Sumitomo Metal Mining : Presentation transcript

SMM, Promoting "Four Challenges" For 2021 3-year Plan Even Under Opaque Economic Conditions

This is a transcript of Sumitomo Metal Mining Co., Ltd.'s Progress of Business Strategy briefing for the second quarter of FY2022, held on November 17, 2022.

＜Speakers＞

SUMITOMO METAL MINING, President and Representative Director, Akira Nozaki

SUMITOMO METAL MINING, Senior Managing Executive Officer and General Manager of the Mineral Resource Business Division, Fumio Mizuno

SUMITOMO METAL MINING, Director, Senior Managing Executive Officer and General Manager of the Metal Business Division, Nobuhiro Matsumoto

SUMITOMO METAL MINING, Executive Officer and General Manager of the Battery Materials Business Division, Katsuya Tanaka

SUMITOMO METAL MINING, Managing Officer Director and General Manager of the Advanced Materials Business Division, Hiroshi Yoshida

FY2022 2nd Quarter Progress of Business Strategy

Akira Nozaki: Good morning, everyone. I am Nozaki, the president. Thank you very much for coming to our business strategy briefing today. We would like to express our sincere gratitude to all of you for your continued understanding and support of our company business.

I would like to highlight the key points of today's briefing.

I Safety Initiatives

1 Safety Initiatives

omestic employee occupational accidents

2021 3-year Plan target		cases or less	2022 actual as of the end of Oct 2 cases
Frequent ecurring accidents	e	fall and caught accidents resulted in an increased num er of
accidents
Serious accidents resulting in a	sence from	ork for more than 3 months 2 cases incl contractors,
previous year 2 cases

Based on the Three Realities	Principle Real places, Real facts, Real things , ensuring safe facilities and
procedures has been set as	the top priority to be achieved.

2021 3-year Plan targets

Serious accidents of employees and contractors in apan and overseas sites : one

Domestic employee accidents: cases year or less

Employee accidents at overseas sites: 1 case year or less

cases	2000	Changes in num er of occupational accidents in apan

2022 Oct

2 cases

21 3-year Plan target

cases 2021 year Plan

Recurring accidents: Accidents that occurred multiple times in the previous 20 years within the SMM Group

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First, let's talk about our safety initiatives. Safety is our top priority, but as the graphs on this slide show, our performance has been disappointing.

We are currently reexamining our efforts to rebuild our safety system in light of the repetition of similar accidents, incidents related to autonomous equipment and rotating machinery, and other typical work related accidents.

1 Glo al Economy

1	Glo al Economy
	Respective regions started to move toward a post
	CO ID world, but their directions differ significantly.

There is a growing concern over the economic slowdown following the start of the U.S. interest rate hike cycle in mid 2022, while inflation continues to rise due to higher costs.

he prospectionof glo al economy is still uncertain

Formation of economic blocs fragmentation continues to expand.

IMF s forecast on global economic growth October forecast

Global

US

Europe

apan

China

2020 .0% . % .1% . % 2.2%

2021 .0% .7% .2% 1.7% .1%

2022 .2% 1. % .1% 1.7% .2%

202

2.7%
1.0%
0.	%
1.	%
.	%

I would like to provide an overview of our economic outlook for 2022. The global economic trends and conditions are shown on this slide. The significant interest rate increases in the United States are said to be measures to control inflation. However, looking at the October data, the one sided rise in inflation has moderated slightly.

The global economic growth rate is .2 % this year, but % is at a level where little growth is felt, and it is projected to fall further next year. China had the momentum to drive the global economy after the Great Depression, but it is a little less robust than it was then.

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2 Current Status of o nside isk Factors

	2 Current Status of o	nside	isk Factors
		Mineral	esources	Smelting	efining	Materials Business
		Business	Business
	ussian invasion of Ukraine	No direct impact but metal and energy prices have
	been affected
						Rising energy prices
		Rising costs due to	Rising costs due to
		led to higher costs
		increasing prices of
	Energy price hikes	increasing prices of
	electricity and light oil
		electricity and coal
		for heavy machineries
	Slo do n in the glo al	Decreasing metal demand caused a supply	demand
	economy	imbalance, leading to lower metal prices		Decrease in materials
	Shortage of industrial	Shortage of various operational materials causing	demand due to the
	difficult sales
	materials and supplies such	increase of project cost
			environment for
	as semiconductors, etc	Increased the cost of operational materials
		smartphones, PCs,
	nother spread of CO I -1	The metal supply demand imbalance mainly in	and other final
	and lockdo n in ma or	products
	China resulted in the decline in metal prices
	Chinese cities
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The current status of downside risk factors is described, from the Russian invasion of Ukraine to the lockdown in China's large cities. Operations are affected by high and high energy prices, which have a significant impact on our performance.

Concerning the global economy's slowdown, we believe there has been a slight shift in sentiment in recent days regarding the outlook for a worsening supply demand balance and a decline in metal prices.

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3 Impact of Energy and Material Prices

3 Impact of Energy and Material Prices

ising energy and material prices put pressure on earnings

	Forecast in May		dditional in	otal
		forecast in ovem er
Forecast	1 .	billion yen		7 billion yen	2. billion yen
Unit cost differentials
vs. FY2021 performance
Estimated impacts
Impact of rising energy prices:	0 billion yen	incl. exchange rate effect of	billion yen

Impact of rising material prices: 10 billion yen incl. exchange rate effect of 1. billion yen

Unit consumption consumption per production volume : No significant change

Impact of volume change : There s only a minor impact while there were affection of decreasing in each metals.

Smelting and Refining business was particularly affected by coal and electricity prices.

Energy prices are a significant issue, but the impact on our business has been more than 0 billion yen throughout the fiscal year. The increase in energy prices is about 0 billion yen, of which the impact of foreign exchange is about billion yen, and the so called energy prices themselves are in the middle of

0 billion yen range.

In our case, the main factors that affect price increases are electricity, coal, and coke, as disclosed in our Integrated Report. On a heat volume basis, electricity and fossil fuels are almost equal, with 1 ,000 terajoules required.

However, there is a difference between primary and secondary energy, and electricity is still more expensive in terms of unit cost per volume.

The price of coal is an individual contract, so the current index does not necessarily reflect that, but market conditions show that the index is nearly double that of last year.

In terms of the unit cost of electricity, the price for residential use increased by about 20% at the beginning of the period compared to last year and is still rising. There are limits, so it may not go that far, but it may go up to maybe 0%.

On the other hand, the industrial extra high voltage power we use is 0% higher at the beginning of the year than last year, and it has soared even more recently.

This is a general statement about apan's electricity situation. While the situation may vary depending on individual contracts and the conditions of power companies, it is clear that the apanese industry is facing a difficult situation.

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Metal Supply and emand Outlook

Metal Supply and emand Outlook

Copper Supply and demand ill ease in the short term

Supply: The supply demand balance will be eased temporally during 202 202 due to the opening of new mines and the expansion of existing ones.

Demand: Tight supplies are expected in the late 2020s as the number of new projects decreases in the low price period.

Fundamentals are helped by the demand for copper.

global decarbonization, clean energy, E shift, etc.

ickel Continued gro th is anticipated

Supply: Increased NPI production will continue in Indonesia

Supply of Class I will be slightly tightened.

Demand: In addition to stainless steel, the production of nickel based lithium ion batteries for E s will continue to rise.

Cu		ICSG projection
			October 2022
kt	2021	2022	2023
Production	2	,7	2	,	2	,
Usage	2	,2	2	, 2	2	,1
Balance				2		1

Ni	INSG projection
		Oct. 2022
kt	2021	2022	2023
Production	2, 12	,0	, 7
Usage	2,77	2, 2	,21
Balance	1	1	171

In terms of the supply and demand for copper and nickel metals, we expect demand for both copper and nickel to grow significantly over time due to the impact of E s and other factors. As for copper, there was a slight supply shortage in fiscal 2022, but next year there will be a slight oversupply, so there will not be a significant impact, and it will be close to a well balance.

We expect demand for nickel to grow significantly over the long term due to growth in demand for high performance materials and stainless steel. The International Nickel Study Group INSG projects an oversupply of 1 0,000 tons for this fiscal year and 170,000 tons for next. INSG's projections for the current fiscal year differ slightly from our company's and will be explained later.

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