Sumitomo Metal Mining Co., Ltd.

Prices of non-ferrous metals such as copper, nickel, and gold are determined based on LME quotations and other benchmarks, and fluctuate due to international supply-demand balance, exchange rates, speculative trading, and other factors. In the FY2026 (ending March 2026) earnings forecast, it is estimated that a ¥100/t change in copper price would impact consolidated pre-tax income by ¥3.5 billion, and a $100/TOZ change in gold price would impact it by ¥3.7 billion, meaning price fluctuations directly affect business results. The Company seeks to mitigate this impact through hedging via commodity futures and options transactions and through revenue stabilization in the Materials Business.

Since smelting margins are effectively denominated in US dollars, and overseas mine investments and product export revenues are also denominated in foreign currencies, exchange rate fluctuations directly affect business results. In the FY2026 (ending March 2026) earnings forecast, it is estimated that a ¥1/$ change in the US dollar exchange rate would impact consolidated pre-tax income by ¥2.0 billion. The Company addresses this through forward exchange contracts, currency option transactions, and the use of foreign currency-denominated accounts.

In overseas mine development, manufacturing, sales, and raw material procurement, there is a risk that political instability, conflicts, resource nationalism, and changes in laws and regulations could affect the supply chain and business continuity. Specific risks cited include disruptions or price surges in the supply of rare earths and petroleum products due to additional tariffs and protectionist policies under the U.S. Trump administration, export restrictions by China, and a potential blockade of the Strait of Hormuz resulting from worsening conditions in the Middle East. The Company addresses this through monitoring of political and social conditions and diversification of its supply chain.

As new deposits become located at higher altitudes, in more remote areas, and with lower ore grades, competition to acquire rights to high-quality projects has intensified, increasing development and entry costs. There is a risk that additional investment, rising mining costs, or abandonment of investment could worsen the Company's financial position and business results. The Company addresses this through continued exploration activities, gathering information on candidate projects, strengthening collaboration with overseas partners, and carefully selecting investments based on prudent profitability assessments.

There is a risk that large-scale earthquakes or wind and flood damage at domestic and overseas manufacturing sites could damage facilities, that political instability, terrorism, or kidnapping overseas could threaten employee safety, and that new infectious diseases could cause a sharp contraction in demand or disruption of the supply chain, leading to operational shutdowns or reduced productivity. The Company seeks to minimize such impacts through seismic reinforcement, flood countermeasures, enhanced wastewater treatment capacity, insurance coverage, securing alternative procurement sources, and development of business continuity plans (BCP).

Intrusions and attacks on information systems by third parties, such as ransomware attacks, are increasing, creating risks of impacts on factory operations and product quality, occurrence of industrial accidents, and loss of stakeholder trust. The Company addresses this through the introduction of zero-trust networks, migration to advanced security cloud services, information security education, and development of BCPs at each business site.

There are risks of hazardous substance leaks, fires, and explosions due to equipment failure, operational errors, or accidents at domestic and overseas manufacturing sites, as well as risks of mining-related damage from heavy rainfall or earthquakes at closed or abandoned mines. The Company thoroughly implements periodic equipment inspections, securing of spare parts, development of management procedure manuals, tailings storage facility maintenance, seismic reinforcement, and water quality management of mine drainage, and also conducts regular inspections and corrective guidance through specialized head office departments.

There is a risk of increasing environmental response costs for the Company, including capital investment to reduce GHG emissions, carbon footprint reduction, and carbon tax burdens. The Company has set a goal of net-zero GHG emissions by 2050, formulated reduction targets and a roadmap for FY2030, and is promoting energy conservation, efficiency improvements, conversion to LNG and woody biomass fuels, expanded use of renewable energy, and research and development of products that contribute to decarbonization.

If a recall occurs for a final product incorporating a defective component, such as in-vehicle products, there is a risk of loss of trust and substantial financial burden due to damages and amounts not covered by product liability insurance. The Company seeks to mitigate this risk through the establishment and operation of the "SMM Quality Standard" based on ISO 9001, deliberation and confirmation of measures by the Quality Subcommittee, and establishment of a response framework in the event of a recall.

There is a risk that intensifying recruitment competition due to a declining working-age population in Japan and changing attitudes toward work among younger generations, combined with labor shortages from employee turnover, could make it difficult to secure the human resources necessary for continued stable operations and business expansion. The Company addresses this through labor-saving and rationalization via DX adoption, formulation and execution of a human resources strategy linked to management strategy, promotion of DE&I, health-oriented management, initiatives to improve employee engagement, and public relations and branding activities to strengthen recruitment competitiveness.