12 Sheffield Resources Limited Annual Report 2024 Review of Operations Such occurrences could have a material adverse effect on the Sheffield business, operating result or financial condition. At Thunderbird, KMS holds comprehensive property and equipment insurance, as well as business interruption insurance to protect against certain risks in such amounts as it considers reasonable. Insurance may not cover all the potential risks associated with the Company’s operations. Contractual Risks The ability to efficiently conduct Sheffield business in several respects depends upon third party product and service providers and contracts. Accordingly, in some circumstances, contractual arrangements have been entered into by KMS. As in any contractual relationship, the ability for KMS to ultimately receive benefits from these contracts is dependent upon the relevant third party complying with its contractual obligations. To the extent that such third parties default in their obligations, it may be necessary for KMS to enforce its rights under any of the contracts and pursue legal action. Such legal action may be costly, and no guarantee can be given by KMS or Sheffield that a legal remedy will ultimately be granted on appropriate terms. Additionally, some existing contractual arrangements that have been entered into by Sheffield and its subsidiaries may be subject to the consent of third parties being obtained to enable controlled entities to carry on all of its planned business and other activities and to obtain full contractual benefits. No assurance can be given that any such required consent will be forthcoming. Failure by Sheffield to obtain such consent may result in Sheffield not being able to carry on all of its planned business and other activities or proceed with its rights under any of the relevant contracts requiring such consent. Commodity Prices The prices that KMS obtains for its products are a key driver of business performance, and fluctuations in these markets affects its results, including cash flows and shareholder returns. 2024 financial year operating cash flows were sourced from the sale of materials from Thunderbird. Each of these commodities are priced contractually or by external markets and, as Sheffield or KMS are not a price maker with respect to the materials available for sale, it is susceptible to adverse price movements. Interest Rates Interest rate movements affect both returns on funds on deposit as well as the cost of borrowings. Interest rate risk may be hedged in certain circumstances, however, no interest rate hedging occurred during the past year. Currency Exchange Rates The functional currency of KMS and Sheffield is Australian Dollars (AUD). KMS cash inflows are in United States dollars (USD), which is the currency of denominated material sales and inflows may therefore be subject to fluctuations in the exchange rate with respect to sales or ad hoc expenditures in currencies that are not AUD. Both KMS and Sheffield did not enter into any currency exchange hedging during the past year.
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