Consolidated Financial Statements
Toho Zinc Co., Ltd.
and Consolidated Subsidiaries
For the year ended March 31, 2019with Independent Auditor’s ReportToho Zinc Co., Ltd. and Consolidated Subsidiaries
Contents to Consolidated Financial Statements

Independent Auditor’s Report-------------------------------------------------------------

1

Consolidated Balance Sheet ---------------------------------------------------------------

2

Consolidated Statement of Operations

4---------------------------------------------------

Consolidated Statement of Comprehensive Income ------------------------------------- 6
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows-------------------------------------

7--------------------------------------------------

9Notes to Consolidated Financial Statements--------------------------------------------

10

Independent Auditor’s Report
The Board of Directors
Toho Zinc Co., Ltd.
We have audited the accompanying consolidated financial statements of Toho Zinc Co., Ltd. and its
consolidated subsidiaries, which comprise the consolidated balance sheet as at March 31, 2019, and theconsolidated statements of operations, comprehensive income, changes in net assets, and cash flows for theyear then ended and a summary of significant accounting policies and other explanatory information, allexpressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for designing andoperating such internal control as management determines is necessary to enable the preparation and fairpresentation of the consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due tofraud or error. The purpose of an audit of the consolidated financial statements is not to express an opinion
on the effectiveness of the entity’s internal control, but in making these risk assessments the auditor
considers internal controls relevant to the entity’s preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of theconsolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Toho Zinc Co., Ltd. and its consolidated subsidiaries as at March 31,
2019, and their consolidated financial performance and cash flows for the year then ended in conformity
with accounting principles generally accepted in Japan.
Convenience Translation
We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented forthe convenience of readers, and, in our opinion, the accompanying consolidated financial statements havebeen properly translated on the basis described in Note 2.

Ernst & Young ShinNihon LLC
June 27, 2019
Tokyo, Japan1

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31,2019
2018
(Millions of yen)

AssetsCurrent assets:
Cash and time deposits (Notes 15 and 17)
Notes and accounts receivable, trade (Notes 3 and 15)
Electronically recorded monetary claims (Note 15)
Inventories (Note 4)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥

Property, plant and equipment:
Buildings and structures (Notes 6 and 8)
Machinery and equipment (Notes 6 and 8)
Land (Notes 5 and 8)
Leased assets
Construction in progress
Less: Accumulated depreciation
Net property, plant and equipment

Investments and other assets:
Investment securities (Notes 15 and 16)
Investments in unconsolidated subsidiaries and associates(Note 7)
Net defined benefit asset (Note 9)
Deferred tax assets (Note 12)
Mining rights (Note 6)
Other assets
Less: Allowance for doubtful accounts
Total investments and other assets

Total assets¥

2019(Thousands of
U.S. dollars)(Note 2)

10,248 ¥14,0272,291
42,3674,050(0)72,984

13,802 $16,814
3,303
41,9281,923(17)77,75425,24579,26017,104
139
1,041
122,790(83,845)
38,94525,212
79,133
17,104
152
740
122,342(81,392)
40,949227,452
714,118
154,103
1,252
9,379
1,106,315(755,428)
350,887

2,911

3,489

26,227

450
203
1,789
11,8011,795(650)
18,302453
281
363
12,454
2,163(649)
18,556

4,054
1,828
16,118106,324
16,172(5,856)
164,897

137,259$ 1,173,357

130,231¥

92,332
126,380
20,641
381,719
36,489(0)657,5722

March 31,
2019
2018
(Millions of yen)

Liabilities and net assets
Current liabilities:
Notes and accounts payable, trade (Notes 3 and 15)
Short-term borrowings (Notes 8 and 15)
Current portion of long-term debt (Notes 8 and 15)
Commercial papers (Notes 8 and 15)
Lease obligations (Note 8)
Accrued income taxes
Accrued expenses
Provision for directors’ bonuses
Provision for loss on construction contracts
Other current liabilities (Note 3)
Total current liabilities¥

Long-term liabilities:
Long-term debt (Notes 8 and 15)
Lease obligations (Note 8)
Deferred tax liabilities (Note 12)
Deferred tax liabilities related to land revaluation (Notes 5
and 12)
Net defined benefit liability (Note 9)
Provision for environmental measures
Provision for loss on business of subsidiaries and associates
Asset retirement obligations (Note 10)
Other long-term liabilities
Total long-term liabilities
Total liabilities
Net assets (Note 11):
Shareholders’ equity:
Common shares:
Authorized – 26,400,000 shares
Issued– 13,585,521 shares
Capital surplus
Retained earnings
Less: Treasury shares, at cost – 7,055 shares in 2019 and
7,011 shares in 2018
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains on other securities
Deferred gains on hedges
Revaluation reserve for land (Note 5)
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

¥

7,067
11,828
11,137
11,000
9
111
3,231
–
442
3,015
47,844¥

7,728
11,462
9,548
8,000
10
463
2,456
40
–
2,989
42,6992019(Thousands of
U.S. dollars)(Note 2)$

63,672
106,568
100,342
99,10881
1,000
29,110–3,982
27,164
431,065

18,86648
282

23,60858384

169,979
432
2,540

4,345
148
35
102
2,436
618
26,88574,730

4,345
145
52
165
2,736
684
32,18074,87939,147
1,333
315
919
21,947
5,568
242,229
673,303

14,6309,876
20,963

14,6309,876
25,211

131,81388,980188,872(30)
45,440(30)
49,688(270)
409,406

657
110
8,997
180
113
10,06055,501
130,231

908
43
8,997
2,576
165
12,691
62,380137,259

5,919
991
81,061
1,621
1,018
90,638500,054$ 1,173,357¥

The accompanying notes are an integral part of these financial statements.

3

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Operations
Year ended March 31,
2019
2018
2019
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Net sales
Cost of sales
Gross profit¥ 117,551
107,9029,649¥ 133,625
111,840
21,784$ 1,059,113
972,177
86,935

4,542
1,647
43
(16)
265
138
–
2,498
9,118
531

4,263
1,512
42
0
269
163
40
2,388
8,681
13,10240,922
14,839
387
(144)
2,387
1,243
–
22,50682,151
4,784

109
(395)
–
(262)
(388)
(4,339)
46
(1)
(178)

189
(452)
9
–
(483)
(100)
0
–
–

982
(3,558)–(2,360)(3,495)(39,093)414(9)(1,603)62798
205(4,343)(3,812)

–
–
314
(523)
12,579

558
7,189
1,847
(39,129)(34,345)

129(1,391)(1,261)(2,550)(2,550)

2,009
196
2,205
10,373
10,373

1,162(12,532)(11,361)(22,975)(22,975)

Selling, general and administrative expenses:
Transportation expense
Salaries and wages
Retirement benefit expenses
Provision of allowance for doubtful accounts
Depreciation
Research and development costs
Provision for directors’ bonuses
Other
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Foreign exchange gains
Foreign exchange losses
Loss on retirement of property, plant and equipment
Impairment loss on fixed assets (Note 6)
Gain on sales of investment securities
Loss on sales of investment securities
Loss on valuation of investment securities
Reversal of provision for loss on business of subsidiaries andassociates
Gain on valuation of derivatives
Other, net(Loss) profit before income taxes
Income taxes (Note 12):Current
Deferred(Loss) profit(Loss) profit attributable to owners of the parent

¥

¥

$

(U.S. dollars)(Note 2)(Yen)
Per share:(Loss) profit – basic¥ (187.82)¥

763.94$(1.69)Cash dividends (Note 11)¥¥125.00

$

0.63

70.00

The accompanying notes are an integral part of these financial statements.

4

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year ended March 31,
2019
2018
2019
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
(Loss) profit¥(2,550)Comprehensive (loss) income

¥

(250)
67
(2,396)(51)(2,630)(5,181)

Comprehensive (loss) income attributable to:
Owners of the parent
Non-controlling interests¥

Other comprehensive income (Note 19):
Net unrealized losses on other securities
Deferred gains on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total other comprehensive (loss) income(5,181)–¥

10,373$(22,975)

¥

(29)
291
1,000
127
1,389
11,762 $(2,252)
603(21,587)(459)(23,695)(46,679)

11,762–(46,679)–¥$

The accompanying notes are an integral part of these financial statements.

5

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets
Shareholders’ equity
Number ofshares ofcommonshares issued(Thousands)
Balance as of April 1, 2017
Dividends of surplus
Profit attributable to owners of the parent
Acquisition of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for land
Net changes in items other than those inshareholders’ equity
Decrease due to share consolidation (Note11)
Balance as of March 31, 2018
Dividends of surplus
Loss attributable to owners of the parent
Acquisition of treasury shares
Net changes in items other than those inshareholders’ equity
Balance as of March 31, 2019

Commonshares135,855
–
–
–
–
–

¥

Capitalsurplus14,630
–
–
–
–
–

¥

9,876
–
–
–
0
–

Retained
Treasury
earnings
shares (*)(Millions of yen)¥

16,189(1,357)
10,373
–
–
5

¥

(26)
–
–
(3)
0
–

Total
shareholders’equity¥40,671(1,357)
10,373
(3)
0
5

–

–

–

–

–

–

(122,269)

–

–

–

–

–

13,585–––

14,630
–
–
–

9,876
–
–
–

25,211(1,697)(2,550)
–

(30)
–
–
(0)

49,688(1,697)(2,550)(0)–13,585¥–
14,630

¥

–
9,876

¥

–
20,963

¥

–
(30)

¥

–
45,440Shareholders’ equity
CommonsharesBalance as of March 31, 2018
Dividends of surplus
Loss attributable to owners of the parent
Acquisition of treasury shares
Net changes in items other than those inshareholders’ equity
Balance as of March 31, 2019

$ 131,813––––$ 131,813

CapitalRetained
Treasury
surplusearnings
shares (*)(Thousands of U.S. dollars)(Note 2)$$

88,980–––$ 227,146(15,289)(22,975)––
88,980–$ 188,872

$

$

Total
shareholders’equity

(270)
–
–
(0)

$ 447,679(15,289)(22,975)
(0)

–
(270)

–
$ 409,406

6

Accumulated other comprehensive income

Balance as of April 1, 2017
Dividends of surplus
Profit attributable to owners of theparentAcquisition of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for land
Net changes in items other than those inshareholders’ equity
Decrease due to share consolidation(Note 11)Net
unrealized
gains onothersecurities

Deferred
gains(losses) onhedges¥¥Balance as of March 31, 2018
Dividends of surplus
Loss attributable to owners of theparentAcquisition of treasury shares
Net changes in items other than thosein shareholders’ equity
Balance as of March 31, 2019

¥

938
–

(247)
–

Foreign
RemeasureRevaluation
currency
ments ofreserve fortranslation
definedland
adjustment benefit plans(Millions of yen)
¥
9,003
¥
1,576
¥
38
–
–
–

Total
accumulated
othercomprehensive
income¥11,308–Total
net assets¥

51,979(1,357)

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

10,373
(3)
0
5

(29)

291

(5)

1,000

127

1,383

1,383

–

–

–

–

–

–

908
–

43
–

8,997
–

2,576
–

165
–

12,691–

62,380(1,697)

–
–

–
–

–
–

–
–

–
–

–
–

(2,550)(0)(2,630)10,060(2,630)¥ 55,501

Total
accumulated
othercomprehensive
incomeTotal
net assets

1,486
–

$ 114,343–$ 562,032(15,289)––––(22,975)(0)(23,695)
90,638(23,695)$ 500,054

(250)
657

¥

67
110

¥

–
8,997

¥

(2,396)
180

(51)
113

¥

¥

Accumulated other comprehensive incomeNet
unrealized
gains onothersecurities

Deferred
gains(losses) onhedgesForeign
RemeasureRevaluation
currency
ments ofreserve fortranslation
definedland
adjustment benefit plans(Thousands of U.S. dollars)(Note 2)

Balance as of March 31, 2018
Dividends of surplus
Loss attributable to owners of theparentAcquisition of treasury shares
Net changes in items other than thosein shareholders’ equity

$

$

387
–

$ 81,061–$ 23,209
–

–
–

–
–

–
–

Balance as of March 31, 2019

$

603
991

–
$ 81,061

8,180
–
–
–
(2,252)
5,919

$

$

(21,587)
1,621

$

$

(459)
1,018

$

(*) There were 7,055 and 7,011 treasury shares as of March 31, 2019 and 2018, respectively. (Note 11)

The accompanying notes are an integral part of these financial statements.

7

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year ended March 31,
2019
2018
2019
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Cash flows from operating activities:
Loss (profit) before income taxes
Depreciation
Impairment loss on fixed assets
Decrease in allowance for doubtful accounts
Decrease (increase) in net defined benefit asset(Decrease) increase in net defined benefit liability
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)
Net loss on sales and retirement of property, plant and equipment
Decrease in notes and accounts receivable, trade
Increase in inventories(Decrease) increase in notes and accounts payable, trade
Loss on valuation of investment securities
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities¥ (3,812)
6,014
4,339
(16)
77
(71)
(109)
395
298
371
3,661
(771)
(1,609)
178
927
9,873
103
(388)
(1,435)
8,153¥ 12,579
5,877
100
(28)
(281)
127
(189)
452
(73)
342
263
(3,743)
1,432(370)
16,489189(462)(4,179)12,036(34,345)
54,18539,093
(144)
693
(639)
(982)
3,558
2,684
3,342
32,984(6,946)(14,496)
1,603
8,352
88,953928(3,495)(12,929)73,457

Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of intangible assets
Payments for purchases of investment securities
Collection of loans receivable
Other, net
Net cash used in investing activities(5,610)20(4,291)(3)
0(252)(10,137)(3,690)12(2,083)(3)
0(325)(6,089)(50,545)180(38,661)(27)
0(2,270)(91,332)

Cash flows from financing activities:
Increase (decrease) in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
Increase in commercial papers
Purchase of treasury shares
Cash dividends paid
Other, net
Net cash used in financing activities

433
6,280
(9,565)3,000(0)(1,697)(10)(1,559)(3,216)
2,477(5,390)5,000(3)(1,357)(21)(2,512)

3,901
56,581(86,178)
27,029(0)(15,289)(90)(14,046)(10)(3,554)
13,802¥ 10,248

03,434
10,368¥ 13,802(90)(32,020)
124,353
92,332

Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 17)

$

–

$

The accompanying notes are an integral part of these financial statements.

8

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 20191.

Summary of Significant Accounting Policies(a) Basis of presentation
Toho Zinc Co., Ltd. (the “Company”) and its domestic subsidiaries maintain their books of account inconformity with accounting principles generally accepted in Japan, and its foreign subsidiaries
maintain their books of account in conformity with International Financial Reporting Standards(“IFRS”) or those of their countries of domicile.
The accompanying consolidated financial statements of the Company and its consolidated subsidiaries(collectively, the “Companies”) are prepared on the basis of accounting principles generally acceptedin Japan, which are different in certain respects as to application and disclosure requirements of IFRS,
and are compiled from the consolidated financial statements prepared by the Company as required by
the Financial Instruments and Exchange Act of Japan.
Certain amounts in the prior year’s financial statements have been reclassified to conform to thecurrent year’s presentation.
As permitted under the Financial Instruments and Exchange Act, amounts of less than one million yen
have been omitted. As a result, the totals shown in the accompanying consolidated financial
statements (both in yen and in U.S. dollars) do not necessarily agree with the sums of the individual
amounts.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto
Local Finance Bureau in Japan have been reclassified in the accompanying consolidated financial
statements for the convenience of readers outside Japan.
(b) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its
significant subsidiaries that are controlled by the Company. Under the effective control approach, allsignificant majority-owned companies are to be consolidated. Additionally, companies in whichshare ownership equals 50% or less may be required to be consolidated in cases where suchcompanies are effectively controlled by other companies through the interests held by a party who has
a close relationship with the parent. All significant intercompany transactions and accounts are
eliminated in consolidation.
(c) Foreign currency translation(1) Foreign currency transactions
All receivables and payables denominated in foreign currencies are translated into Japanese yenat the exchange rate prevailing at the balance sheet date.

9(2) Foreign currency financial statements
Assets and liabilities of the foreign consolidated subsidiaries are translated into Japanese yen at
the current exchange rate prevailing at the balance sheet date. Revenue and expense accounts
are translated at the average exchange rate in effect during the year. Foreign currencytranslation adjustments are included in net assets.
(d) Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of cash flows are composed of cash on hands,bank deposits withdrawable on demand and short-term investments with original maturities of threemonths or less and minor risk for the fair value fluctuation.
(e) Inventories
Merchandise, finished goods, semi-finished goods, work in process and raw materials are stated at thelower of cost or net selling value, for which cost is primarily determined by the first-in first-out
method. Supplies are stated at the lower of cost or net selling value, for which cost is determined by
the moving average method.
(f) Financial instruments(1) Investment securities
Marketable securities classified as other securities are carried at fair value based on the averageof market price during the last month of the fiscal year with any changes in unrealized gains orlosses, net of income taxes, included directly in net assets. Cost of securities sold is determinedby the moving average method. Non-marketable securities classified as other securities arecarried at cost determined by the moving average method.
(2) Derivatives
The Company has entered into various derivative transactions, including forward foreignexchange contracts, interest rate swaps and metal forward contracts, in order to manage certain
risks arising from adverse fluctuations in foreign currency exchange rates, interest rates andcommodity prices, respectively.
All derivatives are recognized in the balance sheet at fair value, with changes in fair value
included in profit or loss for the period in which they arise, except for derivatives that aredesignated as “hedging instruments” (see Note 1. (f) (3) Hedge accounting below).
(3) Hedge accounting
Gains or losses arising from changes in fair value of the derivatives designated as “hedging
instruments” are deferred as an asset or liability and included in profit or loss in the period
during which the gains and losses on the hedged items or transactions are recognized.
Hedging instruments are derivative transactions including metal forward contracts, interest rate
swaps. The related hedged items are raw materials and finished goods exposed to commodity
price fluctuation risk and interest payments on debt loan, respectively.
The Company has a policy to utilize the above hedging instruments in order to reduce theCompany’s exposure to the risks of fluctuations in prices, interest rates and cash flows.

10

The Company evaluates the effectiveness of its hedging activities by reference to theaccumulated gains or losses on the hedging instruments and the underlying hedged items fromthe commencement of the hedging transactions regarding metal forward contracts and foreign
currency deposits. Hedge effectiveness is omitted for interest rate swaps which qualify forhedge accounting and meet specific criteria.
(g) Property, plant and equipment and depreciation
Property, plant and equipment, except for leased assets, are stated at cost and mainly depreciated by
the straight-line method over the estimated useful lives of the respective assets.
(h) Intangible assets and amortization
Mining rights are mainly amortized by using the unit-of-production method. Other intangible assets
are mainly amortized by using the straight-line method. Software for internal use is amortized byusing the straight-line method over the estimated useful life (5 years).
(i)

LeasesLeased assets which are under finance leases and capitalized are primarily the storage equipment(structures) in Smelting business and depreciated over the lease terms of the respective assets by thestraight-line method with no residual value.

(j)

Allowance for doubtful accounts
Allowance for doubtful accounts is provided at an amount sufficient to cover possible losses oncollection. The allowance consists of the estimated uncollectible amounts with respect to specificreceivables plus an amount based on historical experience of bad debt with respect to otherreceivables.

(k) Retirement benefits(1) Method for attribution of expected retirement benefits to periods
In the calculation of retirement benefit obligations, the expected retirement benefits are
attributed to the period up to the end of the current fiscal year based on the benefit formula
method.
(2) Accounting method for actuarial gains and losses and past service costs
Actuarial gains and losses are amortized by the straight-line method over a certain period (10years) which is within the average remaining years of service of the eligible employees when
the gains or losses arise, from the year following the year in which the gains and losses arise.
Past service costs are amortized as incurred by the straight-line method over a certain period (10years) which is within the average remaining years of service of the eligible employees when
the gains or losses arise.
(3) Accounting method for unrecognized actuarial gains and losses and unrecognized past service
costs
Unrecognized actuarial gains and losses and unrecognized past service costs are recorded asremeasurements of defined benefit plans under accumulated other comprehensive income of net

11assets after tax effect adjustments.
(4) Application of the simplified method for small enterprises, etc.
Some of its consolidated subsidiaries apply the simplified method in the calculation of their net
defined benefit liability and retirement benefit expenses. Under the simplified method, thebenefits payable assuming the voluntary retirement of all eligible employees at the year-end are
deemed as retirement benefit obligations.
(l)Provision for directors’ bonuses
In order to prepare for the payments of bonuses to directors, provision for directors’ bonuses isrecorded based on the estimated amount to be paid at the end of the fiscal year.

(m) Provision for loss on construction contracts
Provision for loss on construction contracts is provided for estimated losses on undelivered
construction contracts for which there is a possibility that losses will be incurred at the amount of
expected future losses that can be estimated reliably at the end of the fiscal year.
(n) Provision for environmental measures
Provision for environmental measures is estimated and recorded to provide for future potential costs
related to disposal of polychlorinated biphenyl waste.
(o) Provision for loss on business of subsidiaries and associates
Provision for loss on business of subsidiaries and associates is recorded based on the estimated loss
burden amount corresponding to financial situation of those companies.
(p) Income taxes
Deferred tax assets and liabilities are determined based on the differences between the financial
reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates
and laws which will be in effect when the differences are expected to reverse.
(q) Recognition of revenues
Revenues and costs of construction contracts of which the percentage of completion can be reliably
estimated are recognized by the percentage-of-completion method. The percentage of completion is
calculated as the cost incurred to the estimated total cost. The completed-contract method continues tobe applied to contracts for which the percentage of completion cannot be reliably estimated.
(r) Appropriation of retained earnings
Cash dividends and transfers to legal reserve are recorded in the fiscal year in which the proposed
appropriation of retained earnings is approved at the shareholders’ meeting.
(s) Profit per share
Profit per share is computed based on the profit available for distribution to shareholders of commonshares and the weighted average number of common shares outstanding during the year.

12

(t)

Asset retirement obligations
Asset retirement obligations are calculated based on the estimated life of mine from commencement ofoperations, which is deemed as the estimated usable period, using the discount rates of 0.4% and 0.5%
for the years ended March 31, 2019 and 2018, respectively. The amount mainly represents theobligations of CBH Resources Ltd. (“CBH”) to restore its mine sites at Endeavor Mine and Rasp Mineto their original states upon closure.

(u) Accounting standards and guidance issued but not yet adopted- “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, issued on March 30,
2018)- “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No.
30, issued on March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards
Board (FASB) have jointly developed a comprehensive accounting standard for revenue
recognition and issued “Revenue from Contracts with Customers” (IFRS 15 issued by the IASB
and Topic 606 issued by the FASB) on May 2014.
Considering that IFRS 15 is effective from fiscal years beginning on or after January 1, 2018 andTopic 606 is effective from fiscal years beginning after December 15, 2017, the AccountingStandards Board of Japan (ASBJ) developed the comprehensive accounting standard for revenue
recognition and issued it together with the implementation guidance.
The ASBJ’s basic policy in developing the accounting standard for revenue recognition was toadopt the basic principles of IFRS 15 as a starting point from the viewpoint of comparability offinancial statements, which is one of the benefits of maintaining consistency with IFRS 15, and to
add alternative treatments to the extent not to impair comparability in cases where previous
practices and other factors in Japan should be considered.
(2) Date of application
The accounting standard and guidance will be applied effective from the beginning of the fiscal
year ending March 31, 2022.
(3) Effect of applying the standard and guidance
The Company is currently evaluating the effect of applying the “Accounting Standard for
Revenue Recognition” and the “Implementation Guidance on Accounting Standard for Revenue
Recognition” on its consolidated financial statements.
(v) Reclassifications
Certain reclassifications have been made to the prior year amounts to conform to the current year
presentation.

13

2.

U.S. Dollar Amounts

U.S. dollar amounts presented in the accompanying consolidated financial statements and notes areincluded solely for the convenience of readers outside Japan, at the prevailing exchange rate of ¥110.99 to
U.S. $1 on March 31, 2019. These translations should not be construed as representations that the yenamounts actually represent, or have been or could be converted into U.S. dollars at that or any other rate.

3.

Notes Receivable and Notes Payable Maturing at Fiscal Year-End

Although March 31, 2019 and 2018 were bank holidays, notes maturing on that date were accounted for as
if they were settled on their maturity date. The corresponding amounts of notes receivable and notes
payable maturing on March 31, 2019 and 2018 were as follows:
March 31,2018
2019(Millions of yen)
Notes receivable
Notes payable
Notes payable – equipment (other current liabilities)

4.

¥

20
162
80

¥

27
156
101

2019
(Thousands of
U.S. dollars)
$

180
1,459
720

Inventories

Inventories as of March 31, 2019 and 2018 consisted of the following:
March 31,2018
2019(Millions of yen)
Merchandise and finished goods
Work in process
Raw materials and supplies
Total

5.

¥

¥

10,907
9,101
22,35942,367¥¥

10,713
9,901
21,312
41,928

2019(Thousands of
U.S. dollars)$$

98,27081,998201,450
381,719

Land Revaluation

In accordance with the Act on Revaluation of Land, the Company’s land used for its business operations
was revalued as follows:
Date of revaluation: March 31, 2000
The differences between total fair value of land and the total book value after revaluation of land as ofMarch 31, 2019 and 2018 were ¥8,011 million ($72,177 thousand) and ¥7,943 million, respectively.
The tax effect of the excess on revaluation is recorded as deferred tax liabilities related to land revaluation
which is included in liabilities, and the remainder, net of income taxes portion of the excess on revaluation,is presented as revaluation reserve for land which is included in net assets.

14

6.

Impairment Loss on Fixed Assets

The Companies recognized impairment losses on certain asset groups for the years ended March 31, 2019and 2018 as follows:Year ended March 31, 2019
Location
Use
Category
The State of New
Assets included in Buildings and structures
South Wales,
Mineral Resource
Machinery and equipment
Australia and others business segment
Mining rights(Mining assets)
The State of New
South Wales,
Australia and others

Assets included in
Mineral Resource
business segment(Exploration rights) Mining rights

Year ended March 31, 2018
Location
Use
Category
Annaka City, Gunma Idle assets
Buildings and structures
Machinery and equipment(Millions ofyen)(Thousands of
U.S. dollars)

¥

$

¥

14
2,179
2,074
4,268

$

126
19,632
18,68638,453

¥

70

$

630

(Millions of
yen)
¥
89
10
¥
100

Business assets of the Company are grouped based on the categories used for its managerial accounting.
With respect to idle assets, each asset is treated as an individual unit to apply the accounting for the
impairment.
For the year ended March 31, 2019, regarding the Endeavor Mine in the State of New South Wales,
Australia and other locations, CBH Resources Ltd. (“CBH”) wrote down the book value of the asset group
included in the Mineral Resource business segment to its recoverable amount and recognized the reduction
as impairment losses, since CBH could not expect to generate cash inflows sufficient to recover theinvested capital due to a decrease in the mining volume and change in the market environment. The
recoverable amount of the asset group is measured at value in use, and valued at zero since the estimatedamount of future cash flow is negative.
For the exploration rights at the mines in the State of New South Wales, Australia and other locations, theCompany valued their recoverable amounts at zero on the grounds that there would be no additional
exploration in the future, and recognized impairment losses for the entire book value of the explorationrights recorded as assets.
For the year ended March 31, 2018, the Company recognized impairment losses for the entire book valueof idle assets on the grounds that they were not projected to generate any future cash inflows nor readilysalable.

15

7.

Investments in Unconsolidated Subsidiaries and Associates

Investments in unconsolidated subsidiaries and associates as of March 31, 2019 and 2018 are summarized
as follows:
March 31,2018
2019(Millions of yen)
Unconsolidated subsidiaries
Associates

2019(Thousands of
U.S. dollars)

¥

9
440

¥

12
440

$

81
3,964

¥

450

¥

453

$

4,054

8. Short-Term Borrowings and Long-Term Debt
Short-term borrowings and long-term debt as of March 31, 2019 and 2018 consisted of the following:
March 31,

Amount(Millions ofyen)
Short-term borrowings
Commercial papers
Current portion of
long-term debt
Current portion of leaseobligations
Long-term debt
Lease obligations
Total

¥

¥

2019
Weighted
averageinterest rate

Due in2018

2019

Amount(Millions ofyen)Amount(Thousands of
U.S. dollars)¥$

11,4628,000

11,82811,0000.6%
0.0

11,1370.9

9,548

100,3429
18,866
48

–
1.1
–

10
23,60858

81
169,979
432

52,8902020.4 – 2024.1
2021.7 – 2025.3¥

52,688$106,568
99,108476,529

Average interest rates are calculated by using weighted-average interest rates as of March 31, 2019.
Average interest rates on lease obligations are not provided because interest equivalents included in the
total lease payments are allocated to each applicable fiscal year on a straight-line basis.
The maturities of long-term debt and lease obligations outstanding as of March 31, 2019 were as follows:
Long-term
LeaseLong-term
Lease
debt
obligations
debt
obligations
Year ending March 31,(Millions of yen)(Thousands of U.S. dollars)
2020¥
11,137 ¥9 $100,342 $
81
2021
7,699
9
69,366
81
2022
7,214
9
64,996
81
2023
2,733
9
24,623
81
2024
1,219
9
10,982
81
Thereafter
9
81
Total
¥
30,003 ¥58 $270,321 $522

16Assets pledged as collateral for the long-term debt, including the current portion, as of March 31, 2019 and2018 were as follows:
March 31,2018
2019(Millions of yen)

Pledged assets

Land (*)
Buildings and structures (*)
Machinery and equipment (*)
Total
(*)

2019
(Thousands of
U.S. dollars)¥

13,785
4,580
5,620

¥

13,785
4,581
5,742

$

124,200
41,26450,635¥23,985¥

24,108$216,100

For the above assets, a revolving mortgage is set at the maximum amount of ¥1 million ($9thousand) with one bank as of March 31, 2019 and 2018.

17

9.

Retirement Benefit Plans

The Company and its domestic consolidated subsidiaries have funded and unfunded defined benefit plans
and lump-sum payment plans. The defined benefit corporate pension plans, all of which are funded, provide
lump-sum or pension benefits based on salaries and the length of service. The lump-sum payment plans,
which are unfunded, provide lump-sum benefits based on salaries and the length of service. In addition,certain consolidated subsidiaries apply the simplified method to calculate retirement benefit liabilities andretirement benefit expenses, where the required contributions to the pension fund are accounted for as
retirement benefit expenses.
Information regarding the Company’s defined benefit plans for the years ended March 31, 2019 and 2018
was as follows:(a) The changes in the retirement benefit obligations for the years ended March 31, 2019 and 2018 are as
follows:
Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Retirement benefit obligation at beginning of year
Service costs
Interest costs
Actuarial gains and losses arising during year
Retirement benefits paid¥

Retirement benefit obligation at end of year

¥

3,599
279
1
50
(183)
3,748

¥

¥

3,575 $
278
2
(21)
(235)
3,599 $

32,4262,513
9450(1,648)33,768(b) The changes in plan assets for the years ended March 31, 2019 and 2018 are as follows:Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Plan assets at beginning of year
Expected return on plan assets
Actuarial gains and losses arising during year
Contributions from employer
Retirement benefits paid¥

Plan assets at end of year

¥

3,881
77
(21)
198
(183)
3,952

¥

¥

3,524 $
70
177
344
(235)
3,881 $

34,967
693
(189)
1,783
(1,648)35,60618

(c) The changes in net defined benefit liability accounted for using the simplified method for the years
ended March 31, 2019 and 2018 are as follows:Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Net defined benefit liability at beginning of year¥

Retirement benefit expenses
Retirement benefits paid
Net defined benefit liability at end of year

¥

145
11
(8)
148

¥

¥

150 $
10
(15)
145 $

1,306
99
(72)
1,333

(d) The following table sets forth the funded status of the plans and the amounts recognized in the
consolidated balance sheets as of March 31, 2019 and 2018.
March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Retirement benefit obligation for funded plans
Plan assets

¥

3,748
(3,952)(203)¥

3,599 $
(3,881)(281)

33,768(35,606)(1,828)Retirement benefit obligation for unfunded plans
Net balance of liability and asset recognized on the
consolidated balance sheet

148

145

1,333

(55)

(135)

(495)

Net defined benefit liability
Net defined benefit asset
Net balance of liability and asset recognized on the
consolidated balance sheet

148
(203)

145
(281)

1,333
(1,828)(135) $

(495)

¥

(55)

¥

(e) The components of retirement benefit expenses for the years ended March 31, 2019 and 2018 are as
follows:
Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)Service costs
Interest costs
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of past service costs
Retirement benefit expenses calculated using thesimplified method
Retirement benefit expenses under defined benefit
plans

¥

276
1
(77)
(1)
–

¥

11
¥

209

¥

275 $
2
(70)
23
(38)

2,486
9
(693)
(9)
–

10

99

203

$

1,883

19

(f) Remeasurements of defined benefit plans
The components of remeasurements of defined benefit plans included in other comprehensive income(before tax effect) for the years ended March 31, 2019 and 2018 are as follows:Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Actuarial gains and losses
Past service costs

¥

(72)
–

¥

198
–

$

(648)
–

Total

¥

(72)

¥

198

$

(648)

(g) The components of remeasurements of defined benefit plans included in accumulated othercomprehensive income (before tax effect) as of March 31, 2019 and 2018 are as follows:
March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Unrecognized actuarial gains and losses
Unrecognized past service costs

¥

Total

¥

163
–
163

¥
¥

238
–
238

$
$

1,468
–
1,468

(h) Plan assets(1) Breakdown of plan assets
Percentage of each main category to total plan assets is as follows:Year ended March 31,
2018
2019
Debt securities
Equity securities
Life insurance general account
Other
Total

38%
47
12
3
100%

37%
49
12
2
100%

(2) Determination of expected long-term rate of return on plan assets
In determining the expected long-term rate of return on plan assets, the Company takes into
consideration the current and future plan asset allocation as well as the current and expectedlong-term rate of return on various asset categories comprising plan assets.

20

(i)

Actuarial assumptions
Year ended March 31,
2018
2019
Weighted-average actuarial assumptions at end of year:
Discount rate
Expected long-term rate of returnLump-sum election rate

0.0%
2.0
100.0

(0.1)%
2.0
100.0

10. Asset Retirement Obligations
The changes in asset retirement obligations for the years ended March 31, 2019 and 2018 were as follows:Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Balance at beginning of year
Adjustment due to passage of time
Other

¥

Balance at end of year

¥

2,736
12
(311)
2,436

¥

¥

2,437
13
285
2,736

$

$

24,650108(2,802)
21,94721

11.

Net Assets

Information regarding changes in net assets for the years ended March 31, 2019 and 2018 is as follows:(a) Shares issued and outstanding / Treasury shares
For the year ended March 31, 2019

Types of shares

Number ofshares as ofApril 1, 2018

Increase
Decrease(Thousands of shares)

Number ofshares as ofMarch 31, 2019

Shares issued and outstanding:Common shares
13,585––
13,585
Treasury shares:
Common shares (Note)70–7
Note: The increase of 0 thousand shares was due to purchase of shares of less than standard unit.
For the year ended March 31, 2018

Types of shares

Number ofshares as ofApril 1, 2017

Increase
Decrease(Thousands of shares)

Number ofshares as ofMarch 31, 2018

Shares issued and outstanding:Common shares (Notes 1 and 2)
135,855–(122,269)
13,585
Treasury shares:
Common shares (Notes 1, 3 and
4)
62
1
(57)
7
Notes 1. The Company consolidated its common shares at the ratio of 10 shares to 1 share as of October 1,
2017.
2. The decrease of 122,269 thousand shares was due to share consolidation.
3. The increase of 1 thousand shares was due to purchase of fractional shares arising from shareconsolidation (0 thousand shares) and purchase of shares of less than standard unit (1 thousand
shares: 1 thousand shares before share consolidation, 0 thousand shares after shareconsolidation).
4. The decrease of 57 thousand shares was due to share consolidation.

(b) Dividends(1) Dividends paid
For the year ended March 31, 2019
Resolution

Type ofsharesAnnual general meeting of theshareholders on June 28, 2018

CommonsharesTotal dividends(Millions of yen)
¥

1,697

Dividends per
share
(Yen)
¥

125

Cut-off
date

Effective
date

March 31,2018

June 29,2018

22

For the year ended March 31, 2018
Type ofsharesResolution

Total dividends(Millions of yen)

Dividends per
share
(Yen)

Cut-off
date

Effective
date

Annual general meeting of theCommonMarch 31,
June 30,
shareholders on June 29, 2017
shares
¥
1,357
¥
10
2017
2017
Note: The Company consolidated its common shares at the ratio of 10 shares to 1 share as of October 1,
2017. Dividends per share reflect the amount before share consolidation.
For the year ended March 31, 2019
Resolution

Type ofsharesAnnual general meeting of theshareholders on June 28, 2018

CommonsharesTotal dividends(Thousands of U.S.
dollars)$

Dividends per
share(U.S. dollars)

15,289$

1.12

Cut-off
date

Effective
date

March 31,2018

June 29,2018(2) Dividends with the cut-off date in the year ended March 31, 2019 and the effective date in theyear ending March 31, 2020

Resolution

Type ofsharesTotal
dividends

Source ofdividends

Dividends
per share(Millions of

Cut-off
date

Effective
date

(Yen)

yen)

Annual general meeting of theshareholders on June 27, 2019

Commonshares¥950

Retainedearnings¥

70

March 31,2019

June 28,
2019

Resolution

Type ofsharesTotal
dividends

Source ofdividends

Dividends
per share

Cut-off
date

Effective
date

March 31,2019

June 28,
2019(Thousands of(U.S. dollars)

U.S. dollars)

Annual general meeting of theshareholders on June 27, 2019

Commonshares$ 8,559Retainedearnings$

0.63

The Companies Act of Japan provides that an amount equal to 10% of the amount to be disbursed as
distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the common shares. Such distributions can be made at any
time by resolution of the shareholders, or by the board of directors if certain conditions are met.

23

12. Income Taxes
As of March 31, 2019 and 2018, significant components of deferred tax assets and liabilities were as
follows:
March 31,2018
2019(Millions of yen)
Deferred tax assets:
Net operating loss carry forwards
Asset retirement obligations
Depreciation in excess of tax limit
Foreign exchange losses
Other
Gross deferred tax assets
Valuation allowance on net operating loss
carryforwards (Note 2)
Valuation allowance on deductible temporary
differences
Less: Valuation allowance (Note 1)
Total deferred tax assets¥

Deferred tax liabilities:
Unrealized gains on other securities
Depreciation in foreign subsidiary
Inventories
Royalty gains
Reserve for overseas exploration
Other
Total deferred tax liabilities

1,351
731
3,371
547
1,916

¥

–
813
2,361
618
2,039

2019
(Thousands of
U.S. dollars)$

12,172
6,586
30,372
4,928
17,262

7,919

5,832

71,348–––(4,211)(4,211)
3,708–(3,474)
2,358(37,940)(37,940)
33,408

(288)
(843)
(429)
(121)

(392)
(727)
(400)
(165)

(2,594)(7,595)(3,865)(1,090)

(136)
(382)
(2,201)

(136)
(557)
(2,379)(1,225)(3,441)(19,830)

Net deferred tax assets (liabilities)

¥

1,507

¥

(21)

$

13,577

Deferred tax liabilities:
Deferred tax liabilities related to land revaluation

¥

4,345

¥

4,345

$

39,14724

Notes 1. The increase of ¥737 million ($6,640 thousand) in the valuation allowance was due to additionalrecognition of ¥1,009 million ($9,090 thousand) in the valuation allowance for depreciation inexcess of the tax limit in CBH, a consolidated subsidiary.
2. The expiry schedule of net operating loss carryforwards and the related amount of deferred tax
assets is as follows:
As of March 31, 2019

Due in1 yearNet operating loss
carryforwards (a)Valuation allowance¥

Deferred tax assets

Net operating loss
carryforwards (a)Valuation allowance
Deferred tax assets
(a)
(b)

$

–
–

Due after
1 yearthrough
2 years

Due after Due after Due after
2 years
3 years
4 years
throughthroughthrough
3 years
4 years
5 years(Millions of yen)

¥

¥

–
–

–
–

¥

¥

¥ 1,351
–

–

1,351

–

Due in1 yearDue after
1 yearthrough
2 years

Due after Due after Due after
2 years
3 years
4 years
throughthroughthrough
3 years
4 years
5 years(Thousands of U.S. dollars)

$

$

–

–
–
–

–
–
–

–

–
–

–

–
–

–

–
–

$

–
–
–

$

Due after
5 years

Due after
5 years––$ 12,172––

12,172

Total

¥

1,351
–
(b)
1,351

Total

$ 12,172–(b)
12,172

Net operating loss carryforwards are multiplied by the statutory tax rate.
Deferred tax assets of ¥1,351 million ($12,172 thousand) were recognized for net operating loss
carryforwards of ¥1,351 million ($12,172 thousand) (multiplied by the statutory tax rate). The¥1,351 million ($12,172 thousand) deferred tax assets is recognized for the entire amount of net
operating loss carryforwards of ¥1,351 million ($12,172 thousand) (multiplied by the statutory tax
rate). Net operating loss carryforwards for which deferred tax assets are recognized primarily relate
to the ¥3,331 million ($30,011 thousand) loss before income taxes recorded in the year ended March
31, 2019. No corresponding valuation allowance is recognized since it is expected that sufficient
future taxable income will be available to fully recover the amount of deferred tax assets.

25

The reconciliation between the statutory tax rate and the effective tax rate for the year ended March 31,2018 was as follows:Year ended
March 31,2018
Statutory tax rate
Increase (decrease) due to:Tax loss carryforwards of foreign consolidated subsidiaries
Elimination of intercompany profits
Change in valuation allowance
Other
Effective tax rate

30.86%(17.59)5.06
0.05(0.84)
17.54%For the fiscal year ended March 31, 2019, the reconciliation between the statutory tax rate and the effective
tax rate is not shown as a loss before income taxes was recorded.

13.

LeasesAs lessee:
There were no impairment losses allocated to leased assets for the years ended March 31, 2019 and 2018.

14.

Commitments and Contingent Liabilities

The Company guarantees bank loans of TIANJIN TOHO LEAD RECYCLING CO., LTD., an affiliate of
the Company, in the amount of ¥256 million ($2,306 thousand) as of March 31, 2019. There were no
guarantee obligations as of March 31, 2018. In addition, the Company has entered into loan commitment
agreements amounting to ¥5,600 million ($50,454 thousand) and ¥5,600 million with two financial
institutions as of March 31, 2019 and 2018, respectively. There were no related loans payable outstanding,and therefore, the unused balance was ¥5,600 million ($50,454 thousand) and ¥5,600 million under thecredit facilities as of March 31, 2019 and 2018, respectively.
The Company had repurchase obligations of ¥507 million ($4,567 thousand) and ¥571 million inconnection with the securitization of receivables as of March 31, 2019 and 2018, respectively.

26

15.

Financial Instruments(a) Overview(1) Policy for financial instruments
The Companies raise funds mainly through bank borrowings in consideration of their business plans.
The Companies invest their temporary surplus funds in highly liquid financial assets and raise
short-term operating capital through bank borrowings and issuances of commercial papers. The
Companies use derivatives to avoid after-mentioned risks and do not enter into derivatives for
speculative or trading purposes.
(2) Descriptions of financial instruments and related risks
Trade receivables––notes and accounts receivable, trade and electronically recorded monetary claims––are exposed to customer credit risk. Trade receivables denominated in foreign currencies which
are derived from foreign operations are exposed to foreign currency risk, and such risk is hedged byforward foreign exchange contracts.
Investment securities are mainly composed of equity securities of companies with business
relationships and exposed to market risk.
Trade payables––notes and accounts payable, trade––are mostly due within two months or less.
Certain trade payables denominated in foreign currencies are exposed to foreign currency risk, andsuch risk is hedged by forward foreign exchange contracts.
Trade receivables and payables in connection with the Smelting business are exposed to commodity
price fluctuation risk of London Metal Exchange (“LME”), and such risk is hedged by metal forward
contracts.
Borrowings are principally for the purpose of working capital (mainly short-term), and capital
investments (long-term). Certain long-term debt is exposed to interest rate fluctuation risk, and suchrisk is hedged by derivatives (interest rate swaps).
As for derivatives, the Companies have entered into the forward foreign exchange contracts and others
to hedge the foreign currency risk arising from the trade receivables and payables denominated inforeign currencies, metal forward contracts to hedge the commodity price fluctuation risk of LME
arising from the trade receivables and payables on the Smelting business and interest rate swaps tohedge the fluctuation risk deriving from interest payment of long-term debt. See Note 1. (f) (3)Hedge accounting for information about the method of hedge accounting, hedging instruments andhedged items, hedging policy, and assessment of hedge effectiveness.
(3) Risk management for financial instruments(i)Management of credit risk (risk of default by customers or counterparties)
For trade receivables, sales departments of each division of the Companies periodically monitor
creditworthiness of their main customers and manage due dates and outstanding balances bycustomer in accordance with the internal rules of the Company. In addition, the Companies aremaking efforts to identify uncollectibility in the earlier stage and mitigate risks of bad debts, due
to customers with financial difficulties.
The Companies believe that the credit risk of derivatives is insignificant as they enter into

27

derivative transactions only with financial institutions with high credit ratings.
(ii)Management of market risks (risks of fluctuations in foreign exchange rates, commodity prices,interest rates and others)
For trade receivables and payables denominated in foreign currencies, the foreign currency riskof the Company identified by currency on a monthly basis is hedged by forward foreignexchange contracts and others. In order to mitigate the commodity price fluctuation risks of
LME for trade receivables and payables on the Smelting business, the Company has entered into
the metal forward contracts. In addition, the Company has entered into interest rate swap
transactions to mitigate the interest rate fluctuation risk for interest payment of long-term debt.
For investment securities, the Companies periodically monitor the fair values and financial
position of the issuers and continuously review the holding status taking into account market
conditions and relationships with the issuers.
Derivative transactions are conducted and managed by treasury personnel including directors
and each division, and risk management is sufficiently conducted by making reports tomanagement every time transactions are executed as well as on a periodical basis.

(iii) Management of liquidity risk on funding (risk of default at due dates)
Based on the report from each department, subsidiaries and associates, the department in chargeof the Company prepares and updates its cash flow plan on a timely basis and manages liquidity
risk by maintaining liquid funds.
(4) Supplementary explanation of the fair value of financial instruments
Fair values of financial instruments are based on their respective market prices if available. When
there is no market price available, fair value is reasonably calculated. Since various assumptions andfactors are reflected in the calculation of the fair value, different assumptions and factors could resultin different fair value. In addition, the notional amounts of derivatives in Note 18. Derivative
Transactions are not indicative of the market risk involved in derivative transactions.
(b) Fair values of financial instruments
Carrying values of financial instruments on the consolidated balance sheets as of March 31, 2019 and 2018
and their fair values are shown in the following table. Financial instruments whose fair value is extremely
difficult to determine are not included in the following table (Please refer to Note 2 below).

28

Carrying value

March 31, 2019
Fair value(Millions of yen)

(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Electronically recorded monetary claims(4) Investment securities
Total assets¥¥(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Commercial papers(4) Long-term debt (*1)
Total liabilities¥

Derivatives (*2)

(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Electronically recorded monetary claims(4) Investment securities
Total assets(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Commercial papers(4) Long-term debt (*1)
Total liabilities
Derivatives (*2)¥

10,24814,0272,291
2,301
28,868¥¥

10,24814,0272,291
2,301
28,868

¥

¥

¥

–
–
–
107
107

¥

–

¥

7,067
11,82811,00030,00359,899¥

7,067
11,82811,00030,11060,006

¥

317

¥

317

Carrying value

March 31, 2018
Fair value(Millions of yen)¥

13,802
16,8143,303
2,876
36,796

¥

¥

¥

7,728
11,4628,000
33,15760,348

¥

72

¥
¥

¥

Difference

13,802
16,8143,303
2,876
36,796

¥

–
–
–
–
–

Difference
¥

¥

–
–
–
–
–

¥

¥

7,728
11,4628,000
33,28760,479

¥

–
–
–
130
130

¥

72

¥

–

March 31, 2019
Carrying value
Fair value
Difference(Thousands of U.S. dollars)(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Electronically recorded monetary claims(4) Investment securities
Total assets$(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Commercial papers(4) Long-term debt (*1)
Total liabilities$

Derivatives (*2)$

92,332
126,380
20,641
20,731
260,095$$$

92,332
126,380
20,641
20,731
260,095

$

$

$

–
–
–
964
964

$

–

$

63,672
106,568
99,108
270,321539,679$

63,672
106,568
99,108271,285
540,643

$

2,856

$

2,856

$

–
–
–
–
–

(*1) Current portion of long-term debt is included in long-term debt as of March 31, 2019 and 2018.
(*2) The value of assets and liabilities arising from derivatives is shown at net value, and the net liability
position is shown in parentheses.

29Notes:1.

Methods to calculate the fair value of financial instruments and other matters related to securities andderivative transactions
Assets(1) Cash and time deposits, (2) Notes and accounts receivable, trade and (3) Electronically recordedmonetary claims
Since these items are settled in a short period of time, their carrying value approximates fair value.
(4) Investment securities
The fair value of equity securities is based on a quoted market price. For information on securities
classified by holding purpose, please refer to Note 16. Investment Securities.
Liabilities(1) Notes and accounts payable, trade, (2) Short-term borrowings and (3) Commercial papers
Since these items are settled in a short period of time, their carrying value approximates fair value.
(4) Long-term debt
For long-term debt with floating interest rates, its carrying value approximates fair value since thedebt reflects the market interest rates in a short period of time and the credit condition of theCompany has not changed significantly since the debt was executed. For long-term debt with fixedinterest rates, the fair value is based upon the present value of the total of principal and interest
discounted by the interest rate to be applied if similar new borrowings were entered into.
Derivative transactions
Please refer to Note 18. Derivative Transactions.

2. Financial instruments whose fair value is extremely difficult to determine
March 31,2019
2018
(Millions of yen)

Unlisted equity securities

¥

694

¥

696

2019
(Thousands of
U.S. dollars)
$

6,252

These are not included in (4) Investment securities in the above table because there were no market
prices available and it was extremely difficult to determine the fair value.
3.

Redemption schedule for monetary receivables as of March 31, 2019

Due in one
year or less

Cash and time deposits
Notes and accounts receivable, trade
Electronically recorded monetary claims
Total

¥

¥

10,24014,027
2,291
26,559March 31, 2019
Due after
Due after
one yearfive years
through fivethrough ten
years
years
(Millions of yen)
¥

¥

–
–
–
–

¥

¥

–
–
–
–

Due after
ten years

¥

¥

–
–
–
–

30

Due in one
year or less

Cash and time deposits
Notes and accounts receivable, trade
Electronically recorded monetary claims
Total
4.

$

92,260126,380
20,641$ 239,291

March 31, 2019
Due after
Due after
one yearfive years
through fivethrough ten
years
years
(Thousands of U.S. dollars)
$

$

–
–
–
–

$

$

–
–
–
–

Due after
ten years

$

$

–
–
–
–

The redemption schedule for long-term debt is disclosed in Note 8. Short-Term Borrowings andLong-Term Debt.

31

16.

Investment Securities

Investment securities held by the Companies are all classified as other securities.
The aggregate cost and fair value (carrying value) of marketable securities classified as other securities asof March 31, 2019 and 2018 were as follows:

Cost

March 31, 2019
Fair value(carrying value)(Millions of yen)

Unrealized gains(losses)

Securities whose fair value exceeds theircost:
Equity securities

¥

958

¥

1,939

¥

980

Securities whose fair value does notexceed their cost:
Equity securities
Total

¥

398
1,357

¥

362
2,301

¥

(36)
943

Cost
Securities whose fair value exceeds theircost:
Equity securities
Securities whose fair value does notexceed their cost:
Equity securities
Total

¥

1,261

¥

313
1,575

Cost
Securities whose fair value exceeds theircost:
Equity securities
Securities whose fair value does notexceed their cost:
Equity securities
Total

$

8,631

$

3,585
12,226

March 31, 2018
Fair value(carrying value)(Millions of yen)

Unrealized gains(losses)

¥

2,693

¥

1,432

¥

182
2,876

¥

(131)
1,301

March 31, 2019
Fair value
Unrealized gains(carrying value)(losses)(Thousands of U.S. dollars)$

17,470$3,261
20,731

$

8,829

$

(324)
8,496

As of March 31, 2019 and 2018, unlisted equity securities amounting to ¥694 million ($6,252 thousand)and ¥696 million, respectively, were not included in the above table because there were no market prices
available and it was extremely difficult to determine the fair value.

32

Information about sales of securities classified as other securities for the years ended March 31, 2019 and2018 was as follows:Year ended March 31,
2019
2018
2019
(Millions of yen)(Thousands of
U.S. dollars)
Sales proceeds
Aggregate gains
Aggregate losses

¥

93
46
1

¥

–
–
–

$

837
414
9

For the year ended March 31, 2019, the Company recognized an impairment loss of ¥178 million ($1,603
thousand) on other securities.
If the fair value declines by 50% or more compared to the acquisition cost, the acquisition cost will be
written down to the fair value. If the fair value declines between 30% and 50% compared to the acquisition
cost, the acquisition cost will be written down to the amount deemed appropriate taking into consideration
monetary significance, recoverability and other factors.

17. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2019 and 2018 were composed of the following:
March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Cash and cash equivalents¥¥

10,248
10,248¥¥13,80213,802$$

92,332
92,33233

18.

Derivative Transactions(a) Summarized below are the notional amounts and the fair value of derivative instruments outstanding asof March 31, 2019 and 2018, for which hedge accounting has not been applied.
(1) Currency-related transactions
March 31, 2019
Notional amountContract
Maturing after
amountone year
Fair value(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Forward foreign exchange
contracts
Sell:
US Dollar
Total

¥
¥

24
24

¥
¥

–
–

¥
¥

(0)
(0)

¥
¥

(0)
(0)

March 31, 2018
Notional amountContract
Maturing after
amountone year
Fair value(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Forward foreign exchange
contracts
Sell:
US Dollar
Total

¥
¥

30
30

¥
¥

–
–

¥
¥

0
0

March 31, 2019
Notional amountContract
Maturing after
amountone year
Fair value(Thousands of U.S. dollars)

¥
¥

0
0

Unrealized
gains (losses)

OTC transactions:
Forward foreign exchange
contracts
Sell:
US Dollar
Total

$
$

216
216

$
$

–
–

$
$

(0)
(0)

$
$

(0)
(0)

Note: The calculation of fair value is based on prices obtained from counterparty financial
institutions and others.

34

(2) Commodity-related transactions
March 31, 2019
Notional amountContract
Maturing after
amountone year
Fair value(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Metal forward contracts
Sell:
MetalsCommodity option contracts
Sell/Buy:

¥

132

¥

–

¥

2

¥

2

Metals
Total

¥
¥

2,491
2,623

¥
¥

–
–

¥
¥

156
158

¥
¥

156
158

March 31, 2018
Notional amountContract
Maturing after
amountone year
Fair value(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Metal forward contracts
Sell:
Metals
Total

¥
¥

109
109

¥
¥

–
–

¥
¥

9
9

¥
¥

9
9

March 31, 2019
Notional amountContract
Maturing after
amountone year
Fair value(Thousands of U.S. dollars)

Unrealized
gains (losses)

OTC transactions:
Metal forward contracts
Sell:
MetalsCommodity option contracts
Sell/Buy:
Metals
Total

$

1,189

$

–

$

18

$

18

$
$

22,44323,632

$
$

–
–

$
$

1,405
1,423

$
$

1,405
1,423

Notes: 1. The calculation of fair value is based on prices obtained from counterparties and others.
2. Option contracts are zero cost options, and are shown collectively since call options andput options are considered as integrated contracts.

35(b) Summarized below are the notional amounts and the fair value of derivative instruments outstanding
as of March 31, 2019 and 2018, for which hedge accounting has been applied.
(1) Interest-related transactions
March 31, 2019
Notional amountContract
Maturing after
amountone year(Millions of yen)Interest rate swaps hedging long-term debt,
accounted for by exceptional treatment:
Receive/floating and pay/fixed
Total

¥
¥

13,402
13,402¥¥

Fair value

7,761
7,761

(Note)March 31, 2018
Notional amountContract
Maturing after
amountone year(Millions of yen)Interest rate swaps hedging long-term debt,
accounted for by exceptional treatment:
Receive/floating and pay/fixed
Total

¥
¥

12,554
12,554¥¥

Fair value

11,722
11,722(Note)March 31, 2019
Notional amountContract
Maturing after
amountone year
Fair value(Thousands of U.S. dollars)Interest rate swaps hedging long-term debt,
accounted for by exceptional treatment:
Receive/floating and pay/fixed
Total

$
$

120,749
120,749$$

69,92569,925(Note)

Note: Interest rate swaps to which exceptional treatment is applied are accounted for together withthe long-term debt designated as a hedged item. Therefore, their fair values are included in
the fair value of long-term debt.
(2) Commodity-related transactions
March 31, 2019
Notional amountContract
Maturing after
amountone year(Millions of yen)
Metal forward contracts, accounted for as part of
raw materials and finished goods:
Sell: Metals
Buy: Metals
Total

¥
¥

12,483
5,222
17,706¥¥–––

Fair value

¥
¥

160
(0)
159

36

March 31, 2018
Notional amountContract
Maturing after
amountone year(Millions of yen)
Metal forward contracts, accounted for as part of
raw materials and finished goods:
Sell: Metals
Buy: Metals
Total

¥
¥

10,103
6,306
16,410¥¥–––Fair value

¥
¥

336
(274)
62

March 31, 2019
Notional amountContract
Maturing after
amountone year
Fair value(Thousands of U.S. dollars)
Metal forward contracts, accounted for as part of
raw materials and finished goods:
Sell: Metals
Buy: Metals
Total

$
$

112,469
47,049159,527

$
$

–
–
–

$
$

1,441
(0)
1,432

Note: The calculation of fair value is based on prices obtained from counterparties and others.

37

19.

Other Comprehensive Income

Reclassification adjustments and tax effects allocated to each component of other comprehensive (loss)
income for the years ended March 31, 2019 and 2018 were as follows:
Years ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Net unrealized losses on other securities:
Losses arising during the year
Reclassification adjustments
Amount before tax effectTax effect¥

Deferred gains on hedges:
Gains arising during the year
Reclassification adjustments
Amount before tax effectTax effectForeign currency translation adjustment:
Adjustments arising during the year
Remeasurements of defined benefit plans:(Losses) gains arising during the year
Reclassification adjustments
Amount before tax effectTax effectTotal other comprehensive (loss) income

¥

(309)
(45)
(355)
104
(250)

¥

(43)
(0)
(43)
13
(29)

$

(2,784)(405)(3,198)937(2,252)

508
(411)
96
(29)
67

502
(80)
422
(130)
291

4,576
(3,703)
864
(261)
603

(2,396)(2,396)

1,000
1,000

(21,587)(21,587)

(72)
(1)
(74)
22
(51)
(2,630)

198
(15)
183
(56)
127
1,389

(648)
(9)
(666)
198
(459)
(23,695)

¥

$

38

20.

Segment Information(a) Overview of reportable segments(1) Definition of reportable segments
The Company defines reportable segments as components of the Company for which separate
financial information is available and whose operating results are regularly evaluated by the board of
directors to make decisions about how resources are allocated and assess its performance.
Operating departments of the Company are organized according to products and services, and eachdepartment plans comprehensive domestic and overseas strategies for its products and services anddevelops business activities through the Company and its consolidated subsidiaries. Thus, reportablesegments of the Company are determined based on such operating departments; namely, “Smelting,”“Mineral Resource” (organized based on CBH, a consolidated subsidiary), “Electronic Components
and Materials,” “Environment and Recycling” and “Civil Engineering, Construction and Plant
Engineering” (organized based on TOHO DEVELOPMENT ENGINEERING CO., LTD., aconsolidated subsidiary).
(2) Products and services of each reportable segment
 The Smelting segment engages in sales and production of zinc and lead products, electric silver
and sulfuric acid.
 The Mineral Resource segment engages in exploration, development and production of non-ferrous
metal resources and sales of their output.
 The Electronic Components and Materials segment engages in sales and production of electronicparts, electrolytic iron, plating and machine parts.
 The Environment and Recycling segment engages in sales and production of zinc oxide andrecycling of waste materials.
 The Civil Engineering, Construction and Plant Engineering segment engages in design,
construction, manufacturing and sales of facilities.
(3) Change in reportable segments
The “Civil Engineering, Construction and Plant Engineering segment,” which was previously
included in “Other”, is classified separately from the year ended March 31, 2019 due to an increasedmateriality in terms of volume. To reflect this change in presentation, the amounts in (c) Information
about net sales, profit or loss, assets and other items for the year ended March 31, 2018 haves been
reclassified.
(b) Basis of measurement for the amounts of net sales, profit or loss, assets and other items for eachreportable segment
The accounting policies of each reportable segment are consistent to those described in Note 1.
Summary of Significant Accounting Policies. The segment profit is based on operating income, andintersegment sales and transfers are based on actual market prices.

39

(c) Information about net sales, profit or loss, assets and other items
Year ended March 31, 2019
Reportable segment
Reconciliation(Note 2)

Amounts on
consolidated
financialstatements(Note 3)¥–
(8,414)¥ (8,414)¥
418¥ 17,298¥¥¥¥

117,551–
117,551531
130,231

¥

¥

6,014

Civil

MineralResource

Smelting

Electronic
Engineering,
CompoEnviron- Construction
nents and ment andand Plant
Materials Recycling Engineering

Other(Note 1)

Total

Total

(Millions of yen)
Net sales:
External customers
Intersegment
Total
Segment profit (loss)
Segment assets
Other items:
Depreciation
Increase inproperty, plantand equipment
and intangible
assetsImpairment losses
on fixed assets¥ 81,457
735¥ 82,193¥ (4,149)¥ 70,639¥ 20,544
2,535¥ 23,080¥ 2,489¥ 22,558¥ 5,8611¥ 5,862¥589¥ 10,052¥ 4,703–¥ 4,703¥ 1,325¥ 5,134¥ 1,961¥ 3,361

¥

¥

2,263

7,434

–

4,339

215

¥ 1,915214¥ 2,129¥ (566)¥ 1,489¥114,482
3,486¥117,969¥ (311)¥109,873

¥

¥

254 ¥

3

¥ 5,795

152

201

20

–

–

–

3,069
4,928
7,997
424
3,060

¥
¥
¥

¥ 117,551
8,414¥ 125,966¥
113¥ 112,933

156 ¥

5,951

62

10,072

158

10,23041

10,272

4,339

–

4,339

–

4,339

Reconciliation(Note 2)

Amounts on
consolidated
financialstatements(Note 3)¥–
(11,303)¥ (11,303)¥(994)¥ 19,071¥¥¥¥

133,625–
133,625
13,102
137,259

¥

¥

5,877

Year ended March 31, 2018
Reportable segment
Civil

MineralResource

Smelting

Electronic
Engineering,
CompoEnviron- Construction
nents and ment andand Plant
Materials Recycling Engineering

Other(Note 1)

Total

Total

(Millions of yen)
Net sales:
External customers
Intersegment
Total
Segment profit
Segment assets
Other items:
Depreciation
Increase inproperty, plantand equipment
and intangible
assetsImpairment losses
on fixed assets¥ 94,984
691¥ 95,675¥ 3,328¥ 73,517¥ 20,173
5,482¥ 25,656¥ 7,350¥ 25,186¥ 6,1903¥ 6,193¥560¥ 10,034¥ 5,394–¥ 5,394¥ 2,011¥ 4,704¥ 2,543¥ 2,619

¥

¥

1,513

3,837

–

–

249

¥ 3,593
195¥ 3,788¥332¥ 1,694¥130,336
6,372¥136,709¥ 13,583¥115,138

¥

¥

258 ¥

2

¥ 5,672

169

262

5

–

–

–

3,288
4,931
8,219
513
3,049

¥
¥
¥

¥ 133,625
11,303¥ 144,928¥ 14,097¥ 118,188

145 ¥

5,818

58

5,788

115

5,903

33

5,937

–

–

–

100

100

Year ended March 31, 2019
Reportable segment
Reconciliation(Note 2)

Amounts on
consolidated
financialstatements(Note 3)

$ 1,031,462 $
31,408$ 1,062,879 $$ (2,802) $$ 989,936 $

27,651 $ 1,059,113 $—
44,40075,808(75,808)
72,051 $ 1,134,931 $ (75,808)
3,820 $
1,018 $ 3,766
27,570 $ 1,017,506 $ 155,851$ 1,059,113—$ 1,059,113$
4,784$ 1,173,357

$

1,405

$

Civil

Smelting

MineralResource

Electronic
Engineering,
CompoEnviron- Construction
nents and ment andand Plant
Materials Recycling Engineering

Total

Other
(Note 1)

Total

(Thousands of U.S. dollars)
Net sales:
External customers
Intersegment
Total
Segment profit (loss)
Segment assets
Other items:
Depreciation
Increase inproperty, plantand equipment
and intangible
assetsImpairment losses
on fixed assets$ 733,912
6,622$ 740,544$ (37,381)$ 636,444$ 185,097
22,839$ 207,946$ 22,425$ 203,243$ 17,668 $ 30,282$ 52,8069$ 52,815$ 5,306$ 90,566$ 42,373—$ 42,373$ 11,938$ 46,256$$$$

17,253
1,928
19,181(5,099)13,415$1,937$ 2,288 $27

52,211$$

53,617 $558

54,185

20,38966,979

1,369

1,810

180

90,746

1,423

92,170369

92,548–39,093–––39,093–39,093–39,09340

Notes 1. “Other” represents business segments not belonging to reportable segments and includes
sound insulation building materials, transportation, environmental analysis and others.
2. “Reconciliation” included the followings:
Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)

Segment profit (loss):
Intersegment elimination
Corporate expenses (*)

¥

Total

¥

633
(215)
418

¥
¥

(592)
(401)
(994)

$
$

5,703
(1,937)
3,766(*) “Corporate expenses” represents mainly general and administrative expenses that are notallocated to reportable segments.
Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)

Segment assets:
Corporate assets (*)¥

17,298¥19,071$

155,851(*) “Corporate assets” represents mainly the Company’s investments of surplus funds
including cash, time deposits and investment securities and assets relating toadministrative divisions.
Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)

Other items:
Depreciation
Increase in property, plant and equipment
and intangible assets (*)

¥

62
41

¥

58
33

$

558
369

(*) “Increase in property, plant and equipment and intangible assets” represents mainly
capital expenditures that do not belong to reportable segments.
3. Segment profit is reconciled to operating income on the consolidated statement of operations.

41

(d) Related information(1) Information by product and service
Information by product and service has been omitted since similar information is disclosed insegment information described above.
(2) Information by geographical area
Net sales information by geographical area for the year ended March 31, 2019 and 2018 was asfollows:
Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Japan
Asia
Oceania¥

97,095
11,553
8,902¥ 113,563
9,949
10,112

$

Total

¥

117,551¥ 133,625$ 1,059,113

874,808
104,090
80,205

Property, plant and equipment information by geographical area as of March 31, 2019 and 2018
was as follows:Year ended March 31,
2018
2019
2019
(Millions of yen)(Thousands of
U.S. dollars)
Japan
Australia

¥

Total

¥

31,442
7,502
38,945¥¥31,341
9,607
40,949$$283,286
67,591
350,887(3) Information by major customer
Information by major customer has been omitted since there were no sales to a single externalcustomer accounting for 10% or more of consolidated net sales.

42

21.

Significant Subsequent Events

At the meeting of the board of directors held on April 9, 2019, the Company resolved to conclude aninvestment contract with Australia-based Galena Mining Ltd. (“Galena”), which holds a 100% interest in
the Abra lead deposit development project in the State of Western Australia, Australia, in which theCompany plans to participate through its consolidated subsidiary CBH Resources Ltd. (“CBH”), and toconclude a shareholders’ agreement on the joint management of the Abra lead deposit development project
between Galena and CBH. The above contracts were signed on the same day.
(a) Overview of the contracts(1) CBH (or its subsidiary) will underwrite a capital increase through a third-party allotment byAbra Mining Pty Ltd. (“AMPL”), a wholly-owned subsidiary of Galena, for AU$90 million andwill hold 40% of AMPL shares.
(2) The Company and Galena will each arrange loans required for the Abra lead deposit
development project from financial institutions according to their respective ownership ratios of
AMPL shares.
(3) The Company and Galena will each hold the rights over product collection from the Abra leaddeposit development project according to their respective ownership ratios of AMPL shares.
(b) Impact of the contracts on future business activities
The Company will procure investment funds for AMPL from financial institutions and invest thesefunds in CBH (or its subsidiary) by the year ending March 31, 2020 (planned). AMPL will become an
associate after the completion of this investment (planned to be completed by the year ending March
31, 2020). It is expected that AMPL will contribute to earnings of the Company through CBH after
the production starts in 2021 (planned).

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