NOTE 12
FINANCIAL RISK MANAGEMENT (CONTINUED)
(v) Valuation processes
The main level 3 inputs used by the Group are derived and evaluated as follows:
•
•
Due to the long life of the asset base of the business, cash flows are considered for the shorter of mine life or 20 years.
•
•
Expected cash flows are based on the terms of existing contracts, along with the entity’s knowledge of the
business and assessment of the likely current economic environment impacts, adjusted to account for an expected
arms length market participant’s view of cash flow risks.
•
•
Growth rates for income are derived from the underlying contract data, GDP growth rates, inflation estimates and
pricing assumptions. Long term average growth rates used range from 2.4% to 7.2%.
•
•
Discount rates are determined using an external expert assessment to calculate a post-tax rate that reflects
current market assessments of the time value of money and the risk specific to the business providing a range of
7.1% to 7.9%.
Summarised sensitivity analysis
For the fair values of contingent consideration reasonably possible changes at the reporting date to one of the
significant unobservable inputs, holding other inputs constant would have the following effects:
Increase
Decrease
Profit
Equity
Profit
Equity
$’000’s
$’000’s
$’000’s
$’000’s
Annual revenue (1%movement p.a.)
33,603
132,762
(33,603)
(132,762)
Maintenance and capital expenditure (1%movement p.a.)
(13,312)
(50,005)
13,312
50,005
Discount rate (1%movement)
(127,939)
(558,662)
191,385
775,160
(d) Fair value measurements (continued)
85
