Main

PACIFIC METALS CO., LTD.

Financial Results Briefing Session for the
Six Months Ended September 30, 2023
November 16, 2023

PACIFIC METALS Website:
https://www.pacific-metals.co.jp/en/
Inquiries:
General Administration Dept. (IR Group) TEL: +81-3-3201-6681

Table of Contents

2

1. Business Environment(1) Trends in LME nickel prices and nickel inventory volumes(2) Outlook for global stainless steel production and nickel supply and demand(3) Outlook for stainless steel production and nickel supply and demand by region(4) Trend in nickel pig iron (NPI) production

4
5
6
7

2. Financial Results for the Six Months Ended September 30, 2023
(1) Financial results for the six months (Summary)(2) Financial results for the six months (Topics)(3) Consolidated ordinary profit and loss analysis

9
10
11

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024
(1) Full-year financial results forecast (Summary)(2) Full-year financial results forecast (Topics)(3) Trend in sales destination by country(4) Outlook for sales by country(5) Consolidated ordinary profit and loss analysis

13
14
15
16
17

4. Progress of Medium-term Business Plan PAMCO-2024(1) Summary of progress on major priority measures(2) Ore procurement

19
23

3

1. Business Environment

4

1. Business Environment(1) Trends in LME nickel prices and nickel inventory volumes
LME nickel price(Unit: $/t)

LME nickel inventory

SHFE nickel inventory* Surveyed by Pacific Metals
LME/SHFE nickel inventory(Unit: 1,000 Ni tons)

LME nickel price

40,000600
Due to the situation
related to Russia andUkraineIndonesia banned nickel ore
exports, and the Ukraine
situation destabilized

500

30,000400

Moves of reopening
economic activities incountries expanded in someareas

Indonesia announced thebringing forward of thereintroduction of a nickelore export ban

300

20,000Indonesia relaxed thenickel ore export ban withconditions

Monetary tightening in Europe,
the U.S. and other regions anddelayed economic recovery in
China, etc.

200

10,000
Steady demand forstainless steel in China

0

2014

Trend inoperatingresults

Net sales(million yen)

2015
Fiscal year ended
March 31, 2014

2016
Fiscal year ended
March 31, 20152017
Fiscal year ended
March 31, 20162018
Fiscal year ended
March 31, 2017100

Mainly due to USChina trade tensions

2019
Fiscal year ended
March 31, 2018

Widespread
COVID-19 infections

2020
Fiscal year ended
March 31, 20192021
Fiscal year ended
March 31, 2020

2022
Fiscal year ended
March 31, 2021

2023
Fiscal year ended
March 31, 2022

0
Fiscal year
ended March 31,
2023

56,40861,22547,64938,697

41,21049,062

44,13332,217

57,12934,852

Operatingprofit(million yen)

-4,079-7,787-15,357-3,070-3,239176-1,879

-493

4,806

-12,588

Ordinary
profit(million yen)

-1,838-91-12,283

-515

-203

3,451

972

3,344

12,999-4,9605

1. Business Environment(2) Outlook for global stainless steel production and nickel supply and demand* Surveyed by Pacific Metals

Nickel supply and demand(Unit: 1,000 Ni tons)

Stainless steel production(Unit: 1,000 tons)

80,000

4,400
4,200

For
nonSUS
37%

4,000
3,800

75,000
Ni user(2023)

70,000

For
SUS
64%

65,0003,600

60,0003,400

55,0003,200

50,0003,000

45,0002,800

40,0002,600

35,0002,400

30,0002,200

25,0002,000

20,000

1,800

2014

2015

2016

2017

2018

2019

Nickel supply

2020

2021

Nickel demand

2022

2023

2024

Stainless steel production

2025

15,0002026

6

1. Business Environment(3) Outlook for stainless steel production and nickel supply and demand by region* Survey by Pacific Metals
Outlook for stainless steel production
Other
Indonesia
China
TaiwanSouth Korea
US
India
EuropeJapan

58,200(Unit: 1,000 tons)

65,400
800
5,600

300
4,800

Outlook for nickel demand
Other
Indonesia
China
TaiwanSouth Korea
US
India
Europe
Japan

3,190

(Unit: 1,000 Ni tons)

3,990
120
440

Outlook for nickel supply
Other
AfricaEuropeNorth America and Latin America
Russia and the Middle East
Oceania
Indonesia (NPI)
China (NPI)
China
Asia (excluding China)

3,430
80
220

90

250
120
170

380
37,800

4,250
80
260
320
140
170

1,520

2,440

34,900

1,350

1,920

800
2,200
1,900
4,200

(Unit: 1,000 Ni tons)

900
2,400
2,700
4,700

30
80
140
90
290

290

30
110
190
90
340

350

1,050

640

6,700

7,700

2,400

2,800

170

230

250

2023

2026

2023

2026

2023

420

2026

7

1. Business Environment(4) Trend in nickel pig iron (NPI) production* Survey by Pacific Metals

Nickel pig iron (NPI) production
Production volume(Unit: 1,000 Ni tons)

Nickel ore procurement by China

LME nickel price(Unit: $/t)
40,000

1,800
1,600

Procurement volume(Unit: 1,000 tons)

LME nickel price(Unit: $/t)

80,00040,00070,0001,400

30,0001,200

60,00030,00050,0001,000
20,00040,00020,000800
30,000600
10,000400

20,00010,00010,000

200
0

0

0

0

(Year)

NPI in China

NPI in Indonesia

LME nickel price(Year)

Philippines

Indonesia

Others

LME nickel price8

2. Financial Results for the Six Months
Ended September 30, 2023

9

2. Financial Results for the Six Months Ended September 30, 2023
(1) Financial results for the six months (Summary)
Results for the fiscal
year ended
September 30, 2022
Amount(million yen)

Profit rate(%)

Forecast for the fiscal
year ended
September 30, 2023
(Announced on Aug. 2)

Amount(million yen)

Profit rate(%)

Results for the fiscal
year ended
September 30, 2023
Amount(million yen)

Year-on-year(%)

Vs
Forecast
announced
on Aug. 2(%)

Profit rate(%)

Net sales

17,642

―

8,592

―

8,083

―

-54.2

-5.9

Operating profit (loss)-4,464-25.3-6,343-73.8-6,194(*)

-76.6

―

―

Ordinary profit (loss)

605

3.4

-3,712-43.2-2,487(*)

-30.8

―

―

Profit attributable to owner ofparent (loss)

229

1.3

-3,871-45.1-2,611(*)

-32.3

―

―

(Investment)

497

―

―

―

176

―

-64.6

―

(Depreciation)

135

―

―

―

171

―

26.7

―

(*) Profit including inventory write-down of 2.5 billion yen (results for the fiscal year ended September 30, 2023)

Results for the fiscal
year ended
September 30, 2022

Forecast for the fiscal
year ended
September 30, 2023
(Announced on Aug. 2)

Results for the fiscal
year ended
September 30, 2023

Year-on-year(%)

Vs
Forecast
announced
on Aug. 2(%)

Production volume (Ni t)

8,079

3,428

3,210

-60.3

-6.4

Sales volume (Ni t)

5,668

3,330

3,052

-46.2

-8.4

Applicable LME nickel price (US$/t)

26,72023,85423,766[Applicable LME nickel price(US$/lb.)][ 12.12 ][ 10.82 ][ 10.78 ]

-11.0

-0.4

Applicable exchange rate (¥/US$)

131.49135.34140.18

6.6

3.6

2. Financial Results for the Six Months Ended September 30, 2023

10(2) Financial results for the six months (Topics)
1) On the production and sales volume front• Maintaining policy of strategic volume reduction
 The price of nickel pig iron (NPI), which is viewed as being price competitive, also
affected our selling prices, which led us to continue our policy of strategic volume
reduction2) On the selling price front• Impact from nickel pig iron (NPI) price We set selling price level based on the LME nickel price applicable to the Company, theexchange rate applicable to the Company, and in addition, the nickel pig iron price as apartial reference, resulting in the continuation of a difficult sales environment withsluggish income growth3) On the procurement price front• Nickel ore price Procurement prices are high• Energy costs (raw fuel/electricity)
 Prices soared due to global resource price hikes, leading to higher production costs2. Financial Results for the Six Months Ended September 30, 2023

11(3) Consolidated ordinary profit and loss analysis-3.1 billion yen(Unit: Billion yen)

2.0
1.0

Results forthe fiscal year ended
September 30, 2022
0.6 billion yen

0.0
-1.0

+0.0

+0.3

-0.9

-2.0

-0.5

-3.0

Results forthe fiscal year
ended
September 30,
2023-2.5 billion yen

+3.4

-8.0

-2.5

-4.0
-5.0

* Inventory valuation decreased year-on-year due toa decrease in inventory, which is a positive factor for
earnings.

+6.7

-6.0
-7.0
-8.0
-2.2

-9.0
-10.0

+0.6
Results forthe fiscal year
ended
September 30,
2022

Sales volume

LME price, etc. Exchange rates

Factors in ferronickel sales-9.6 billion yen

Sales volume

Raw material
prices, etc.

Evaluation of
inventory

Ferronickel
depreciation

Factors in ferronickel cost of sales+7.6 billion yen

Ferronickel
selling generalandadministrative
expenses

Equity gains

Other-1.1 billion yen

Other

Results forthe fiscal year
ended
September 30,
2023

12

3. Full-Year Financial Results Forecast for
the Fiscal Year Ending March 31, 2024

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

13(1) Full-year financial results forecast (Summary)
Results for the fiscal
year ended
March 31, 2023
Amount(million yen)

Profit rate(%)

Forecast for the fiscal
year ending
March 31, 2024

Forecast for the fiscal
year ending
March 31, 2024
(Announced on Aug. 2)

AmountProfit rate

(million yen)

Year-on-year(Announced on Oct. 31)(%)

Amount(%)

Profit rate

(million yen)

Vs
Forecast
announced
on Aug. 2(%)(%)

Net sales

34,852―

20,885―

15,874

―

-54.5

-24.0

Operating profit (loss)-12,588-36.1-7,089-33.9-8,611

-54.2

―

―

Ordinary profit (loss)-4,960-14.2-2,891-13.8-3,511

-22.1

―

―

Profit attributable to ownerof parent (loss)-5,026-14.4-3,246-15.5-2,442

-15.4

―

―

(Investment)

1,232

―

―

―

2,563

―

108.0

―

(Depreciation)

289

―

―

―

359

―

24.2

―

Forecast for the fiscal year
endingMarch 31, 2024

Vs
Forecast
announced
on Aug. 2

1st half

2nd half

Full year

Forecast for
the fiscal
year ending
March 31,2024
(Announced
on Aug. 2)

Production volume (Ni t)

8,079

5,301

13,380

6,968

3,210

2,848

6,058

-54.7

-13.1

Sales volume (Ni t)

5,668

6,725

12,393

8,200

3,052

3,148

6,200

-50.0

-24.4

Applicable LME nickel price (US$/t)

26,72024,49325,507

22,77423,766

20,43722,068[Applicable LME nickel price(US$/lb.)][ 12.12 ][ 11.11 ][ 11.57 ][ 10.33 ][ 10.78 ][ 9.27 ][ 10.01 ]

-13.5

-3.1

Applicable exchange rate (¥/US$)

131.49138.44135.26134.60140.18139.22139.693.3

3.8

Results for the fiscal year ended
March 31, 2023

(Announced on Oct. 31)

Results forthe 1st half

Forecast
for the 2nd
half

Forecast
for the fullyear

Year-onyear
(%)

(%)

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

14(2) Full-year financial results forecast (Topics)
1) On the production and sales volume front• Maintaining policy of strategic volume reduction
 We expect a decrease from the previous plan announced in August 2023, as we do notsee any significant change in the environment and will strengthen the control of volume
from the perspective of profitability2) On the selling price front• Impact from nickel pig iron (NPI) price We set selling price level based on the LME nickel price applicable to the Company, theexchange rate applicable to the Company, and in addition, the nickel pig iron price as apartial reference3) On the procurement price front• High raw material and energy costs continue
 Nickel ore prices, the main raw material, as well as raw fuel costs and electricity prices
remain high
 A significant impact on profit expected3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

15(3) Trend in sales destination by country[China]Production is increasing due to
expectations for economic recovery, but
actual demand remains weak[India]Production continues to expand, butmain raw material is shifting to NPI[Japan]Production is on a downward
trend due to declining
demand[South Korea]
There is recovery from the previous year’s
typhoon damage, but production is on a
downward trend since the summer[Taiwan]Production reduction is continuing,
demand for Fe-Ni is decreasing3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

(4) Outlook for sales by country

16(Unit: Ni tons)

Results of previous year

Full-year forecast announced on Oct. 31
12,393

India
China
Taiwan151

South Korea
Japan

2,689

Going forward, the outlook does notsee any trend toward changes in thebusiness environment from the fiscal
year ended March 2023.
The reduced volume system will bemaintained.

1,658
6,725
0

5,668
151
101
1,203

2,588

802

455
803

3,412

Results for 1H ofthe fiscal year ended
March 31, 2023

1,605

6,290

2,879

Results for 2H ofthe fiscal year ended
March 31, 2023

Results forthe fiscal year ended
March 31, 2023

6,200
556

3,052
356

3,148
200

2,696

2,948

Results for 1H ofthe fiscal year ending
March 31, 2024
(Announced on Oct. 31)

Forecast for 2H ofthe fiscal year ending
March 31, 2024
(Announced on Oct. 31)

5,644

Forecast for
the fiscal year ending
March 31, 2024
(Announced on Oct. 31)

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

17(5) Consolidated ordinary profit and loss analysis+1.4 billion yen(Unit: Billion yen)

2.0
0.0
+0.0

-2.0

+0.1
-2.8
+0.4

-4.0
-6.0
-8.0
-10.0

Results forthe fiscal year
ended
March 31, 2023
-4.9 billion yen-3.7* Inventory valuation is expected to decrease in thefiscal year ending March 31, 2024 due to a decrease
in inventory from the fiscal year ended March 31,
2023, which is a significant positive factor for
earnings.

-12.0
-17.0

-14.0

Forecast for
the fiscal year
endingMarch 31, 2024
-3.5 billion yen

+9.0

+17.6

-16.0
-18.0
-20.0
-22.0
-2.8

-24.0
-26.0

+0.6
Results for the
fiscal year
ended March
31, 2023

Sales volume

LME price, etc. Exchange rates

Factors in ferronickel sales-19.2 billion yen

Sales volume

Raw material
prices, etc.

Evaluation of
inventory

Ferronickel
depreciation

Factors in ferronickel cost of sales+22.9 billion yen

Ferronickel
selling generalandadministrative
expenses

Equity gains

Other-2.3 billion yen

Other

Forecast for the
fiscal year
ending March
31, 2024

18

4. Progress of Medium-term Business
Plan PAMCO-2024

4. Progress of Medium-term Business Plan PAMCO-2024

19(1) Summary of progress on major priority measures
Progress Status/Future Initiatives
Creation of new businesses that
contribute to society•

Promotion of new metal smelting projects

Challenge to metal smelting business from new resources byutilizing smelting technologies cultivated through various ferro-alloy
manufacturing businesses since the Company’s establishment
Transition to feasibility study of new metal smelting business using
resources from underwater sources
 Pre-feasibility study results did not identify any critical issues that would lead tothe cancellation of the project at the Hachinohe Works Signed an MOU with The Metals Company (TMC)
Signed an MOU to deepen our research into outsourcing smelting to our HachinoheWorks with a target year of 2026 in line with TMC’s plan to start commercial production ofpolymetallic nodules at the Clarion Clipperton Zone at the end of 2025** When mining rules are established by the International Seabed Authority (ISA) in 2024
[Agreed matters] Negotiations to conclude a final outsourcing smelting contract Reasonable efforts to implement the programs and schedules agreed by the two companies
 Feasibility study on the remodeling of the Hachinohe Works and cooperation between the twocompanies

With the environment and society as our first considerations, we will pursue
this initiative while monitoring and respecting trends at all organizations.

4. Progress of Medium-term Business Plan PAMCO-2024

20(1) Summary of progress on major priority measures
Progress Status/Future Initiatives
Creation of new businesses that
contribute to society• Realization of production and sales of raw materials for LIB materials
Establish manufacturing process and move to demonstration phase Establish base case production volume and continue investigation with LIB-related business
operators to commercialize the project In addition, start development of another process to produce raw materials for LIB cathodematerials from different raw materials→To be considered in parallel with the base case as a separate business plan

• Development of LIB recycling technology
 Promote the development of LIB recycling technology to extract rare metals for LIB
applications from black mass raw materials in collaboration with Emulsion Flow Technologies
Ltd. and confirm steady results Technology developed will be used in the LIB recycling plant that Emulsion Flow Technologies
aims to start operation in 2026
Acceleration of consideration of
expansion into overseas
smelting business• Promotion of overseas smelting projects and start-up of production

 Discussions are underway with an Indonesian project owner to participate in an overseas
smelting project Participation of a new partner will strengthen our financial position→It is expected that financing through an initial public offering will be unnecessary

Diversification of business inJapan to contribute to a
recycling-oriented society• Restructuring of recycling businessBusiness of manufacturing and sales of steelmaking raw materials and battery
materials
 Conduct demonstration tests using by-products generated by other companies and thesmelting reduction technology obtained in the incinerated ash melting and processing

business Raw materials for steelmaking, etc. obtained through the demonstration tests are being
evaluated and improved, and marketing (demand volume and prices) is underway

4. Progress of Medium-term Business Plan PAMCO-2024

21(1) Summary of progress on major priority measures
Progress Status/Future Initiatives
Enhancement of corporate value
by addressing sustainability
issues• Reduction of GHG emissions

Pursuing new metal smelting technologies that takethe global environment into consideration
Concluded a joint development agreement with Microwave Chemical Co., Ltd. for
smelting technology using microwaves
 Continue to study process electrification to replace fossil fuel combustion energy with electric
power-derived microwaves in the calcination process, which is the main source of CO2
emissions in Fe-Ni production
 Table test confirmed removal of crystalline water from ore with microwave heating Currently designing and manufacturing a small demonstration facility with the aim of

introducing actual equipment by FY2030
 Expect energy savings through a 67% reduction in fossil fuel-derived CO2
emissions and improved thermal efficiency
Microwave method

Microwave

Microwave

Microwave

Microwave

Ore
Coal

Heat loss, small
CO2 emissions, small

Conventional method

Microwave method

Energyconsumption

Large

Small

CO2 emissions

Large

Small

4. Progress of Medium-term Business Plan PAMCO-2024

22(1) Summary of progress on major priority measures
Progress Status/Future Initiatives
Enhancement of corporate value
by addressing sustainability
issues•Updated Climate-related Financial Disclosures (TCFD)

Add likelihood of occurrence to scenario analysis

Updated Scope 1 and 2 and newly calculated Scope 3•

Reduction of policy shareholdings

 Five of our stock holdings were reduced in
the fiscal year ended March 31, 2023
 One of our stock holdings will be partially reduced in
the fiscal year ending March 31, 2024
The FY2023 Integrated Report was published in
November 2023
For more information, click here•

Initiatives regarding respect for human rights are being promoted.

•

Make a “Healthy Company Declaration” and engage in health promotion
throughout the Company.

•

Together with local communitiesParticipation in Marine Garbage Zero Week
(cleanup activities)

23

4. Progress of Medium-term Business Plan PAMCO-2024(2) Ore procurement
1) Status of conclusion of long-term contracts
Other party in long-term contracts

Fiscal year ended
March 31, 2022

Fiscal year ending
March 31, 2024

Fiscal year ending
March 31, 2025

 Rio Tuba Nickel Mining Corporation (36% stake held byPacific Metals)

Prior contract
periodContract period: Jan. 2022 to Dec. 2026 (5 years)

 Taganito Mining Corporation (33.5% stake held by Pacific
Metals)Prior contract
periodContract period: Jan. 2022 to Dec. 2026 (5 years)

 Cagdianao Mining Corporation

Prior contract
periodContract period: Jan. 2022 to Dec. 2026 (5 years)

 MKM (1)Contract period: Jan. 2014 to Dec. 2023 (10 years)

 MKM (2)Contract period: Jan. 2016 to Dec. 2025 (10 years)

 Montagna SARL

Contract period: Apr. 2016 to Mar. 2026 (10 years)

 The Philippines

Fiscal year ending
March 31, 2026

To be updated New Caledonia

3) Status of procurement

2) Procurement ratio•
Period covered by PAMCO-2024

100%
80%



60%




40%
20%
0%

Fiscal year ended
March 31, 2023

Results forthe fiscal year ended
March 31, 2022

Results forthe fiscal year ended
March 31, 2023

New Caledonia

Forecast for
the fiscal year ending
March 31, 2024

The Philippines

PAMCO-2024
Forecast for
the fiscal year ending
March 31, 2025•


Environment surrounding nickel ore procurement
The export ban on Indonesian ore came in effect in January
2014.
The export ban was relaxed temporarily between January
2017 and December 2019.
Afterwards, the export ban was reintroduced in January 2020.
Since then, ore supply and demand has remained tight.
The Company’s ore procurement policy
As an ongoing ore procurement policy, the Company ispushing forward with the expansion of the procurement ofores from New Caledonia.

This material is not disclosure material under the Financial Instruments and Exchange Act and the Company does not guarantee the accuracy orcompleteness of the information.
Any forward-looking statements in this material are based on information available at the time of preparation and may differ from actual results due
to changes in circumstances that may arise in the future. Therefore, please refrain from making investment decisions based solely on this material.
The Company assumes no responsibility whatsoever for any damage resulting from the use of this material.
All copyrights, trademarks, and other intellectual property rights related to this material are the property of the Company.