Ann: Sandfire Announce 2018 Annual Results, page-21

You should read this from the Financial Report page 18.

Financial

The marketability of the concentrates is dependent on mine supply, smelter demand and quality of the product. The prices received are dictated by global commodity and currency markets. Commodity prices and exchange rates have a direct and material impact on the Group’s financial performance.

The Group does not actively take steps to hedge its currency or commodity risks, but may from time to time enter into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings, in order to reduce the exposure to fluctuations in copper price during the Quotational Period (QP) period. The hedges are generally in the form of QP hedging via copper swaps to either fix the price of sales at the time of shipment or to reduce the length of the QP, therefore reducing the short and medium term exposure to the market price of metal for completed or imminent shipments. There were no hedging activities undertaken during the year.

The high copper grade ore of Sandfire’s DeGrussa Copper-Gold Mine and its low production cost profile, relative to global copper producers, provides resilience to reduced commodity prices and an ability to maximise margins during high commodity price periods.

The Group selectively utilises letters of credit to mitigate risk of receipt of sales funds and receives provisional payments prior to shipments arriving at their destination port.

The majority of the Group’s costs are incurred in Australian dollars, funded through the conversion of US dollar sales proceeds to Australian dollars on receipt from customers.

The Group’s approach to managing liquidity is to ensure that it has 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. The Group manages liquidity risk by conducting regular reviews and updates of the timing of cash flows in order to ensure sufficient funds are available to meet its obligations.