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## COMMANDER RESOURCES LTD. 

(An Exploration Stage Company) 

Notes to Financial Statements 

For the Years Ended December 31, 2012 and 2011 

(Expressed in Canadian dollars) 

## 4. Financial Instruments and Risk Management (Continued) 

## (c) Credit risk (Continued) 

The Company’s concentration of credit risk and maximum exposure at December 31, 2012 and 2011 are as follows: 

<img src='content_image/152302.jpg'>

## (d) Market risk 

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk. 

## i. Interest rate risk 

Interest rate risk consists of two components: 

(a) To the extent that payments made or received on the Company’s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk. 

(b) To the extent that changes in prevailing market rates differ from the interest rate in the Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk. 

The Company’s cash and cash equivalents consist of cash and term deposits held in bank accounts. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on estimated fair values as of December 31, 2012. 

Future cash flows from interest income on cash and cash equivalents will be affected by interest rate fluctuations. Given the balance of the term deposit at the year-end, any fluctuations in the interest rate would lead to an immaterial change in net income and comprehensive income. 

## ii. Foreign currency risk 

Foreign currency risk arises primarily as a result of the Company having US dollar denominated cash balances. The financial position of the Company may vary at the time that a change in foreign currency rate occurs. For the year ended December 31, 2012, a change in the foreign currency rate by 2% would increase or decrease exchange loss by $5,429. 

## iii. Other price risk 

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company is exposed to other price risk with respect to its investment in securities. A change in the fair value by 44% would increase or decrease comprehensive income by $78,165. 

There were no changes in the Company's approach to risk management during the year ended December 31, 2012. 

