| 36. | FAIR VALUE OF ASSETS AND LIABILITIES |
The estimated fair values of the Group’s financial assets and liabilities are:
| 2017 | 2016 | |||||||||||||||
| Carrying amount US$ million |
Fair value US$ million |
Carrying amount US$ million |
Fair value US$ million |
|||||||||||||
|
Financial assets |
||||||||||||||||
|
Cash and cash equivalents |
479.0 | 479.0 | 526.7 | 526.7 | ||||||||||||
|
Trade and other receivables |
66.5 | 66.5 | 68.5 | 68.5 | ||||||||||||
|
Gold and oil derivative contracts |
25.0 | 25.0 | — | — | ||||||||||||
|
Environmental trust fund |
55.5 | 55.5 | 44.5 | 44.5 | ||||||||||||
|
Investments |
104.6 | 104.6 | 19.7 | 19.7 | ||||||||||||
|
Financial liabilities |
||||||||||||||||
|
Trade and other payables |
451.0 | 451.0 | 459.3 | 459.3 | ||||||||||||
|
Borrowings |
1,587.9 | 1,611.5 | 1,504.9 | 1,496.7 | ||||||||||||
|
Current portion of borrowings |
193.6 | 193.6 | 188.0 | 188.0 | ||||||||||||
|
Copper derivative contracts |
3.3 | 3.3 | — | — | ||||||||||||
|
South Deep dividend |
6.4 | 6.4 | 6.4 | 6.4 | ||||||||||||
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Trade and other receivables, trade and other payables and cash and cash equivalents
The carrying amounts approximate fair values due to the short maturity of these instruments.
Investments
The fair value of publicly traded instruments (listed investments) is based on quoted market values. Unlisted investments are accounted for at cost with adjustments for write-downs where appropriate and the fair value approximates their carrying value. Derivative instruments are accounted for at fair value with adjustments to the fair value being recognised in profit or loss.
Environmental trust fund
The environmental trust fund is stated at fair value based on the nature of the fund’s investments.
Borrowings and current portion of borrowings
The fair value of borrowings and current portion of borrowings, except for the US$1 billion notes issued at a fixed interest rate, approximates their carrying amount as the impact of credit risk is included in the measurement of carrying amounts. The fair value of the US$1 billion notes issue is based on listed market prices.
South Deep dividend
The carrying amount approximates the fair value.
Gold, oil and copper derivative contracts
The fair value of these contracts are determined by using available market contract values for each trading date’s settlement volume.
The Group uses the following hierarchy for measuring the fair value of assets and liabilities at the reporting date:
Level 1: unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. There were no transfers during the years ended 31 December 2017 and 2016.
The following table sets out the Group’s assets and liabilities measured at fair value by level within the fair value hierarchy at the reporting date:
|
UNITED STATES DOLLAR |
UNITED STATES DOLLAR |
|||||||||||||||
|
2016 |
2017 |
|||||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
Total |
Level 1 |
Level 2 |
Level 3 |
|||||||||
| Assets measured at fair value | ||||||||||||||||
|
— |
10.6 | — | 10.6 | Trade receivables from provisional copper and gold concentrate sales | 21.2 | — | 21.2 | — | ||||||||
|
10.5 |
— |
— | 10.5 | Listed investments | 99.0 | 99.0 | — | — | ||||||||
|
— |
5.9 | — | 5.9 | Derivative instruments | 5.5 | — | 5.5 | — | ||||||||
|
— |
— |
— | — | Oil derivative contracts | 14.1 | — | 14.1 | — | ||||||||
|
— |
— |
— | — | Gold derivative contracts | 10.9 | — | 10.9 | — | ||||||||
| Liabilities measured at fair value | ||||||||||||||||
|
— |
— | — |
— |
Copper derivative contracts | 3.3 | — | 3.3 | — | ||||||||
Trade receivables from provisional copper and gold concentrate sales
Valued using quoted market prices based on the forward London Metal Exchange (“LME”) and, as such, is classified within level 2 of the fair value hierarchy.
Listed investments
Comprise equity investments in listed entities and are therefore valued using quoted market prices in active markets.
Derivative instruments
Derivative instruments are measured at fair value through profit or loss. The fair value is determined using a standard European call option format based on a standard option theory model.
Oil, gold and copper derivative contracts
The fair values of these contracts are determined by using available market contract values for each trading date’s settlement volume.