Note 21. Financial instruments and financial risk management (continued) (i) Credit risk The Group’s maximum exposures to credit risk at the reporting date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the Statement of Financial Position. Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and other receivables. The Group trades only with recognised, credit worthy third parties. As the Group holds the majority of the Group’s cash balances with one institution, the credit risk is concentrated in one area. Risk is considered minimal as the institution is Australian and AA rated. The Group’s primary banker is National Australia Bank Limited. At the reporting date all operating accounts are with this bank, except for funds transferred to Ecuador, Finland and Sweden to meet the working capital needs of the subsidiary companies. The cash needs of the subsidiary operations are monitored by the Company and funds are advanced to the operations on an as needs basis. The Directors believe this is the most efficient method of balancing the monitoring and mitigation of potential credit risks arising out of holding cash assets in overseas jurisdictions, and the funding mechanisms required by the Group. (ii) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due. It is the Group’s policy to review the Group’s liquidity position including cash flow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels. The remaining contractual maturities of the Group’s liquid financial assets and financial liabilities are: 2022 $ 2021 $ Liquid financial liabilities Three months or less 1,543,814 224,808 Three - twelve months 30,263 27,234 Between 12 months and 5 years 32,579 72,483 1,606,656 324,525 Fair values All financial assets and liabilities recognised on the Consolidated Statement of Financial Position, whether they are carried at amortised cost or at fair value, are recognised at amounts that represent a reasonable approximation of fair value unless otherwise stated in the applicable notes (refer Note 8). (iii) Interest rate risk The Group’s exposure to interest rates primarily relates to its cash and cash equivalents. At reporting date, the Group had the following exposure to variable interest rate risk. 2022 $ 2021 $ Financial assets Cash and cash equivalents 23,997,222 12,171,240 23,997,222 12,171,240 The following sensitivity analysis is based on the interest rate risk exposure in existence at the reporting date. The 1% sensitivity (2021: 1%) is based on reasonably possible changes over a financial year, using the observed range of actual historical rates for the preceding five year period. Notes to the Financial Statements for the year ended 30 June 2022 54 Sunstone Metals Limited Annual Report 2022 SUNSTONE METALS LIMITED ANNUAL REPORT 2022
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