Decline in the profitability and asset value of CBH's mines

「Under the transfer, the Company will continue to maintain the environmental guarantee currently provided for 2 years after the transfer, but the amount of the environmental guarantee provided at the time of transfer will serve as the cap. The transaction will release the Company from its management obligations for the mine and from the obligation to effectively carry out restoration itself upon closure, thereby limiting the possibility of additional future costs.」

「Upon completion of this transaction, the Company and CBH will transfer all rights and obligations relating to the Rasp Mine to BHM, thereby being released from future additional costs associated with restoration obligations if they were to close the mine themselves.」

「Operations fell well short of the initial plan due to unstable operations caused by the impact of heavy rainfall in March 2024 and factors associated with the early ramp-up stage, as well as a shortage of experienced operators.」

「Accordingly, the carrying amount of the asset group related to the Resources Business (Rasp Mine) was reduced to its recoverable amount, and the decrease was recognized as an impairment loss. The impairment loss recognized for the cumulative third quarter of the current consolidated fiscal year was ¥21,127 million.」

「In the Resources segment, after carefully reviewing the medium- to long-term business plan for the Rasp Mine operated by CBH in Australia, the Company concluded that development of the orebody expected to become the mine's main production source was not economically viable and that the mine's medium- to long-term business plan, premised on that development, could not be expected to be viable. The Company therefore decided to close the Rasp Mine by the end of 2024. Accordingly, the carrying amount of the asset group related to the Resources Business (Rasp Mine) was reduced to its recoverable amount, and the decrease was recognized as an impairment loss. The impairment loss recognized for the cumulative second quarter of the current consolidated fiscal year was ¥19,562 million.」

「An equity-method investment loss of slightly more than ¥900 million was recognized, due to reduced production at the Rasp Mine following the decline in ore grades caused by the postponement of actual mining of the high-grade orebody to the beginning of fiscal 2024, initial-stage operating losses at the Abra Mine, which began full-scale operations this quarter, and interest expenses associated with development.」

「Following a review of external conditions, including market conditions, and the mine's production plan, it was determined that the Rasp Mine in New South Wales, Australia, was not expected to generate sufficient cash flow to recover the capital invested. Accordingly, the carrying amount of the asset group related to the Resources Business was reduced to its recoverable amount, and the decrease, including ¥231 million related to mining rights, was recognized as an impairment loss under extraordinary losses.」

「During the cumulative third quarter under review, there were no significant changes in the matters described in this quarterly report regarding the business and accounting conditions that management recognizes could materially affect the financial position, operating results and cash flows of the consolidated companies, or in the “Business and Other Risks” described in the securities report for the previous fiscal year.」

「The Resources Business reported positive operating income for the consolidated fiscal year, and as no other events indicating impairment had occurred, there were no indications of impairment and no impairment loss was recognized.」

「Improved ore grades reduced the unit production cost of concentrates. Despite containing market risks, higher metal prices also contributed to higher revenue and operating profit, and the business returned to profitability.」

「Although production declined year on year following the shift to reduced production operations at the Rasp mine in Australia from the third quarter of 2020, revenue increased and operating profit rose, resulting in a return to profitability, due to improved unit manufacturing costs from higher ore grades and higher metal prices.」

「At the Rasp mine in New South Wales, Australia, the Company determined, following a review of the mine production plan, that it could no longer expect to recover sufficient cash flow to justify the capital invested. It therefore reduced the carrying amount of the asset group related to the resources business, including mining rights of ¥1.486 billion, to its recoverable amount and recorded the reduction as an impairment loss under extraordinary losses.」

「In the resources segment, the Company revised the market assumptions used to calculate value in use, mainly foreign exchange rates, in response to changes in market conditions. It then determined that it could no longer expect to recover sufficient cash flow to justify the capital invested, reduced the carrying amounts of the asset groups related to the resources business, comprising the Endeavour and Rasp mines, to their recoverable amounts, and recorded the reductions as impairment losses. The impairment losses recorded for the cumulative third quarter of the current fiscal year were ¥5 million for the Endeavour mine and ¥1.468 billion for the Rasp mine.」

「In the resources segment, the Company determined, following a review of the mine production plan, that it could no longer expect to recover sufficient cash flow to justify the capital invested. It therefore reduced the carrying amount of the asset group related to the resources business (the Endeavour mine) to its recoverable amount and recorded the reduction as an impairment loss. In the same segment, it also recorded the full carrying amount of projects whose exploration activities had ended as impairment losses. The impairment losses recorded for the cumulative second quarter of the current fiscal year were ¥649 million and ¥46 million, respectively.」

「As a result of downside revisions to the assumptions for metal prices and a review of the mining plan, the Company recorded impairment losses of ¥1.895 billion for CBH's Rasp mine and ¥1.274 billion for the Endeavour mine.」

「The Company reduced the carrying amounts of the asset groups related to the resources business, comprising the Endeavour and Rasp mines, to their recoverable amounts and recorded the reductions as impairment losses. In the same segment, it also recorded the full carrying amounts of exploration rights for projects whose exploration activities had ended as impairment losses. The impairment losses recorded for the cumulative third quarter of the current fiscal year were ¥946 million for the Endeavour mine, ¥1.908 billion for the Rasp mine and ¥45 million for exploration rights.」

「In the resources segment, the Company determined, following a review of the mine production plan, that it could no longer expect to recover sufficient cash flow to justify the capital invested. It therefore reduced the carrying amount of the asset group related to the resources business (the Endeavour mine) to its recoverable amount and recorded the reduction as an impairment loss. In the same segment, it also recorded the full carrying amount of projects whose exploration activities had ended as impairment losses. The impairment losses recorded for the cumulative second quarter of the current fiscal year were ¥649 million and ¥46 million, respectively.」

「In the resources segment, the Company determined, following a review of the mine production plan, that it could no longer expect to recover sufficient cash flow to justify the capital invested. It therefore reduced the carrying amount of the asset group related to the resources business (the Endeavour mine) to its recoverable amount and recorded the reduction as an impairment loss. The impairment loss recorded for the cumulative first quarter of the current fiscal year was ¥325 million.」

「As a result of downside revisions to the assumptions for metal prices and a review of the mining plan, the Company recorded impairment losses totaling ¥4.339 billion in the third and fourth quarters at the Endeavour mine and other assets.」

「In the resources segment, the Company determined, following a review of the mine production plan, that it could no longer expect to recover sufficient cash flow to justify the capital invested. It therefore reduced the carrying amount of the asset group related to the resources business (the Endeavour mine) to its recoverable amount and recorded the reduction as an impairment loss. The impairment loss recorded for the cumulative third quarter of the current fiscal year was ¥3.092 billion.」

「During the six-month period ended [the current second quarter], there were no newly arising business or other risks, nor any material changes to the business and other risks described in the Annual Securities Report for the prior fiscal year.」

「During the current first-quarter consolidated cumulative period, no new business or other risks arose. There were also no material changes to the business and other risks described in the securities report for the previous fiscal year.」

「The business segment that includes CBH recorded higher revenue and profit year on year, despite such factors as preparatory costs recognized in connection with the lifting of production cuts at the Endeavor mine and the resulting preparation for increased production. The impact of higher metal prices was substantial.」

「In addition to the lower depreciation burden resulting from the mine impairment carried out in the previous fiscal year, higher metal prices resulted in increased earnings in the resources business,」

「The resources business returned to profitability, helped by the reduced depreciation burden following the mine impairment carried out in the previous fiscal year, improved productivity at the Rasp mine and improved sales terms.」

「The resources segment turned profitable, partly due to the reduced depreciation burden following the impairment of the mine carried out in the previous fiscal year.」

「Although tight supply and demand for zinc ore was expected going forward, the Company judged that this would not lead to an early increase in zinc prices. Following a review of its business plan, it recorded an impairment loss of approximately ¥15.2 billion as an extraordinary loss for 2 CBH mines.」