GALAXY RESOURCES LIMITED
ANNUAL FINANCIAL REPORT DECEMBER 2011
30. FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Foreign exchange risk The Group is exposed to currency risk on purchases of property, plant and equipment and on borrowings that are denominated in a currency other than the respective functional currencies of the Company or its subsidiaries. The currencies in which these transactions primarily are denominated are USD, HKD and RMB. At any point in time the Group may monitor and manage its estimated foreign currency exposure in respect of cash and cash equivalents, other receivables and interest bearing liabilities. The Group ensures that the net exposure is kept to an acceptable level by buying or selling foreign currency at spot rates where necessary to address short-term imbalances. The Group’s exposure to foreign currency risk at each balance date was as follows. For presentation purposes, the amounts of the exposure are shown in Australian dollars translated using the spot rate at each balance sheet date. December 31, 2011 Group Cash and cash equivalents Restricted cash deposit Other receivables Interest bearing liabilities Balance sheet exposure
USD
HKD
4,943,958
December 31, 2010
RMB
CAD
Euro
USD
316,406
160,085
28,253
6,231
3,971
-
8,642,038
96,460
-
-
(33,499,404)
4,947,929
316,406
(24,697,281)
The following significant exchange rates applied during the year: Average rate AUD 2011 US 1 0.968 euro 1 1.348 CAD 1 0.979 CNY 1 0.150 HKD 1 0.124
HKD
RMB
17,148,881
16,796
28,981
-
48,054,753 -
-
1,723,936
-
-
(98,715,837)
-
-
124,713
6,231
(33,512,203)
16,796
1,752,917
2010
1.088 N/A N/A 0.161 0.140
Reporting date spot rate 2011 2010 0.964 0.984 1.273 N/A 0.983 N/A 0.155 0.149 0.127 0.126
Sensitivity analysis
A 10% strengthening of the Australian dollar against the following currencies would have (increased)/decreased equity and loss for the year by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. December 31, 2010 December 31, 2011 Equity Loss for the Loss for the Effect in Australian dollars Equity period period (494,793) 3,351,220 3,351,220 USD (494,793) (31,641) (1,680) (1,680) HKD (31,641) (175,292) (175,292) RMB A 10% weakening of the Australian dollar against the above currencies would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. (d) Interest rate risk Throughout the year, the Group may monitor and manage its interest rate exposure on future borrowings. The Group’s main interest rate risk arises from cash at bank and interest bearing liabilities, which are held at a variable rates that expose the Group to cash flow interest rate risk. The Group's interest-bearing cash at bank and liabilities and the respective interest rates as at each balance sheet date are set as below: December 31, Group December 31, 2011 2010 17,996,933 27,509,567 Cash and cash equivalents 0% to 4% 0% to 5% - Interest rate 99,567,595 130,715,836 Interest bearing liabilities 6.4% SIBOR + 4.5% - Interest rate to 8% to 8%
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