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Whitehaven Coal Limited : Annual Report 2011
WhitehavenCoalLimited–AnnualReport2011 73 noteS to the Financial StatementS 30 june 2011 5. fiNANCiAL Risk mANAGEmENT OBJECTivEs ANd POLiCiEs (CONTiNuEd) Risk exposures and responses Foreign currency risk The consolidated entity is exposed to currency risk on sales, purchases and demurrage that are denominated in a currency other than the respective functional currency of the consolidated entity, the Australian dollar (AUD) The currency in which these transactions primarily are denominated is US Dollars (USD) The consolidated entity uses forward exchange contracts (FECs) to hedge its currency risk The Hedging Policy of the consolidated entity is to utilise forward exchange contracts to cover: • 100% of contracted sales where both volume and US dollar price are fixed; • 90% of contracted sales where volume is fixed but pricing is provisional; • 80% of planned sales from existing operations over a 12 month period; and • a maximum of 50% of planned sales from existing operations for between 12 and 24 months No cover is taken out beyond 24 months other than contracted sales where both volume and US dollar prices are fixed In respect of other monetary assets and liabilities denominated in foreign currencies, the consolidated entity ensures that its net exposure is kept to an acceptable level by buying and selling foreign currencies at spot rates when necessary to address short-term imbalances The consolidated entity classifies its forward exchange contracts as cash flow hedges and measures them at fair value The fair value of forward exchange contracts used as hedges at 30 June 2011 was $48,790,000 (2010: $3,705,000), comprising assets and liabilities that were recognised as fair value derivatives At 30 June 2011, the consolidated entity had the following financial instruments that were not designated in cash flow hedges that were exposed to foreign currency risk: In thousands of USD USD 30 June 2011 USD 30 June 2010 Cash 33,517 5,217 Trade and other receivables 68,186 124,290 Trade and other payables (25,135) (4,250) Finance lease liabilities (15,566) (20,964) Net statement of financial position exposure 61,002 104,293 Currency risk exposure arising from derivative financial instruments is disclosed in note 17 The following exchange rates applied during the year: Average rate Reporting date spot rate Fixed rate instruments 2011 2010 2011 2010 USD 0 9881 0 8821 1 0739 0 8523 EUR 0 7245 0 6737 07405 0 6979
Annual Report 2010
Annual Report 2012