost (payable) Sustaining capex Development capex Exploration expenditure t t t A$/Ib Ni A$M A$M A$M A$M oz oz A$/oz Au A$/oz Au A$M A$M A$M A$M t A$/Ib Ni A$M A$M A$M A$M Nova ~3,400(1) ~1,500(1) - - 165 to 180 - - 3.5 to 4.5 Tropicana (IGO 30%) 390,000 to 430,000 117,000 to 129,000 850 to 950 1,150 to 1,250 2 to 3 7 to 8 37 to 43 6 to 8 Long 7,400 to 8,200 3.50 to 3.90 1 - 2 to 3 - t t A$/Ib Zn A$M A$M A$M Jaguar 39,000 to 43,000 4,600 to 5,100 0.70 to 0.80 8 to 9 12 to 13 3 to 4 Greenfields & generative 11 to 15 3,502 2,106 112 - 166 - - 4.3 431,625 128,601 817 1,162 2.2 7.5 39.9 5.6 8,433 3.28 0.8 0.2 0.4 - 32,638 4,565 0.76 7.6 11.4 3.2 23,000 to 27,000 10,000 to 12,000 800 to 1,050 1.90 to 2.50 0 to 2 9 to 13 40 to 44 8 to 10 440,000 to 490,000 132,000 to 147,000 680 to 750 1,060 to 1,170 3 to 5 6 to 7 44 to 55 4 to 5 5,400 to 6,000 4.40 to 4.90 0.5 – 1 0.5 – 1 1 to 2 9 to 10 29,000 to 33,000 2,600 to 3,000 0.85 to 1.05 8 to 9 10 to 11 3 to 5 6 29 to 33 Greenfields & generative A$M (1) As restated in the 26 June 2017 Nova update ASX release (2) Actual results not reported for FY17 due to extended period of “pre-production” costs and revenue (3) Actual FY17 result differs from FY17 guidance due to extended period of “pre-production” resulting in additional costs capitalised Actual results include pre-production cash sale receipts of A$19 million capitalised to the Nova project over the same extended period (4) As restated in the 15 December 2016 Tropicana update ASX release GROWTH 12 — IGO ANNUAL REPORT 2017 KEY OPERATIONS AND PROJECTS LAKE MACKAY JV IGO EARNING 70% JAGUAR (Zn-Cu-Ag) IGO 100% LONG (Ni) IGO 100% NOVA (Ni-Cu-Co) IGO 100% TROPICANA JV (Au) IGO 30% FRASER RANGE Various JVs MINES BELT-SCALE EXPLORATION PROJECTS GROWTH IGO ANNUAL REPORT 2017 — 13 NOVA OPERATION NICKEL-COPPER-COBALT IGO 100% LOCATION 140 road-km East of Norseman, Western Australia (Fraser Range) PRODUCT Nickel (Ni), Copper (Cu), Cobalt (Co) MINING Underground contract mining and owner operated process plant PROCESSING METHOD Conventional crushing, grinding, floatation and filtration SALES 100% nickel sulphide concentrate for first three years to BHP Billiton Nickel West Pty Ltd and Glencore International AG (50:50 split). 100% copper sulphide concentrate for first three years to Trafigura Pte Ltd. RESOURCES1 (in-situ metal) 271,000t Ni 113,000t Cu 9,000t Co RESERVES1 (in-situ metal) 274,000t Ni 110,000t Cu 9,000t Co ESTIMATED MINE LIFE 9 years GROWTH POTENTIAL In-mine exploration and Mineral Resource extensions Regional exploration opportunities 1 See Resources and Reserves section on pages 23 to 30 of this report 14 — IGO ANNUAL REPORT 2017 OPERATIONS — NOVA MINE BACKGROUND PROJECT DEVELOPMENT Nova is located in the Great Western Woodland approximately 140 road-km East of Norseman. The Ngadju are the Traditional Owners and custodians of this area and their native title was recognised by the Federal Court on 21 November 2014. The Nova deposit was discovered in July 2012 and development of the site commenced in January 2015. Commercial production commenced in July 2017 with the operation expected to reach nameplate production in the September 2017 quarter. Since the commencement of the Nova decline, our contractor, Barminco, has completed 15.9km of underground development and, during this year, commenced stoping operations. The construction of the process plant and associated infrastructure, including the tailings storage facility, village, access road and aerodrome were all completed on time and on budget resulting in the first delivery of concentrate being achieved by December 2016. During FY17, ramp up of the underground operation has continued successfully with life of mine ventilation systems and mine dewatering systems complete. Service installations including high voltage power, water and telecommunications were also installed. 1ST ORE OCTOBER 2016 $456 MILLION PROJECT CAPITAL INVESTED 492 ROOM ACCOMMODATION VILLAGE IGO ANNUAL REPORT 2017 — 15 OPERATIONS — NOVA MINE a concept was developed to construct a 6.7MW solar power station. This project has taken longer than planned to reach construction stage due to the changing economic situation resulting from lower oil prices. Zenith Pacific and IGO are currently negotiating with ARENA to assist in funding of this project. NEAR MINE EXPLORATION The majority of the focus during FY17 has been on the completion of underground grade control drilling with limited near mine exploration. One of these programs was underground diamond drilling of C5 mineralisation, above the Bollinger orebody. A 2D seismic traverse of almost 10km was completed by HiSeis which has shown strong reflectivity and the ability to map the geological and structural architecture. Work is progressing with the aim of completing a 3D seismic survey on the Nova Mining Lease during FY18. Surface diamond drilling has also commenced, designed to test a number of EM conductors proximal to the Nova-Bollinger deposit. ORE MINING AND PROCESSING By the end of FY17, the paste fill plant had been commissioned and ore production was taking place over three levels to enable consistent ore feed to the processing plant. Development is continuing both at Nova and Bollinger. Grade control drilling at Nova and Bollinger is well advanced and due to be completed by the end of the December 2017 quarter. The process plant has transitioned to a continuous operation as the delivery of stope ore has become more consistent. Continuous operation of the plant has enabled ore recoveries and concentrate quality to approach design levels. As part of the original design, the tailings storage facility is used as a water storage dam to store water pumped from an aquifer above the underground mine. Dewatering of this aquifer was successfully completed during FY17 to provide a process water source from the tailings dam. Electric power for the Nova operation is provided by Zenith Pacific’s 20MW power station under a build, own and operate contract. This power station has proved to be reliable and efficient. As part of the design, 16 — IGO ANNUAL REPORT 2017 PROCESS PLANT CONSTRUCTED AND COMMISSIONED ONE MONTH AHEAD OF SCHEDULE IGO ANNUAL REPORT 2017 — 17 LOCATION 330km Northeast of Kalgoorlie, Western Australia PRODUCT Gold (Au) MINING Open pit contract mining with production from up to four contiguous pits extending some 5km in strike length PROCESSING METHOD Conventional crushing, grinding and CIL (carbon in leach) recovery SALES To a combination of the Perth Mint and Financial Institutions via forward sales contracts FY17 PRODUCTION 431,625oz (100% basis); 129,487oz (IGO share) FY17 CASH COSTS A$817 /oz RESOURCES1 7.74Moz (100%) RESERVES1 3.56Moz (100%) ESTIMATED MINE LIFE 7 – 10 years GROWTH POTENTIAL Grade streaming in CY18 and CY19 Long Island open pit study to be completed in December 2017 quarter Underground potential Expansion potential Regional exploration upside 1 See Resources and Reserves section on pages 23 to 30 of this report TROPICANA OPERATION GOLD IGO 30% 18 — IGO ANNUAL REPORT 2017 OPERATIONS — TROPICANA JV OVERVIEW Tropicana is located on the western edge of the Great Victoria Desert of which the Traditional Owners and custodians emanate from the Wongatha and Spinifex peoples. It is a Joint Venture of which IGO owns 30% and AngloGold Ashanti holds 70% and is the manager. IGO targeted and pegged the area containing the current gold reserves in 2001. AngloGold Ashanti farmed into the project in 2002, discovering the Tropicana, Havana and Boston Shaker gold deposits in 2005, 2006 and 2010 respectively. The decision to develop the Tropicana Gold Mine was announced in November 2010 following completion of a positive Bankable Feasibility Study. Mining of the Havana deposit commenced in 2012 with the first gold being produced in September 2013. In October 2015, the Tropicana Gold Mine achieved its 1-million-ounce milestone. FY17 PRODUCTION Tropicana gold production for FY17 exceeded expectation at 431,625oz (on a 100% basis) and cash costs and All in Sustaining Costs were $817/oz produced and $1,162/oz sold respectively. During the year, a total of 82.1Mt of material was mined and hauled ex-pit. This material comprised of 7.9Mt of full grade ore (>0.6g/t), 1.0Mt of marginal ore (grading between 0.4 & 0.6g/t Au) and 73.2Mt of waste material. Full grade ore sources were the Havana pit, the Boston Shaker Pit and Tropicana with the average run-of-mine grade for full grade ore (>0.6g/t Au) being 2.05g/t Au for the year. ATTRIBUTABLE PRODUCTION IGO’s attributable gold production during FY17 was 129,487oz and IGO’s attributable share of gold refined and sold was 128,601oz. TROPICANA OPERATIONS Open pit mining operations achieved a 17% increase above budget for the 12 months ending 30 June 2017, achieving 33.7 million BCM’s. A CAT 6060 (600t class) hydraulic shovel was successfully introduced to the open pit mining operation which has resulted in overall improvement in mining efficiencies. The shovel has delivered higher productivities and lower unit costs. It is capable of mining higher benches than currently employed at Tropicana and work is underway to optimise bench heights in both ore and waste. A processing rate in excess of 7.6Mtpa was achieved during the year following the completion of the process plant expansion and optimisation project, with additional upgrades scheduled in FY18 to target further production increases. LONG ISLAND STUDY Work continued during the year on the Long Island Study, which is investigating cutbacks to the Boston Shaker, Havana and Havana South open pits. The mining strategy includes using the completed Tropicana pit as a void into which waste will be backfilled, significantly reducing waste haulage costs. As noted previously, this approach considers a strip mining technique more commonly used in the coal mining industry that has the effect of reducing waste haulage distance by backfilling areas previously mined and hence lowering the mining cost. The study is expected to be completed in the December 2017 quarter. NEAR MINE EXPLORATION An extension drilling program continued during the first half of FY17 to form the basis of the Mineral Resource for the Long Island Study, based on a strip mining strategy designed to significantly reduce waste mining costs. Mineralisation remains open with high-grade ore shoots defined at both Boston Shaker and Havana South. NAMEPLATE PROCESSING CAPACITY INCREASED BY 29% TO 7.5MTPA IGO ANNUAL REPORT 2017 — 19 JAGUAR OPERATION ZINC-COPPER-SILVER IGO 100% BACKGROUND BUSINESS IMPROVEMENT IGO acquired and commenced management of the Jaguar operation in 2011. Since FY14, mining has been solely from the Bentley mine and processed through the Jaguar concentrator to produce a copper concentrate rich in silver and gold credits, plus a high-grade zinc concentrate. FY17 PRODUCTION A total of 444,700t (FY16: 497,751t) of ore at 8.16% Zn, 1.28% Cu, 137g/t Ag and 0.58g/t Au was mined from the Bentley underground mine in FY17. In addition, advancement of 2,046m of capital development was undertaken. The processing facility treated 443,485t of ore at 8.27% Zn, 1.30% Cu, 134g/t Ag, 0.52g/t Au (FY16: 505,578t of ore at 8.90% Zn, 1.70% Cu, 128g/t Ag, 0.75g/t Au). Metal production was 32,638t Zn (FY16: 39,335t), 4,565t Cu (FY16: 7,412t), 1,376,521oz Ag (FY16: 1,603,565oz), 2,532oz Au in 88,444t of concentrate. Both zinc and copper concentrate production were below FY17 guidance. A major focus for Jaguar over the past year has been the feasibility study of the Triumph deposit and the Jaguar Process Plant Value Enhancement Study to produce a third product from the Jaguar Operation, being a high precious metal (HPM) concentrate. Both projects aim to increase the operational cash flow and mine life to 2022. All permitting and regulatory approvals have been obtained and the projects are awaiting final internal approvals. NEAR MINE EXPLORATION The discovery of a new massive sulphide lens named Bentayga was made in FY17 and is situated 250m to the south of the Arnage lens at a depth of approximately 800m below surface. Drilling is continuing around the high-grade core of Bentayga to deliver an economic envelope for mining feasibility studies. Exploration is set to continue by defining the massive sulphide extents and possible extensions of Bentayga at depth and to the south. Additional near mine exploration is planned at Triumph to test down plunge continuation and potential mineralisation directly below Stag lens. Previous work has focused on the delivery of a reserve for the Stag lens with limited focus on a potential repetition of Stag lens mineralisation at depth. 20 — IGO ANNUAL REPORT 2017 LOCATION 300km north of Kalgoorlie, 60km north of Leonora, Western Australia PRODUCT Copper (Cu), Zinc (Zn), Silver (Ag), Gold (Au) MINING Owner operated underground mine PROCESSING METHOD Single stage crushing, SAG/Ball milling, differential flotation and filtration SALES Through offtake agreements with various parties FY17 PRODUCTION 32,638t Zn 4,565t Cu 1,376,521oz Ag 2,532oz Au contained in 88,444t of zinc and copper concentrate FY17 CASH COSTS A$0.76/lb Zn RESOURCES1 (in-situ metal) 364,000t Zn 55,000t Cu 18Moz Ag 90,000oz Au RESERVES1 (in-situ metal) 161,000t Zn 16,000t Cu 8Moz Ag 36,000oz Au ESTIMATED MINE LIFE 3-5 years GROWTH POTENTIAL Jaguar Value Enhancement Study Bentayga Discovery 1 See Resources and Reserves section on pages 23 to 30 of this report LONG OPERATION NICKEL IGO 100% BACKGROUND IGO acquired the Long Operation in September 2002. The mine was re-commissioned in October 2002 and has been operating safely and successfully since then. Over the 15 years that Long has been under IGO management, the operation has produced more than 3.3Mt of nickel ore, containing approximately 203,000t of nickel metal. Since 2002, exploration has seen the discovery of the McLeay (2005) and Moran (2008) ore bodies and historically enabled the operation to maintain a reserve base to support a two to three-year mine life. The current life of mine plan supports mining until May 2018. FY17 PRODUCTION In FY17, production came from the Moran, McLeay, Victor South and Long ore bodies. Total mining was 205,372t of ore (FY16: 215,337t) at an average grade of 4.11% Ni for 8,433t of contained nickel. Long successfully achieved better than guidance performance on production and costs in all four quarters of FY17. This was a result of the dedicated effort by the team who worked diligently to consistently meet production requirements. BUSINESS IMPROVEMENT As the current Long business plan involves mining all known Ore Reserves to the point of depletion, some of the lower-margin areas were mined concurrently with higher profitability areas. This included contracting a single Airleg miner in the December 2016 quarter to mine some remnant areas. The positive result of this initiative led to an increase to three Airleg miners being employed by the end of FY17 to progress to completion areas in McLeay and Long. SUSPENSION OF MINING Mining at Long is expected to be suspended in the June 2018 quarter. Planning for the suspension of mining is underway, with expectation the operation will be put into care and maintenance while further exploration in the area continues. Employees will be redeployed to other IGO operations wherever possible, however retention and redundancy payments of A$9-10M have been provisioned for FY18. NEAR MINE EXPLORATION A number of promising near mine exploration targets have been developed as a result of re-interpretation of the geological and structural setting at Long. Targets include potential extension of the Long deposit to the north, with the favourable channel position previously interpreted to be stoped out by a late stage granite. Geophysics and current interpretation indicates that this interpretation may not be correct. The second target includes the potential stratigraphic repetition to the east. Both targets will be tested in FY18 with the potential to provide a step-change extension to the life of mine at Long. LOCATION Kambalda, 60km south of Kalgoorlie, Western Australia PRODUCT Nickel (Ni) MINING Owner operated underground mine SALES Offtake agreement for ore produced delivered to the adjacent BHP Nickel concentrator for toll treatment and production of nickel concentrate. FY17 PRODUCTION 8,433t contained nickel FY17 CASH COSTS A$3.28/lb Ni RESOURCES1 (in-situ metal) 54,000t Ni RESERVES1 (in-situ metal) 6,000t Ni ESTIMATED MINE LIFE <1 year GROWTH POTENTIAL Exploration whilst planning for a suspension in mining period 1 See Resources and Reserves section on pages 23 to 30 of this report IGO ANNUAL REPORT 2017 — 21 REGIONAL EXPLORATION AND DEVELOPMENT COMMITTED TO DELIVERING GROWTH THROUGH EXPLORATION Exploration discovery is core to the IGO DNA and value creation proposition. During FY17 we transformed our portfolio with the consolidation of our ground position on the prospective Fraser Range to leverage off the capital investment and geological understanding at Nova. Our discovery portfolio includes both highly prospective brownfields opportunities and belt-scale greenfields projects. PROJECTS/EXPLORATION OPPORTUNITIES Fraser Range Project and Salt Creek JV (Ni & Cu) (70%) Regional geochemical sampling, moving loop electromagnetic surveying and/or drilling Aircore programs identified anomalous results requiring additional exploration Lake Mackay (Gold/Base metals) (70%) Unlocking new under- explored mineral province Drilling at Bumblebee has confirmed proof of concept Bryah Basin (Cu & Au) (70%) De Beers Database Follow-up drilling of targets within a 2km strike of previously delineated zone of geochemical anomalism and electromagnetic conductors Unique sample database 22 — IGO ANNUAL REPORT 2017 FRASER RANGE PROJECT Base Metals Project (IGO various ownership levels) IGO has consolidated the largest ground position of any listed company on the prospective Fraser Range where IGO currently holds ~12,000km2 of tenure outside the Tropicana joint venture areas on and proximal to the Fraser Range. The tenement package is under-explored and considered highly prospective for nickel, copper and cobalt sulphide mineralisation. IGO is in a unique position to leverage from both the Nova capital infrastructure and the fingerprinting of the Nova- Bollinger deposits. Exploration activities have increased over the second half of FY17 with improved geological interpretation and target generation through the completion of significant soil sampling programs, regional geophysical gravity surveys and 3D inversion modelling, as well as by conducting moving loop electromagnetic (MLEM) surveys and data collection for a number of EM conductors that require follow-up drill testing. Systematic reconnaissance aircore drilling is underway on the northern tenements. Reverse circulation (RC) drilling was also completed on a number of the more advanced targets including Raising Dragon and Cobra. Follow-up drilling is required on both these prospects. LAKE MACKAY JOINT VENTURE – NORTHERN TERRITORY Gold / Base Metals Project (IGO Manager and Option to Earn 70%) The Lake Mackay Joint Venture with ABM Resources is located 400km northwest of Alice Springs. The JV has ~8,000km2 of exploration licences and applications over a favourable Proterozoic margin, characterised by continent-scale targeting criteria. Exploration is at a very early stage and has been limited to a small proportion of the tenement package. Work programs during FY17 have included a regional aeromagnetic survey and the completion of an 18 hole RC program which led to the discovery of the Grapple Prospect. Encouraging drilling intersections were reported and have defined mineralisation over a strike length of 300m. Mineralisation remains open to the west. MINERAL RESOURCES AND ORE RESERVES IGO’s Mineral Resource and Ore Reserve estimates for 30 June 2017 (and 30 June 2016) are listed in the tables below. Mineral Resource estimates are reported inclusive of Ore Reserve estimates. All estimates are reported with levels of precision appropriate for the respective JORC Code classifications applied at the time of reporting. The totals and averages in some reports may appear to be inaccurate as a function of value rounding. Below each table, notes explain material changes to the tonnage and grades of estimates between the 2016 and 2017 reports. The complete JORC Code estimation reports on which the summary tables below are based, including JORC Code Table 1 checklists, and explanations of material assumptions and technical parameters, can be found at www.igo.com.au – refer to the menu ‘Our Business – Mineral Resources & Ore Reserves Summary’. JORC Code Competent Person statements for the 30 June 2017 estimate are included on page 30. IGO’s Mineral Resource and Ore Reserve governance include systems and procedures that ensure: • All persons responsible for preparing and reporting IGO estimates qualify as a Competent Person as defined by the JORC Code (2012 Edition), and the Competent Persons have provided written sign-off on publicly reported estimates • Competent Persons have used IGO’s annual corporate guidance for metal prices and foreign exchange rates when determining economic viability and cut-off grades • Estimates are prepared using accepted industry methods and the estimation forecasting precision is monitored against production in operating mines • Competent Persons prepare and provide IGO with the supporting documentation for each estimate, and before being reported to the Board, estimates are either reviewed by IGO senior technical staff or by a suitably qualified external reviewer • Any material changes or updates to estimates are reviewed and approved by the IGO’s Board before being promptly announced to the market IGO ANNUAL REPORT 2017 — 23 MINERAL RESOURCES AND ORE RESERVES – CONT’D IGO TOTAL TABLE 1 — 30 JUNE 2016 / 2017 FY Year End Project or Operation Tonnes (Mt) 2016 2017 Nova Long Tropicana Jaguar Stockman Total 2016 Nova Long Tropicana Jaguar Stockman Total 2017 14.3 1.3 37.4 3.7 14.0 70.6 11.4 1.2 42.4 6.5 14.0 75.5 IGO TOTAL — MINERAL RESOURCES Grades Ni (%) 2.3 4.7 - - - Cu (%) Co (%) 0.9 0.08 - - 1.4 2.1 - - - - Zn (%) - - - 7.0 4.3 Ag (g/t) Au (g/t) - - - 111 38 - - 1.9 0.6 1.0 Ni (kt) 325 60 - - - Cu (kt) 134 - - 51 294 In situ Metal Co (kt) Zn (kt) Ag (Moz) Au (koz) 11 - - - - - - - 256 598 - - - - - 2,200 13 17 100 400 (Total average grades are not additive) (Total in situ metals not reported in 2016) 2.4 4.6 - - - 1.0 0.08 - - 0.9 2.1 - - - - - - - 5.6 4.3 - - - 85 38 - - 1.7 0.4 1.0 271 54 - - - (Total average grades are not additive) 325 113 - - 55 287 455 9 - - - - 9 - - - 364 599 963 - - - - - 2,322 18 17 90 437 35 2,849 1. 2. 3. Tropicana tonnages and in situ gold are reported above as a 30% share – divide by 0.3 to derive the 100% estimates Cobalt was not reported for Nova in IGO’s summary for 2016 but is included in the 2017 report There have been material increases in tonnage and grade at Tropicana and Jaguar and decreases at Nova – refer to the notes below the respective summary tables further below for explanations TABLE 2 — 30 JUNE 2016 / 2017 FY Year End Project or Operation Tonnes (Mt) 2016 2017 Nova Long Tropicana Jaguar Stockman Total 2016 Nova Long Tropicana Jaguar Stockman 13.6 0.4 12.3 1.4 9.0 36.7 13.3 0.2 17.1 2.4 9.0 IGO TOTAL — ORE RESERVES Grades Ni (%) 2.0 3.9 - - - Cu (%) Co (%) 0.8 0.07 - - 1.1 2.1 - - - - Zn (%) - - - 9.5 4.5 Ag (g/t) Au (g/t) - - - 145 39 - - 1.8 0.8 1.1 Ni (kt) 275 14 - - - Cu (kt) 112 - - 16 189 In situ Metal Co (kt) Zn (kt) Ag (Moz) Au (koz) 9 - - - - - - - - - - 137 408 6.7 11.3 - - 700 0.0 300 (Total average grades are not additive) (Total in situ metals not reported in 2016) 2.06 3.64 - - - 0.83 0.07 - - 0.66 2.10 - - - - - - - - - - 6.71 4.53 100 39 - - 1.94 0.47 1.08 274 110 6 - - - - - 16 189 315 9 - - - - 9 - - - 161 408 568 - - - - - 1,067 8 11 36 311 19 1,414 Total 2017 41.9 (Total average grades are not additive) 280 1. 2. 3. The notes below Table 1 also apply to this listing Gold metal for Jaguar was reported as 0.0 Moz in 2016 due to the 0.1 Moz rounding approach applied at the time of reporting. The reporting precision for gold has been changed to thousands of ounces (koz) for the 30 June 2017 reports The Ore Reserve for Nova is based on mining depletion of the prior estimate and not the updated Mineral Resource 24 — IGO ANNUAL REPORT 2017 MINERAL RESOURCES AND ORE RESERVES – CONT’D NOVA OPERATION TABLE 3 — 30 JUNE 2016 / 2017 NOVA OPERATION — MINERAL RESOURCES Deposit JORC Code Class Tonnes (Mt) Nova Measured Indicated Inferred Subtotal Nova Bollinger Measured Indicated Inferred Subtotal Bollinger Stockpiles Measured Total Measured Indicated Inferred Nova-Bollinger Total - 9.1 1.0 10.1 - 2.4 1.8 4.2 - - 11.5 2.8 14.3 Ni (%) - 2.5 1.4 2.4 - 2.7 1.0 - - 2.5 1.1 2.3 30 June 2016 Grades Cu (%) - Co (%) - 1.0 0.08 230 0.6 0.05 14 1.0 0.08 244 100 In situ Metal Cu Ni Co (kt) (kt) (kt) 30 June 2017 Grades Cu (%) Co (%) Ni (%) Tonnes (Mt) In situ Metal Cu Ni Co (kt) (kt) (kt) - - 64 17 82 - - - 94 6 - 26 8 34 - - 117 13 - 7.3 0.5 7.7 - 2.6 0.7 3.3 - - 9.9 1.2 5.2 2.63 1.10 0.08 137 2.4 0.7 8.2 - 2.47 1.02 0.08 1.5 2.5 - 0.8 0.05 1.0 0.08 206 - - 2.1 2.54 1.02 0.10 1.1 3.2 - 1.1 2.1 - 0.5 0.05 0.8 0.08 - - 5.2 2.63 1.10 0.08 4.5 2.50 1.02 0.09 1.7 11.4 1.3 2.4 0.6 0.05 1.0 0.08 57 24 5 87 - 21 5 26 - 57 45 10 113 4 2 0.4 7 - 2 0.5 3 - 4 4 1 9 59 10 - 53 12 65 - 137 112 22 271 1.0 0.09 292 0.5 0.04 32 0.9 0.08 325 134 11.0 - 1.1 - 0.11 0.4 0.04 - - - - 2.0 0.8 0.08 1. 2. 3. In 2017, 46% of the total estimate was upgraded to a Measured Resource confidence by incorporation of close-spaced drilling completed to 16 March 2017 over the Nova area into an estimate update, which was then depleted for mining to 30 June 2017 The reduction in tonnage between the 2016 and 2017 estimates is a function of the additional drilling information and underground geological mapping leading to a revised and more constrained geological interpretation of the continuity of low and high-grade zones in both deposits Actual mining depletion for 2017 was 328 kt grading 1.33 % Ni, 0.55% Cu and 0.04% Co TABLE 4 — 30 JUNE 2016 / 2017 NOVA OPERATION – ORE RESERVES Deposit JORC Code Class Tonnes (Mt) Nova Proved Probable Subtotal Nova Bollinger Proved Probable Subtotal Bollinger Stockpiles Proved Total Proved Probable Nova-Bollinger Total - 10.9 10.9 - 2.7 2.7 - - 13.6 13.6 Ni (%) - 2.0 2.0 - 2.2 2.2 - - 2.0 2.0 In situ Metal Cu Ni Co (kt) (kt) (kt) In situ Metal Cu Ni Co (kt) (kt) (kt) 30 June 2016 Grades Cu (%) - Co (%) - 0.8 0.06 0.8 0.06 - - 0.9 0.09 0.9 0.09 - - - - - 216 216 - 59 59 - - - 89 89 - 24 24 - - - 7 7 - 2 2 - - 9 9 30 June 2017 Tonnes (Mt) Ni (%) - - Grades Cu (%) - Co (%) - 10.6 2.02 0.81 0.06 10.6 2.02 0.81 0.06 - - - 2.20 0.90 0.09 2.20 0.90 0.09 - - - - - - - 2.7 2.7 - - 13.3 13.3 0.8 0.07 0.8 0.07 275 275 112 112 2.06 0.83 0.07 2.06 0.83 0.07 274 274 110 110 - 214 214 - 59 59 - - - 86 86 - 24 24 - - - 6 6 - 2 2 - - 9 9 1. 2. The estimate is calculated by depletion of the FY16 estimate (originally prepared in 2013) for FY17 mining, with no changes to assumptions and modifying factors. The FY17 estimate is not based on the updated Nova Mineral Resource estimate reported to the market on 26 July 2017, which indicated a 3Mt reduction in Mineral Resources from the prior estimate An updated Nova-Bollinger Ore Reserve estimate is in preparation and a reduction in Ore Reserve tonnage is anticipated IGO ANNUAL REPORT 2017 — 25 MINERAL RESOURCES AND ORE RESERVES – CONT’D TROPICANA GOLD MINE TABLE 5 — 30 JUNE 2016 / 2017 Area Open pit Measured Indicated Inferred Subtotal Open pit Underground Measured Indicated Inferred Subtotal Underground Stockpiles Total Measured Measured Indicated Inferred TROPICANA GOLD MINE — 100% MINERAL RESOURCES JORC Code Class 30 June 2016 30 June 2017 Tonnes (Mt) Au (g/t) Au (koz) Tonnes (Mt) Au (g/t) Au (koz) 10.9 78.3 4.4 93.7 - 5.4 12.1 17.6 13.6 24.5 83.8 16.6 1.91 1.71 2.23 1.76 - 3.36 3.13 3.20 0.85 1.32 1.82 2.89 1.86 670 4,320 320 5,300 - 590 1,220 1,810 370 1,040 4,900 1,540 7,480 6.1 79.1 22.3 107.5 - 6.8 11.9 18.6 15.2 21.3 85.8 34.2 141.3 1.94 1.61 1.32 1.56 - 3.38 3.15 3.23 0.82 1.14 1.74 1.95 1.70 380 4,080 940 5,400 - 730 1,200 1,940 400 780 4,810 2,150 7,740 Tropicana Gold Mine Total 124.8 1. 2. 3. AngloGold prepared the Tropicana estimates on a 100% basis, IGO share is 30% The Competent Person confirmed to IGO that there is no material grade extrapolation related to the Inferred Mineral Resource class of the Tropicana underground estimate, which is 69% Inferred Mineral Resource The total estimate tonnage increased due to an update of the estimate in December 2016 – refer to IGO’s ASX announcement 15 December 2016 TABLE 6 — 30 JUNE 2016 / 2017 Deposit or Area Open pit TROPICANA GOLD MINE — 100% ORE RESERVES JORC Code Class 30 June 2016 30 June 2017 Tonnes (Mt) Au (g/t) Au (koz) Tonnes (Mt) Au (g/t) Proved Probable Subtotal Open pit Underground Proved Probable Subtotal Underground Stockpiles Total Proved Proved Probable Tropicana Gold Mine Total 7.6 24.2 31.8 - - - 9.2 16.8 24.2 41.0 2.33 2.01 2.07 - - - 0.98 1.58 2.00 1.83 570 1,560 2,120 - - - 290 850 1,560 2,410 4.4 43.0 47.4 - - - 9.5 14.0 43.0 57.0 2.31 2.13 2.15 - - - 0.93 1.37 2.13 1.94 Au (koz) 330 2,950 3,280 - - - 290 620 2,950 3,560 1. The total Ore Reserve tonnage and grades have increased due to changes in the open pit mining assumptions and costs – refer to IGO’s ASX announcement 15 December 2016 26 — IGO ANNUAL REPORT 2017 MINERAL RESOURCES AND ORE RESERVES – CONT’D LONG OPERATION TABLE 7 — 30 JUNE 2016 / 2017 Area Long Victor South McLeay Moran Stockpiles Total LONG OPERATION — MINERAL RESOURCES JORC Code Class 30 June 2016 30 June 2017 Tonnes (Mt) Ni (%) Ni (kt) Tonnes (Mt) Ni (%) Ni (kt) Measured Indicated Inferred Measured Indicated Inferred Subtotal Long Subtotal Victor South Measured Indicated Inferred Measured Indicated Inferred Measured Measured Indicated Inferred Subtotal McLeay Subtotal Moran 0.062 0.287 0.355 0.704 - 0.147 0.033 0.180 0.061 0.071 0.021 0.153 0.126 0.044 0.052 0.222 - 0.249 0.549 0.461 1.259 5.3 5.1 4.7 4.9 - 2.1 1.5 2.0 6.4 4.9 6.7 5.8 7.2 3.9 3.7 5.7 - 6.5 4.2 4.4 4.7 3.3 14.6 16.7 34.6 - 3.1 0.5 3.6 3.9 3.5 1.4 8.8 9.1 1.7 1.9 12.7 - 16.3 22.9 20.5 59.7 0.1 0.3 0.4 0.7 - 0.2 0.03 0.2 0.1 0.1 0.02 0.2 0.1 0.04 0.1 0.2 - 0.2 0.5 0.5 1.2 5.39 5.11 4.7 4.9 - 2.11 1.5 2.0 6.35 4.92 6.7 5.7 7.99 3.38 3.7 5.3 - 6.59 4.11 4.4 4.6 LONG OPERATION — ORE RESERVES JORC Code Class 30 June 2016 30 June 2017 Tonnes (Mt) Ni (%) Ni (kt) Tonnes (Mt) Ni (%) Ni (kt) Long Operation Total TABLE 8 — 30 JUNE 2016 / 2017 Deposit Long Proved Probable Subtotal Long Victor South Proved Probable Subtotal Victor South McLeay Moran Stockpiles Total Proved Probable Proved Probable Proved Proved Probable Subtotal McLeay Subtotal Moran Long Operation Total 0.023 0.045 0.068 0.004 0.006 0.010 0.018 0.019 0.037 0.224 0.012 0.236 - 0.269 0.082 0.351 3.5 3.1 3.2 5.0 1.7 3.0 3.9 3.2 3.5 4.2 3.3 4.2 - 4.1 3.1 3.9 0.8 1.4 2.2 0.2 0.1 0.3 0.7 0.6 1.3 9.4 0.4 9.8 - 11.1 2.5 13.6 0.01 0.02 0.04 0.003 0.01 0.01 0.01 0.02 0.03 0.06 0.03 0.09 - 0.09 0.08 0.17 4.09 3.26 3.55 4.83 1.71 2.67 3.53 3.22 3.34 4.20 3.22 3.89 - 4.11 3.10 3.64 3 14 17 33 - 3 1 4 4 3 1 9 5 1 2 8 - 12 22 20 54 0.6 0.8 1.4 0.2 0.1 0.3 0.4 0.7 1.0 2.5 0.9 3.4 - 3.7 2.5 6.2 1. The changes in both Mineral Resource and Ore Reserve estimates are solely by mining depletion with most of mining taking place from the Moran deposit and small tonnages from Long IGO ANNUAL REPORT 2017 — 27 MINERAL RESOURCES AND ORE RESERVES – CONT’D JAGUAR OPERATION TABLE 9 — 30 JUNE 2016 / 2017 JAGUAR OPERATION — MINERAL RESOURCES 30 June 2016 30 June 2017 Deposit JORC Code Class Tonnes (Mt) Grades In situ Metal Grades In situ Metal Zn Cu (%) (%) Ag (g/t) Au (g/t) Zn Cu (kt) (kt) Ag (Moz) Au (koz) Tonnes (Mt) Zn (%) Cu (%) Ag (g/t) Au (g/t) Zn Cu (kt) (kt) Ag (Moz) Au (koz) Bentley Measured Indicated Inferred 0.402 1.418 0.282 11.5 11.0 5.3 Subtotal Bentley 2.107 10.3 Triumph Measured Indicated Inferred Subtotal Triumph Teutonic Measured - - - - - Bore Indicated Inferred 0.946 0.608 Subtotal Teutonic Bore 1.554 Stockpiles Measured Total Measured Indicated Inferred 0.005 0.407 2.364 0.890 Jaguar Total 3.661 - - - - - 3.6 0.7 2.5 8.9 11.5 8.0 2.2 7.0 1.8 1.0 0.7 1.1 - - - - - 1.7 1.4 1.6 2.0 177 161 107 157 - - - - - 65 25 49 131 1.8 176 1.3 123 0.9 1.0 1.0 1.0 - - - - - - - - 0.8 0.9 0.6 0.3 1.2 1.4 51 111 0.6 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0.3 1.7 0.8 12.88 1.52 204 1.05 7.00 0.76 109 0.74 3.9 0.5 58 0.8 43 118 29 2.8 6.9 0.8 106 0.8 190 - 1.7 0.5 - - - - - 5.99 0.49 81 0.26 102 6.9 0.4 94 0.3 35 2.2 6.2 0.5 84 0.3 137 - 0.9 0.6 1.5 - - 3.60 1.70 0.7 2.5 7.3 1.4 1.6 0.9 - 65 25 49 - - - - - 32 4 36 5 13 3 21 - 8 2 10 - 15 8 23 2 6 1 9 - 4 2 6 - 2 1 3 11 40 19 70 - 16 4 20 - - - - - 0.007 97 0.46 1.0 0.06 0.02 0.10 - - - - 0.3 4.3 1.9 6.5 12.77 1.51 202 1.04 43 5.89 0.85 89 0.39 254 3.7 0.7 57 0.4 64 5 37 14 5.6 0.9 85 0.4 364 55 2 12 3 18 11 56 23 90 1. 2. 3. In situ metal estimates were not reported in 2016 but are included for 2017 Triumph is a new estimate reported to the ASX on 26 July 2017 but effective as at 30 June 2017 The tonnage increase at Bentley for FY17 reflects an assumption of higher metal prices used for FY17 estimate updates TABLE 10 — 30 JUNE 2016 / 2017 JAGUAR OPERATION — ORE RESERVES Deposit JORC Code Class Bentley Proved Probable Tonnes (Mt) 0.277 1.157 Subtotal Bentley 1.434 Triumph Proved Probable Subtotal Triumph Stockpiles Measured Total Proved Probable - - - 0.004 0.281 1.157 Jaguar Total 1.438 30 June 2016 30 June 2017 Grades In situ Metal Grades In situ Metal Zn Cu (%) (%) Ag (g/t) Au (g/t) Zn Cu (kt) (kt) Ag (Moz) Au (koz) Tonnes (Mt) Zn (%) Cu (%) Ag (g/t) Au (g/t) Zn Cu (kt) (kt) Ag (Moz) Au (koz) 9.7 9.5 9.5 - - - 9.3 9.7 9.5 9.5 1.8 157 1.0 142 0.8 0.7 1.1 145 0.8 - - - - - - 1.7 138 1.8 157 1.0 142 - - - 0.7 0.8 0.7 1.1 145 0.8 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0.3 0.9 1.2 - 1.2 9.39 1.31 159 0.79 6.56 0.83 103 0.64 7.18 0.94 115 0.67 - - - - 6.24 0.39 85 0.27 1.2 6.24 0.39 85 0.27 24 61 85 - 75 75 3 8 11 - 5 5 1 3 4 - 3 3 7 19 26 - 10 10 - 0.007 7.33 0.93 97 0.46 0.50 0.06 0.02 0.10 - - - 0.3 2.1 9.34 1.30 158 0.78 25 6.38 0.58 93 0.43 136 2.4 6.71 0.66 100 0.47 161 3 13 16 1 6 8 7 30 36 1. 2. 3. In situ metal estimates were not reported in 2016 but are included for 2017 No Ore Reserves have been estimated for Teutonic Bore Bentley has undergone mining depletion with total ore mining of ≈ 0.45 Mt grading 8.16% Zn, 1.28% Cu, 137 g/t Au and 0.58 g/t Au 28 — IGO ANNUAL REPORT 2017 MINERAL RESOURCES AND ORE RESERVES – CONT’D STOCKMAN PROJECT TABLE 11 — 30 JUNE 2016 / 2017 STOCKMAN PROJECT — MINERAL RESOURCES 30 June 2016 30 June 2017 Deposit JORC Code Class Grades In situ Metal Grades In situ Metal Tonnes (Mt) Zn Cu (%) (%) Ag (g/t) Au (g/t) Zn Cu (kt) (kt) Ag (Moz) Au (koz) Tonnes (Mt) Zn Cu (%) (%) Ag (g/t) Au (g/t) Zn Cu (kt) (kt) Ag (Moz) Au (koz) Currawong Measured Indicated Inferred - 9.5 0.8 - 4.2 2.2 - 2.0 1.4 Subtotal Currawong 10.3 4.0 2.0 Wilga Measured Indicated Inferred - - - 3.0 4.80 2.00 0.7 5.50 3.70 - 42 23 41 - 31 34 - 1.2 0.5 1.1 - 0.5 0.4 Subtotal Wilga 3.7 4.93 2.32 32 0.5 Stockpiles Measured Total Measured Indicated Inferred - - - - - - 12.5 4.34 2.00 1.5 3.7 2.5 Stockman Total 14.0 4.3 2.1 - - 39 28 38 - - 1.0 0.5 1.0 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1. 2. The estimates for Stockman are unchanged since 2016 In situ metal not reported in 2016 - - - - - - - - - 9.5 4.20 2.00 42 1.20 399 190 13 367 0.8 2.2 1.4 10.3 4.0 2.0 - - - 23 41 - 0.5 18 11 1 13 1.1 417 201 13 379 - - 3.0 4.80 2.00 31 0.50 144 0.7 3.7 - - 5.5 3.7 34 0.4 39 4.9 2.3 32 0.5 183 - - - - - - - - - - - 60 26 86 - - - 3 1 4 - - - 48 9 57 - - 12.5 4.34 2.00 39 1.03 543 250 16 415 1.5 3.7 2.5 14.0 4.3 2.1 28 38 0.5 56 37 1 22 1.0 599 287 17 437 TABLE 12 — 30 JUNE 2016 / 2017 STOCKMAN PROJECT — ORE RESERVES 30 June 2016 30 June 2017 Deposit JORC Code Class Grades In situ Metal Grades In situ Metal Tonnes (Mt) Zn Cu (%) (%) Ag (g/t) Au (g/t) Zn Cu (kt) (kt) Ag (Moz) Au (koz) Tonnes (Mt) Zn (%) Cu (%) Ag (g/t) Au (g/t) Zn Cu (kt) (kt) Ag (Moz) Au (koz) Currawong Proved - - - - - Probable 7.4 4.30 2.10 40 1.20 Subtotal Currawong 7.4 4.30 2.10 40 1.20 Wilga Proved - - - - - Probable 1.6 5.60 2.10 31 0.50 Subtotal Wilga 1.6 5.60 2.10 31 0.50 Stockpiles Proved Total Proved Probable Stockman Total - - 9.0 9.0 - - - - 4.5 2.1 4.5 2.1 - - 39 39 - - 1.1 1.1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7.4 4.30 2.10 40 1.20 318 155 10 285 7.4 4.30 2.10 40 1.20 318 155 10 285 - 1.6 - - - - 5.60 2.10 31 0.50 1.6 5.60 2.10 31 0.50 - - - - - - - - - - - 90 90 - - - 34 34 - - - 2 2 - - - 26 26 - - 9.0 4.53 2.10 39 1.08 408 189 11 311 9.0 4.53 2.10 39 1.08 408 189 11 311 1. 2. The estimates for Stockman are unchanged since 2016 In situ metal not reported in 2016 IGO ANNUAL REPORT 2017 — 29 COMPETENT PERSON STATEMENTS Information in this report that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on the information compiled by the Competent Persons named in Table 13, which also includes, details of their respective professional organisation memberships, and their relationships to IGO. All Competent Persons named in Table 13 have provided IGO with written confirmation that they have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Each Competent Person named in Table 13 has also provided IGO with written consent to the inclusion in this report of the matters based on his or her, information in the form and context in which it appears, and that there are no issues that could be perceived as a material conflict of interest for public reporting. TABLE 13 — 30 JUNE 2016 / 2017 COMPETENT PERSONS Competent Person Professional Membership1 IGO Relationship Activity Responsibility Mr Paul Hetherington AusIMM – Member IGO full-time employee Mr Mark Drabble AusIMM – Member Optiro Pty Ltd full-time employee Data for Nova Operation Mineral Resource estimates Nova Operation Mineral Resource estimates Mr Rob Dennis AusIMM – Fellow IGO full-time employee Nova Ore Reserve estimates Mr Mark Kent AusIMM – Member AngloGold full-time employee Tropicana Mineral Resource estimates Mr Jason Vos AusIMM – Member AngloGold full-time employee Tropicana Ore Reserve estimates Ms Somealy Sheppard AIG – Member IGO full-time employee Long Operation Mineral Resource estimates Mr Mark Bradley AusIMM – Member IGO full-time employee Long Operation Ore Reserve estimates Mr William Stewart AusIMM – Member IGO full-time employee Mr Brent Kail AusIMM – Member Mining Plus Pty Ltd full-time employee Jaguar Operation Mineral Resource estimates Jaguar – Bentley Ore Reserve estimates Mr Daniel Donald AusIMM – Member Entech Pty Ltd full-time employee Jaguar – Triumph Ore Reserve estimates Mr Matt Dusci AIG – Member IGO full-time employee Mr Geoff Davidson AusIMM – Member Mine & Cost Engineering full-time employee Mr Mark Murphy AIG – RPGeo IGO full-time employee Stockman Mineral Resource estimates & Annual report Exploration Results Stockman Ore Reserve estimates Annual Report Mineral Resource & Ore Reserve statements 1. AIG – Australian Institute of Geoscientists; AusIMM – Australasian Institute of Mining and Metallurgy 30 — IGO ANNUAL REPORT 2017 FINANCIAL REPORT 32 63 64 65 66 68 70 Directors’ Report Auditor’s Independence Declaration Consolidated Statement Of Profit Or Loss And Other Comprehensive Income Consolidated Balance Sheet Consolidated Statement Of Changes In Equity Consolidated Statement Of Cash Flows Notes To The Consolidated Financial Statements 121 Directors’ Declaration 122 127 Independent Auditor’s Report Additional Information For Listed Public Companies IGO ANNUAL REPORT 2017 — 31 DIRECTORS’ REPORT 30 JUNE 2017 Your Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Independence Group NL (referred to hereafter as the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2017. Directors The following persons held office as Directors of Independence Group NL during the whole of the financial year and up to the date of this report, unless otherwise noted: Directors' report 30 June 2017 Peter Bilbe Peter Bradford Debra Bakker Peter Buck Geoffrey Clifford Keith Spence Neil Warburton Debra Bakker was appointed as a Non-executive Director on 14 December 2016 and continues in office at the date of this report. Principal activities The principal activities of the Group during the financial year were non-operator gold mining from the Company’s 30% interest in the Tropicana Gold Mine, nickel mining at the Long Operation, zinc and by-product mining at the Jaguar Operations, development of the Nova Project and ongoing mineral exploration. Dividends Dividends paid to members during the financial year were as follows: Final ordinary dividend for the year ended 30 June 2016 of 2.0 cents (2015: 2.5 cents) per fully paid share Interim ordinary dividend for the year ended 30 June 2017 of 1.0 cent (2016: nil cents) per fully paid share 2017 $'000 11,734 5,867 17,601 2016 $'000 12,786 - 12,786 In addition to the above dividends, since the end of the financial year the Company has announced the payment of a final ordinary dividend of $5,867,000 (1 cent per fully paid share, fully franked) to be paid on 22 September 2017. Operating and financial review Independence Group NL is a company listed on the Australian Securities Exchange (ASX:IGO). The Company has been listed on the ASX since 17 January 2002, having traded as Independence Gold NL from 17 January 2002 to 19 December 2003. Independence Group NL 1 32 — IGO ANNUAL REPORT 2017 Operating and financial review (continued) Directors' report 30 June 2017 (continued) The Group currently has the following operations in the production phase in Western Australia: • The Tropicana Gold Mine (IGO: Non-operator joint venturer; 30% owned) is located 330km east northeast of Kalgoorlie. The Operation comprises approximately 3,000km2 of tenements (excluding the Beachcomber and Salt Creek joint venture tenure) stretching over more than 275km in strike length along the Yilgarn Craton and Fraser Range Mobile Belt Collision Zone. The Company targeted and pegged the area containing the current Ore Reserves in 2001. AngloGold Ashanti Australia Limited farmed into the project in 2002, discovering Tropicana, Havana and the Boston Shaker gold deposits in 2005, 2006 and 2010 respectively. The gold deposits occur over a 5km strike length with gold mineralisation intersected to a depth of 1km vertically beneath the natural surface. The decision by the Tropicana Joint Venture partners to develop the Tropicana Gold Mine was announced in November 2010 following a positive bankable feasibility study assessment. In early 2011, construction commenced with the site access road, followed by key site infrastructure including an aerodrome, accommodation village, borefields and processing plant. Mining of the Havana deposit commenced in 2012. Commissioning of the processing plant occurred in 2013, with the first gold poured in September 2013. In 2016, the gas pipeline project, which included the installation of 17 gas fired generators, was completed. The original designed nameplate capacity of the processing plant of 5.8Mtpa was achieved in March 2014. In 2016 and early 2017, the processing plant went through a redesign and optimisation project to increase the throughput capacity to 7.5Mtpa, a rate at which Tropicana was able to demonstrate in the second half of FY17. Independence Group NL 2 IGO ANNUAL REPORT 2017 — 33 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Operating and financial review (continued) • The Jaguar Operation, 100% owned, is located 60km north of Leonora and 300km north of Kalgoorlie in Western Australia and was acquired by the Company in 2011 through the acquisition of Jabiru Metals Limited. The Jaguar Operation comprises approximately 475 square kilometres of tenements situated on tenure that hosts a corridor of prospective stratigraphy. The prospective corridor has hosted three economically viable volcanogenic massive sulphides (VMS) ore bodies. The first deposit discovered was Teutonic Bore in 1976. The Jaguar deposit was discovered in 2002 (now mined out), approximately 4km south of Teutonic Bore. All mining is from the Bentley deposit located another 4km south of Jaguar, which was discovered in 2008. The Operation now consists of the Bentley zinc-copper-silver-gold underground mine, the Jaguar processing facility, administration infrastructure and the accommodation village. All ore is processed at the Jaguar concentrator, producing both a copper concentrate and a zinc concentrate, which is trucked to the port of Geraldton for export. The copper concentrate contains significant levels of silver and gold as by-products, which attract precious metal credits that contribute significantly to the Group’s revenues and cash flows. The zinc concentrate has minor amounts of silver in its concentrate. The Jaguar Operation has more recently undergone a number of value enhancement programs, one of which has demonstrated possible additional value through the discovery of the Triumph ore deposit, which pre-feasibility studies indicate will extend the Jaguar Operation’s mine life to at least 2022. In addition, a new lens, the Bentayga lens which is a down plunge of the Arnage lens at the Bentley deposit, has been discovered with a number of high grade intersections. • The Long Operation, 100% owned, located near Kambalda in Western Australia. The Company acquired the Long Operation from BHP Billiton Nickel West Pty Ltd (BHPB Nickel West) in September 2002. The mine was successfully re-commissioned in October 2002 and has been operating successfully and safely since then. Since recommissioning, and through to 30 June 2017, the Long Operation has mined 3.4Mt ore for 133,000t of contained nickel metal and has achieved exploration success with the discovery of the McLeay (2005) and Moran (2008) ore bodies. At the time of purchasing the Long Operation, the Group entered into an offtake agreement with BHPB Nickel West whereby the ore produced from the mine is delivered to the adjacent BHPB Nickel West treatment and production of nickel concentrate. The current offtake Kambalda Nickel Concentrator for toll agreement with BHPB Nickel West expires in February 2019. Based on current life of mine plans, the Long Operation will reach the end of its Ore Reserves and cease mining operations towards the end of FY18. The mine life has not been able to be extended due to recent near mine drilling and exploration programs being unsuccessful. The Company currently expects the mine will go into Care and Maintenance and to continue exploration. • The Nova Operation, 100% owned, was acquired as a development stage project via the acquisition of Sirius Resources NL (Sirius) in September 2015. Sirius was an ASX listed minerals exploration and development company with a key focus on the development of the Nova Project, located east of Norseman in Western Australia. The Nova Operation comprises an underground mine consisting of two orebodies, Nova and Bollinger, as well as a 1.5Mtpa processing facility that will produce a nickel concentrate and a copper concentrate, and associated infrastructure. Significant progress on Nova was achieved during FY17, with commercial production declared with effect from 1 July 2017, and progression of the ramp up of mining and processing activities towards the 1.5Mtpa nameplate production capacity. The Company is committed to transformational value creation through exploration discovery. During FY17, the Group has continued to build and develop its unique portfolio of highly prospective brownfields opportunities and belt scale greenfield projects. Key work activities completed during this period include: Independence Group NL 3 34 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Operating and financial review (continued) Brownfields Exploration • Tropicana Gold Mine - Resource extension drilling program continued during the first half of FY17 to form the basis of the Mineral Resource for the Long Island Study, based on a strip mining strategy designed to significantly reduce waste mining costs. Mineralisation remains open with high-grade ore shoots defined at both Boston Shaker and Havana South. Additional drilling will be completed in FY18 to test the down plunge extensions on these shoots as part of an underground mining study. • Jaguar Operation - Exploration activities during FY17 were focused on three key work streams including: • • • Underground drilling at Bentley which resulted in the discovery of a new massive sulphide lens named Bentayga, located approximately 250m to the south of the main Arnage lens; Resource definition drilling on the Triumph deposit to upgrade the Mineral Resource from Inferred to Indicated status on the upper Stag lens, which formed the basis of the Triumph Feasibility Study; and Reconnaissance exploration on the northern portion of the tenement portfolio at Heather Bore and Wilson Creek prospects. • • Nova Project - The focus for the Nova Project in FY17 has been on the underground grade-control drilling, with up to five underground diamond drill rigs executing this work program. The grade-control drilling is scheduled for completion towards the end of CY17 at which point the underground drilling focus will shift to exploration for resource extensions. Surface exploration activities include diamond drill testing of a number of electromagnetic plates along with the completion of a 2D seismic traverse. Long Operation - Reprocessing and reinterpretation of 3D seismic data has resulted in the development of a number of exploration targets at Long. These targets will be tested as part of the FY18 exploration program. Greenfields Exploration • • Fraser Range - During FY17, the Company has consolidated a prospective tenement package over the Fraser Range of approximately ~12,000km2. The tenement package is under explored and considered highly prospective for nickel, copper and cobalt mineralisation. Systematic geophysical and aircore drilling has commenced during the second half of FY17. Lake Mackay - Work programs during FY17 have included a regional aeromagnetic survey and the completion of an 18 hole RC program which lead to the discovery of the Grapple Prospect. Encouraging drilling intersections were reported and have defined mineralisation over a strike length of 300m with mineralisation remaining open to the west. Negotiations with the Central Land Council to gain access to the entire tenement package remains ongoing. This review should be read in conjunction with the financial statements and the accompanying notes. The objective and strategy of the Group is to create long-term shareholder value through the discovery, acquisition, development and operation of low cost and high grade gold and base metals projects. Since incorporation in 2002, and including the current financial year, the Company has returned to shareholders in excess of $164.2 million by way of a combination of $154.5 million fully franked dividends and a $9.7 million share buy back in 2009. The Company currently has 586,747,023 shares outstanding. The Group’s future prospects are dependent on a number of external factors that are summarised towards the end of this report. At the end of the financial year, the Group had cash and cash equivalents of $35.8 million and marketable securities of $15.3 million (2016: $46.3 million and $5.0 million respectively). Cash flows from operating activities for the Group were $77.7 million, a result of strong operational cash flows from the Tropicana, Long and Jaguar operations. Cash flows from operations were higher at Tropicana as a result of lower production costs, with payments reducing by $8.7 million, offset by lower gold and silver sales receipts. Long Operation delivered exceptional operational and financial results throughout the year, with cash from operating activities up 55% to $28.8 million. Jaguar’s contribution to cash from operations was $40.9 million. Included in cash from operating activities were two significant stamp duty payments made to the Western Australian State Government during the year. These comprised of $52.5 million for the interim assessment of Sirius Resources Limited’s Nova acquisition (in September 2015) and a $5.7 million payment in relation to the completed duties assessment for the Company’s acquisition of Jabiru Metals Limited (Jaguar Operation) in 2011. Lastly, payments for exploration expenditure amounted to $18.0 million for the year. Independence Group NL 4 IGO ANNUAL REPORT 2017 — 35 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Operating and financial review (continued) Cash outflows from investing activities decreased to $273.3 million for the year, compared to $430.4 million in FY16. This primarily comprised of the continued funding of the development of the Nova Operation, with the net project capital expenditure amounting to $165.6 million for the year. However, cash outflows from investing activities were lower than the prior year due to the FY16 year containing a cash payment for the acquisition of Sirius ($202.1 million, net of cash acquired). On 5 October 2016, the Company announced a takeover bid for Windward Resources Ltd, which resulted in cash outflows, net of cash acquired, of $17.6 million. Other movements in cash outflows from investing activities include $14.6 million associated with acquisition of property, plant and equipment, $13.4 million cash outflow in relation to borrowing costs on the syndicated debt facility and $6.0 million paid for other investments. Cash flows from financing activities during the financial year included the successful completion of an equity placement to raise $281.4 million, with associated capital raising costs of $7.5 million. As a result, the Company repaid $71.0 million of debt, reducing the Company’s outstanding debt to $200.0 million, and cancelled a further $79.0 million of its Term Loan Facility. As at 30 June 2017, the Company's facilities comprise $200.0 million in drawn term debt and a $200.0 million revolving credit facility, which remains undrawn at the end of the financial year. The term debt is scheduled to be repayable bi-annually over seven equal instalments commencing in September 2017 and ending September 2020, though the Company retains flexibility to repay debt earlier. During discussions of the operating results of its business, the Group’s Board and management monitor a measure commonly understood as Underlying EBITDA. The Board considers this measure to be important to the Group and investors alike, as it represents a useful proxy to measuring an operation’s cash generating capabilities. Underlying EBITDA is calculated as profit before tax adjusted for finance costs, interest income, asset impairments, retention and redundancy costs, depreciation and amortisation. Underlying EBITDA increased relative to the previous financial year as can be seen in the following chart: Net profit after tax (NPAT) for the year was $17.0 million, compared to a loss of $58.8 million in the previous financial year. The current year gain includes an impairment of the Stockman Project of $17.1 million after tax, resulting from the previously announced sale which is expected to be completed in FY18. In addition, NPAT was also impacted by the recognition of $6.4 million of retention and redundancy costs associated with the less than one year anticipated remaining mine life of the Long Operation. Independence Group NL 5 36 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Operating and financial review (continued) Directors' report 30 June 2017 (continued) Below is a reconciliation of Underlying EBITDA to NPAT for FY17: Depreciation and amortisation expense of $89.8 million was $9.9 million lower than the previous financial year (2016: $99.7 million), in line with the lower reserve depletion throughout the year, and includes $47.5 million relating to Tropicana, $16.5 million to Jaguar Operation, $24.5 million to Long Operation and the balance to corporate assets. Independence Group NL 6 IGO ANNUAL REPORT 2017 — 37 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Operating and financial review (continued) Operations Tropicana Operation Tropicana revenue for the period was $211.9 million, marginally lower than the previous year result of $215.0 million. The Company’s share of gold refined and sold was 128,601 ounces, down 5% on the prior year as a result of lower grade milled following the cessation of grade streaming in mid-FY16. This was partially offset by an increase in ore milled for the year, a total of 7.3 million tonnes, as a result of a plant throughput optimisation project completed during FY17. The average AUD gold price achieved throughout the period was $1,649 per ounce, an increase of $71 per ounce compared to the previous period. Cash costs per ounce produced, which comprises the costs of producing gold at the mine site and includes credit adjustments for waste stripping costs and inventory build and draw costs, were $817 per ounce, while All-in Sustaining Costs (AISC) per ounce sold were $1,162 per ounce. AISC comprises of cash costs and capitalised sustaining deferred waste stripping costs, sustaining exploration costs, sustaining capital and non-cash rehabilitation accretion costs. AISC excludes improvement capital expenditure and other sustaining or expansion exploration expenditure. Total Tropicana assets increased by 23.5% due to ongoing contributions by the Company to the operation by way of cash calls paid to the joint venture manager ($154.9 million for the year). Tropicana liabilities largely remained steady, reducing by $2.7 million to $34.0 million. During the year, a total of 7.9Mt of full grade ore (>0.6g/t), 1.0Mt of marginal ore (grading between 0.4 & 0.6g/t Au) and 73.2Mt of waste material was mined, with the average run-of-mine grade for full grade ore (>0.6g/t Au) being 2.05g/t Au for the year. Ore milled was 7.3Mt, which was up 12% on the prior year as a result of the processing plant optimisation work, while grade milled was 2.07g/t for FY17. At year end, the capitalised run of mine stockpile totalled 9.5Mt grading an average of 0.93g/t (2016: 9.0Mt at 0.96g/t). Based on current Ore Reserves, the mine currently has a life of approximately 7.5 years. The table below outlines the key results and operational statistics during the current and prior year. Tropicana Gold Mine Total revenue Segment operating profit before tax Total segment assets Total segment liabilities Gold ore mined (>0.6g/t Au) Gold ore mined (>0.4 and 0.6g/t Au) Waste mined Gold grade mined (>0.6g/t) Ore milled Gold grade milled Metallurgical recovery Gold recovered Gold produced Gold refined and sold (IGO share) Cash Costs All-in Sustaining Costs (AISC)* $'000 $'000 $'000 $'000 '000 dmt '000 dmt '000 dmt g/t '000 dmt g/t % ounces ounces ounces $ per ounce produced $ per ounce sold 2017 211,915 58,300 1,037,257 34,071 7,900 975 73,249 2.05 7,326 2.07 89.1 431,005 431,625 128,601 817 1,162 2016 214,998 64,330 840,174 36,813 7,289 1,210 50,350 2.13 6,528 2.39 89.3 448,546 448,116 135,864 730 918 * All-in Sustaining Costs is a measure derived by the World Gold Council. On 27 June 2013, the Council released a publication outlining definitions of both Cash Costs and All-in Sustaining Costs. Independence Group NL 7 38 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Operating and financial review (continued) Operations (continued) Long Operation The Long Operation continued to supply ore to BHPB Nickel West under its ore tolling agreement, whereby the Group is paid for the nickel metal contained in the ore mined, less applicable ore toll charges and payability discounts. Total revenue increased by 10% during FY17, due to 4% higher realised AUD nickel prices combined with favourable quotation period adjustments. Production continued around the lower volumes following a restructure implemented in FY16 which discontinued a number of mining methods, however this had a positive impact on cash costs. Nickel metal production year on year was unchanged with higher grades offsetting lower tonnes mined. During the year a total of 205,372t of ore was mined, sourced from Moran (72%), Long Lower (22%) and McLeay (6%), with the majority of ore continuing to be mined from long hole stoping. Payable cash costs including royalties (net of copper credits) were lower at $3.28/lb (2016: $3.67/lb). Based on current Ore Reserves, the mine will cease mining operations within the next 12 months. The table below highlights the key results and operational statistics during the current and prior year. Long Operation Total revenue Segment operating (loss) profit before tax Total segment assets Total segment liabilities Ore mined Nickel grade Copper grade Tonnes milled Nickel delivered Copper delivered Metal payable (IGO share) - Nickel - Copper Ni cash costs and royalties* * Cash costs include credits for copper. Jaguar Operation $'000 $'000 $'000 $'000 tonnes head % head % tonnes tonnes tonnes tonnes tonnes A$ per pound of payable metal 2017 70,475 716 38,693 40,402 205,372 4.11 0.29 205,372 8,433 592 5,098 240 3.28 2016 63,926 (3,532) 65,738 35,200 215,337 3.94 0.28 215,337 8,493 610 5,125 247 3.67 The Jaguar Operation continued to ship copper and zinc concentrates out of the Geraldton port throughout the year. The Company recently completed an internal value enhancement study that included a series of metallurgical test programs, combined with engineering design, costing and financial evaluations, to assess the feasibility of producing a new precious metal concentrate. The study work demonstrated that the process plant improvements are technically and financially feasible and would deliver significant value for the business with the additional extensions to mine life through the development of Triumph and/or Bentayga. The project would involve the upgrade of the Jaguar process plant from a two-product flotation circuit to a four-phase, three product flotation circuit that would produce higher-grade copper and zinc concentrates through higher metallurgical recoveries from all Bentley ores. Additionally, a new third concentrate would be produced consisting of lead, gold and silver, referred to as a High Precious Metals (HPM) concentrate. Revenue for FY17 increased by $4.5 million as a result of higher AUD dollar zinc metal prices and lower treatment and refining costs following a renewed purchase contract during the year. Segment operating profit before tax increased by $16.2 million over the prior year, due to $9.2 million lower depreciation and amortisation expense and $4.5 million higher segment revenue, while production costs were in line with the previous financial year. The Bentley underground mine underperformed during the year, with lower than planned underground production which was a result of ventilation issues delaying access to continuous ore supply from higher grade stopes as well as reducing the amount of development ore mined. As a result, ore was supplied from lower grade remnant areas within the upper levels of the mine. Ore mined was 444,700 tonnes, at a zinc grade of 8.3% and copper grade of 1.3%. Independence Group NL 8 IGO ANNUAL REPORT 2017 — 39 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Operating and financial review (continued) Operations (continued) Jaguar Operation (continued) Processing plant performance was constrained by the availability of ore from the Bentley underground mine, resulting in 62,093 fewer tonnes milled, which was 12.3% lower than the prior year. Based on current Ore Reserves only, approximately 2.5 years. the Bentley underground mine is currently anticipated to have a life of The table below outlines the key results and operational statistics during the current and prior year. Jaguar Operation Total revenue Segment operating profit before tax Total segment assets Total segment liabilities Ore mined Copper grade Zinc grade Silver grade Gold grade Ore milled Metal in concentrate - Copper - Zinc - Silver - Gold Metal payable (IGO share) - Copper - Zinc - Silver - Gold Zinc cash costs and royalties* $'000 $'000 $'000 $'000 tonnes % % g/t g/t tonnes tonnes tonnes ounces ounces tonnes tonnes ounces ounces A$/lb total Zn metal produced 2017 137,470 33,534 175,917 25,665 444,700 1.3 8.3 134 0.52 443,485 4,565 32,638 1,376,521 2,532 4,377 27,067 951,182 2,328 0.76 2016 132,987 17,317 145,892 22,816 497,751 1.7 8.9 128 0.75 505,578 7,412 39,335 1,603,565 4,880 7,122 32,634 1,071,989 4543 0.53 * Cash costs include credits for copper, silver and gold. Nova Operation The Nova Operation is based on a designed 1.5Mtpa underground operation with decline access, 1.5Mtpa processing plant and associated infrastructure and services. The principal stoping methods is sub-level open stoping with paste fill to maximise extraction of the orebody. The stopes measure up to 25 metres by 25 metres horizontally and 70 metres in height. The processing plant comprises conventional crushing and grinding by open circuit SAG mill, followed by a ball mill in closed circuit, and sulphide flotation to produce separate copper and nickel concentrates. Significant progress was achieved during FY17 to ramp up Nova mining, with the mine contractor Barminco continuing to advance development and stoping, with the emphasis shifting to production drilling and stoping activities toward the end of the financial year. Mine design and scheduling continues to be optimised to reflect the increased understanding of the orebody through the ongoing grade control drilling program and ongoing mining activity. This work has delivered further reductions in total metres of development whilst focusing on operational flexibility and the number of mining fronts that can be brought on line in FY18. Since commissioning in October 2016, the processing plant has been constrained by ore production from underground and, as such, has operated on a campaign basis. Campaign processing has allowed the process design and installed equipment to be tested but has not provided opportunity for the process to be optimised. With the commencement of mining of the first of the larger stopes from the Nova underground mine, the processing plant transitioned to continuous operations towards the end of June 2017. Independence Group NL 9 40 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Operating and financial review (continued) Operations (continued) Nova Operation (continued) Based on current Ore Reserves, the Nova mine is currently anticipated to have an initial life of approximately 10 years. External factors affecting the Group's results The Group operates in an uncertain economic environment and its performance is dependent upon the result of inexact and incomplete information. As a consequence, the Group’s Board and management monitor these uncertainties and mitigate the associated risk of adverse outcomes where possible. The following external factors are all capable of having a material adverse effect on the business and will affect the prospects of the Group for future financial years. Commodity prices The Group’s operating revenues are sourced from the sale of base metals and precious metals that are priced by the London Metals Exchange and, as the Group is not a price maker with respect to the metals it sells, it is, and will remain, susceptible to adverse price movements. The Group mitigates its exposure to commodity prices through a financial risk management policy in which a percentage of anticipated usage can be hedged. To this end, gold hedging in FY18 and FY19 represents approximately 42% and 30% respectively of the Group's share of forecast annual gold production. The Company has also initiated diesel hedging in order to protect against increases in oil prices. As at year end, the Company had hedged approximately 75% and 19% of anticipated usage for FY18 and FY19 respectively. Exchange rates The Group is exposed to exchange rate risk on sales denominated in United States dollars (USD) whilst its Australian dollar (AUD) functional currency is the currency of payment to the majority of its suppliers and employees. The monthly average AUD/USD currency pair strengthened from 0.7272 for the 2016 financial year to 0.7544 for the year ended 30 June 2017. A weaker AUD implies a higher AUD receipt of sales denominated in USD. The Group’s policy is to mitigate adverse foreign exchange risk by transacting commodity hedges in AUD equivalent terms where possible. Downstream processing markets The price of sea freight, smelting and refining charges are market driven and vary throughout the year. These also impact on the Group’s overall profitability. Interest rates Interest rate movements affect both returns on funds on deposit as well as the cost of borrowings. Furthermore, AUD and USD interest rate differentials are intimately related to movements in the AUD/USD exchange rate. Native Title With regard to tenements in which the Group has an existing interest in, or will acquire an interest in the future, it is the case that there are areas over which Native Title rights exist, or may be found to exist, which may preclude or delay exploration, development or production activities. The Company engages suitably qualified personnel to assist with the management of its exposure to native title risks, including appropriate legal and community relations experts. These risks are discussed in more detail in the Company's Sustainability Report which can be found on the Company's website. Exposure to economic, environmental and social sustainability risks The Group has material exposure to economic, environmental and social sustainability risks, including changes in environmental regulatory legislation. The Group employs suitably qualified personnel to assist with the management of its exposure to environmental and social sustainability risks, including appropriate health and safety personnel, as well as heritage and environmental experts. These risks are discussed in more detail in the Company's Sustainability Report which can be found on the Company's website. Other external factors and risks • Operational performance including uncertain mine grades, seismicity ground support conditions, grade control, in fill resource drilling, mill performance and experience of the workforce; Independence Group NL 10 IGO ANNUAL REPORT 2017 — 41 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Operating and financial review (continued) External factors affecting the Group's results (continued) Other external factors and risks (continued) - - Contained metal (tonnes and grades) are estimated annually and published in resource and reserve statements, however actual production in terms of tonnes and grade often vary as the orebody can be complex and inconsistent. Active underground mining operations can be subjected to varying degrees of seismicity. This natural occurrence can represent significant safety, operational and financial risk. To mitigate this risk substantial amounts of resources and technology are used in an attempt to predict and control seismicity. • Exploration success or otherwise; - Due to the nature of an ever depleting reserve/resource base, reserves/resources presents a significant operational risk. the ability to find or replace • Operating costs including labour markets and productivity; - Labour is one of the main cost drivers in the business and as such can materially impact the profitability of an operation. Changes in market supply and demand of products; - Any change in supply or demand impacts on the ability to generate revenues and hence the profitability of an operation. Changes in government taxation legislation; Changes in health and safety regulations; Environmental issues and social expectations; and Assumption of estimates that impact on reported asset and liability values. • • • • • Significant changes in the state of affairs Significant changes in the state of affairs of the Group during the financial year were as follows: During the current year, the Company conducted a fully underwritten institutional placement (Placement) and raised $250.0 million. The Placement comprised an issue of 66,666,667 new shares in the Company at a price of $3.75 per share (Placement Price). to facilitate retail shareholder The Company also conducted a non-underwritten Share Purchase Plan (SPP) participation of up to $15,000 per eligible shareholder at the Placement Price, subject to an overall cap of $30.0 million (the Placement and SPP together being the Equity Raising). The SPP was oversubscribed, however in recognition of the strong interest in the SPP by eligible retail shareholders, the Company's Board resolved to accept all valid applications without any scale back. The SPP resulted in the issue of an additional 8,388,689 ordinary shares and raised $31.5 million. The Company undertook the Equity Raising to strengthen its balance sheet and to provide greater financial flexibility to the Equity Raising provided funding for the remaining development capital fund growth initiatives. Specifically, expenditure for the Nova Project, reducing the requirement for further drawdown under the Company's existing debt facilities. The Equity Raising also provided additional funds for the payment of residual acquisition costs (stamp duty), funding for debt repayment and general corporate purposes, including working capital. The Company also restructured its existing banking facilities during the period. In July 2015, the Company entered into a syndicated facility agreement (Facility Agreement) with National Australia Bank Limited, Australia and New Zealand Banking Group and Commonwealth Bank of Australia Limited for a $550.0 million unsecured committed term facility. The Facility Agreement comprises: • • A $350.0 million amortising term loan facility expiring in September 2020; and A $200.0 million revolving loan facility expiring in September 2020. Following the Equity Raising discussed above, the Company repaid $71.0 million of the amortising term loan facility and also cancelled a further $79.0 million of the same facility. Following this restructure, the Company has available facilities of: amortising loan facility of $200.0 million, which is fully drawn at balance date; and revolving loan facility of $200.0 million, which is currently undrawn. During the period the Company also completed an off-market takeover of Windward Resources Ltd (Windward). Windward was a listed public company holding a number of tenements within the Fraser Range region. Independence Group NL 11 42 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Significant changes in the state of affairs (continued) The takeover comprised a cash price of $0.19 per share and the acquisition was completed in December 2016. The total cost of the acquisition, including transaction costs, was $22.1 million. This balance included $4.5 million of cash balances acquired and resulted in a net cash outflow for the period of $17.6 million. There have been no other significant changes in the state of affairs of the Group during the year. Events since the end of the financial year On 30 August 2017, the Company announced that a final dividend for the year ended 30 June 2017 would be paid on 22 September 2017. The dividend is 1 cent per share and will be fully franked. On 26 July 2017, the Company reported an interim Mineral Resource estimate for the Nova Operation based on improved geological understanding and results of close spaced diamond core ‘grade control’ drilling on the Nova deposit. The revised Mineral Resource estimate reported ~15% lower tonnage with marginally higher nickel and copper grades. Other than the above, there has been no other transaction or event of a material and unusual nature likely, in the opinion of the Directors, to significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. Environmental regulation The Group’s operations are subject to significant environmental regulation under the laws of the Commonwealth and various States of Australia. During the year there were no non-compliance incidents. The Group is subject to the reporting obligations of the National Greenhouse and Energy Reporting Act 2007, under which the Group reports its greenhouse emissions, energy consumption and production. Systems have been put in place to comply with these reporting requirements. The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use. The Environmental Policy is available in the Sustainability section of the Company’s website. Information on directors Peter Bilbe - Chairman and Independent Non-executive Director Qualifications BEng (Mining) (Hons), MAusIMM Tenure Board member since March 2009 and Chairman since July 2011. Special responsibilities Mr Bilbe is Chair of the Nomination & Governance Committee and a member of the Remuneration Committee, Audit Committee and Sustainability & Risk Committee. Other directorships Mr Bilbe is currently a director of Intermin Resources Limited. He was also previously a director of Northern Iron Limited. Peter Bradford - Managing Director and Chief Executive Officer Qualifications BAppSc (Extractive Metallurgy), FAusIMM, MSMME Tenure Managing Director and Board member since March 2014. Special responsibilities Mr Bradford is the executive in charge of the day to day management of the Group’s activities, including operations, risk management and corporate development. He is also a member of the Nomination & Governance Committee and Sustainability & Risk Committee. Other directorships Mr Bradford was previously a director of Asanko Gold Inc. Independence Group NL 12 IGO ANNUAL REPORT 2017 — 43 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Information on directors (continued) Debra Bakker - Independent Non-executive Director from 14 December 2016 Qualifications MAppFin, BBus (FinAcc), GradDip FINSIA, MAICD Tenure Board member since her appointment on 14 December 2016. Special responsibilities Ms Bakker is a member of the Audit Committee, Remuneration Committee, Nomination & Governance Committee and Sustainability & Risk Committee. Other directorships Ms Bakker does not currently hold any directorships of listed entities. Peter Buck - Independent Non-executive Director Qualifications M.Sc. (Geology), MAusIMM Tenure Board member since October 2014. Special responsibilities Mr Buck is Chair of the Remuneration Committee and a member of the Audit Committee, Nomination & Governance Committee and Sustainability & Risk Committee. Other directorships Mr Buck is currently a non-executive director of Antipa Minerals Ltd. Geoffrey Clifford - Independent Non-executive Director Qualifications BBus, FCPA, FGIA, FAICD Tenure Board member since 2012. Special responsibilities Mr Clifford is Chair of the Audit Committee and a member of the Remuneration Committee, Nomination & Governance Committee and Sustainability & Risk Committee. Other directorships Mr Clifford is currently non-executive chairman of Saracen Mineral Holdings Limited. Keith Spence - Independent Non-executive Director Qualifications BSc (Geophysics) (Hons) Tenure Board member since December 2014. Special responsibilities Mr Spence is Chair of the Sustainability & Risk Committee and a member of the Remuneration Committee, Audit Committee and Nomination & Governance Committee. Other directorships Mr Spence is currently the non-executive chairman of Base Resources Limited and a non-executive director of Oil Search Limited and Murray & Roberts Holdings Limited. Mr Spence was also previously a director of Clough Limited and non-executive chairman of Geodynamics Limited. Neil Warburton - Non-executive Director Qualifications Assoc. MinEng WASM, MAusIMM, FAICD Tenure Board member since October 2015. Special responsibilities Mr Warburton is a member of the Remuneration Committee, Nomination & Governance Committee and Sustainability & Risk Committee. Other directorships Mr Warburton is currently a non-executive director of Australian Mines Limited and Flinders Mines Ltd. He was previously a non-executive director of Sirius Resources NL, Namibian Copper Limited and Peninsular Energy Limited and non-executive chairman of Red Mountain Mining Ltd. Independence Group NL 13 44 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Company secretary Ms Joanne McDonald was appointed to the position of Company Secretary on 5 October 2015. Ms McDonald is a qualified Chartered Secretary with over 12 years' experience working for listed companies in Australia and the UK. Ms McDonald was previously Assistant Company Secretary with Paladin Energy Ltd and, during her eight years at Paladin, she also held the role of Company Secretary of Summit Resources Ltd. Ms McDonald is a Fellow of the Governance Institute Australia. Meetings of directors The numbers of meetings of the Company's board of Directors and of each Board Committee held during the year ended 30 June 2017, and the numbers of meetings attended by each Director were: Meetings of committees Full meetings of directors B A 5 5 10 10 10 10 10 10 10 10 10 9 10 9 Remuneration Committee B A 2 2 4 4 ** ** 4 4 4 4 4 4 4 3 Audit Committee A 2 6 ** 6 6 5 3 B 2 6 ** 6 6 6 4 Debra Bakker1 Peter Bilbe Peter Bradford Peter Buck Geoff Clifford Keith Spence Neil Warburton2 Nomination & Governance Committee B A 2 2 4 4 4 4 4 4 4 4 4 4 4 3 Sustainability and Risk Committee B 1 5 5 5 5 5 5 A 1 5 5 5 5 5 4 A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee during the year ** = Not a member of the relevant committee 1. Appointed a Non-executive director on 14 December 2016 2. Ceased to be a member of the Audit Committee on 23 January 2017 Directors interests in shares and share rights of the Company At the date of this report, the interests of the Directors in the shares and share rights of Independence Group NL were as follows: Ordinary fully paid shares Share rights Debra Bakker Peter Bilbe Peter Bradford Peter Buck Geoffrey Clifford Keith Spence Neil Warburton Total 5,200 32,000 800,000 22,200 10,000 22,125 106,034 997,559 - - 352,391 - - - - 352,391 Independence Group NL 14 IGO ANNUAL REPORT 2017 — 45 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Remuneration report The Remuneration Report arrangements of the Company in accordance with the requirements of the Corporations Act 2001 and its regulations. for the year ended 30 June 2017 outlines the Director and executive remuneration Key Management Personnel (KMP) of the Group (also referred to as Executive Management) are detailed in the table below and are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director, whether executive or otherwise of the Company. Details of KMP covered in this report Non-executive and executive Directors (see pages 43 to 44 for details about each Director) Peter Bilbe Peter Bradford Debra Bakker Peter Buck Geoffrey Clifford Keith Spence Neil Warburton Non-executive Chairman Managing Director Non-executive Director Non-executive Director Non-executive Director Non-executive Director Non-executive Director Other key management personnel Name Keith Ashby Rob Dennis Matt Dusci Joanne McDonald Sam Retallack Scott Steinkrug Remuneration Committee Overview Position Head of Governance & Risk Chief Operating Officer Chief Growth Officer Company Secretary Head of People & Culture Chief Financial Officer The Company’s Remuneration Committee (Committee) is made up entirely of non-executive directors, the majority of whom are independent. The Committee is charged with assisting the Board by reviewing, on an annual basis, and making appropriate recommendations on the following: • • • • • the Company’s remuneration policy and structure, to ensure that it remains aligned to business needs and meets the Company’s remuneration principles; executive remuneration policy for KMP; equity based remuneration plans for KMP and other employees; superannuation arrangements for the organisation; and remuneration equity. The Committee, chaired by Peter Buck, held four meetings during the year. Ms Bakker and Messrs Bilbe, Clifford, Spence and Warburton are also Committee members. The Managing Director is invited to attend those meetings which consider the remuneration strategy of the Group and recommendations in relation to Executives. Further information on the Committee’s role, responsibilities and membership can be found at www.igo.com.au. Use of remuneration consultants The Committee undertakes a broad review of data derived from remuneration consultants who track industry levels to ensure it is fully informed when making remuneration decisions. During the year ended 30 June 2017 no remuneration recommendations, as defined by the Corporations Act, were provided by remuneration consultants. However, the Committee did utilise data provided by AON Hewitt McDonald ($5,030), Mercer Consulting ($4,500) and BDO Reward (WA) Pty Limited ($15,000) regarding salaries and benefits across the organisation. Independence Group NL 15 46 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Remuneration report (continued) Remuneration and Rewards Philosophy The Board recognises that, as a mid-tier diversified mining company, there is an added complexity to the business that depends upon the quality of its Directors, Executives and employees. To ensure the Company continues to succeed and grow, it must attract, motivate and retain highly skilled Directors, Executives and employees. To this end, the Company has adopted the following Remuneration and Reward Philosophy: • • Remuneration policy is transparent with information communicated to all employees to create a high level of understanding of the link between pay, performance and delivery against Company objectives and values; “At Risk” components, such as short-term incentives (STIs) and long-term incentives (LTIs) are designed to motivate and incentivise for high performance and are aligned with the Company’s strategic and business objectives to create short and long-term shareholder value; Learning and development is a quantifiable and essential component of all roles; Career planning is a valued component of the total reward philosophy and forms part of all development plans; and • • • Work/life programs aim to provide balance and additional value for people at all levels of the organisation. Remuneration components Component Vehicle Total fixed remuneration (TFR) Base salary and superannuation contributions. Objective • To provide competitive 'guaranteed' remuneration with reference to role, market and experience. Short-term incentive (STI) 50% cash and 50% equity (service rights) targeted at a percentage of TFR. The equity component will be subject to service and deferred for 12 months (50%) and 24 months (50%). • To provide an ‘at risk’ incentive to reward Executives and key personnel for current year performance. • To provide a deferred benefit to encourage the retention of Executives and key personnel. Long-term incentive (LTI) Performance rights based on a percentage of TFR. • To provide an ‘at risk’ grant to incentivise and motivate Executives to pursue the long-term growth and success of the Company; and • To provide a deferred benefit to support the retention of Executives and key personnel over time. Link to performance Annual performance of individuals towards the achievement of specific roles. STIs are a combination of Company and Individual KPIs to drive individual performance that deliver stretch outcomes. STIs aim to align an individual's performance with the achievement of the overall strategic plan and are measured against annual KPIs. LTIs are clearly focused on the achievement of mid to long-term shareholder value and the Company's long-term strategic objectives. Developments for FY17 FY17 was a year of transition for the Company with completion of manning up at the Nova Operation, increased focus on attracting and developing additional skills and better structuring and formalisation of the Company’s Remuneration and Rewards policies. In parallel, changes to the local labour market and the availability of high quality skills and experience in some professional and trade groups required careful consideration when setting remuneration policy and the acquisition of talent. The Board and Executive team understand that access to talented people, for all roles in the organisation, is a critical factor for ongoing success of the Company and its ability to grow. Anticipating the need for transition in FY17, the Committee undertook a significant review of the Company’s Remuneration and Rewards policies in 2016, to ensure continued alignment of employee performance and shareholder value in the changing labour market. As a result of the review, a number of changes were made which had effect from 1 July 2016. A summary of the key elements of the implemented changes is provided below: Independence Group NL 16 IGO ANNUAL REPORT 2017 — 47 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Remuneration report (continued) Developments for FY17 (continued) (i) Executive Management Remuneration • • • • • • • • no increase to Director's fees; increase to the Managing Director's TFR of 6.7% to $800,000*; no general increase to Executive TFR, with the exception of the Chief Growth Officer and the Chief Financial Officer who both received an increase of 7.7% to $420,000*; increase in the potential STI opportunity for the Managing Director to 70% of TFR and a decrease in LTI opportunity to 70% of TFR*; increase in the potential STI opportunity for executives to 30-50% of TFR and decrease in LTI opportunity to 20-40% of TFR*. * Note: the above increases were in line with market comparison data and took into account the additional responsibilities that came with the growth of the Company. alteration to the payment structure of STIs to be paid as a part cash payment (50%) and part service rights (50%) to further align the interests of shareholders and management teams. Service rights will vest in two tranches, with the first tranche of 50% vesting after 12 months following the award and the second tranche of 50% vesting after 24 months. introduction of a claw-back provision for any unvested STI and LTI awards in the case of fraud, dishonesty, gross misconduct or a material misstatement of the financial statements and subject to Board discretion; and continuation of a three year measurement period for LTI and the introduction of a gateway process for LTI vesting to provide the Board with the overriding discretion to adjust the LTI vesting if TSR is negative over the period. (ii) Group-wide Remuneration • • • • payment of a competitive and equitable TFR that incorporates a “pay for performance” consideration with no general CPI increase awarded; a revised benchmarking policy and reward grade system using a simplified Paterson Band type structure implemented across the organisation to provide greater transparency and clarity to all employees with regard to the remuneration philosophy and structure; levels of STI opportunity revised for the STI program, to ensure the Company remains competitive with its peer group for at-risk remuneration; and successful launch of the Employee Share Ownership Award to increase the level of employee share ownership and connection to shareholders. FY17 Executive Management Remuneration Remuneration for FY17 consisted of a mix of: • • total fixed remuneration (TFR); and at-risk remuneration, comprising STIs and LTIs. The mix of fixed and at-risk remuneration varies depending on the role and grading of Executives. It also depends on the performance of both the Company and the individual. Total fixed remuneration (TFR) Individual KMPs TFR for FY17 were as follows: Independence Group NL 17 48 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Remuneration report (continued) FY17 Executive Management Remuneration (continued) Total fixed remuneration (TFR) (continued) Name Peter Bradford Keith Ashby Rob Dennis Matt Dusci Joanne McDonald1 Sam Retallack Position Managing Director Head of Governance & Risk Chief Operating Officer Chief Growth Officer Company Secretary Head of People & Culture Scott Steinkrug Chief Financial Officer Directors' report 30 June 2017 (continued) TFR (30/6/2017) $ 800,000 TFR (30/6/2016) $ 750,000 333,975 498,225 420,000 280,000 333,975 420,000 333,975 498,225 390,000 280,000 333,975 390,000 TFR change in FY17 % 6.7% - - 7.7% - - 7.7% 1. Joanne McDonald ceased to be a KMP effective 30 June 2017 following an internal restructure of reporting lines. At-risk remuneration - STIs Specific KPIs are set and weighted at the beginning of each year and are designed to drive successful and sustainable financial and business outcomes, with reference to the Company's strategic plan and budgets. The Board assesses and sets the KPIs applicable to the Managing Director, and the Managing Director assesses and sets the KPIs for each of his direct reports in consultation with the Board. This process is cascaded throughout the organisation. FY17 KPIs Prior to the beginning of the FY17 year, the Board determined the KPIs listed in the table below reflected the key result areas of the business. Following a significant review of the Company's Remuneration and Reward policies in 2016, it was decided to substantially increase the weighting related to the financial performance of the Company and reduce the weighting of the individual KPI component. The following table indicates performance of KMP against FY17 KPIs. STIs will be paid to eligible Executives for the results achieved in September 2017: Key Result Area Operations and financial Assessed against budgeted Group underlying NPAT, delivery of Nova first concentrate production and achievement towards full mining and processing capacity. Growth Assessed against year on year improvement in Group reserves and completion of planned expansion to broaden tenure in the Fraser Range. ESG Measures Assessed against year on year improvement in ten lag and leading ESG (Environmental Social and Governance) metrics. Strategy Based on achievement of defined strategic growth initiatives and year on year improvement in agreed organisational culture and behaviours. KPI Measure (in summary)* Tropicana and Long delivered significantly better than budget. Jaguar delivered on budget with lower production offsetting higher metal prices. Overall result downgraded due to delays to Nova ramp up. Year on year improvement in reserves, primarily due to Tropicana and Jaguar reserve growth. Stretch target met for Fraser Range consolidation. Opportunity Achievement 40% 17.5% 10% 12.5% Year on year improvements delivered against most ESG metrics in FY17. 10% 10% Progress achieved on defined objectives. 20% 10% Independence Group NL 18 IGO ANNUAL REPORT 2017 — 49 DIRECTORS’ REPORT30 JUNE 2017 (continued)Remuneration report (continued) FY17 Executive Management Remuneration (continued) Directors' report 30 June 2017 (continued) At-risk remuneration - STIs (continued) Individual KPIs/Personal performance Assessed for each individual and designed to more specifically focus individual Executives on key performance elements that align to the Company's strategic plan and profitability drivers that are within the Executive's control. Assessed for each individual relative to 5-10 individual KPI's. 20% 8-18% * Due to the sensitive nature of some corporate KPIs the full detail on measures and achievement is confidential. Gating relating to payment of STIs for FY17 Company KPI Gating • • • No Operational/Financial component in the event of Company NPAT being negative before abnormal items; No Growth component in the event of a material downward restatement of the previous years; and No ESG component in the event of a fatality, permanent disabling injury or material environmental breach. Individual KPI Gating • No individual component in the event of a material breach of the Company’s Code of Conduct by the individual. The following table reflects a summary of eligible individual executives’ potential STI components as a percentage of TFR for amounts to be paid for FY17 compared to amounts paid for FY16: Name Peter Bradford Keith Ashby Rob Dennis Matt Dusci Position Managing Director Head of Governance & Risk Chief Operating Officer Chief Growth Officer Joanne McDonald Company Secretary Sam Retallack Head of People & Culture Scott Steinkrug Chief Financial Officer FY17 Potential STI1 % 70 FY17 Declared2 $ 350,000 FY16 Potential STI1 % 50 35 50 50 35 35 50 74,000 144,000 200,0004 66,500 74,000 132,000 30 40 40 30 30 40 FY16 Paid3 $ 280,000 60,000 120,000 120,000 37,5005 60,000 120,000 1. % of TFR (base salary plus superannuation). 2. To be paid in September 2017 50% in cash and 50% in service rights. 3. Paid in August 2016. 4. Amount includes FY17 STI of $139,000 plus an additional special bonus of $61,000 for extraordinary contribution on specific projects during the year. 5. Pro-rata entitlement based on commencement date. Appointed Company Secretary on 5 October 2015. The payment of all STIs is subject to Board approval. The Board has the discretion to adjust remuneration outcomes higher or lower to prevent any inappropriate reward outcomes, including reducing (down to zero, if appropriate) any STI. FY16 KPIs As reported in the 2016 Annual Report, STIs paid in August 2016 were for the performance by eligible Executives in FY16. The following table indicates the performance of KMP against FY16 KPIs: Independence Group NL 19 50 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Remuneration report (continued) FY17 Executive Management Remuneration (continued) At-risk remuneration - STIs (continued) Key Result Area Operations and financial Near-term growth Longer-term growth Sustainability KPI Measure (in summary)* Assessed against Group underlying NPAT, Jaguar and Long production, Jaguar and Long mine life and Tropicana conceptual studies. Assessed against completion of Sirius transaction, integration of Sirius assets and people, completion of Nova Project optimisation study and development timetable and expenditure. Stretch target achieved. Assessed against measures in line with growth strategy. Assessed against systems and processes and ESG measures. Opportunity Achievement 17.5% 12.5% 15% 17.5% 10% 7.5% 2.5% 5.0% Individual KPIs/Personal performance As determined for each individual executive 50% 40-50% * Due to the sensitive nature of some corporate KPIs the full detail on measures and achievement is confidential. At-risk remuneration - LTIs The LTI component of the remuneration package is to reward executive directors, senior managers and other invited employees in a manner which aligns a proportion of their remuneration package with the creation of shareholder wealth over a longer period than the STI. The Independence Group NL Employee Incentive Plan (EIP) was approved by shareholders at the Annual General Meeting in November 2016. Under the EIP, participants are granted share rights for no consideration that will only vest if certain performance conditions are met and the employees are still employed by the Group at the end of the vesting period. Participation in the EIP is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. The EIP replaced the previous Independence Group NL Employee Performance Rights Plan (PRP) which was approved at the Annual General Meeting of the Company in November 2011 and re-approved at the Annual General the PRP will continue in Meeting in November 2014. Any existing unvested performance rights issued under accordance with their terms under the PRP. In FY17, the Managing Director had the opportunity to earn 70% of his TFR as an LTI. All other Executives had the opportunity to earn between 20-40% of their TFR as an LTI. The quantum of share rights issued in FY17 was determined by the Executive’s TFR; the applicable multiplier; and the face value of the Company's shares, calculated as the 20 day volume weighted average price (VWAP) to 26 August 2016. During the period, 589,967 share rights were issued as FY17 LTIs to executive KMP and senior managers in accordance with the EIP. Additionally, 48,443 shares were issued in accordance with the Employee Share Ownership Award (ESOA) implemented in FY17 to those employees who did not receive LTI share rights. Refer to note 27 for further information of the ESOA. The following share rights were issued to executive KMP in relation to FY17: Independence Group NL 20 IGO ANNUAL REPORT 2017 — 51 DIRECTORS’ REPORT30 JUNE 2017 (continued)Remuneration report (continued) FY17 Executive Management Remuneration (continued) At-risk remuneration - LTIs (continued) Name Peter Bradford Keith Ashby Rob Dennis Matt Dusci Position Managing Director Head of Governance & Risk Chief Operating Officer Chief Growth Officer Joanne McDonald Company Secretary Sam Retallack Head of People & Culture Scott Steinkrug Chief Financial Officer 1. Share rights awarded at 20 day VWAP to 26 August 2016 of $4.15. 2. Share rights awarded at 20 day VWAP to 20 August 2015 of $3.45. 3. Approved by shareholders at the 2016 Annual General Meeting. 4. Pro-rata entitlement based on commencement date. Directors' report 30 June 2017 (continued) Number of share rights issued for FY17 period1 135,0003 17,000 49,000 41,000 14,000 17,000 41,000 Number of share rights issued for FY16 period2 217,391 19,361 78,116 62,174 10,5864 19,361 62,174 The number of share rights able to be issued under the EIP is limited to 5% of the issued capital of the Company. The 5% limit includes grants under all plans made in the previous five years (with certain exclusions under the Corporations Act 2001). At the end of FY17 this percentage stands at 0.96%. There are no voting or dividend rights attached to the share rights. Vesting of share rights Vesting of the EIP share rights granted to executive KMP is based on a continuous service condition and performance conditions as detailed below. Service condition The service condition is met if employment with IGO is continuous for three years commencing on or around the grant date and is aimed at retaining key personnel. The treatment of LTI awards for executives whose employment ceases prior to vesting depends on the reason for cessation of employment and is subject to Board discretion to determine otherwise. If, in the opinion of the Board, the executive acts fraudulently or dishonestly, or is in material breach of his or her obligations to any Group entity, then the Board in its absolute discretion may determine all the executive's unvested share rights will lapse and the Board's discretion will be final and binding. Performance condition The TSR scorecard for the three year measurement period will be determined based on a percentile ranking of the Company's TSR results relative to the TSR of each of the companies in the peer group over the same three year measurement period. Reflecting on market practice, the Board considers that relative TSR is an appropriate performance hurdle because it ensures that a proportion of each participant’s remuneration is linked to the return received by shareholders from holding shares in a company in the peer group over a particular period. There is no re-testing provision of the TSR performance condition following the initial testing at the end of the three year measurement period. Board discretion on vesting The Board has overriding discretion to adjust the LTI vesting if, on assessment, absolute TSR is negative over the performance period. Peer group The peer group used to determine relative TSR is comprised of constituents of the S&P ASX 300 Metals and Mining Index. Independence Group NL 21 52 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Remuneration report (continued) FY17 Executive Management Remuneration (continued) At-risk remuneration - LTIs (continued) Vesting of share rights (continued) The Company's TSR performance for share rights issued during FY17 will be assessed against the following 28 peer group companies: Peer Group Alacer Gold Corp. BHP Billiton Limited Fortescue Metals Group Ltd Lynas Corporation Limited Northern Star Resources Ltd OZ Minerals Limited Rio Tinto Limited South32 Limited Sandfire Resources NL Western Areas Limited Vesting schedule Alumina Limited BlueScope Steel Limited Gold Road Resources Limited Metals X Limited OceanaGold Corporation Pilbara Minerals Limited Regis Resources Limited Saracen Mineral Holdings Limited Sims Metal Management Limited Beadell Resources Ltd Evolution Mining Limited Iluka Resources Limited Newcrest Mining Limited Orocobre Limited Perseus Mining Limited Resolute Mining Limited St Barbara Limited Syrah Resources Limited The vesting schedule of the share rights subject to relative TSR testing is as follows: Relative TSR performance Less than 50th percentile Between 50th and 75th percentile 75th percentile or better Level of vesting Zero Pro-rata straight line percentage between 50% and 100% 100% Note: The relative TSR performance condition of the share rights granted in FY15 (which were due to vest on 1 July 2017) was tested post 30 June 2017, and resulted in a relative TSR performance for the period 1 July 2014 to 30 June 2017 of less than the 50th percentile of the comparator group and as such all the share rights lapsed and were cancelled. This will be accounted for in the FY18 Remuneration Report. Share trading policy The trading of shares issued to participants under the EIP is subject to, and conditional upon, compliance with the Company’s Dealing in Securities Standard. The Standard also prohibits all employees, including Directors and senior management, from entering into any hedging arrangement over unvested securities issued pursuant to any share scheme, performance rights plan or option plan. Share rights granted prior to 30 June 2014 Vesting of the share rights granted to executive KMP prior to 30 June 2014 were subject to a combination of the Company’s shareholder return and return on equity. The final tranche of these outstanding share rights was assessed at 30 June 2016 and there are no further share rights outstanding which are subject to these performance conditions. The the following performance hurdles were performance rights vested if, over the three year measurement period, achieved: Shareholder return The vesting of 75% of the share rights at the end of the third year was based on measuring the actual shareholder return over the three year period compared with the change in the S&P ASX 300 Metals and Mining Index (Index) over that same period. The portion of share rights (75% of the total) that vested based on the comparative shareholder return was: Shareholder return 100% of the Index Between 100% and 115% of the Index 115% of the Index or greater Level of vesting 25% Pro-rata straight line percentage 100% Independence Group NL 22 IGO ANNUAL REPORT 2017 — 53 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Remuneration report (continued) FY17 Executive Management Remuneration (continued) At-risk remuneration - LTIs (continued) Share rights granted prior to 30 June 2014 (continued) Return on equity The vesting of the remaining 25% of the share rights at the end of the third year was based on the average return on equity over the three year period compared with the average target return on equity as set by the Board for the same period. Return on equity (ROE) for each year was calculated in accordance with the following formula: ROE = Net profit after tax / Total shareholders’ equity The target ROE used was 10%. The portion of share rights (25% of the total) that vested based on the comparative return on equity was: Actual ROE 100% of average target ROE Between 100% and 115% of average target ROE 115% of average target ROE or greater Level of vesting 25% Pro-rata straight line percentage 100% LTI - Non-executive directors The EIP permits non-executive directors to be eligible employees and therefore to participate in the plan. It is not currently intended that non-executive directors will be issued with share rights under the EIP and any such issue would be subject to all necessary shareholder approvals. Developments for FY18 The Western Australian labour market in which the Company competes is expected to continue to strengthen in FY18, resulting in continuing competition for talent. The Board and Executive team appreciate the importance of competitive remuneration to ensure that the Company remains able to attract, motivate and retain the valued team of employees built in FY17. In FY18, the Company will continue to focus on alignment of employee performance and shareholder value. The Company reviews all remuneration practices annually. As a result of the review conducted in FY17, a number of changes have been actioned for FY18, with effect from 1 July 2017. Completed changes and/or progress towards remuneration objectives will be reported in more detail in the 2018 Remuneration Report, however a summary of the key elements of the FY18 program are provided below: Group-wide remuneration • • • • • • review of operational rosters to ensure the Company maximises operational productivity while focused on market competitive terms and conditions for all employees; LTI performance metrics were reviewed and for FY18 grants will incorporate two performance measures equally weighted: (i) relative TSR and (ii) absolute TSR; further review, investigation and implementation of flexible work arrangements across the organisation; review of group wide remuneration benchmarking and award of a group wide CPI increment (or consideration of) for all roles; strengthening and extension of the Company wide investment in learning, development and training; and continued revision of the STI program, with a particular focus on maximising shareholder value delivered by specific business units. Executive management remuneration • • • no increase in TFR for Managing Director; increases in TFR for Executive KMPs in line with market benchmarking and to ensure that Executive fixed remuneration remains competitive within the comparator and broader industry groups for similar roles; no change to STI levels; and Independence Group NL 23 54 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Remuneration report (continued) Developments for FY18 (continued) Executive management remuneration (continued) • increases in LTI levels to achieve improved connection between long-term shareholder value creation and the executive team through heavier weighting of at-risk reward in favour of LTI and following independent mining industry benchmarking and trends. Review of for greater the Company's comparator group and industry remuneration trends indicate the potential alignment of Executive performance and long-term value creation for shareholders when “at-risk” remuneration is more heavily weighted to the award of LTI benefits. As such the Board and Committee have chosen to adjust Executive STI/LTI percentages in favour of an increased LTI opportunity for FY18. The following table reflects remuneration components available to Executives effective 1 July 2017: Name Peter Bradford1 Keith Ashby2 Rob Dennis3 Matt Dusci4 Sam Retallack2 Scott Steinkrug4 Position Managing Director Head of Governance & Risk Chief Operating Officer (COO) Chief Growth Officer (CGO) Head of People & Culture Chief Financial Officer (CFO) TFR FY18 $ 800,000 350,000 500,000 500,000 350,000 450,000 Potential STI5 Potential LTI %6 70 35 50 50 35 50 %6 110 50 80 80 50 80 1. No increase in TFR. Increase in LTI from 70%. 2. Increase in TFR from $333,975. Increase in LTI from 20%. 3. Increase in TFR from $498,225. Increase in LTI from 40%. 4. Increase in TFR from $420,000. Increase in LTI from 40%. 5. No increase in STI levels. 6. Potential STI and LTI are based on a % of TFR comprising base salary and superannuation only. If maximum at-risk remuneration were to be earned for FY18, the percentage of fixed to at-risk remuneration would be as follows: Summary of Remuneration Annual Components for Executive Management, if all at risk payments are made Company performance and remuneration A key and continued focus for the Board and Company is to align its Executive remuneration to the strategic and business objectives of the Group and the creation of shareholder value. The table below shows measures of the Group's financial performance over the last five years as required by the Corporations Act 2001. These measures are not necessarily consistent with the measures used in determining the at-risk amounts of remuneration to be awarded to KMPs as other internal measures are used to drive these results. Revenue ($ millions) Profit for the year attributable to owners ($ millions) Dividends payments (cents per share) Share price at year end ($ per share) 2017 2016 421.9 17.0 3.0 3.15 413.2 (58.8) 2.5 3.28 2015 495.3 76.8 11.0 4.17 2014 399.1 48.6 7.0 4.35 2013 225.9 18.3 5.0 2.26 Independence Group NL 24 IGO ANNUAL REPORT 2017 — 55 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Remuneration report (continued) Executive contracts Remuneration and other terms of employment for the executives are formalised in service agreements. The service agreements specify the components of remuneration, benefits and notice periods. Participation in the STI and LTI plans is subject to the Board's discretion. Other major provisions of the agreements relating to remuneration are set out below. Name Position Term of agreement Base salary including super- annuation $ Peter Bradford Managing Director No fixed term 800,000 Keith Ashby Rob Dennis Matt Dusci Head of Governance & Risk No fixed term 350,000 Chief Operating Officer Chief Growth Officer No fixed term 500,000 No fixed term 500,000 Sam Retallack Head of People & Culture No fixed term 350,000 Scott Steinkrug Chief Financial Officer No fixed term 450,000 Notice period Termination benefit 6 months 3 months 3 months 3 months 3 months 3 months 6 months1 6 months 6 months 6 months 6 months 6 months 1. In addition to the above, Mr Bradford is entitled to a maximum termination benefit payable of up to 12 months of average annual base salary should the Company terminate the employment contract without cause, but only if such payment would not breach ASX Listing Rules. A termination benefit of three month's remuneration is payable to Mr Bradford should the Company terminate the employment contract due to illness, injury or incapacity. Remuneration expenses for KMP's The following table shows the cash value of earnings realised by executive KMP during FY17. The cash value of earnings realised include cash salary, superannuation and cash bonuses received in cash during the year and the intrinsic value of LTI vesting during the financial year. to the disclosures required by the Corporations Act and Accounting Standards, This is in addition and different particularly in relation to share rights. As a general principle, the Accounting Standards require a value to be placed on share rights based on probabilistic calculations at the time of grant, which may be reflected in the Remuneration Report even if ultimately the share rights do not vest because performance and service hurdles are not met. By contrast, this table discloses the intrinsic value of share rights, which represents only those share rights which actually vest and result in shares issued to a KMP. The intrinsic value is the Company’s closing share price on the date of vesting. Actual cash value of earnings realised for FY17 Name Peter Bradford Keith Ashby Rob Dennis Matt Dusci Joanne McDonald Sam Retallack Scott Steinkrug3 Fixed remuneration (TFR)1 $ 800,000 333,975 498,255 420,000 280,000 333,975 420,000 STI2 $ LTI3 $ Total Actual Remuneration $ 280,000 60,000 120,000 120,000 37,5004 60,000 120,000 - - - - - - 181,420 1,080,000 393,975 618,255 540,000 317,500 393,975 721,420 1. Includes base salary and superannuation. 2. Represents the amount paid in the financial year for performance in FY16. 3. Value of share rights granted in FY13 and vesting on 1 September 2016 at a market price of $3.65. No other executives were entitled to the LTI rights which were granted in FY13 as they were not employed by the Company at that time. 4. Pro-rata entitlement based on appointment as Company Secretary on 5 October 2015. Independence Group NL 25 56 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Remuneration report (continued) Remuneration expenses for KMP's (continued) The following tables show details of the remuneration received by the Group's KMP for the current and previous financial year. Short-term employee benefits Post- employment benefits Cash salary and fees1 $ Cash bonus2 $ Super- annuation $ Long- term benefits Long service leave3 $ Share-based payments Share rights4 $ Total $ 2017 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2016 2016 59,776 219,178 219,178 123,288 123,288 123,288 123,288 123,288 123,288 109,589 79,286 70,154 - - - - - - - - - - - - 788,668 717,681 280,000 270,000 308,520 317,920 499,253 157,269 400,344 370,584 262,617 174,784 306,173 331,045 402,699 369,564 246,379 121,487 54,795 - 109,589 - 109,589 82,192 34,247 - 54,795 31,963 109,589 82,192 82,192 68,493 5,679 20,822 20,822 11,712 11,712 11,712 11,712 11,712 11,712 10,411 7,532 6,655 35,000 35,000 34,180 28,975 35,000 14,540 30,000 30,000 27,546 16,254 34,180 30,000 35,000 33,835 27,808 16,407 - - - - - - - - - - - - - - - - - - - - - - - - 65,455 240,000 240,000 135,000 135,000 135,000 135,000 135,000 135,000 120,000 86,818 76,809 18,395 11,028 378,464 279,523 1,500,527 1,313,232 4,838 2,555 11,060 1,748 7,633 3,951 2,625 709 9,161 12,173 16,484 11,132 7,093 18,105 4,828 69,966 12,277 101,134 65,773 12,370 2,640 28,573 15,325 101,134 121,899 86,016 420,438 354,278 724,868 185,834 648,700 552,500 339,405 194,387 432,882 420,506 664,906 618,622 449,488 (5,198) (113,303) 87,886 Name Non-executive Directors Debra Bakker5 Peter Bilbe Peter Bilbe Peter Buck Peter Buck Geoffrey Clifford Geoffrey Clifford Keith Spence Keith Spence Neil Warburton6 Neil Warburton Mark Bennett7 Executive Directors Peter Bradford Peter Bradford Other key management personnel Keith Ashby Keith Ashby9 Rob Dennis8 Rob Dennis Matt Dusci Matt Dusci Joanne McDonald9 Joanne McDonald Sam Retallack Sam Retallack Scott Steinkrug Scott Steinkrug Brett Hartmann10 Tony Walsh11 Independence Group NL 26 IGO ANNUAL REPORT 2017 — 57 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Remuneration report (continued) Remuneration expenses for KMP's (continued) 1. Cash salary and fees includes movements in annual leave provision during the year. 2. Cash bonus excludes superannuation contribution component of STI which is shown in Post-employment benefits. 3. Long service leave relates to movements in long service leave provision during the year. 4. Rights to shares granted under the EIP and PRP are expensed over the performance period, which includes the vesting period of the rights, in accordance with AASB 2 Share-based Payment. Refer to note 27 for details of the valuation techniques used for the EIP and PRP. 5. Ms Bakker was appointed a Non-executive Director effective 14 December 2016. 6. Mr Warburton was appointed a Non-executive Director on 12 October 2015. 7. Mr Bennett was appointed a Non-executive Director on 12 October 2015 and resigned effective 31 May 2016. 8. Mr Dennis was appointed Chief Operating Officer effective 1 March 2016, having previously held the role of General Manager, Project Development (from 22 September 2015) and prior to that Chief Operating Officer, Sirius Resources NL. 9. Ms McDonald commenced employment as Company Secretary on 5 October 2015. 10. Effective 1 March 2016, Mr Hartmann became the General Manager, Nova, having previously held the role of Chief Operating Officer. 11. Mr Walsh ceased employment with the Company on 9 October 2015. Non-executive Director remuneration policy The remuneration of Non-executive Directors is determined by the Board within the maximum amount approved by shareholders in general meeting. Non-executive Directors are not entitled to retirement benefits other than statutory superannuation or other statutory required benefits. Non-executive Directors do not participate in share or bonus schemes designed for Executive Directors or employees. The remuneration of Non-executive Directors is fixed to encourage impartiality, high ethical standards and independence on the Board. The available Non-executive Directors’ fees pool is $1,500,000 which was approved by shareholders at the Annual General Meeting on 16 December 2015, of which $885,000 was being utilised at 30 June 2017 (2016: $885,000). The Board resolved, for a third consecutive year, not to increase Non-executive Directors’ fees for FY17. Non-executive Directors may provide additional consulting services to the Group, at a rate approved by the Board. No such amounts were paid to Directors during the current year. Base fees/Committee fees Chairman Non-executive Directors Chair Audit Committee Chair Remuneration Committee Chair Sustainability and Risk Committee Chair Nomination Committee 30 June 2017 $ 230,000 30 June 2016 $ 230,000 120,000 120,000 15,000 15,000 15,000 10,000 15,000 15,000 15,000 10,000 Independence Group NL 27 58 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Remuneration report (continued) Additional statutory information (i) Relative proportions of fixed vs at-risk remuneration expense The following table shows the relative proportions of remuneration that are linked to performance and those that are fixed, based on the amounts disclosed as statutory remuneration expense: Name Fixed remuneration1 2017 % 2016 % At risk - STI 2017 % 2016 % At risk - LTI 2017 % 2016 % Executive Directors of Independence Group NL Peter Bradford Other key management personnel of the group Keith Ashby Rob Dennis Matt Dusci Joanne McDonald Sam Retallack Scott Steinkrug Brett Hartmann Tony Walsh 56 82 74 66 85 79 67 - - 58 99 93 72 99 88 66 61 63 19 14 16 18 11 14 18 - - 21 - - 16 - 8 14 20 37 25 4 10 16 4 7 15 - - 21 1 7 12 1 4 20 19 - 1. Fixed remuneration paid is not based upon any measurable performance indicators. Non-performance based remuneration is based on relative industry remuneration levels and is set at a level designed to retain the services of the director or senior executive. (ii) Performance based remuneration granted and forfeited during the year The table below shows for each KMP how much of their STI cash bonus was awarded and how much was forfeited. It also shows the value of share rights that were granted, vested and forfeited during FY17. The number of share rights and percentages vested/forfeited for each grant are disclosed in the table on page 60. 2017 Peter Bradford Keith Ashby Rob Dennis Matt Dusci Joanne McDonald Sam Retallack Scott Steinkrug Total STI bonus (cash) LTI share rights Total opportunity $ 375,000 100,500 199,290 156,000 61,677 100,500 156,000 Awarded % 75 60 60 77 61 60 77 Forfeited % 25 40 40 23 39 40 23 Value granted1 $ 298,732 38,411 110,714 92,638 31,633 38,411 92,638 Value vested2 $ - - - - - - 106,367 Value forfeited2 $ - - - - - - 35,456 1. The value at grant date for share rights granted during the year as part of remuneration is calculated in accordance with AASB 2 Share-based Payment. Refer to note 27 for details of the valuation techniques used for the EIP. 2. Value of shares vested and forfeited is based on the value of the share right at grant date. Independence Group NL 28 IGO ANNUAL REPORT 2017 — 59 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Remuneration report (continued) Additional statutory information (continued) (iii) Terms and conditions of the share-based payment arrangements Share rights Share rights under the Company's EIP are granted annually. The shares vest after three years from the start of the financial year. On vesting, each right automatically converts into one ordinary share. The Executives do not receive any dividends and are not entitled to vote in relation to the rights during the vesting period. If an Executive ceases employment before the rights vest, the rights will be forfeited, except in limited circumstances that are approved by the Board. The value at grant date for share rights granted during the year as part of remuneration is calculated in accordance with AASB 2 Share-based Payment. Refer to note 27 for details of the valuation techniques used for the EIP. Grant date 22 May 2017 24 November 2016 18 November 2016 22 January 2016 16 December 2015 9 January 2015 20 November 2014 28 February 2014 28 February 2013 Vesting date 1 July 2019 1 July 2019 1 July 2019 1 July 2018 1 July 2018 1 July 2017 1 July 2017 1 July 2016 1 July 2015 Grant date value $2.30 $2.26 $2.21 $1.20 $1.56 $2.55 $2.84 $2.14 $2.06 (iv) Reconciliation of share rights held by KMP The table below shows the number of share rights that were granted, vested and forfeited during the year. Name Peter Bradford Keith Ashby Matt Dusci Rob Dennis Joanne McDonald Sam Retallack Scott Steinkrug Balance at the start of the year Granted during the year Vested during the year1 Forfeited during the year2 Balance at the end of the year (unvested) Maximum value yet to vest Year granted Number Number Number3 % Number3 % Number $ 2017 2016 2015 2017 2016 2017 2016 2015 2017 2016 2017 2016 2017 2016 2015 2017 2016 2015 2014 - 217,391 175,365 - 19,361 62,174 50,154 78,116 - 10,586 - 19,361 10,473 - 62,174 50,154 66,272 135,000 - 17,000 41,000 - 49,000 14,000 17,000 - 41,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 49,704 - 75 - 16,568 - 25 135,000 217,391 175,365 199,337 113,304 - 17,000 19,361 41,000 62,174 50,154 49,000 78,116 14,000 10,586 17,000 19,361 10,473 41,000 62,174 50,154 - 29,485 9,179 71,110 29,476 - 84,986 37,033 24,282 5,019 29,485 9,179 - 71,110 29,476 - - Independence Group NL 29 60 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) Directors' report 30 June 2017 (continued) Remuneration report (continued) Additional statutory information (continued) (iv) Reconciliation of share rights held by KMP (continued) 1. The Company achieved shareholder return over the 3 year period to 30 June 2016 of greater than 115% of the S&P ASX 300 Metals and Mining Index (Index) resulting in 100% vesting of the share rights attributable to shareholder return (75%). 2. The Company achieved less than 100% of average target Return on Equity (ROE) for the 3 year period to 30 June 2016 resulting in 0% vesting of the share rights attributable to ROE (25%). 3. No other vesting conditions for share rights granted in 2017, 2016 or 2015 were met during the year. (v) Shareholdings of KMP The number of ordinary shares in the Company held by each Director and other KMP, including their personally related entities, are set out below. 2017 Name Directors of Independence Group NL Debra Bakker Peter Bilbe Peter Bradford Peter Buck Geoffrey Clifford Keith Spence Neil Warburton HEADER Other key management personnel Keith Ashby Rob Dennis Matt Dusci Joanne McDonald Sam Retallack Scott Steinkrug Total Balance at the start of the period Received on vesting of share rights Other changes during the period Balance at the end of the year - 20,000 595,680 4,700 - - 103,368 53,885 16,644 9,900 - 19,865 46,845 870,887 - - - - - - - - - - - - 49,704 49,704 5,200 12,000 204,320 17,500 10,000 22,125 2,666 (53,885) - - - - (18,000) 5,200 32,000 800,000 22,200 10,000 22,125 106,034 - 16,644 9,900 - 19,865 78,549 201,926 1,122,517 (vi) Other transactions with key management personnel During the current financial year, there were no other transactions with key management personnel or their related parties. (vii) Voting of shareholders at last year's annual general meeting Independence Group NL received more than 90% of “yes” votes on its remuneration report for the 2016 financial year. The Company has endeavoured to address feedback received throughout the year on its remuneration practices through developments to be implemented in FY18. This feedback has included advice on the introduction of an additional performance condition for the LTI and continuing to ensure the weighting of the STI KPIs are more aligned with the financial performance of the Company. The Committee has continued to work to improve the transparency of its Remuneration Report and ensure remuneration across the business reflects the strategic direction of the Company. Shares under option * End of Remuneration Report * At the reporting date, there were no unissued ordinary shares under options, nor were there any ordinary shares issued during the year ended 30 June 2017 on the exercise of options. Independence Group NL 30 IGO ANNUAL REPORT 2017 — 61 DIRECTORS’ REPORT30 JUNE 2017 (continued)Directors' report 30 June 2017 (continued) Insurance of officers and indemnities During the financial year, the Company paid an insurance premium in respect of a contract insuring the Directors and executive officers of the Company and of any related body corporate against a liability incurred as such a Director or executive officer to the extent permitted by the Corporations Law. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify any officer of the Company or of any related body corporate against a liability incurred by such an officer. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. The Company was not a party to any such proceedings during the year. Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the Group are important. Details of the amounts paid or payable to the auditor (BDO Audit (WA) Pty Ltd) for non-audit services provided during the year are set out below. The Directors are satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 nor the principles set out in APES110 Code of Ethics for Professional Accountants. During the period the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms: Other services BDO Audit (WA) Pty Ltd firm: Other services in relation to the entity and any other entity in the consolidated Group Total remuneration for non-audit services Auditor's independence declaration 2017 $ 2016 $ 37,338 37,338 38,158 38,158 A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 63. Rounding of amounts The Company is of a kind referred to in ASIC Corporation Legislative Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in the directors' report. Amounts in the directors' report have been rounded off in accordance with that Legislative Instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar. This report is made in accordance with a resolution of Directors. Peter Bradford Managing Director Perth, Western Australia Dated this 29th day of August 2017 Independence Group NL 31 62 — IGO ANNUAL REPORT 2017 DIRECTORS’ REPORT30 JUNE 2017 (continued) AUDITOR’S INDEPENDENCE DECLARATION Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF INDEPENDENCE GROUP NL As lead auditor of Independence Group NL for the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Independence Group NL and the entities it controlled during the period. Glyn O'Brien Director BDO Audit (WA) Pty Ltd Perth, 29 August 2017 IGO ANNUAL REPORT 2017 — 63 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees 32 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017 Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2017 Revenue from continuing operations Other income Mining, development and processing costs Employee benefits expense Share-based payments expense Fair value movement of financial investments Depreciation and amortisation expense Rehabilitation and restoration borrowing expense Exploration costs expensed Royalty expense Ore tolling expense Shipping and wharfage costs Borrowing and finance costs Impairment of exploration and evaluation expenditure Impairment of other assets Acquisition and other integration costs Other expenses Profit (loss) before income tax Income tax (expense) benefit Profit (loss) for the period Notes 2 3 15 5 2017 $'000 421,926 - (146,135) (64,740) (1,147) 4,343 (89,773) (1,232) (20,139) (14,391) (9,606) (12,092) (26) (24,891) (135) (3,910) (11,635) 26,417 (9,406) 17,011 2016 $'000 413,188 3,862 (139,931) (66,975) (819) 2,374 (99,695) (707) (19,720) (12,557) (10,092) (16,143) (76) (35,518) - (65,137) (11,266) (59,212) 442 (58,770) Other comprehensive income Items that may be reclassified to profit or loss Effective portion of changes in fair value of cash flow hedges, net of tax Exchange differences on translation of foreign operations Other comprehensive income for the period, net of tax 241 4 245 404 - 404 Total comprehensive income (loss) for the period 17,256 (58,366) Profit (loss) for the period attributable to the members of Independence Group NL 17,011 (58,770) Total comprehensive income (loss) for the period attributable to the members of Independence Group NL 17,256 (58,366) Cents Cents Earnings (loss) per share for profit (loss) attributable to the ordinary equity holders of the Company: Basic earnings (loss) per share Diluted earnings (loss) per share 6 6 2.93 2.92 (13.12) (13.12) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Independence Group NL 34 64 — IGO ANNUAL REPORT 2017 CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2017 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Financial assets at fair value through profit or loss Derivative financial instruments Assets classified as held for sale Total current assets Non-current assets Receivables Inventories Property, plant and equipment Mine properties Exploration and evaluation expenditure Deferred tax assets Derivative financial instruments Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Borrowings Derivative financial instruments Provisions Total current liabilities Non-current liabilities Borrowings Derivative financial instruments Provisions Deferred tax liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY Consolidated balance sheet As at 30 June 2017 Notes 2017 $'000 2016 $'000 7 8 9 10 20 23 9 13 14 15 5 20 11 16 20 12 16 20 12 5 17 18 35,763 59,383 63,158 15,348 657 44,797 46,264 30,900 46,498 5,017 784 - 219,106 129,463 14 20,077 44,922 1,612,919 60,016 251,429 - 1,989,377 14 31,995 47,309 1,470,851 107,533 219,427 799 1,877,928 2,208,483 2,007,391 49,052 56,226 965 15,259 121,502 140,815 251 73,228 139,903 354,197 107,132 43,154 2,487 6,901 159,674 222,672 - 68,305 100,949 391,926 475,699 551,600 1,732,784 1,455,791 1,878,469 13,445 (159,130) 1,732,784 1,601,458 12,873 (158,540) 1,455,791 The above consolidated balance sheet should be read in conjunction with the accompanying notes. Independence Group NL 35 IGO ANNUAL REPORT 2017 — 65 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017 Consolidated statement of changes in equity For the year ended 30 June 2017 Issued capital $'000 Accumulated losses $'000 Hedging reserve $'000 Share- based payments reserve $'000 Foreign currency translation reserve $'000 Acquisition reserve $'000 Total equity $'000 Balance at 1 July 2015 737,324 (88,020) - 13,057 3,142 (8) 665,495 - 1,036 (1,036) - - - - 737,324 (86,984) (1,036) 13,057 3,142 (8) 665,495 Adjustment on adoption of AASB 9 (net of tax) Restated total equity at 1 July 2015 Loss for the period Other comprehensive income Effective portion of changes in fair value of cash flow hedges, net of tax Total comprehensive loss for the period Transactions with owners in their capacity as owners: Dividends paid Share-based payments expense Issue of shares - Employee Performance Rights Plan Shares issued on acquisition of subsidiary - - - - - 3,505 860,629 (58,770) - - 404 (58,770) 404 (12,786) - - - - - - - - - - - 819 (3,505) - - - - - - - - - - - - - - - (58,770) 404 (58,366) (12,786) 819 - 860,629 Balance at 30 June 2016 1,601,458 (158,540) (632) 10,371 3,142 (8) 1,455,791 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Independence Group NL 36 66 — IGO ANNUAL REPORT 2017 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017 (continued) Consolidated statement of changes in equity For the year ended 30 June 2017 (continued) Issued capital $'000 Accumulated losses $'000 Hedging reserve $'000 Share- based payments $'000 Acquisition reserve $'000 Foreign currency translation reserve $'000 Total equity $'000 Balance at 1 July 2016 Profit for the period 1,601,458 - (158,540) 17,011 (632) - 10,371 - 3,142 - (8) - 1,455,791 17,011 Other comprehensive income Effective portion of changes in fair value of cash flow hedges, net of tax Currency translation differences - current period Total comprehensive income for the period Transactions with owners in their capacity as owners: Dividends paid Share-based payments expense Issue of shares - Employee Performance Rights Plan Shares issued on capital raising Costs associated with capital raising (net of tax) - - - - - 820 281,459 (5,268) - - 241 - 17,011 241 (17,601) - - - - - - - - - - - - - 1,147 (820) - - - - - - - - - - - 4 4 - - - - - 241 4 17,256 (17,601) 1,147 - 281,459 (5,268) Balance at 30 June 2017 1,878,469 (159,130) (391) 10,698 3,142 (4) 1,732,784 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Independence Group NL 37 IGO ANNUAL REPORT 2017 — 67 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2017 Consolidated statement of cash flows For the year ended 30 June 2017 Notes 2017 $'000 2016 $'000 Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest and other costs of finance paid Interest received Payments for exploration expenditure Receipts from other operating activities Net cash inflow from operating activities Cash flows from investing activities Interest and other costs of finance paid Payments for property, plant and equipment Proceeds from sale of property, plant and equipment and other investments Payments for purchase of listed investments Payments for development expenditure Payments for capitalised exploration and evaluation expenditure Payment for acquisition of subsidiary, net of cash acquired Net cash (outflow) from investing activities Cash flows from financing activities Proceeds from issues of shares Share issue transaction costs Proceeds from borrowings Transaction costs associated with borrowings Repayment of borrowings Repayment of finance lease liabilities Payment of dividends Net cash inflow from financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the period 17(b) 17(a) 19 7 416,375 (323,416) 92,959 - 2,201 (18,022) 540 77,678 (13,431) (14,564) 2,418 (5,994) (220,481) (3,662) (17,574) (273,288) 281,459 (7,526) - - (71,000) - (17,601) 185,332 (10,278) 46,264 (223) 35,763 441,317 (320,926) 120,391 (49) 1,587 (20,032) 163 102,060 (6,866) (10,711) 16,961 (1,605) (215,489) (10,586) (202,052) (430,348) - - 271,000 (5,355) - (510) (12,786) 252,349 (75,939) 121,296 907 46,264 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Independence Group NL 38 68 — IGO ANNUAL REPORT 2017 About this report Independence Group NL is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the directors' report. The financial report of Independence Group NL (the Company) and its subsidiaries (collectively, the Group) for the year ended 30 June 2017 was authorised for issue in accordance with a resolution of the Directors on 28 August 2017. Basis of preparation This financial report is a general purpose financial report, prepared by a for-profit entity, which: • • • • • • Has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB); Has been prepared on a historical cost basis, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss and certain classes of property, plant and equipment; Is presented in Australian dollars with values rounded to the nearest thousand dollars or in certain cases, the in accordance with the Australian Securities and Investments Commission 'ASIC Corporation nearest dollar, Legislative Instrument 2016/191'; Presents comparative information where required for consistency with the current year's presentation; Adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the operations of the Group and effective for reporting periods beginning on or after 1 July 2016 as disclosed in note 32; and Does not early adopt Accounting Standards and Interpretations that have been issued or amended but are not yet effective with the exception of AASB 9 Financial Instruments (December 2010) as amended by 2013-0 (AASB 9 (2013)) which was adopted in the prior period. Key estimates and judgements In the process of applying the Group's accounting policies, management has made a number of judgements and applied estimates of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in the following notes: future events. The areas involving a higher degree of Note 5 Note 9 Note 12 Note 13 Note 14 Note 15 Note 27 Income tax expense Inventories Provisions Property, plant and equipment Mine properties Exploration and evaluation expenditure Share-based payments Basis of consolidation The consolidated financial statements comprise the financial statements of the Group. A list of controlled entities (subsidiaries) at year end is contained in note 24. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profit or losses resulting from intra-Group transactions have been eliminated. Subsidiaries are consolidated from is disposed. The acquisition of subsidiaries is the date on which control accounted for using the acquisition method of accounting. is obtained to the date on which control Independence Group NL IGO ANNUAL REPORT 2017 — 69 39 Contents of the notes to the consolidated financial statements Financial Performance 1 Segment information 2 Revenue 3 Other income 4 Expenses and losses 5 Income tax 6 Earnings per share Working Capital Provisions 7 Cash and cash equivalents 8 9 Trade and other receivables Inventories 10 Financial assets at fair value through profit or loss 11 Trade and other payables 12 Provisions Invested Capital 13 Property, plant and equipment 14 Mine properties 15 Exploration and evaluation Capital structure and financing activities 16 Borrowings 17 Contributed equity 18 Reserves 19 Dividends paid and proposed Risk 20 Derivatives 21 Financial risk management Group structure 22 Acquisition of Windward Resources 23 Assets held for sale 24 Subsidiaries Unrecognised items 25 Commitments and contingencies 26 Events occurring after the reporting period Other information 27 Share-based payments 28 Related party transactions 29 Parent entity financial information 30 Deed of cross guarantee 31 Remuneration of auditors 32 Summary of significant accounting policies 70 — IGO ANNUAL REPORT 2017 71 71 74 75 75 75 79 80 80 81 81 82 83 83 85 85 87 89 91 91 92 94 95 96 96 98 107 107 107 108 109 109 110 110 110 113 114 115 118 118 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) Financial Performance This section of the notes includes segment information and provides further information on key line items relevant to financial performance that the Directors consider most relevant, including accounting policies, key judgements and estimates relevant to understanding these items. 1 Segment information (a) Identification of reportable segments Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Group operates in predominantly only one geographic segment (ie. Australia) and has identified the following operating segments, being the Tropicana Operation, the Long Operation, the Jaguar Operation, the Nova Project and New Business and Regional Exploration Activities (New Business). The Tropicana Operation represents the Group’s 30% joint venture interest in the Tropicana Gold Mine. AngloGold Ashanti Australia Limited (AngloGold Ashanti) is the manager of the project and holds the remaining 70% interest. Programs and budgets are provided by AngloGold Ashanti and are considered for approval by the Company's Board. The Long Operation produces primarily nickel, together with copper, from which its revenue is derived. Revenue derived by the Long Operation is received from one customer, being BHP Billiton Nickel West Pty Ltd. The Registered Manager of the Long Operation is responsible for the budgets and expenditure of the operation, which includes exploration activities on the mine’s tenure. The Long Operation and exploration properties are owned by the Group’s wholly owned subsidiary Independence Long Pty Ltd. The Jaguar Operation primarily produces copper and zinc concentrate. Revenue is derived from multiple customers. The General Manager of the Jaguar Operation is responsible for the budgets and expenditure of the operation, responsibility for ore concentrate sales rests with the Chief Operating Officer. The Jaguar Operation and exploration properties are owned by the Group’s wholly owned subsidiary Independence Jaguar Pty Ltd. The Nova Project was acquired by the Company following the acquisition of Sirius Resources NL in September 2015. The Nova Project comprises the construction and development of the Nova nickel, copper and cobalt mine, located east of Norseman in Western Australia. The General Manager of the Nova Project is responsible for the budgets and expenditure of the Project. The Group’s Chief Growth Officer is responsible for budgets and expenditure relating to the Group’s regional exploration, scoping studies, feasibility studies and new business development. The New Business division does not normally derive any income. Should a project generated by the New Business division commence generating income or lead to the construction or acquisition of a mining operation, that operation would then be disaggregated from New Business and become reportable in a different segment. Independence Group NL 41 IGO ANNUAL REPORT 2017 — 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 1 Segment information (continued) (b) Segment results Year ended 30 June 2017 Tropicana Operation $'000 Long Operation $'000 Jaguar Operation $'000 Nova Project $'000 New Business and Regional Exploration Activities $'000 Total $'000 Revenue from external customers Other revenue 211,915 - 69,905 570 137,349 121 Total segment revenue 211,915 70,475 137,470 - - - - 65 65 419,169 756 419,925 Segment net operating profit (loss) before income tax SPACE Total segment assets 58,300 716 33,534 (752) (48,950) 42,848 1,037,257 38,693 175,917 1,398,182 110,712 2,760,761 SPACE Total segment liabilities SPACE Acquisition of property, plant and equipment SPACE Impairment loss before tax SPACE Depreciation and amortisation SPACE Other non-cash expenses Year ended 30 June 2016 34,071 40,402 25,665 823,010 37,689 960,837 2,479 788 7,525 2,092 - 12,884 - - - 47,575 24,463 16,502 - - 254 101 256 621 25,026 25,026 94 - 88,634 1,232 Total Revenue from external customers Other revenue 214,998 - 63,796 130 132,773 214 Total segment revenue 214,998 63,926 132,987 - - - - 30 30 411,567 374 411,941 Segment net operating profit (loss) before income tax SPACE Total segment assets SPACE Total segment liabilities SPACE Acquisition of property, plant and equipment SPACE Impairment loss before tax SPACE Depreciation and amortisation SPACE Other non-cash expenses 64,330 (3,532) 17,317 (196) (57,405) 20,514 840,174 65,738 145,892 1,213,261 111,412 2,376,477 36,813 35,200 22,816 682,152 33,588 810,569 4,540 1,638 1,779 516 - 8,473 - - - 50,282 22,503 25,703 - - 233 32 246 196 35,518 35,518 79 - 98,567 707 Independence Group NL 42 72 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 1 Segment information (continued) (c) Segment revenue A reconciliation of reportable segment revenue to total revenue is as follows: Revenue from external customers Other revenue from continuing operations Total revenue 2017 $'000 419,925 2,001 421,926 2016 $'000 411,941 1,247 413,188 Revenues for the Long Operation are all derived from a single customer, being BHP Billiton Nickel West Pty Ltd. Revenues for the Jaguar Operation were derived from multiple customers during the year. Revenues for the Tropicana Operation were derived from multiple customers during the year. (d) Segment net profit (loss) before income tax A reconciliation of reportable segment net profit before income tax to net profit (loss) before income tax is as follows: Segment net operating profit before income tax Interest revenue on corporate cash balances and other unallocated revenue Fair value movement of corporate financial investments Share-based payments expense Other corporate costs and unallocated other income Borrowing and finance costs Acquisition and other integration costs Depreciation expense on corporate assets Total net profit (loss) before tax (e) Segment assets A reconciliation of reportable segment assets to total assets is as follows: Total assets for reportable segments Intersegment eliminations Unallocated assets: Deferred tax assets Listed equity securities Cash and receivables held by the parent entity Office and general plant and equipment Total assets as per the balance sheet 2017 $'000 42,848 2,001 4,362 (1,147) (16,570) (26) (3,910) (1,141) 26,417 2016 $'000 20,514 1,247 2,396 (819) (16,298) (64) (65,137) (1,051) (59,212) 2017 $'000 2016 $'000 2,760,761 (847,104) 2,376,477 (616,812) 251,429 15,339 24,171 3,887 219,427 4,989 18,967 4,343 2,208,483 2,007,391 Independence Group NL 43 IGO ANNUAL REPORT 2017 — 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 1 Segment information (continued) (f) Segment liabilities A reconciliation of reportable segment liabilities to total liabilities is as follows: Total liabilities for reportable segments Intersegment eliminations Unallocated liabilities: Deferred tax liabilities Creditors and accruals Provision for employee entitlements Bank loans Total liabilities as per the balance sheet 2 Revenue Sales revenue Sale of goods Other revenue Interest revenue Other revenue Total revenue 2017 $'000 960,837 (828,456) 139,903 3,854 2,520 197,041 475,699 2016 $'000 810,569 (690,382) 100,949 63,358 1,280 265,826 551,600 2017 $'000 2016 $'000 419,169 419,169 411,567 411,567 2,217 540 2,757 1,458 163 1,621 421,926 413,188 (a) Recognition and measurement Revenue is measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Group and revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Sale of goods Revenue from the sale of goods is recognised when there is persuasive evidence indicating that there has been a transfer of risks and rewards to the customer. Sales revenue comprises gross revenue earned, net of treatment and refining charges where applicable, from the provision of products to customers, and includes hedging gains and losses. Sales are initially recognised at estimated sales value when the product is sold. Adjustments are made for variations in metals price, assay, weight and currency between the time of sale and the time of final settlement of sales proceeds. Interest income Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Independence Group NL 44 74 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 3 Other income Net foreign exchange gains Net gain on sale of investments Net gain on disposal of tenements 4 Expenses and losses Cost of sale of goods Employee benefits expenses Share-based payments expense Exploration costs expensed Rental expense relating to operating leases Rehabilitation and restoration borrowing costs Impairment of exploration and evaluation expenditure Impairment of assets Net loss of sale of property, plant and equipment Net foreign exchange losses Amortisation expense Depreciation Depreciation expense Less : amounts capitalised Depreciation expensed Borrowing and finance costs Borrowing and finance costs - other entities Amortisation of borrowing costs Less: amounts capitalised Finance costs expensed 5 Income tax (a) Income tax expense The major components of income tax expense are: Deferred income tax expense Current income tax (benefit) expense Income tax expense (benefit) Deferred income tax revenue (expense) included in income tax expense comprises: Increase in deferred tax assets Increase in deferred tax liabilities Deferred income tax expense (benefit) Independence Group NL 2017 $'000 - - - - 2017 $'000 235,134 64,740 1,147 20,139 1,597 1,232 24,891 135 613 570 76,652 14,427 (1,306) 13,121 8,706 4,099 (12,779) 26 2017 $'000 41,471 (32,065) 9,406 (29,247) 38,653 9,406 2016 $'000 907 1,433 1,522 3,862 2016 $'000 233,880 66,975 819 19,720 1,473 707 35,518 - 219 - 84,843 15,759 (907) 14,852 10,729 402 (11,055) 76 2016 $'000 17,087 (17,529) (442) (25,141) 24,699 (442) 45 IGO ANNUAL REPORT 2017 — 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 5 Income tax (continued) (b) Amounts recognised directly in equity Deferred income tax benefit (expense) related to items charged or credited to other comprehensive income or directly to equity: Recognition of hedge contracts Costs associated with capital raising Income tax expense reported in equity (c) Numerical reconciliation of income tax expense to prima facie tax payable Profit (loss) from continuing operations before income tax expense Tax expense (benefit) at the Australian tax rate of 30% (2016: 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Share-based payments Non-deductible costs associated with acquisition of subsidiary Other non-deductible items Capital losses not brought to account Previously unrecognised capital losses brought to account Difference in overseas tax rates Overseas tax losses not brought to account Adjustments for current tax of prior periods Income tax expense (benefit) 2017 $'000 104 (2,258) (2,154) 2017 $'000 26,417 7,925 51 1,173 - 84 - 46 126 1 9,406 2016 $'000 173 - 173 2016 $'000 (59,212) (17,764) (1,378) 19,234 17 - (721) 20 56 94 (442) (d) Reconciliation of carry forward tax losses, income tax paid and effective income tax rate (35,823) 59,654 Tax effected balances at 30% Carry forward tax losses at the beginning of the year Tax losses arising (recouped) from current income tax benefit (expense) Tax losses acquired through business combination Income tax paid during the year Carry forward tax losses at the end of the year 2017 $'000 166,506 32,065 - - 198,571 2016 $'000 92,958 17,529 56,019 - 166,506 Effective income tax rate -% -% Independence Group NL 46 76 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 - - - - - - - - - - - 1,974 - - - - 1,974 - - - Notes to the consolidated financial statements 30 June 2017 (continued) 5 Income tax (continued) (e) Deferred tax assets and liabilities Balance Sheet Profit or loss Equity 2017 $'000 2016 $'000 2017 $'000 2016 $'000 2017 $'000 2016 $'000 Acquisition of Subsidiary 2017 $'000 2016 $'000 Deferred tax liabilities Capitalised exploration expenditure Mine properties Deferred gains and losses on hedging contracts Trade debtors Consumable inventories Other (13,285) (115,721) (20,393) (73,270) (7,108) 42,451 (4,521) 26,853 (197) (6,906) (2,514) (1,280) (1,440) (3,932) (1,700) (214) (1,544) 2,974 814 1,066 (323) 2,555 (48) 183 Gross deferred tax liabilities (139,903) (100,949) 38,653 24,699 - - 301 - - - 301 - - 296 - - - 296 Deferred tax assets Property, plant and equipment Deferred losses on hedged commodity contracts Concentrate inventories Business-related capital allowances Provision for employee entitlements Provision for rehabilitation Mining information Carry forward tax losses Other 17,965 21,370 3,405 365 - 1,711 - 1,543 - (730) (684) 398 - - (197) - (123) - 5,509 5,007 2,056 1,554 (2,258) 4,740 21,813 715 198,571 1,751 2,654 19,908 1,022 166,506 1,249 (2,086) (1,905) 307 (32,065) (502) 46 (9,636) 370 (17,529) 1,070 - - - - - - - - - - - (300) (5,653) - - - - - - (1,974) - (56,019) - Gross deferred tax assets 251,429 219,427 (29,247) (25,141) (2,455) (123) (300) (63,646) Deferred tax expense (benefit) (f) Tax losses 111,526 118,478 9,406 (442) (2,154) 173 (300) (61,672) In addition to the above recognised tax losses, the Group also has the following capital tax losses for which no deferred tax asset has been recognised: Unrecognised capital tax losses Potential tax benefit @ 30% (2016: 30%) (g) Recognition and measurement 2017 $'000 280 84 2016 $'000 - - Current taxes The income tax expense or benefit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Independence Group NL 47 IGO ANNUAL REPORT 2017 — 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 5 Income tax (continued) (g) Recognition and measurement (continued) Current taxes (continued) The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred taxes Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Offsetting deferred tax balances Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. (h) Significant estimates The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining deferred tax assets and liabilities. There are many transactions and calculations during the ordinary course of business for which the ultimate tax determination is uncertain. In addition, deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future forecast taxable profits are available to utilise those temporary differences and losses, and the tax losses continue to be available having regard to the relevant tax legislation associated with their recoupment. The Australian consolidated tax group has recognised a deferred tax asset relating to carry forward tax losses of $198,571,000 at 30 June 2017 (2016: $166,506,000). The utilisation of this deferred tax asset amount depends upon future taxable amounts in excess of profits arising from the reversal of temporary differences. The Group believes this amount to be recoverable based on taxable income projections. Independence Group NL 48 78 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 6 Earnings per share (a) Earnings used in calculating earnings per share Profit (loss) used in calculating basic and diluted earnings per share attributable to ordinary equity holders of the parent is $17,011,000 (2016: $58,770,000 loss). (b) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Share rights Weighted average number of ordinary and potential ordinary shares used as the denominator in calculating diluted earnings per share 2017 Number 2016 Number 580,422,734 448,064,084 1,333,910 - 581,756,644 448,064,084 (c) Information concerning the classification of securities Share rights Share rights granted to executives and employees under the Company's Employee Incentive Plan are included in the calculation of diluted earnings per share in the current period. The share rights were not included in the calculation of diluted earnings per share in the prior period as they were anti-dilutive. The share rights are not included in the determination of basic earnings per share. Further information about the share rights is provided in note 27. (d) Calculation of earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing: • • the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: • • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. Independence Group NL 49 IGO ANNUAL REPORT 2017 — 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) Working Capital Provisions This section of the notes provides further information about the Group's working capital and provisions, including accounting policies and key judgements and estimates relevant to understanding these items. 7 Cash and cash equivalents Cash at bank and in hand Deposits at call 2017 $'000 35,733 30 35,763 2016 $'000 46,235 29 46,264 The Group has cash balances of $108,000 (2016: $2,360,000) not generally available for use as the balances are held by the Tropicana Joint Venture and may only be used in relation to joint venture expenditure. The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 21. (a) Reconciliation of profit (loss) after income tax to net cash inflow from operating activities Profit (loss) for the period Depreciation and amortisation Impairment of exploration and evaluation expenditure Impairment of assets Net (gain) loss on sale of non-current assets Fair value of movement of financial investments Non-cash employee benefits expense - share-based payments Amortisation of borrowing expenses Amortisation of lease incentive Foreign exchange gains (losses) on cash balances Change in operating assets and liabilities: (Increase) decrease in trade receivables (Increase) decrease in inventories (Increase) decrease in deferred tax assets (Increase) decrease in other operating receivables and prepayments (Increase) decrease in derivative financial instruments (Decrease) increase in trade and other payables (Decrease) increase in deferred tax liabilities (Decrease) increase in other provisions Net cash inflow from operating activities (b) Non-cash investing and financing activities 2017 $'000 17,011 89,773 24,891 135 613 (4,343) 1,147 - (78) 223 (10,425) 635 (29,445) (955) - (58,517) 38,850 8,163 77,678 2016 $'000 (58,770) 99,695 35,518 - (2,736) (2,374) 819 27 (72) (907) (6,488) (12,914) (25,264) 2,254 3,359 44,851 24,822 240 102,060 There were no non-cash investing and financing activities during the current or previous year. (c) Recognition and measurement Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the balance sheet. Independence Group NL 50 80 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 8 Trade and other receivables Trade receivables GST Receivable Sundry debtors Prepayments Notes to the consolidated financial statements 30 June 2017 (continued) 2017 $'000 50,047 4,372 2,139 2,825 59,383 2016 $'000 21,561 3,804 2,741 2,794 30,900 No balances within trade and other receivables contain impaired assets. The balance of trade receivables includes amounts of $1,547,000 (2016: $1,448,000) that are past due but not impaired. (a) Recognition and measurement (i) Trade receivables Trade receivables are generally received up to four months after the shipment date. The receivables are initially recognised at fair value. Trade receivables are subsequently revalued by the marking-to-market of open sales. The Group determines mark-to-market prices using forward prices at each period end for copper and zinc concentrates and nickel ore. (ii) Impairment of trade receivables Collectibility of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified. An allowance is made for doubtful debts based on credit losses expected over the life of the trade receivable taking into account information about past events, current conditions and forecasts of further economic conditions. On confirmation that the trade receivable will not be collectible, the gross carrying value of the asset is written off against the associated provision. 9 Inventories Current Mine spares and stores - at cost ROM inventory - at cost Concentrate inventory - at cost Work in progress - gold in process Gold in circuit Gold dore Non-current ROM inventory - at cost (a) Classification of inventory 2017 $'000 2016 $'000 20,447 29,516 10,078 - 882 2,235 63,158 16,368 19,513 7,058 1,175 1,145 1,239 46,498 20,077 20,077 31,995 31,995 Inventory classified as non-current relates to 0.6g/t to 1.2g/t grade gold ore stockpiles which are not intended to be utilised within the next 12 months but will be utilised beyond that period. Independence Group NL 51 IGO ANNUAL REPORT 2017 — 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 9 Inventories (continued) (b) Recognition and measurement (i) Ore, concentrate and gold inventories Inventories, comprising copper and zinc in concentrate, gold dore, gold in circuit and ore stockpiles, are valued at the lower of weighted average cost and net realisable value. Costs include fixed direct costs, variable direct costs and an appropriate portion of fixed overhead costs. A portion of the related depreciation, depletion and amortisation charge is included in the cost of inventory. (ii) Stores and fuel Inventories of consumable supplies and spare parts are valued at the lower of cost and net realisable value. Cost is assigned on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion, and the estimated costs necessary to make the sale. The recoverable amount of surplus items is assessed regularly on an ongoing basis and written down to its net realisable value when an impairment indicator is present. (c) Key estimates and judgements The Group reviews the carrying value of inventories regularly to ensure that their cost does not exceed net realisable value. In determining net realisable value various factors are taken into account, including estimated future sales price of the product based on prevailing spot metals prices at the reporting date, less estimated costs to complete production and bring the product to sale. Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the amount of contained metal based on assay data, and the estimated recovery percentage based on the expected processing method. 10 Financial assets at fair value through profit or loss Shares in Australian listed companies - at fair value through profit or loss 2017 $'000 15,348 15,348 2016 $'000 5,017 5,017 (a) Amounts recognised in profit or loss During the current year, the changes in fair values of financial assets resulted in a gain to the profit or loss of $4,343,000 (2016: $2,374,000). Changes in fair values of financial assets at fair value through profit or loss are recorded in fair value movement of financial investments in the profit or loss. (b) Recognition and measurement The Group classifies financial assets at fair value through profit or loss if they are acquired principally for the purpose of selling in the short term, ie are held for trading. They are presented as current assets if they are expected to be sold within 12 months after the end of the reporting period; otherwise they are presented as non-current assets. Independence Group NL 52 82 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 11 Trade and other payables Current liabilities Trade payables Other payables (a) Recognition and measurement Notes to the consolidated financial statements 30 June 2017 (continued) 2017 $'000 6,401 42,651 49,052 2016 $'000 9,933 97,199 107,132 These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. 12 Provisions Current Provision for employee entitlements Provision for restructuring costs Provision for rehabilitation costs Non-current Provision for employee entitlements Provision for rehabilitation costs (a) Movements in provisions Movements in the provision for rehabilitation costs during the financial year are set out below: Carrying amount at beginning of financial year Additional provision Additional provision on acquisition of subsidiary Rehabilitation and restoration borrowing costs expense Payments during the period Carrying amount at end of financial year (b) Recognition and measurement 2017 $'000 7,647 6,374 1,238 15,259 2017 $'000 1,779 71,449 73,228 2017 $'000 66,359 5,119 - 1,232 (23) 72,687 2016 $'000 6,901 - - 6,901 2016 $'000 1,946 66,359 68,305 2016 $'000 27,660 31,439 6,579 707 (26) 66,359 Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Independence Group NL 53 IGO ANNUAL REPORT 2017 — 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 12 Provisions (continued) (b) Recognition and measurement (continued) Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as rehabilitation and restoration borrowing expense in the profit or loss. (i) Rehabilitation and restoration Long-term environmental obligations are based on the Group’s environmental management plans, in compliance with current environmental and regulatory requirements. Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the reporting date. To the extent that future economic benefits are expected to arise, these costs are capitalised and amortised over the remaining lives of the mines. Annual increases in the provision relating to the change in the net present value of the provision are recognised as finance costs. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Cost estimates are not reduced by the potential proceeds from the sale of assets or from plant clean-up at closure. (ii) Employee benefits The provision for employee benefits represents annual employees. leave and long service leave entitlements accrued by Short-term obligations Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The amounts are presented as current employee entitlements in the balance sheet. Other long-term employee benefit obligations The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss. The obligations are presented as current liabilities in the consolidated balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. (c) Key estimates and judgements Rehabilitation and restoration provisions The provision for rehabilitation and restoration costs is based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the reporting date. Significant estimates and assumptions are made in determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases as compared to the inflation rates and changes in discount rates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at reporting date represents management’s best estimate of the present value of the future rehabilitation costs required. Long service leave Long service leave is measured at the present value of benefits accumulated up to the end of the reporting period. The liability is discounted using an appropriate discount to determine key assumptions used in the calculation, including future increases in salaries and wages, future on-costs rates and future settlement dates of employees' departures. requires judgement rate. Management Independence Group NL 54 84 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) Invested Capital This section of the notes provides further information about property, plant and equipment, mine properties and exploration and evaluation expenditure and the carrying amount of these non-financial assets, including accounting policies, key judgements and estimates relevant to understanding these items. 13 Property, plant and equipment Land and buildings $'000 Mining plant and equipment $'000 Furniture, fittings and other equipment $'000 Motor vehicles $'000 Assets under construction $'000 Total $'000 37,652 140,391 13,137 7,008 3,989 202,177 (23,030) (120,090) 14,622 20,301 (9,354) 3,783 (4,781) 2,227 - (157,255) 3,989 44,922 19,095 - 290 (996) - (1,024) (2,608) (135) 14,622 19,514 - 7,338 - 3,127 (509) (9,169) - 20,301 4,069 44 1,130 (17) 185 (14) (1,614) - 3,783 2,097 120 1,046 - - - (1,036) - 2,227 2,534 - 3,763 - (2,308) - - - 3,989 47,309 164 13,567 (1,013) 1,004 (1,547) (14,427) (135) 44,922 39,383 133,754 11,773 5,900 2,534 193,344 (20,288) (114,240) 19,095 19,514 (7,704) 4,069 (3,803) 2,097 - (146,035) 2,534 47,309 20,041 1,113 412 1,332 (127) (3,676) 19,095 20,086 1,010 6,045 2,297 (87) (9,837) 19,514 2,467 510 1,777 847 (22) (1,510) 4,069 1,219 788 780 70 (24) (736) 2,097 3,431 11 1,378 (2,286) - - 2,534 47,244 3,432 10,392 2,260 (260) (15,759) 47,309 Year ended 30 June 2017 Cost Accumulated depreciation and impairment Net book amount Movements Opening net book amount Acquisition of subsidiary Additions Assets included in a disposal group classified as held for sale Transfers Disposals Depreciation charge Impairment loss Closing net book amount Year ended 30 June 2016 Cost Accumulated depreciation and impairment Net book amount Movements Opening net book amount Acquisition of subsidiary Additions Transfers Disposals Depreciation charge Closing net book amount (a) Non-current assets pledged as security Refer to note 16 for information on non-current assets pledged as security by the Group. Independence Group NL 55 IGO ANNUAL REPORT 2017 — 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 13 Property, plant and equipment (continued) (b) Recognition and measurement Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. It also includes the direct cost of bringing the asset to the location and condition necessary for first use and the estimated future cost of rehabilitation, where applicable. The assets are subsequently measured at cost less accumulated depreciation and any accumulated impairment losses. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. Depreciation Land is not depreciated. Depreciation on other assets is calculated using either units-of-production or straight-line depreciation as follows: Depreciation periods are primarily: Buildings Mining plant and equipment Motor vehicles Furniture and fittings Leased assets 5 - 10 years 2 - 10 years 3 - 8 years 3 - 10 years 3 - 4 years Depreciation is expensed as incurred, unless it relates to an asset or operation in the construction phase, in which case it is capitalised. Derecognition An item of property, plant and equipment is derecognised when it is sold or otherwise disposed of, or when its use is expected to bring no future economic benefits. Any gain or loss from derecognising the asset (being the difference between the proceeds of disposal and the carrying amount of the asset) is included in the profit or loss in the period the item is derecognised. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. (c) Key estimates and judgements The estimations of useful lives, residual values and depreciation methods require significant management judgements and are regularly reviewed. If they need to be modified, the depreciation and amortisation expense is accounted for prospectively from the date of the assessment until the end of the revised useful life (for both the current and future years). Independence Group NL 56 86 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 14 Mine properties Year ended 30 June 2017 Cost Accumulated amortisation and impairment Net book amount Notes to the consolidated financial statements 30 June 2017 (continued) Mine properties in development $'000 Mine properties in production $'000 Deferred stripping $'000 Total mine properties $'000 1,355,722 - 1,355,722 627,098 (424,816) 202,282 118,579 (63,664) 2,101,399 (488,480) 54,915 1,612,919 Movements Opening net book amount Additions Transfers from exploration and evaluation expenditure Transfers to property, plant and equipment Amortisation expense Borrowing costs capitalised Depreciation expense capitalised Closing net book amount 1,197,011 144,626 - - - 12,779 1,306 1,355,722 239,076 20,766 327 (1,004) (56,883) - - 202,282 34,764 39,920 - - (19,769) - - 1,470,851 205,312 327 (1,004) (76,652) 12,779 1,306 54,915 1,612,919 Year ended 30 June 2016 Cost Accumulated amortisation and impairment Net book amount 1,197,011 - 1,197,011 607,009 (367,933) 239,076 78,659 (43,895) 1,882,679 (411,828) 34,764 1,470,851 Movements Opening net book amount Additions Acquisition of subsidiary Transfers from exploration and evaluation expenditure Transfers to property, plant and equipment Amortisation expense Borrowing costs capitalised Depreciation expense capitalised Closing net book amount - 200,273 984,776 - - - 11,055 907 1,197,011 271,724 28,418 - 10,586 (2,260) (69,392) - - 239,076 31,576 18,639 - - - (15,451) - - 303,300 247,330 984,776 10,586 (2,260) (84,843) 11,055 907 34,764 1,470,851 (a) Recognition and measurement (i) Mine properties in development Mine properties in development represent the expenditure incurred when technical feasibility and commercial viability of extracting a mineral resource have been demonstrated, and includes the costs incurred up until such time as the asset is capable of being operated in a manner intended by management. These costs are not amortised but the carrying value is assessed for impairment whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. Independence Group NL 57 IGO ANNUAL REPORT 2017 — 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 14 Mine properties (continued) (a) Recognition and measurement (continued) (ii) Mine properties in production Mine properties in production represent the accumulation of all acquisition, exploration, evaluation and development expenditure incurred by or on behalf of the Group in relation to areas of interest in which mining of the mineral resource has commenced. When further development expenditure, including waste development and stripping, is incurred in respect of a mine property after the commencement of production, such expenditure is carried forward as part of the cost of that mine property only when substantial future economic benefits are established, otherwise such expenditure is classified as part of the cost of production. Amortisation is provided on a units-of-production basis, with separate calculations being made for each mineral resource. The units-of-production method results in an amortisation charge proportional the economically recoverable mineral resources (comprising proven and probable reserves). to the depletion of A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. An impairment exists when the carrying value of mine properties exceeds its estimated recoverable amount. The asset is then written down to its recoverable amount and the impairment losses are recognised in profit or loss. (iii) Deferred stripping Stripping activity costs incurred in the development phase of a mine are capitalised as part of the cost of constructing the mine and subsequently amortised over the life of the mine on a units-of-production basis. Stripping activity incurred during the production phase of a mine is assessed as to whether the benefit accruing from that activity is to provide access to ore that can be used to produce ore inventory, or whether it in addition provides improved access to ore that will be mined in future periods. To the extent that the benefit from the stripping activity is realised in the form of inventory produced, the Group accounts for those stripping activity costs in accordance with AASB102 Inventories. A stripping activity asset is brought to account if it is probable that future economic benefits (improved access to the ore body) will flow to the Group, the component of the ore body for which access has been improved can be identified and costs relating to the stripping activity can be measured reliably. The amount of stripping activity costs that are capitalised is determined based on a comparison of the stripping ratio in the relevant period with the life of mine stripping ratio. To the extent that there is a period of sustained stripping that exceeds the average life of mine stripping ratio, mine waste stripping costs are capitalised to the stripping activity asset. Such capitalised costs are amortised over the life of that mine on a units-of-production basis. The life of mine ratio is based on ore reserves of the mine. Changes to the life of mine are accounted for prospectively. (b) Key estimates and judgements (i) Proved and probable ore reserves The Group uses the concept of life of mine as an accounting value to determine the amortisation of mine properties. In determining life of mine, the Group prepares ore reserve estimates in accordance with the JORC Code 2012, guidelines prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia. The estimate of these proved and probable ore reserves, by their very nature, require judgements, estimates and assumptions. Where the proved and probable reserve estimates need to be modified, the amortisation expense is accounted for prospectively from the date of the assessment until the end of the revised mine life (for both the current and future years). (ii) Deferred stripping The Group defers advanced stripping costs incurred during the production stage of its operations. This calculation requires the use of judgements and estimates, such as estimates of tonnes of waste to be removed over the life of the mining area and economically recoverable reserves extracted as a result. Changes in a mine's life and design may result in changes to the expected stripping ratio (waste to mineral reserves ratio). Any resulting changes are accounted for prospectively. Independence Group NL 58 88 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 15 Exploration and evaluation Jaguar Operation $'000 Long Operation $'000 Nova Project $'000 Stockman Project $'000 Windward $'000 Other $'000 Total $'000 Year ended 30 June 2017 Opening net book amount Acquisition of subsidiary Additions Assets included in a disposal group classified as held for sale Impairment loss Transfer to mine properties in production Closing net book amount Year ended 30 June 2016 Opening net book amount Acquisition of subsidiary Additions Assets included in a disposal group classified as held for sale Impairment loss Transfer to mine properties in production Closing net book amount (a) Impairment 5,250 - 216 - - - - 603 - (492) (216) (111) 34,100 68,183 - - 107,533 - - - - - 34,100 - - 17,823 - - 2,843 17,823 3,662 (43,784) (24,399) - - - - - - - - (43,784) (24,891) (327) 17,823 2,843 60,016 5,250 8,235 - 3,152 - (2,985) - - - - - 100,716 - 7,434 34,100 - - - - (32,533) - - - - (3,152) (7,434) 5,250 - 34,100 68,183 - - - - - - - 979 109,930 - - 34,100 10,586 (979) (979) - - - (35,518) (10,586) 107,533 The Group recognised impairment charges of $24,891,000 during the current reporting period (2016: $35,518,000). Independence Group NL 59 IGO ANNUAL REPORT 2017 — 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 15 Exploration and evaluation (continued) (a) Impairment (continued) An amount of $24,399,000 related to the Stockman Project, which is an exploration asset reported within the New Business and Regional Exploration Activities segment. The circumstances and events that led to the recognition of the impairment loss emerged following an assessment for the existence of impairment triggers as at 30 June 2017 in accordance with AASB6 Exploration for and Evaluation of Mineral Resources. The recognised impairment charge has been determined with reference to the recoverable amount of the asset being assessed based on its fair value less costs of disposal. The recoverable amount has been determined in accordance with the announcement to the ASX on 14 June 2017 titled to Divest Stockman Project”, with reference to an executed sale agreement between Independence “Agreement Stockman Project Pty Ltd, a wholly owned subsidiary of the Company, and CopperChem Limited, a wholly owned subsidiary of Washington H Soul Pattinson and Company Limited. Terms of the sale agreement include a deferred cash consideration component of $31,600,000, and a net smelter return royalty for which the Company has determined a value. Key assumptions include a pre-tax real discount rate of 10.5%, and five year average commodity prices as follows: Copper: USD5,808 per tonne, Zinc: USD2,520 per tonne, Silver: USD17.86 per ounce and foreign exchange: USD:AUD 0.74. As the fair value of the Stockman Project was determined in reference to the sales contract and use of observable inputs, this is a level 2 measurement of the fair value hierarchy. Refer to note 21(d) for the policy relating to fair value hierarchy. In the previous financial year, an impairment of $32,533,000 related to the Stockman Project. The recognised impairment charge was determined with reference to the recoverable amount of the asset being assessed based on its fair value less costs of disposal. The Company adopted a discounted cash flow fair value model to arrive at the recoverable amount. Key assumptions include a post-tax real discount rate of 10.2%, and five year average commodity prices as follows: Copper: USD5,380 per tonne, Zinc: USD2,076 per tonne, Silver: USD16.50 per ounce and foreign exchange: USD:AUD 0.72. (b) Recognition and measurement Exploration for and evaluation of mineral resources is the search for mineral resources after the entity has obtained legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource. Exploration and evaluation expenditure is expensed to the profit or circumstances in which case the expenditure may be capitalised: loss as incurred except in the following • • The existence of a commercially viable mineral deposit has been established and it is anticipated that future economic benefits are more likely than not to be generated as a result of the expenditure; and The exploration and evaluation activity is within an area of interest which was acquired as an asset acquisition or in a business combination and measured at fair value on acquisition. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. An impairment exists when the carrying value of expenditure exceeds its estimated recoverable amount. The area of interest is then written down to its recoverable amount and the impairment losses are recognised in profit or loss. Upon approval for the commercial development of an area of interest, exploration and evaluation assets are tested for impairment and transferred to 'Mine properties in development'. No amortisation is charged during the exploration and evaluation phase. (c) Key estimates and judgements The recoverability of the carrying amount of the exploration and evaluation assets is dependent on the successful development and commercial exploitation, or alternatively, sale of the respective area of interest. The Group reviews the carrying value of exploration and evaluation expenditure on a regular basis to determine whether economic quantities of reserves have been found or whether further exploration and evaluation work is underway or planned to support continued carry forward of capitalised costs. This assessment requires judgement as to the status of the individual projects and their estimated recoverable amount. Independence Group NL 60 90 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) Capital structure and financing activities This section of the notes provides further information about the Group's borrowings, contributed equity, reserves and dividends, including accounting policies relevant to understanding these items. 16 Borrowings Current Unsecured Bank loans Total current borrowings Non-current Unsecured Bank loans Total non-current borrowings (a) Corporate loan facility 2017 $'000 2016 $'000 56,226 56,226 2017 $'000 43,154 43,154 2016 $'000 140,815 140,815 222,672 222,672 On 16 July 2015, the Company entered into a Syndicated Facility Agreement (Facility Agreement) with National Australia Bank Limited, Australia and New Zealand Banking Group Limited and Commonwealth Bank of Australia Limited for a $550,000,000 unsecured committed term finance facility. The Facility Agreement comprises: • • A $350,000,000 amortising term loan facility expiring in September 2020; and A $200,000,000 revolving loan facility expiring in September 2020. In October 2016, Company repaid $71,000,000 of the amortising term loan facility and also cancelled a further $79,000,000 of the same facility. Following this restructure, the Company has available facilities of: amortising loan facility of $200,000,000, which is fully drawn at balance date; and revolving loan facility of $200,000,000, which is undrawn at balance date. Total capitalised transaction costs to 30 June 2017 are $5,495,000 (2016: $5,549,000). Transaction costs are accounted for under the effective interest rate method. These costs are incremental costs that are directly attributable to the loan and include loan origination fees, commitment fees and legal fees. At 30 June 2017, a balance of unamortised transaction costs of $2,959,000 (2016: $5,174,000) was offset against liability of $200,000,000 (2016: $271,000,000). the bank loans contractual Borrowing costs incurred during the year of $12,779,000 (2016: $11,055,000) relate to a qualifying asset (Nova Project) and have been capitalised in accordance with AASB 123 Borrowing Costs. Refer to note 14. The Facility Agreement has certain financial covenants that the Company has to comply with. All such financial covenants have been complied with in accordance with the Facility Agreement. (b) Assets pledged as security There were no assets pledged as security at 30 June 2017 (2016: $nil). Independence Group NL 61 IGO ANNUAL REPORT 2017 — 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 16 Borrowings (continued) (c) Financing arrangements The Group had access to the following financing arrangements at the reporting date: Total facilities Corporate debt facility Contingent instrument facility1 Facilities used as at reporting date Corporate debt facility Contingent instrument facility Facilities unused as at reporting date Corporate debt facility 2017 $'000 400,000 1,281 401,281 200,000 1,281 201,281 2016 $'000 550,000 1,315 551,315 271,000 1,315 272,315 200,000 200,000 279,000 279,000 1. This facility provides financial backing in relation to non-performance of third party guarantee requirements. (d) Recognition and measurement (i) Borrowings transaction costs incurred. Borrowings are subsequently Borrowings are initially recognised at measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. fair value, net of Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs and amortised over the period of the remaining facility. (ii) Borrowing costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed in the period in which they are incurred. 17 Contributed equity (a) Share capital Fully paid issued capital 2017 $'000 2016 $'000 1,878,469 1,601,458 Independence Group NL 62 92 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 17 Contributed equity (continued) (a) Share capital (continued) (b) Movements in ordinary share capital Details Balance at beginning of financial year Issue of shares under the Employee Performance Rights Plan Acquisition of subsidiary Share placement and share purchase plan issues Less: Transaction costs arising on share issue (net of tax) 2017 Number of shares 2017 $'000 2016 Number of shares 2016 $'000 511,422,871 1,601,458 234,256,573 737,324 268,796 - 820 - 1,323,614 275,842,684 3,505 860,629 75,055,356 281,459 - (5,268) - - - - Balance at end of financial year 586,747,023 1,878,469 511,422,871 1,601,458 (c) Capital management The Board’s policy is to preserve a strong balance sheet so as to maintain investor, creditor and market confidence, and to sustain ongoing and future development of the business. Demonstrating the Company's balance sheet strength are various financing and liquidity ratios, supported by strong EBITDA margins: Current ratio (times) Debt to equity Underlying EBITDA margin 2017 1.4 12% 35% 2016 0.8 19% 33% including reserves, and net debt/(cash). As at 30 June 2017 this totalled The Group's capital comprises equity, $1,897,021,000, an increase of 13% over 2016. Contributing to the increase was an equity raising in July 2016 and the continued investment during 2017 in building and commissioning the Nova Operation. An appropriate allocation and deployment of capital is required to maintain a strong balance sheet. Primarily, capital is allocated to ensure that the Company’s operations are able to generate cash flows, at appropriate margins, and to continue to operate safely according to plan. the Company operates in a cyclical commodity price environment, and in that context considers the allocation of capital in order to provide a buffer from future potential adverse price movements. The Company also preserves and manages its capital to repay debt and invest in growth and acquire assets. The Company also returns capital to shareholders by way of dividend payments which target 30 % of net profit after tax, after excluding non-recurring items. In addition, Sources of capital of the Company are equity markets, through the raising of capital, as well as debt markets. None of the Group’s entities are currently subject to externally imposed capital requirements. There were no changes in the Group’s approach to capital management during the year. (d) Recognition and measurement Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. Every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Independence Group NL 63 IGO ANNUAL REPORT 2017 — 93 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 18 Reserves Hedging reserve Share-based payments reserve Foreign currency translation Acquisition reserve (a) Movements in reserves Notes to the consolidated financial statements 30 June 2017 (continued) 2017 $'000 (391) 10,698 (4) 3,142 13,445 2016 $'000 (632) 10,371 (8) 3,142 12,873 The following table shows a breakdown of the movements in these reserves during the year. A description of the nature and purpose of each reserve is provided below the table. Hedging reserve $'000 Share- based payments reserve $'000 Acquisition reserve $'000 Foreign currency translation reserve $'000 Balance at 1 July 2016 Revaluation - gross Deferred tax Transfer to profit or loss - gross Deferred tax Currency translation differences - current period Share-based payment expenses Issue of shares under the Employee Performance Rights Plan (632) 676 (203) (331) 99 - - - Balance at 30 June 2017 (391) 10,371 - - - - - 1,147 (820) 10,698 3,142 - - - - - - - (8) - - - - 4 - - 3,142 (4) 13,445 Total $'000 12,873 676 (203) (331) 99 4 1,147 (820) Balance at 1 July 2015 Reclassification on adoption of AASB 9, net of tax Adjusted balance at 1 July 2015 Revaluation - gross Deferred tax Share-based payment expenses Issue of shares under the Employee Performance Rights Plan Balance at 30 June 2016 (b) Nature and purpose of reserves - 13,057 (1,036) (1,036) 577 (173) - - (632) - 13,057 - - 819 (3,505) 10,371 3,142 - 3,142 - - - - 3,142 (8) - (8) - - - - (8) 16,191 (1,036) 15,155 577 (173) 819 (3,505) 12,873 Hedging reserve The hedging reserve is used to record gains or losses on derivatives that are designated and qualify as cash flow hedges and that are recognised in other comprehensive income. Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss. Independence Group NL 64 94 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 18 Reserves (continued) (b) Nature and purpose of reserves (continued) Share-based payments reserve The share-based payments reserve is used to record the value of share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 27 for further details of these plans. Foreign currency translation reserve Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. Acquisition reserve The acquisition reserve is used to record differences between the carrying value of non-controlling interests and the fair value of the shares issued, where there has been a transaction involving non-controlling interests that do not result in a loss of control. The reserve is attributable to the equity of the parent. 19 Dividends paid and proposed (a) Ordinary shares Final ordinary dividend for the year ended 30 June 2016 of 2 cents (2015: 2.5 cents) per fully paid share Interim dividend for the year ended 30 June 2017 of 1 cent (2016: nil cents) per fully paid share Total dividends paid during the financial year (b) Dividends not recognised at the end of the reporting period In addition to the above dividends, since year end the Directors have recommended the payment of a final dividend of 1 cent (2016: 2 cents) per fully paid ordinary share, fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 22 September 2017 out of retained earnings at 30 June 2017, but not recognised as a liability at year end, is: (c) Franked dividends Franking credits available for subsequent reporting periods based on a tax rate of 30% (2016: 30%) 2017 $'000 11,734 5,867 17,601 2016 $'000 12,786 - 12,786 2017 $'000 2016 $'000 5,867 11,734 2017 $'000 2016 $'000 34,829 42,373 The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted for: (a) (b) (c) franking credits that will arise from the payment of the amount of the provision for income tax; franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. The impact on the franking account of the dividend recommended by the Directors since the end of the reporting period, but not recognised as a liability at the reporting date, will be a reduction in the franking account of $2,515,000 (2016: $5,029,000). Independence Group NL 65 IGO ANNUAL REPORT 2017 — 95 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 19 Dividends paid and proposed (continued) (d) Recognition and measurement Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before the reporting date. Risk This section of the notes includes information on the Group's exposure to various risks and shows how these could affect the Group's financial position and performance. 20 Derivatives Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedging criteria, they are classified as ‘held for trading’ for accounting purposes below. The Group has the following derivative financial instruments: Current assets Foreign currency contracts - cash flow hedges Diesel hedging contracts - cash flow hedges Non-current assets Diesel hedging contracts - cash flow hedges Current liabilities Commodity hedging contracts - cash flow hedges Diesel hedging contracts - cash flow hedges Non-current liabilities Diesel hedging contracts - cash flow hedges (a) Instruments used by the Group 2017 $'000 657 - 657 - - 910 55 965 251 251 2016 $'000 - 784 784 799 799 2,487 - 2,487 - - Derivative financial instruments are used by the Group in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates, commodity prices and diesel prices. The derivative financial instruments are classified as held for trading and accounted for at fair value through profit or loss unless they are designated as cash flow hedges. The Group's accounting policy for its cash flow hedges is set out below. The fair value of the derivative instruments at the reporting date is reflected in current and non-current assets and liabilities in the balance sheet and is calculated by comparing the contracted rate to the market rates for derivatives with the same length of maturity. Refer to note 21 and below for details of the foreign currency, commodity prices and diesel fuel risk being mitigated by the Group’s derivative instruments as at 30 June 2017 and 30 June 2016. Diesel The Group held various diesel fuel hedging contracts at 30 June 2017 and 30 June 2016 to reduce the exposure to future increases in the price of the Singapore gasoil component of diesel fuel. Independence Group NL 66 96 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 20 Derivatives (continued) Diesel (continued) The following table details the diesel fuel hedging contracts outstanding at the reporting date: Barrels of oil Weighted average price (AUD/barrel) 0 - 6 months 6 -12 months 1 - 2 years Total 2017 103,557 104,161 54,346 262,064 2016 20,228 29,532 60,525 110,285 2017 76.57 78.56 81.08 78.30 2016 61.50 65.61 74.37 69.67 Fair value 2017 $'000 36 (91) (251) (306) 2016 $'000 341 443 799 1,583 Copper At 30 June 2017, the Group held various copper commodity contracts denominated in USD. Foreign exchange contracts are also held which match the terms of the commodity contracts. These contracts are used to reduce the exposure to a future decrease in the AUD market value of copper sales. The following table details the copper contracts outstanding at the reporting date: Tonnes of metal Weighted average price (USD/metric tonne) 0 - 6 months 6 - 12 months Total 2017 1,020 1,020 2,040 2016 - - - 2017 5,613 5,613 5,613 2016 - - - Fair value 2017 $'000 (435) (475) (910) The following table details the forward foreign currency contracts outstanding at the reporting date: Notional amounts (USD) Weighted average AUD:USD exchange rate 2017 2016 Fair value 2017 $'000 Sell USD forward 0 - 6 months 6 - 12 months Total 2017 $'000 5,725 5,726 11,451 2016 $'000 - - - 0.7353 0.7336 0.7345 - - - 330 327 657 2016 $'000 - - - 2016 $'000 - - - Gold There were no gold collar structures (ie purchased put and sold call) held by the Group at 30 June 2017. The table below details the outstanding gold collar structures which were designated as hedges of future gold sales and were designated as cash flow hedges at 30 June 2016. These comprise: Ounces of metal Weighted average price (AUD/ounce) 2017 2016 2017 2016 Fair value 2017 $'000 - - - - 12,500 12,500 12,500 12,500 - - - - 1,330 1,593 1,330 1,593 - - - - 2016 $'000 4 (2,491) 4 (2,491) 67 0 - 6 months Gold put options purchased Gold call options sold Total/weighted average strike price Gold put options purchased Gold call options sold Independence Group NL IGO ANNUAL REPORT 2017 — 97 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 20 Derivatives (continued) Gold (continued) (b) Recognition and measurement Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: • • hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges). The Group documents, at the inception of the hedging transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability. Movements in the hedging reserve in shareholder's equity are shown in note 18. (i) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. (ii) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the hedging reserve in equity, limited to the cumulative change in the fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales is recognised in profit or loss within 'sales'. The changes in the time value component of options that relate to hedged items are recognised with other comprehensive income in the hedging reserve within equity. The cumulative changes accumulated in the hedge reserve are reclassified to the profit or loss when the hedged item affects profit or loss. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss. (iii) Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in profit or loss. 21 Financial risk management This note explains the Group's exposure to financial risks and how these risks could affect the Group's future financial performance. Financial instruments are held by the Group for various purposes, including: • Operational: Activities of the Group generate financial instruments which include cash, trade receivables and trade payables; Independence Group NL 68 98 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 21 Financial risk management (continued) • • Financing: The Company may enter into debt instruments in order to finance both internal growth opportunities and acquire assets. Types of instruments used include syndicated and other bank loans and hire purchase agreements. Surplus funds are held either at call or as short-term deposits; and Risk management: The Group is exposed to commodity and foreign exchange risk which is overseen by management, under policies approved by the Board of Directors. Management identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. Financial instruments used by the Group to mitigate these risks include forward exchange contracts, commodity swaps and forward sales agreements. By holding these financial instruments, the Group exposes itself to risk. The Board reviews and agrees the Group's policies for managing each of these risks, which are summarised below: (a) Risk exposures and responses (i) Foreign currency risk As the Group’s sales revenues for base and precious metals are denominated in United States dollars (USD) and the majority of operating costs are denominated in Australian dollars (AUD), the Group’s cash flow is significantly exposed to movements in the AUD:USD exchange rate. The Group mitigates this risk through the use of derivative instruments, including, but not limited to, forward contracts denominated in AUD. Financial currency (i.e. AUD) were as follows: instruments, including derivative instruments, denominated in USD and then converted into the functional Financial assets Cash and cash equivalents Trade and other receivables Derivative financial instruments Financial liabilities Derivative financial instruments Net financial assets 2017 $'000 8,162 50,047 657 58,866 910 910 2016 $'000 14,773 19,969 - 34,742 - - 57,956 34,742 The cash balance above only represents the cash held in the USD bank accounts at the reporting date and converted into AUD at the 30 June 2017 AUD:USD exchange rate of $0.7692 (2016: $0.7426). The remainder of the cash balance of $27,601,000 (2016: $31,491,000) was held in AUD and therefore not exposed to foreign currency risk. The trade and other receivables amounts represent the USD denominated trade debtors. All other trade and other receivables were denominated in AUD at the reporting date. The following table summarises the Group’s sensitivity of financial instruments held at 30 June 2017 to movements in the AUD:USD exchange rate, with all other variables held constant. Impact on post-tax profit Impact on other components of equity Sensitivity of financial instruments to foreign currency movements Increase/decrease in foreign exchange rate Increase 5.0% Decrease 5.0% 2017 $'000 (1,934) 2,138 2016 $'000 (884) 988 2017 $'000 494 (546) Independence Group NL 2016 $'000 - - 69 IGO ANNUAL REPORT 2017 — 99 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 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 Financial assets Trade and other receivables Derivative financial instruments - diesel hedging contracts Financial liabilities Derivative financial instruments - commodity hedging contracts Derivative financial instruments - diesel hedging contracts Net exposure 2017 $'000 46,742 - 46,742 910 306 1,216 45,526 2016 $'000 18,520 1,583 20,103 2,487 - 2,487 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. Sensitivity of financial instruments to nickel price movements Increase/decrease in nickel prices Increase Decrease Independence Group NL 100 — IGO ANNUAL REPORT 2017 Impact on post-tax profit 2017 $'000 465 (465) 2016 $'000 177 (177) 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 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 (continued) The following table summarises the sensitivity of financial instruments held at 30 June 2017 to movements in the copper 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. Sensitivity of financial instruments to copper price movements Increase/decrease in copper price Increase Decrease Impact on post-tax profit Impact on other components of equity 2017 $'000 9 (9) 2016 $'000 251 (251) 2017 $'000 (2,157) 2,157 2016 $'000 - - The following table summarises the sensitivity of financial instruments held at 30 June 2017 to movements in the gold price, with all other variables held constant. Sensitivity of financial instruments to gold price movements Increase/decrease in gold price Increase 20% (2016: 20%) Decrease 20% (2016: 20%) Impact on other components of equity 2017 $'000 - - 2016 $'000 (3,018) 1,743 The following table summarises the sensitivity of financial instruments held at 30 June 2017 to movements in the zinc price, with all other variables held constant. Sensitivity of financial instruments to zinc price movements Increase/decrease in zinc price Increase 1.5% (2016: 1.5%) Decrease 1.5% (2016: 1.5%) Impact on post-tax profit 2017 $'000 148 (148) 2016 $'000 225 (225) The following table summarises the sensitivity of financial Singapore gasoil price, with all other variables held constant. instruments held at 30 June 2017 to movements in the Sensitivity of financial instruments to Singapore gasoil price movements Increase/decrease in Singapore gasoil price Increase 20% (2016: 20%) Decrease 20% (2016: 20%) Impact on other components of equity 2017 $'000 2,793 (2,793) 2016 $'000 1,301 (1,301) (iii) Equity price risk sensitivity analysis The following sensitivity analysis has been determined based on the exposure to equity price risks at the reporting date. Each equity instrument is assessed on its individual price movements with the sensitivity rate based on a reasonably possible change of 20% (2016: 20%). At reporting date, if the equity prices had been higher or lower, net profit for the year would have increased or decreased by $2,149,000 (2016: $702,000). Independence Group NL 71 IGO ANNUAL REPORT 2017 — 101 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 21 Financial risk management (continued) (a) Risk exposures and responses (continued) (iv) Cash flow and fair value interest rate risk The Group’s exposure to interest rate risk is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates. At the reporting date, the Group had the following exposure to interest rate risk on financial instruments: Financial assets Cash and cash equivalents Financial liabilities Bank loans 30 June 2017 30 June 2016 Weighted average interest rate % 2.1% 2.1% 3.9% 3.9% Weighted average interest rate % 1.7% 1.7% 4.5% 4.5% Balance $'000 35,763 35,763 200,000 200,000 Balance $'000 46,264 46,264 271,000 271,000 The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. Sensitivity of interest revenue and expense to interest rate movements Interest revenue Increase 1.0% (2016: 1.0%) Decrease 1.0% (2016: 1.0%) Interest expense Increase 1.0% (2016: 1.0%) Decrease 1.0% (2016: 1.0%) (b) Credit risk Impact on post-tax profit 2017 $'000 192 (192) (1,400) 1,400 2016 $'000 276 (276) (1,897) 1,897 Gold bullion sales Credit risk arising from the sale of gold bullion to the Company's customer is low as the payment by the customer (being The Perth Mint Australia) is guaranteed under statute by the Western Australian State Government. In addition, sales are made to high credit quality financial institutions, hence credit risk arising from these transactions is considered to be low. Nickel, copper and zinc concentrate sales Credit risk arising from sales to customers is managed by contracts that stipulate a provisional payment of between 90% and 100% of the estimated value of each sale. Provisional payments are made via an unconditional and irrevocable letter of credit, governed by the laws of Western Australia, and are expected to be received within a few business days. Title to the concentrate does not pass to the buyer until this provisional payment is received by the Group. Final payment is dependent on the quotation period of the respective purchase contract, and is also made via an irrevocable letter of credit. Due to the large size of concentrate shipments, there are a relatively small number of transactions each month and therefore each transaction and receivable balance is actively managed on an ongoing basis, with attention to timing of customer payments and imposed credit limits. The resulting exposure to bad debts is not considered significant. Independence Group NL 72 102 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 21 Financial risk management (continued) (b) Credit risk (continued) Nickel ore sales The Group has a concentration of credit risk in that it depends on BHP Billiton Nickel West Pty Ltd (BHPB Nickel West) for sales revenue from the Long Operation. During the year ended 30 June 2017, all nickel ore sales revenue was sourced from this company. The risk is mitigated in that the agreement relating to sales revenue contains provision for the Group to seek alternative revenue providers in the event that BHPB Nickel West is unable to accept supply of the Group’s product due to a force majeure event. This has been further de-risked as the Nova Operation could accept ore from the Long Operation for processing and concentrate production. The risk is also further mitigated by the receipt of 70% of the value of any months’ sale within a month of that sale occurring. The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit history. Other In respect of financial assets and derivative financial instruments, the Group's exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. Exposure at the reporting date is addressed below. The Group does not hold any credit derivatives to offset its credit exposure. Derivative counterparties and cash transactions are restricted to high credit quality financial institutions. The maximum exposure to credit risk at the reporting date was as follows: Financial assets Cash and cash equivalents Trade and other receivables Other receivables Financial assets Derivative financial instruments 2017 $'000 2016 $'000 35,763 50,047 6,525 15,348 657 108,340 46,264 21,561 6,559 5,017 1,583 80,984 On analysis of trade and other receivables, no balances are impaired for either 30 June 2017 or 30 June 2016. Trade receivables balance includes $1,547,000 (2016: $1,448,000) that are past due but not impaired. (c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial liabilities as they fall due. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Management and the Board monitors liquidity levels on an ongoing basis. Maturities of financial liabilities The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables are based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Independence Group NL 73 IGO ANNUAL REPORT 2017 — 103 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 21 Financial risk management (continued) (c) Liquidity risk (continued) Maturities of financial liabilities (continued) Contractual maturities of financial liabilities At 30 June 2017 Trade and other payables Bank loans* At 30 June 2016 Trade and other payables Bank loans* * Includes estimated interest payments. Notes to the consolidated financial statements 30 June 2017 (continued) Less than 6 months $'000 6 - 12 months $'000 Between 1 and 5 years $'000 Total contractual cash flows $'000 Carrying amount $'000 49,052 30,234 79,286 - 33,283 33,283 - 149,821 149,821 49,052 213,338 49,052 197,041 262,390 246,093 107,132 6,070 113,202 - 46,735 46,735 - 243,056 243,056 107,132 295,861 107,132 265,826 402,993 372,958 The following table details the Group’s liquidity analysis for its derivative financial instruments. The table is based on the undiscounted net cash inflows/(outflows) on the derivative instrument that settles on a net basis. When the net amount payable is not fixed, the amount disclosed has been determined by reference to the projected forward curves existing at the reporting date. At 30 June 2017 Commodity hedging contracts At 30 June 2016 Commodity hedging contracts Less than 6 months $'000 6 - 12 months $'000 Between 1 and 5 years $'000 Total contractual cash flows $'000 Carrying amount $'000 399 399 2,487 2,487 566 566 - - 251 251 - - 1,216 1,216 1,216 1,216 2,487 2,487 2,487 2,487 (d) Recognised fair value measurements (i) Fair value hierarchy The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (a) (b) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2); and inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). (c) The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30 June 2017 and 30 June 2016 on a recurring basis. Independence Group NL 74 104 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 21 Financial risk management (continued) (d) Recognised fair value measurements (continued) (i) Fair value hierarchy (continued) At 30 June 2017 Financial assets Listed investments Derivative instruments Foreign currency hedging contracts Financial liabilities Derivative instruments Commodity hedging contracts Diesel hedging contracts At 30 June 2016 Financial assets Listed investments Derivative instruments Diesel hedging contracts Financial liabilities Derivative instruments Commodity hedging contracts Notes to the consolidated financial statements 30 June 2017 (continued) Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 15,348 - 15,348 - - - - 657 657 910 306 1,216 - - - - - - Level 1 $'000 Level 2 $'000 Level 3 $'000 5,017 - 5,017 - - - 1,583 1,583 2,487 2,487 - - - - - 15,348 657 16,005 910 306 1,216 Total $'000 5,017 1,583 6,600 2,487 2,487 The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June 2017 and did not transfer any fair value amounts between the fair value hierarchy levels during the year ended 30 June 2017. (ii) Valuation techniques used to determine level 1 fair values The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. (iii) Valuation techniques used to determine level 2 and level 3 fair values The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Specific valuation techniques used to value financial instruments include: • • The use of quoted market prices or dealer quotes for similar instruments. The fair value of commodity and forward foreign exchange contracts is determined using forward commodity and exchange rates at the reporting date. • Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. Independence Group NL 75 IGO ANNUAL REPORT 2017 — 105 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 21 Financial risk management (continued) (d) Recognised fair value measurements (continued) (iii) Valuation techniques used to determine level 2 and level 3 fair values (continued) All of the resulting fair value estimates are included in level 2 except for unlisted equity securities which are included in level 3. (iv) Fair value of other financial instruments The Group also has a number of financial instruments which are not measured at fair value in the balance sheet. These instruments had the following fair value at the reporting date. At 30 June 2017 Current assets Cash and cash equivalents Current liabilities Bank loans Non-current liabilities Bank loans At 30 June 2016 Current assets Cash and cash equivalents Current liabilities Bank loans Non-current liabilities Bank loans Carrying amount $'000 Fair value $'000 35,763 35,763 56,226 56,226 140,815 140,815 Carrying amount $'000 46,264 46,264 43,154 43,154 35,763 35,763 57,142 57,142 142,858 142,858 Fair value $'000 46,264 46,264 43,750 43,750 222,672 222,672 227,250 227,250 Independence Group NL 76 106 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) Group structure This section of the notes provides information which will help users understand how the group structure affects the financial position and performance of the Group. 22 Acquisition of Windward Resources (a) Summary of acquisition On 22 December 2016, Independence Group NL acquired 100% of the issued share capital of Windward Resources Ltd (Windward) by way of an off-market takeover. Windward was a listed public Australian company holding a number of tenements within the Fraser Range region. The assets and liabilities recognised as a result of the acquisition are as follows: Cash Trade and other receivables Plant and equipment Exploration and evaluation expenditure Deferred tax assets Trade and other payables Net identifiable assets acquired Fair value $'000 4,507 141 164 17,823 300 (848) 22,087 The Company gained control of Windward on 27 October 2016, with a shareholding of 53.94%. Following the completion of the off-market and compulsory acquisition of the remaining shares, the Company held 100% of Windward as at 22 December 2016. Total cash outflows relating to the acquisition of Windward for the period, including acquisition-related costs, were $22,081,000. Cash received on the acquisition of Windward was $4,507,000, resulting in a net cash outflow in investing activities in the statement of cash flows of $17,574,000. (b) Recognition and measurement When an asset acquisition does not constitute a business combination, the assets and liabilities are assigned a carrying amount based on their relative fair values in an asset purchase transaction. No goodwill will arise on the acquisition and transaction costs of the acquisition will be included in the capitalised cost of the asset. 23 Assets held for sale On 14 June 2017, the Company announced its intention to divest of the Stockman Project, which is owned by the Group's wholly owned subsidiary Independence Stockman Project Pty Ltd. The associated assets were consequently presented as held for sale in the 2017 financial statements. (a) Assets and liabilities classified as held for sale The following assets were reclassified as held for sale as at 30 June 2017: Assets classified as held for sale Exploration and evaluation expenditure Property, plant and equipment Total assets 2017 $'000 43,784 1,013 44,797 2016 $'000 - - - The carrying amounts of the assets included as held for sale reflect the recoverable amount as determined with reference to an executed sale agreement between Independence Stockman Project Pty Ltd and CopperChem Limited, a wholly owned subsidiary of Washington H Soul Pattinson and Company Limited. Independence Group NL 77 IGO ANNUAL REPORT 2017 — 107 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 23 Assets held for sale (continued) (a) Assets and liabilities classified as held for sale (continued) Terms of the sale agreement include a deferred cash consideration component of $31,600,000, and a net smelter return royalty for which the Company has determined a value. (b) Recognition and measurement Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition. Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet. 24 Subsidiaries (a) Significant investments in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of Independence Group NL and the subsidiaries listed in the following table: Name of entity Note Country of incorporation Equity holding 2017 % 2016 % Independence Long Pty Ltd Independence Newsearch Pty Ltd Independence Karlawinda Pty Ltd Independence Jaguar Pty Ltd Independence Stockman Parent Pty Ltd Independence Stockman Project Pty Ltd Independence Jaguar Project Parent Pty Ltd Independence Jaguar Project Pty Ltd Independence Europe Pty Ltd Independence Nova Holdings Pty Ltd Independence Nova Pty Ltd Independence Windward Pty Ltd Independence Group Europe AB (a) (a) (a) (a) (b) Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Sweden 100 100 100 100 100 100 100 100 100 100 100 100 100 (a) (b) These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments Commission. For further information refer to note 30. On 14 July 2017, Windward Resources Pty Ltd changed its name to Independence Windward Pty Ltd. Independence Group NL 108 — IGO ANNUAL REPORT 2017 100 100 100 100 100 100 100 100 100 100 100 - 100 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 24 Subsidiaries (continued) (b) Principles of consolidation Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entities. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group (refer to note 32(c)(i)). Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. the asset Unrealised losses are also eliminated unless the transaction provides evidence of transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. the impairment of Unrecognised items This section of the notes provides information about items that are not recognised in the financial statements as they do not yet satisfy the recognition criteria but could potentially have an impact on the Group's financial position and performance. 25 Commitments and contingencies (a) Capital commitments Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows: Mine properties in development (b) Commitments (i) Leasing commitments Operating lease commitments Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Total minimum lease payments 2017 $'000 1,667 1,667 2016 $'000 163,938 163,938 2017 $'000 2016 $'000 1,599 4,859 6,458 1,549 6,458 8,007 Independence Group NL 79 IGO ANNUAL REPORT 2017 — 109 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 25 Commitments and contingencies (continued) (c) Gold delivery commitments Within one year Later than one but not later than five years Total Notes to the consolidated financial statements 30 June 2017 (continued) Gold for physical delivery oz 60,000 47,988 107,988 Average contracted sale price A$/oz 1,796 1,859 1,824 Value of committed sales $'000 107,787 89,200 196,987 The physical gold delivery contracts are settled by the physical delivery of gold as per the contract terms. The contracts are accounted for as sales contracts with revenue recognised once gold has been delivered to the counterparties. The physical gold delivery contracts are considered to sell a non-financial item and therefore do not fall within the scope of AASB 139 Financial Instruments: Recognition and Measurement. Hence, no derivatives have been recognised in respect of these contracts. (d) Contingencies The Group had guarantees outstanding at 30 June 2017 totalling $1,281,000 (2016: $1,315,000) which have been granted in favour of various third parties. The guarantees primarily relate to environmental and rehabilitation bonds at the various mine sites. 26 Events occurring after the reporting period On 30 August 2017, the Company announced a fully franked final dividend of 1 cent per share to be paid on 22 September 2017. On 26 July 2017, the Company reported an interim Mineral Resource estimate for the Nova Operation based on improved geological understanding and results of close spaced diamond core ‘grade control’ drilling on the Nova deposit. The revised Mineral Resource estimate reported ~15% lower tonnage with marginally higher nickel and copper grades. Other than the above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future financial years, other than as stated elsewhere in the financial report. Other information This section of the notes includes other information that must be disclosed to comply with the accounting standards and other pronouncements, but are not considered critical in understanding the financial performance or position of the Group. 27 Share-based payments The Group provides benefits to employees (including executive directors) of the Group through share-based incentives. Information relating to these schemes is set out below. (a) Employee Incentive Plan The Independence Group NL Employee Incentive Plan (EIP) was approved by shareholders at the Annual General Meeting of the Company in November 2016. The EIP incorporates both broad based equity participation for eligible employees as well as key executive incentive schemes designed to provide long-term incentives to senior management (including executive directors) to deliver long-term shareholder returns. The EIP replaced the previous Independence Group NL Employee Performance Rights Plan (PRP) which was approved at the Annual General Meeting of the Company in November 2011 and re-approved at the Annual General the PRP will continue in Meeting in November 2014. Any existing unvested performance rights issued under accordance with their terms under the PRP. Independence Group NL 80 110 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 27 Share-based payments (continued) (a) Employee Incentive Plan (continued) The EIP comprised the following schemes during the current financial year: • • Long-term incentive (LTI) - performance rights; and Employee share ownership award. LTI - Performance Rights Under the LTI scheme, participants are granted share rights which will only vest if certain performance conditions are met and the employees are still employed by the Group at the end of the vesting period. Participation in the LTI scheme is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. Equity settled awards outstanding Set out below are summaries of share rights granted under the LTI scheme: Outstanding at the beginning of the year Rights issued during the year Rights vested during the year Rights lapsed during the year Rights cancelled during the year Outstanding at the end of the year Fair value of share rights granted 2017 2016 Number of share rights 1,352,123 589,967 (220,353) (73,452) - 1,648,285 Weighted average fair value 1.91 2.26 2.14 2.14 - 2.00 Number of share rights 2,313,757 643,911 (1,323,613) (258,903) (23,029) 1,352,123 Weighted average fair value 2.85 1.32 3.19 2.23 2.41 1.91 The fair value of the share rights granted during the year ended 30 June 2017 are determined using a trinomial tree which has been adopted by the Boyle and Law (1994) node alignment algorithm to improve accuracy, with the following inputs: Fair value inputs CEO Senior management Other employees Grant date Vesting date Share price at grant date Fair value estimate at grant date Expected share price volatility (%) Expected dividend yield (%) Expected risk-free rate (%) 18 November 2016 1 July 2019 3.08 2.21 54 0.65 1.86 24 November 2016 1 July 2019 3.14 2.26 54 0.64 1.92 22 May 2017 1 July 2019 3.28 2.30 58 0.61 1.75 The share-based payments expense included in profit or loss for the year totalled $1,147,168 (2016: $818,968). Vesting of share rights Vesting of the performance rights granted to executive directors and executives after 1 July 2014 is based on a total shareholder return (TSR) scorecard. The TSR scorecard for the three year measurement period will be determined based on a percentile ranking of the Company's TSR results relative to the TSR of each of the companies in the peer group over the same three year measurement period. The peer group is to comprise the constituents of the S&P ASX 300 Metals and Mining Index. The vesting schedule of the performance rights subject to relative TSR testing is as follows: Relative TSR performance Less than 50th percentile Between 50th and 75th percentile 75th percentile or better Level of vesting Zero Pro-rata straight line percentage between 50% and 100% 100% Independence Group NL 81 IGO ANNUAL REPORT 2017 — 111 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 27 Share-based payments (continued) Vesting of share rights (continued) The Company's TSR performance for share rights issued during the current financial year will be assessed against the following 28 peer group companies: * Alacer Gold Corp. * Alumina Limited * Beadell Resources Ltd * BHP Billiton Limited * BlueScope Steel Limited * Evolution Mining Limited * Fortescue Metals Group Ltd * Gold Road Resources Limited * Iluka Resources Limited * Lynas Corporation Limited * Metals X Limited * Newcrest Mining Limited * Northern Star Resources Ltd * OceanaGold Corporation Peer companies * Orocobre Limited * Oz Minerals Limited * Pilbara Minerals Limited * Perseus Mining Limited * Rio Tinto Limited * Regis Resources Limited * Resolute Mining Limited * South32 Limited * Saracen Mineral Holdings Limited * St Barbara Limited * Sandfire Resources NL * Sims Metal Management Limited * Syrah Resources Limited * Western Areas Limited Employee Share Ownership Award In accordance with the terms of the EIP, the Employee Share Ownership Award (ESOA) was also introduced during the current financial year. The ESOA provides for shares to be issued by the Company to employees for no cash consideration. All employees (excluding executive directors and senior management entitled to participate in the LTI scheme and non-executive directors) who have been continuously employed by the Group for a period of at least three months prior to 1 July are eligible to participate in the ESOA. Under the ESOA, eligible employees may be granted up to $1,000 worth of fully paid ordinary shares in Independence Group NL annually for no cash consideration. The number of shares issued to participants in the scheme is the offer amount divided by the weighted average price at which the Company's shares are traded on the Australian Securities Exchange for the 20 days up to and including the date of grant. Number of shares issued under the plan to participating employees on 7 March 2017 2017 Number 48,443 2016 Number - Each participant was issued with shares worth $1,000 based on the weighted average market price of $3.97 (2016: $nil). Share rights granted prior to 30 June 2014 Vesting of the performance rights granted to eligible employees of the Company prior to 30 June 2014, and which vested in July 2016, were subject to a combination of the Company’s shareholder return (with a 75 per cent weighting) and return on equity (with a 25 per cent weighting), measured over a three year measurement period. Further information is included in the Remuneration Report. The performance rights will not be subject to any further escrow restrictions once they have vested to the employees. Share trading policy The trading of shares issued to participants under the Company’s EIP is subject to, and conditional upon, compliance with the Company’s employee share trading policy. Non-executive Directors The EIP permits non-executive directors to be eligible employees and therefore to participate in the plan. It is not currently intended that non-executive directors will be issued with performance rights under the EIP and any such issue would be subject to all necessary shareholder approvals. Independence Group NL 82 112 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 27 Share-based payments (continued) (b) Recognition and measurement Equity-settled transactions The fair values of equity settled awards are recognised in share-based payments expense, together with a corresponding increase in share-based payments reserve within equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date). The cost of these equity-settled transactions is measured by reference to the fair value at the date at which they are granted. The fair value is determined with the assistance of a valuation software using a trinomial tree which has been adopted by the Boyle and Law (1994) node alignment algorithm to improve accuracy. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Independence Group NL (market conditions). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available information at the reporting date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award is treated as if it was a modification of the original award, as described in the previous paragraph. Upon the settlement of equity settled share awards, the balance of the share-based payments reserve relating to those rights and awards is transferred to share capital. The dilutive effect, if any, of outstanding rights is reflected as additional share dilution in the computation of diluted earnings per share. 28 Related party transactions (a) Transactions with other related parties During the financial year, a wholly-owned subsidiary paid dividends of $33,000,000 (2016: $22,000,000) to Independence Group NL. This amount has been eliminated on consolidation for the purposes of calculating the profit of the Group for the financial year. Loans were made between Independence Group NL and certain entities in the wholly-owned group. The loans receivable from controlled entities are interest-free and repayable on demand. (b) Key management personnel Compensation of key management personnel Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments 2017 $ 4,479,285 302,954 70,196 709,746 5,562,181 2016 $ 4,162,227 302,964 45,191 474,978 4,985,360 Detailed remuneration disclosures are provided in the remuneration report on pages 46 to 61. Independence Group NL 83 IGO ANNUAL REPORT 2017 — 113 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 29 Parent entity financial information (a) Summary financial information The following information relates to the parent entity, Independence Group NL, at 30 June. Balance sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Acquisition reserve Hedging reserve Share-based payments reserve Accumulated losses Total equity Profit (loss) for the year Other comprehensive income for the period Total comprehensive income (loss) for the year (b) Guarantees entered into by the parent entity 2017 $'000 2016 $'000 82,428 2,005,009 2,087,437 75,790 204,385 280,175 54,755 1,846,030 1,900,785 124,219 275,895 400,114 1,807,262 1,500,671 (1,807,262) (1,500,671) 1,878,469 1,601,458 3,142 (66) 10,698 (84,981) 3,142 (1,322) 10,371 (112,978) 1,807,262 1,500,671 2017 $'000 45,598 1,256 46,854 2016 $'000 (14,229) (286) (14,515) The parent entity has no unsecured guarantees in respect of finance leases of subsidiaries (2016: $nil). There are cross guarantees given by Independence Group NL, Independence Long Pty Ltd, Independence Jaguar Pty Ltd, Independence Nova Holdings Pty Ltd and Independence Nova Pty Ltd as described in note 30. No deficiencies of assets exist in any of these companies. (c) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016. (d) Contractual commitments for the acquisition of property, plant or equipment The parent entity did not have any outstanding contractual commitments for the acquisition of property, plant and equipment at 30 June 2017 or 30 June 2016. (e) Recognition and measurement The financial statements, except as set out below. information for the parent entity has been prepared on the same basis as the consolidated financial Independence Group NL 84 114 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 29 Parent entity financial information (continued) (e) Recognition and measurement (continued) (i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries entities are accounted for at cost in the financial statements of Independence Group NL. (ii) Tax consolidation legislation Independence Group NL and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Independence Group NL, and the controlled entities in the tax consolidated Group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated Group continues to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, Independence Group NL also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated Group. The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Independence Group NL for any current tax payable assumed and are compensated by Independence Group NL for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Independence Group NL under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the Group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. 30 Deed of cross guarantee Independence Group NL, Independence Long Pty Ltd, Independence Jaguar Pty Ltd, Independence Nova Holdings Pty Ltd and Independence Nova Pty Ltd are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors' report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (as amended) issued by the Australian Securities and Investments Commission. (a) Consolidated statement of profit or loss and other comprehensive income and summary of movements in consolidated retained earnings The above companies represent a 'closed group' for the purposes of the Legislative Instrument, and as there are no other parties to the deed of cross guarantee that are controlled by Independence Group NL, they also represent the 'extended closed group'. Set out below is a consolidated statement of profit or loss and other comprehensive income and a summary of movements in consolidated retained earnings for the year ended 30 June 2017 of the closed group consisting of Independence Group NL, Independence Long Pty Ltd, Independence Jaguar Pty Ltd, Independence Nova Holdings Pty Ltd and Independence Nova Pty Ltd. Independence Group NL 85 IGO ANNUAL REPORT 2017 — 115 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 30 Deed of cross guarantee (continued) (a) Consolidated statement of profit or loss and other comprehensive income (continued) Consolidated statement of profit or loss and other comprehensive income Revenue from continuing operations Other income Mining, development and processing costs Employee benefits expense Share-based payments expense Fair value movement of financial investments Depreciation and amortisation expense Rehabilitation and restoration borrowing costs Exploration costs expensed Royalty expense Ore tolling expense Shipping and wharfage expense Borrowing and finance costs Impairment of exploration and evaluation expenditure Impairment of loans to and investments in subsidiaries Acquisition and other integration costs Other expenses Profit (loss) before income tax Income tax expense Profit (loss) for the period Other comprehensive income Items that may be reclassified to profit or loss Effective portion of changes in fair value of cash flow hedges, net of tax Other comprehensive income for the period, net of tax Total comprehensive (loss) income for the period Summary of movements in consolidated retained earnings (accumulated losses) (Accumulated losses) retained earnings at the beginning of the financial year Adjustment on adoption of AASB 9, net of tax Restated (accumulated losses) retained earnings at the beginning of the financial year Profit (loss) for the year Dividends paid Retained earnings (accumulated losses) at the end of the financial year 2017 $'000 421,861 - (146,135) (64,740) (1,147) 4,362 (85,740) (979) (17,155) (14,391) (9,606) (12,092) (26) (492) 793 (3,910) (11,037) 59,566 (18,802) 40,764 2016 $'000 413,159 2,342 (139,931) (66,975) (819) 2,396 (105,872) (474) (17,875) (12,557) (10,092) (16,143) (76) (2,985) (1,960) (65,137) (11,121) (34,120) (6,999) (41,119) 241 241 404 404 41,005 (40,715) 2017 $'000 (17,317) - 2016 $'000 35,552 1,036 (17,317) 36,588 40,764 (17,601) 5,846 (41,119) (12,786) (17,317) (b) Consolidated balance sheet Set out below is a consolidated balance sheet as at 30 June 2017 of the closed group consisting of Independence Group NL, Independence Long Pty Ltd, Independence Jaguar Pty Ltd, Independence Nova Holdings Pty Ltd and Independence Nova Pty Ltd. Independence Group NL 86 116 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 30 Deed of cross guarantee (continued) (b) Consolidated balance sheet (continued) ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Financial assets at fair value through profit or loss Derivative financial instruments Total current assets Non-current assets Receivables Property, plant and equipment Mine properties Exploration and evaluation expenditure Deferred tax assets Investments in controlled entities Investments in joint ventures Derivative financial instruments Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Borrowings Derivative financial instruments Provisions Total current liabilities Non-current liabilities Borrowings Derivative financial instruments Provisions Deferred tax liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Other reserves Retained earnings (accumulated losses) TOTAL EQUITY Notes to the consolidated financial statements 30 June 2017 (continued) 2017 $'000 2016 $'000 35,215 56,354 22,900 15,339 657 130,465 4 22,726 1,409,430 39,850 247,576 161,581 311,457 - 2,192,624 43,832 27,086 17,540 4,989 784 94,231 4 22,242 1,270,512 39,350 215,406 139,494 306,151 799 1,993,958 2,323,089 2,088,189 66,495 56,226 965 15,259 138,945 140,815 251 52,916 92,398 286,380 120,150 43,154 2,487 2,000 167,791 222,672 - 48,567 52,137 323,376 425,325 491,167 1,897,764 1,597,022 1,878,469 13,449 5,846 1,897,764 1,601,458 12,881 (17,317) 1,597,022 Independence Group NL 87 IGO ANNUAL REPORT 2017 — 117 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 31 Remuneration of auditors The auditor of Independence Group NL is BDO Audit (WA) Pty Ltd. Amounts received or due and receivable by BDO Audit (WA) Pty Ltd for: Audit and review of financial statements Other services in relation to the entity and any other entity in the consolidated Group 2017 $ 2016 $ 165,500 232,500 37,338 202,838 38,158 270,658 32 Summary of significant accounting policies (a) New and amended standards and interpretations adopted by the Group A number of new or amended standards became applicable for the current reporting period, however, the Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards. The Group has not elected to early adopt any new standards or amendments during the current financial year. (b) New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2017 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below. Mandatory application date/ Date of adoption by group Mandatory for financial years commencing on or after 1 January 2018, but available for early adoption Expected date of adoption by the group: 1 January 2018. Title of standard AASB 15 Revenue from Contracts with Customers Nature of change Impact This standard is not expected to have a material impact on the Group's financial statements and disclosures. The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers revenue arising from the sale of goods and the rendering of services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption. Independence Group NL 88 118 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 32 Summary of significant accounting policies (continued) (b) New standards and interpretations not yet adopted (continued) AASB 16 (issued February 2016) Leases AASB 16 eliminates the operating and finance lease classifications for lessees currently accounted for under AASB 117 Leases. It instead requires an entity to bring most leases into its statement of financial position in a similar way to how existing finance leases are treated under AASB 117. An entity will be required to recognise a lease liability and a right of use asset in its statement of financial position for most leases. There are some optional exemptions for leases with a period of 12 months or less and for low value leases. Lessor accounting remains largely unchanged from AASB 117. To the extent that the entity, as lessee, has significant operating leases outstanding at the date of initial application, 1 July 2019, right-of-use assets will be recognised for the amount of the unamortised portion of the useful life, and lease liabilities will be recognised at the present value of the outstanding lease payments. Mandatory for financial years commencing on or after 1 January 2019, but available for early adoption Expected date of adoption by the group: 1 January 2019. Thereafter, earnings before interest, depreciation, amortisation and tax (EBITDA) will increase because operating lease expenses currently included in EBITDA will be recognised instead as amortisation of the right-of-use asset, and interest expense on the lease liability. However, there will be an overall reduction in net profit before tax in the early years of a lease because the amortisation and interest charges will exceed the current straight-line expense incurred under AASB 117 Leases. This trend will reverse in the later years. There will be no change to the accounting treatment for short-term leases less than 12 months and leases of low value items, which will continue to be expensed on a straight-line basis. The Group is still assessing the potential impact of the adoption of this standard. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. (c) Other significant accounting policies (i) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred. Independence Group NL 89 IGO ANNUAL REPORT 2017 — 119 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 Notes to the consolidated financial statements 30 June 2017 (continued) 32 Summary of significant accounting policies (continued) (c) Other significant accounting policies (continued) (ii) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. Independence Group NL 90 120 — IGO ANNUAL REPORT 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2017 DIRECTORS’ DECLARATION 30 JUNE 2017 Directors' declaration 30 June 2017 In the Directors' opinion: (a) the financial statements and notes set out on pages 64 to 120 are in accordance with the Corporations Act 2001, including: (i) (ii) complying with Accounting Standards, professional reporting requirements, and the Corporations Regulations 2001 and other mandatory giving a true and fair view of the consolidated entity's financial position as at 30 June 2017 and of its performance for the year ended on that date, and (b) (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 30 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 30. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of Directors. Peter Bradford Managing Director Perth, Western Australia Dated this 29th day of August 2017 Independence Group NL 91 IGO ANNUAL REPORT 2017 — 121 Tel: +61 8 6382 4600 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 Fax: +61 8 6382 4601 www.bdo.com.au www.bdo.com.au 38 Station Street 38 Station Street Subiaco, WA 6008 Subiaco, WA 6008 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 Australia Australia INDEPENDENT AUDITOR'S REPORT INDEPENDENT AUDITOR'S REPORT To the members of Independence Group NL To the members of Independence Group NL Report on the Audit of the Financial Report Report on the Audit of the Financial Report Opinion Opinion We have audited the financial report of Independence Group NL (the Company) and its subsidiaries (the We have audited the financial report of Independence Group NL (the Company) and its subsidiaries (the Group), which comprises the consolidated balance sheet as at 30 June 2017, the consolidated Group), which comprises the consolidated balance sheet as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: Act 2001, including: (i) (i) Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year ended on that date; and financial performance for the year ended on that date; and Complying with Australian Accounting Standards and the Corporations Regulations 2001. Complying with Australian Accounting Standards and the Corporations Regulations 2001. (ii) (ii) Basis for opinion Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. for our opinion. Key audit matters Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. a separate opinion on these matters. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and the acts or omissions of financial services licensees form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees 122 — IGO ANNUAL REPORT 2017 92 92 Carrying Value of Nova Mine Properties Key audit matter How the matter was addressed in our audit At 30 June 2017 the carrying value of Mine Properties We evaluated management’s impairment model for was $1.61bn (2016: $1.47bn), as disclosed in Note 14. the Nova mine asset by critically challenging the key Included in the mine properties is the carrying value of estimates and assumptions used by management in the Nova mine asset of $1.36bn. During the year the arriving at their assessment. Our work included but Group identified indicators of possible impairment was not limited to the following procedures: relating to the Nova mine asset due to volatility in the nickel price. As a result the Group undertook an impairment assessment on the Nova mine asset and the Group concluded that the mine asset was not impaired. When an impairment assessment is performed, there are significant judgements made in relation to assumptions, such as: · Benchmarking and analysing management’s commodity price assumptions against external market information and trends, to determine whether a significant change would impact the value of the asset; · Challenging the appropriateness of management’s ore reserves estimate by assessing the significant assumptions, Long term nickel, copper and cobalt pricing; methods and source data used by Reserves estimates; management in estimating ore reserves, in conjunction with our independent auditor’s Production and processing volumes; experts; · · · · · · Operating costs: Foreign exchange rates and inflation rates; and Discount rate. The assessment of carrying value of Nova mine asset requires management to make significant accounting judgements and estimates in producing the impairment model used for determining whether the Nova mine asset requires impairment. · Evaluating forecasted production and processing volumes against the Board approved mine plan and the forecast operating costs in conjunction with our independent auditor’s experts; · Challenging the appropriateness of management’s discount rate used in the impairment model in conjunction with our internal valuation experts; and · Challenging management’s sensitivity assessment by performing our own sensitivity analysis in respect of the key assumptions to indicate if there would be a significant change to the value of the asset. We assessed the adequacy of related disclosures in Note 14 to the financial statements. IGO ANNUAL REPORT 2017 — 123 93 Recoverability of Deferred Tax Assets Key audit matter How the matter was addressed in our audit At 30 June 2017, the Group has $251m (2016: $219m) We assessed the Group’s ability to utilise the deferred of deferred tax assets recognised. Australian tax assets by obtaining the latest Board approved cash Accounting Standards require deferred tax assets to be flow budget and assessed the forecasted taxable recognised only to the extent that it is probable that profits over the relevant utilisation period which sufficient future taxable profits will be generated in includes the life of mines. Our work included but was order for the benefits of the deferred tax assets to be not limited to the following procedures: realised. These benefits are realised by reducing tax payable on future taxable profits. This was a key audit matter due to the quantum of the accumulated losses as well as the judgments behind preparing forecasts to demonstrate the future utilisation of these losses in accordance with the requirements of Australian Accounting Standards. Significant judgement is required to assess whether there will be sufficient future taxable profits to utilise the recognised deferred tax assets, and given the high value of the balance, such judgements can have a significant impact on the financial statements. · · · · · Evaluating whether the forecasts have been appropriately adjusted for the differences between accounting profits to taxable profits; Comparing the latest Board approved budget to historical performance to assess the consistency and accuracy of the Group’s budgeting processes; Assessing whether the latest Board approved cash flow budget is consistent with life of mine; Challenging management’s key assumptions in the cashflow budget and forecasts; and Assessing whether deferred tax assets had been appropriately recognised in the financial report as at 30 June 2017 based on the extent to which they can be recovered by future taxable profits. We Assessed the adequacy of related disclosures in Note 5 to the financial statements. Other information The directors are responsible for the other information. The other information comprises the unaudited information contained in the Directors’ Report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon, which we obtained prior to the date of this auditor’s report, and the Annual Report to Shareholders, which is expected to be made available to us after that date. 124 — IGO ANNUAL REPORT 2017 94 Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the Annual Report to Shareholders, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and will request that it is corrected. If it is not corrected, we will seek to have the matter appropriately brought to the attention of users for whom our report is prepared. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_files/ar2.pdf This description forms part of our auditor’s report IGO ANNUAL REPORT 2017 — 125 95 Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 46 to 61 of the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Independence Group NL, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit (WA) Pty Ltd Glyn O'Brien Director Perth, 29 August 2017 126 — IGO ANNUAL REPORT 2017 96 ADDITIONAL ASX INFORMATION The following additional information not shown elsewhere in this report is required by ASX Limited in respect of listed companies only. This information is current as at 11 September 2017. 1. Shareholding a. Distribution of shareholders Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – Over Total Total holders 3,816 3,248 1,176 1,219 157 9,616 Units 1,413,616 8,471,447 8,702,656 31,099,984 537,059,320 586,747,023 % of issued capital 0.24 1.44 1.48 5.30 91.53 100.00 b. The number of shareholders holding less that a marketable parcel of fully paid ordinary shares is 1,297. c. The Company has received the following notices of substantial shareholding (Notice): Substantial shareholder Commonwealth Bank of Australia T. Rowe Price Associates, Inc. FIL Limited Mark Creasy and Creasy Group entities Relevant interest per the Notice – Number of shares 41,783,890 48,341,790 50,715,214 95,562,917 d. Voting rights: The voting rights of the fully paid ordinary shares are one vote per share held. 2. Twenty largest holders of ordinary shares Ordinary Shareholders 1 2 3 4 5 6 7 8 9 9 J P MORGAN NOMINEES AUSTRALIA LIMITED HSBC CUSTODY NOMINEES LIMITED NATIONAL NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED YANDAL INVESTMENTS PTY LTD FRASERX PTY LTD YANDAL INVESTMENTS PTY LTD PONTON MINERALS PTY LTD FREE CI PTY LTD LAKE RIVERS GOLD PTY LTD 11 BNP PARIBAS NOMS PTY LTD 12 BNP PARIBAS NOMINEES PTY LTD 13 HSBC CUSTODY NOMINEES LIMITED-GSCO ECA No. of Shares held Percentage held 169,802,690 114,680,014 28.94 19.55 41,387,960 36,479,236 32,486,218 13,415,188 12,500,000 10,964,532 10,964,531 10,964,531 8,314,611 4,592,640 3,550,985 7.05 6.22 5.54 2.29 2.13 1.87 1.87 1.87 1.42 0.78 0.61 0.56 0.48 0.47 0.45 0.44 0.41 0.39 14 HSBC CUSTODY NOMINEES LIMITED 3,260,226 15 PERTH SELECT SEAFOODS PTY LTD 16 UBS NOMINEES PTY LTD 17 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 18 NATIONAL NOMINEES LIMITED 19 HSBC CUSTODY NOMINEES LIMITED - A/C 2 20 WARBONT NOMINEES PTY LTD 2,837,200 2,750,894 2,662,023 2,556,239 2,419,567 2,292,346 Totals: Top 20 holders of INDEPENDENCE ORDINARY SHARE CLASS (Total) Total Remaining Holders Balance 488,881,631 97,865,392 83.32 16.68 3. Unquoted securities: IGO has 1,131,629 performance rights on issue. The number of beneficial holders of performance rights totals 58. IGO ANNUAL REPORT 2017 — 127 SHAREHOLDER REPORTING TIMETABLE Please note that the dates below are subject to change. Please check the IGO website nearer the time to confirm dates. IMPORTANT DATES 2017 25 October 2017 September Quarterly Activities Report 25 October 2017 Investor Webcast 24 November 2017 Annual General Meeting to be held in Perth, Western Australia 2018 31 January 2018 December Quarterly Activities Report 31 January 2018 Investor Webcast 21 February 2018 Half Yearly Financial Statements 21 February 2018 Investor Webcast 30 April 2018 30 April 2018 30 July 2018 30 July 2018 March Quarterly Activities Report Investor Webcast June Quarterly Activities Report Investor Webcast 128 — IGO ANNUAL REPORT 2017 GLOSSARY OF TERMS AC air core usually in the context of drilling or drill holes AngloGold Ashanti AngloGold Ashanti Australia Pty Ltd Ag Au BCM Co Cu EBITDA EM silver gold bulk cubic metres cobalt copper Underlying Earnings Before Interest, Tax, Depreciation and Amortisation electromagnetic EM conductors electromagnetic conductors returned from EM surveys FLEM HPGR HPM IGO LTIFR MLEM Mt Mtpa NPAT Ni oz Fixed-Loop electromagnetic High Pressure Grinding Rolls high precious metal Independence Group NL lost time injury frequency rate per million hours worked moving-loop electromagnetic surveys million metric tonnes million tonnes per annum Net Profit After Tax nickel ounce RC drilling reverse circulation drilling t TGM TJV Zn $ $M metric tonnes Tropicana Gold Mine that is 30% owned by the Company and 70% owed by AngloGold Ashanti under the TJV agreement Tropicana Joint Venture that is 30% owned by the Company and 70% owed by AngloGold Ashanti zinc Australian dollars. All currency amounts in this report are Australian Dollars unless otherwise stated million Australian dollars FORWARD-LOOKING STATEMENTS This document may include Forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning IGO’s planned production and planned exploration program and other statements that are not historical facts. When used in this document, the words such as “could”, “plan”, “estimate”, “expect”, “intend”, “may”, “potential”, “should” and similar expressions are Forward-looking statements. Although IGO believes that its expectations reflected in these Forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these Forward-looking statements. CASH COSTS All cash costs quoted include royalties and net of by-product credits unless otherwise stated. Underlying EBITDA is a non-IFRS measure and comprises net profit or loss after tax, adjusted to exclude tax expense, finance costs, interest income, asset impairments, investment sales, depreciation and amortisation, and once-off transaction costs. Underlying NPAT comprises net profit (loss) after tax adjusted for; post tax effect of acquisition and integration costs, investment sales and impairments. CURRENCY All currency amounts in this report are Australian Dollars unless otherwise stated. ALL-IN SUSTAINING COSTS (AISC) PER OUNCE OF GOLD SOLD IGO reports All-in Sustaining Costs (AISC) per ounce of gold sold in AUD for its 30% interest in the Tropicana Gold Mine using the World Gold Council guidelines for AISC. The World Gold Council guidelines publication was released via press release on 27th June 2013 and is available from the World Gold Council’s website. IGO ANNUAL REPORT 2017 — 129 COMPANY DIRECTORY DIRECTORS Peter Bilbe Non-Executive Chairman Peter Bradford Managing Director and CEO Debra Bakker Non-Executive Director Peter Buck Non-Executive Director Geoffrey Clifford Non-Executive Director Keith Spence Non-Executive Director Neil Warburton Non-Executive Director MANAGEMENT Peter Bradford Managing Director and CEO Keith Ashby Head of Governance & Risk Rob Dennis Chief Operating Officer Matt Dusci Chief Growth Officer Joanne McDonald Company Secretary Sam Retallack Head of People & Culture Scott Steinkrug Chief Financial Officer & Joint Company Secretary PERTH OFFICE Suite 4, Level 5 South Shore Centre 85 South Perth Esplanade South Perth WA 6151 Postal: PO Box 496 South Perth WA 6951 Telephone: +61 8 9238 8300 Facsimile: +61 8 9238 8399 Email: Website: contact@igo.com.au www.igo.com.au EXTERNAL AUDITOR BDO Audit (WA) Pty Ltd 128 Hay Street Subiaco WA 6008 Telephone: +61 8 9380 8400 SHARE REGISTRY Computershare Investor Services Pty Limited Level 2, 45 St Georges Terrace Perth WA 6000 Telephone: 1300 850 505 (within Australia), +61 3 9415 4000 (outside Australia) +61 3 9473 2500 www.investorcentre.com/contact www.computershare.com Fax: Email: Web: SHARES Listed on Australian Securities Exchange (ASX) ASX code: IGO Shares on issue: 586,747,023 ordinary shares WEBSITE Through the use of the internet, we have ensured that our corporate reporting is timely, complete and available at minimum cost to the Company. All ASX releases, investor presentations, financial statements and other information are available on our website. www.igo.com.au The Company’s Corporate Governance Statement outlines the Company’s current corporate governance framework, by reference to the ASX Recommendations. This statement can be found in the Governance section of IGO’s website at http://www.igo.com.au/ irm/content/governance.aspx?RID=295, along with the ASX Appendix 4G, a checklist cross-referencing the ASX Recommendations to disclosures in the Corporate Governance Statement, the current Annual Report and the Company website. 130 — IGO ANNUAL REPORT 2017 This page has been left intentionally blank. This page has been left intentionally blank. Cautionary Notes and Disclaimer This annual report has been prepared by Independence Group NL (“IGO”) (ABN 46 092 786 304). It should not be considered as an offer or invitation to subscribe for or purchase any securities in IGO or as an inducement to make an offer or invitation with respect to those securities in any jurisdiction. This annual report contains general summary information about IGO. The information, opinions or conclusions expressed in the course of this presentation should be read in conjunction with IGO’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange (ASX), which are available on the IGO website. No representation or warranty, express or implied, is made in relation to the fairness, accuracy or completeness of the information, opinions and conclusions expressed in this presentation. This annual report includes forward looking information regarding future events, conditions, circumstances and the future financial performance of IGO. Often, but not always, forward looking statements can be identified by the use of forward looking words such as “may”, “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “continue” and “guidance”, or other similar words and may include statements regarding plans, strategies and objectives of management, anticipated production or construction commencement dates and expected costs or production outputs. Such forecasts, projections and information are not a guarantee of future performance and involve unknown risks and uncertainties, many of which are beyond IGO’s control, which may cause actual results and developments to differ materially from those expressed or implied. Further details of these risks are set out below. All references to future production and production guidance made in relation to IGO are subject to the completion of all necessary feasibility studies, permit applications and approvals, construction, financing arrangements and access to the necessary infrastructure. Where such a reference is made, it should be read subject to this paragraph and in conjunction with further information about the Mineral Resources and Ore Reserves, as well as any Competent Persons’ Statements included in periodic and continuous disclosure announcements lodged with the ASX. Forward looking statements only apply at the date of issue. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, in providing this information IGO does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based. There are a number of risks specific to IGO and of a general nature which may affect the future operating and financial performance of IGO and the value of an investment in IGO including and not limited to economic conditions, stock market fluctuations, commodity demand and price movements, access to infrastructure, timing of environmental approvals, regulatory risks, operational risks, reliance on key personnel, reserve and resource estimations, native title and title risks, foreign currency fluctuations and mining development, construction and commissioning risk. The production guidance in this presentation is subject to risks specific to IGO and of a general nature which may affect the future operating and financial performance of IGO. Any references to Mineral Resource and Ore Reserve estimates should be read in conjunction with IGO’s 2017 Mineral Resource and Ore Reserve announcement dated 23 October 2017, and lodged with the ASX, which are available on the IGO website. 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