Westgold Resources Limited Annual Report 2020

73 Westgold Resources Limited Annual Report 2020 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Risk exposures and responses (continued) The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise: Level 1 – the fair value is calculated using quoted prices in active markets. Level 2 – the fair value is estimated using inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from price). Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below. Quoted market price (Level 1) Valuation technique market observable inputs (Level 2) Valuation technique non-market observable inputs (Level 3) Total 2020 Financial assets Instruments carried at fair value Royalties receivable – – 13,000,000 13,000,000 – – 13,000,000 13,000,000 2019 Financial assets Instruments carried at fair value Listed investments 41,210,813 – – 41,210,813 Royalties receivable – – 15,000,000 15,000,000 41,210,813 – 15,000,000 56,210,813 Sensitivity Analysis Significant unobservable input Variance Estimated increase / (decrease) in fair value Estimated fair value Estimated fair value Ore Processing +/- 5% 699,572 13,699,572 12,300,428 Lithium price +/- 20% 1,665,314 14,665,314 11,334,686 Discount rate 100 basis points (846,516) 12,153,484 13,846,516 Quoted market price represents the fair value of listed investments determined based on quoted prices on active markets as at the reporting date without any deduction for transaction costs. The fair value of royalties’ receivable is valued based on discounted cash flow model. The fair value of long-term borrowings is based on fixed lease interest rates. Transfer between categories There were no transfers between Level 1 and Level 2, and no transfers into and out of Level 3 fair value measurement.