Nittetsu Mining Co., Ltd.

The Torigatayama Mine, which produces approximately half of the limestone accounting for 17.1% of net sales, faces the risk that production and shipment could be halted by natural disasters such as typhoons, torrential rains (average annual precipitation of approximately 4,000mm), and a Nankai Trough megaquake. If a major accident were to occur at key facilities such as the 23.3km-long-distance belt conveyor, limestone production, transport, and shipment could be halted for an extended period, potentially having a severe impact on operating results and financial position. Countermeasures include regular meetings and BCP revisions led by the BCM Promotion Office, switching to flame-resistant conveyor belts, and strengthening the backup shipment system from the Sodegaura Logistics Center.

The Atacama Mine is located in an arid zone with average annual precipitation of less than 10mm, making it prone to large-scale flooding when significant rainfall occurs, which could disrupt production and sales. In addition, production costs and initial development expenses are rising due to deeper and more remote mining operations and declining ore grades, raising concerns about the impact on operating results and financial position, including at the Algarrobos Mine currently under development. Countermeasures being implemented include flood measures such as embankment and barricade installation, optimization of operations and improvement of the mineral processing process, and risk diversification through strategic partnerships.

Because the Company engages in domestic electrolytic copper production and copper concentrate production at the Atacama Mine, international copper market conditions have a significant impact on business performance. It is estimated that a 10-cent-per-pound rise in the copper price would increase consolidated net sales by approximately ¥2,080 million and consolidated operating profit by approximately ¥450 million per year, with a comparable risk of decrease in a downturn. The Company hedges this risk through commodity forward transactions.

Fluctuations in exchange rates have a significant impact on business performance due to foreign-currency-denominated copper ore purchase transactions and the yen conversion of overseas consolidated subsidiaries' financial statements. It is estimated that a ¥5 depreciation of the yen per US dollar would increase consolidated net sales by approximately ¥3,880 million and consolidated operating profit by approximately ¥190 million per year, with a comparable risk of decrease in a yen appreciation scenario. The Company hedges this risk through currency option transactions.

The balance of interest-bearing debt at the end of the fiscal year under review stood at ¥64,000 million, and rising market interest rates could put pressure on earnings. Due to financing for the development of the Algarrobos Mine, the balance of interest-bearing debt has increased substantially during the development period, making the interest rate fluctuation risk greater than before. Measures are being taken to avoid interest rate fluctuation risk through the use of fixed-rate borrowings and interest rate swap contracts.

Limestone, the Company's core product, is sold mainly to domestic steel and cement manufacturers. If public and private capital investment declines, or if major customers reduce production volumes or change raw materials due to steel mill reorganization or technological innovation in manufacturing methods, this could affect operating results and financial position. The Company continues to gather information on industry trends and individual business partners while considering the development of new customers both domestically and overseas.

Exploration and mine development for non-ferrous metals such as copper, and geothermal resource surveys and development, require substantial survey and development costs. If mineral price levels or resource volumes fall short of expectations, or if obtaining permits/licenses or securing financing proves difficult, investment recovery could become challenging, potentially affecting operating results and financial position. The Company regularly reviews price levels and resource volumes and revises plans accordingly, while working to secure flexible financing through close provision of information to government-affiliated financial institutions and megabanks.

In August 2023, the Republic of Chile enacted a new mining royalty law raising the royalty tax on copper, which came into effect in January 2024; however, since the Atacama Mine and Algarrobos Mine are largely excluded from the main scope of the tax increase, the current impact is minor. However, depending on the content of future legal amendments, changes could occur to copper mine operation and development plans, potentially affecting operating results and financial position. The Company is working to stay abreast of the latest information and has established a system for close coordination and consultation with relevant Japanese government ministries and agencies.

There is a risk that important information could be leaked or tampered with due to cyberattacks such as malicious emails, unauthorized access, and malware infection, or due to theft of devices, and this risk has increased with the introduction of telework arrangements. If a major incident were to occur, it could disrupt the operations of stakeholders, including the supply chain, and the resulting recovery costs and loss of credibility could affect operating results and financial position. Countermeasures being implemented include building multi-layered defenses, data encryption, and security awareness training via e-learning.

Regarding the steam blowout accident that occurred in June 2023 in Rankoshi Town, Hokkaido, consolidated subsidiary Nittetsu Mining Consultants Co., Ltd. filed a lawsuit in September 2024 against the project owner, MOECO, seeking payment of ¥2,129 million, while also receiving a damages lawsuit from MOECO seeking ¥3,464 million; the two cases are currently being jointly heard at the Tokyo District Court. An unfavorable outcome for the Group could affect operating results and financial position.