Sumitomo Metal Mining : Updated Corporate Governance Report

Corporate Governance

Sumitomo Metal Mining Co., Ltd.

Last updated: February 15, 2024

(English translation released on March 21, 2024)

Sumitomo Metal Mining Co., Ltd.

President & Representative Director: Akira Nozaki

Contact: [phone]

Securities Code: 5713

URL: https://www.smm.co.jp/en/

The corporate governance of Sumitomo Metal Mining Co., Ltd. ("the Company") is as set out below.

1. Basic Philosophy of Corporate Governance, Capital Structure, Corporate Data, and Other Basic Information

1. Basic philosophy

The Company's basic philosophy pertaining to corporate governance is set out in "Corporate Governance Basic Policy, 2. Basic philosophy" and is displayed publicly on the Company website at the address below.

Corporate Governance Basic Policy

URL: https://www.smm.co.jp/en/ir/management/governance/

Updated

Reasons for not applying a particular principle of Japan's Corporate Governance Code

The Company writes this Corporate Governance Report by reference to all Principles of the Corporate Governance Code revised as of June 1, 2021.

Supplementary Principle 4.1.3: The board's engagement in succession planning for

the CEO and other top executives

The succession planning for holders of the office of chief executive officer (president and director) is conducted and executed appropriately on the basis of our corporate philosophy and business plans.

With regard to the candidate for the successor to the president, the Governance Committee (Chair: Taeko Ishii, Director), composed of the chairman of the Board of Directors who is not an executive officer and two independent outside directors, has opportunities to deliberate on the environment and methods for fostering the next president as well as concerning the candidates, etc. Regarding the specific procedure for selecting the successor to the president, after consulting with the Governance Committee about the candidate recommended by the president and receiving advice on whether the candidate has the qualifications, knowledge, experience, abilities, and insight worthy of a president

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and director, the president makes the final proposal to the Board of Directors, which makes the final decision after due deliberation.

With regard to the selection of the candidate executive officers who will constitute the pool of candidates for future president, the president, based on recommendations from the executive officers, consults with the Governance Committee regarding the best lineup to resolve the issues management faces, formulates the final proposal with reference to that advice, and submits the proposal to the Board of Directors. The Board of Directors then makes the final decision after due deliberation.

Supplementary Principle 4.2.1: Management remuneration as an incentive

The Company's financial results are significantly impacted by prevailing metal market conditions and exchange rates, and thus do not necessarily correspond with the progress of management strategies and projects. Furthermore, projects related to resource development and the construction of smelting and refining plants require extremely long time periods from start to completion, and it is not unusual for the composition of management to have changed by the time the fruits of those projects can be reaped.

Given these characteristics of its business, the Company has considered how remuneration should operate as a healthy incentive for individual directors and managers and has consequently laid down its current remuneration system composed of performance-based remuneration and bonuses based on consolidated financial results and assessment factors such as the degree of attainment of personal targets under medium-to-long-term management strategies. For the basic policies and procedures for remuneration, please refer to section (iii) of "Principle 3.1: Full disclosure" below. At present, we do not believe that remuneration in the form of Company stock would effectively operate as a healthy incentive for management, and thus have not introduced it.

Principle 4.8: Effective Use of Independent Directors

The Company appoints at least one-third of directors as independent outside directors. As outlined in 3. "Reasons for selection of present corporate governance system" below, the Company has positioned the three businesses of Mineral Resources, Smelting & Refining, and Materials as its three core businesses. Since all three businesses are related to non-ferrous metals, they have a mutual organic relationship and we believe that the current composition of the Board of Directors, which includes a certain percentage of directors from within the company and a certain percentage of independent outside directors, is optimal for making decisions on diverse management issues and for the growth of our business. We believe that it is in the best interests of the Company, its shareholders, and other stakeholders to conduct thorough deliberations from a variety of perspectives between internal director who possess a deep understanding of the Company's business and internal affairs, and independent outside directors who are able to offer opinions from the perspective of shareholders and other stakeholders.

However, as announced in the timely disclosure "Change of Outside Director (Obituary)"

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released on January 9, 2024, one of the Company's independent outside directors regrettably passed away on January 4, 2024, and retired his position on the Board of Directors effective the same day. As a result, as of the date of submission of this report the ratio of the Company's independent outside directors is less than one-third of the total number of directors.

With regard to the above circumstances, in preparation for the ordinary general meeting of shareholders scheduled to be held in June 2024 the Company will study ways to rectify the situation and ensure that independent directors constitute at least one-third of its Board of Directors.

Updated

Disclosures pursuant to specific principles of Japan's Corporate Governance Code

The Company writes this Corporate Governance Report by reference to all Principles of the Corporate Governance Code revised as of June 1, 2021.

Principle 1.4: Cross-shareholdings

When advancing our business strategy, the Company may engage in strategic shareholdings with business partners or other companies if it is judged that doing so will contribute to strengthening our business base over the mid to long term. With regard to existing cross-shareholdings, the Board of Directors verifies aspects such as the objectives of holdings and whether the benefits therefrom cover the Company's cost of capital every year. As a result of this verification, with regard to shares whose holding is judged to have little significance, including shares considered no longer worth the cost of capital and shares judged to have become less relevant due to recent business changes, we will proceed with concrete consideration based on the premise of reduction. Furthermore, in cases where a company cross-holding the Company's shares expresses a desire to sell, we will not prevent such a sale, etc. by suggesting a reduction in the size of the transaction, or by other means.

With regard to the exercise of voting rights in cross-shareholdings, the Company determines whether to vote for or against each proposal after giving comprehensive consideration, based on the financial results and other aspects of the financial condition of each of the issuing companies, to matters such as whether each proposal will contribute to increasing the corporate value of, or enhancing shareholders' interests in, that company over the medium to long term, and what impact it will have on the Company's corporate value or shareholders' interests. In order to determine whether to approve or reject proposals, the Company will engage in dialogue with the issuing company regarding the contents of each proposal, etc., as necessary. Decisions on voting are made particularly cautiously in circumstances such as cases of companies affected by major scandals or by persistent losses.

In fiscal 2022, the Company sold all cross-shareholdings in five companies, and partial cross-shareholdings in three companies.

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As of May 31, 2023, the Company maintained cross-shareholdings in 48 publicly-listed companies. Each of the aforementioned cross-shareholdings was verified at the regular Board of Directors meeting held in June 2023.

For details on cross-shareholdings, please see the Company's Annual Securities Report.

Principle 1.7: Related-party transactions

Transactions between the Company and our Directors or Audit & Supervisory Board Members will require the prior approval of the Board of Directors so as to ensure that the interests of the Company and the common interests of our shareholders are not harmed. Additionally, the Company will survey whether or not such transactions have been carried out and report our findings to the Board of Directors semiannually.

If any transaction with a major shareholder arises, it will be handled under the same standards as transactions between the Company and our Directors. A major shareholder is one who holds 10% or more of the voting rights of the Company.

Supplementary Principle 2.4.1: Ensuring diversity in the promotion of core human resources

1. Approach to ensuring diversity

The SMM Group Corporate Philosophy calls for recognizing the dignity and value of people based on respect for all individuals. The SMM Group Code of Conduct, which summarizes specific standards of conduct for officers and employees in achieving that respect for individuals, stipulates that we "accept diversity and respect the individuality and rights of people." The Sumitomo Metal Mining Group Policy on Human Rights declares that we will not allow discrimination, harassment, or bullying on the basis of race, religion, gender, age, sexual orientation, disabilities, nationality, or other characteristics in employment and work scenarios. Viewing diverse human resources and the development and participation of human resources as material issues, we aim to be "a company where all employees can take a vibrant and active part" as our Vision for 2030.

In order to realize Diversity, Equity and Inclusion (DE&I), create new wisdom, and become an organization capable of advancing growth strategies, the Company is committed to securing, developing, and utilizing human resources while respecting the diverse values of each employee and providing equal opportunities, as well as establishing a work environment that allows each and every individual can fully demonstrate their abilities.

Based on this approach, in July 2023 we revised our human resource system to one centered on a job grade system for managerial track employees, in order to take in diverse human resources, make use of diverse values, and enhance our corporate value while maintaining a membership-style employment mechanism that allows

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organizations and employees to grow from a long-term perspective. We will make our Company into one that continues to provide the sense of security and stability of the past while also enabling new challenges, transformation, and growth as all employees learn and grow autonomously.

2. Voluntary and measurable goals for ensuring diversity and progress toward their achievement

1. Women in managerial positions

In order to realize the Company's "Vision for 2030," we are working to promote greater opportunities for women, including promotion to managerial positions, active roles at production and mining sites, and assignment to overseas posts in addition to domestic locations. The Company aims to increase the number of women in managerial positions to 20 or greater by the end of fiscal 2023 in the General Employers Action Plan based on the Act on Promotion of Women's Participation and Advancement in the Workplace, and the number of women in managerial positions as of February 2024 was 25. Furthermore, in the Company's "Vision for 2030," we aim to have 50 women in managerial positions and a female employee ratio of at least 20%. In order to create an environment where women can naturally thrive, and to promote our growth strategy, we are implementing necessary measures from a medium- to long-term perspective.

• Measures to support balance according to life stage
• Training for the development of female leaders (participation in interactions with other industries)
• Interviews with female employees returning to work after childcare leave to support their career development

These efforts have been recognized in the form of the Kurumin certification by the Minister of Health, Labour and Welfare as a company supporting childcare.

1. Midcareer hires

The Company is actively promoting midcareer hiring. In addition to securing personnel with specific expertise and skills, we are also working to further promote an open and vibrant organizational culture by incorporating the diverse knowledge and perspectives that our members from different backgrounds offer. The Company hired 49 midcareer career-track employees in fiscal 2022, and as we continue to expand our business in line with our growth strategy, we will proactively increase the number of midcareer hires from the current level through to fiscal 2030.

1. Foreign nationals

The Company continues to hire regardless of nationality. As of February 2024, the Company employs 13 non-Japanese employees, and as we expand our business domain and create opportunities for new business outside Japan, we continue to

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increase the number of human resources who can play an active role globally, regardless of whether they are new graduates or midcareer hires. Specifically, we conducted a questionnaire to assess issues faced by foreign employees, along with interviews with those who wanted them, feedback to superiors, and hearings on issues. By holding round-table discussions with foreign employees in our Company and communicating the content through our Group in-house bulletins, we make all employees aware of the activities of our global human resources and internally raise awareness of the importance of creating workplace environments in which everyone can play active roles. In addition, we are working to increase opportunities to appoint foreign employees to core posts, including appointing locally-employed staff to key positions at business sites outside Japan, (particularly those operating under the Company's operatorship).

1. Persons with disabilities

The Company is working across the organization to improve the environment for persons with disabilities so that they can have pride, motivation, and joy in their work. Among our specific initiatives, since fiscal 2019 we have accepted students from special support schools near our workplaces to take part in workplace experiences. By deepening understanding of our workplaces and work through the experience, we are increasing the number of students who feel confident in joining our Company. Since fiscal 2020, we have offered internships for university students with disabilities and actively recruited these students at workplaces that can make use of their expertise and characteristics. To support retention, we arrange regular meetings with human resource staff after joining the company to eliminate job-related anxieties and problems and to offer support as needed. We also work to make a range of improvements to our workplace environment in order to accommodate employees with disabilities. By acting under the idea of normalization to create environments in which people with and without disabilities can work together, we are steadily increasing our percentage of employees with disabilities. The employment rate of persons with disabilities in the SMM (in Japan) is 2.59% as of June 2023, and in the Company's "Vision for 2030," we aim to raise this rate to at least 3% by 2030-higher than the legally mandated rate (2.3%).

3. Policies for human resource development and internal environment development to ensure diversity, and the status of their implementation

The SMM Group has set "a company where all employees can take a vibrant and active part" as a key component of its "Vision for 2030," and aims to be a company that respects the humanity of each and every employee, and where employees feel pride, motivation, and joy in work, as well as a company that provides each and every employee with opportunities to improve his/her capabilities, and grows together with employees. We believe that autonomous growth by every employee will lead to sustainable growth for our Group. In order to build a new business model and adapt to a changing business environment, we provide all employees with opportunities to

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improve their capabilities and are developing human resources who can steadily execute on growth strategies. Our specific initiatives are outlined below.

• 3-yearprogram for managerial-track new employees and hierarchical position-specific education
• Programs to develop next generation of management (Officers' Coaching School, training to develop the next generation of executive managers, etc.)
• Self-developmentsupport and recommendations
• Initiatives to encourage autonomous growth (one-on-one meetings between superiors/subordinates, etc.)
• Career design training

In addition, based on the approach of "respect for all individuals" set forth in our Corporate Philosophy, we respect the diverse values of all employees and are working to foster a workplace environment in which all employees can fully demonstrate their abilities. As the nature of the duties performed by each division and workplace in the SMM Group often differs, we tailor our initiatives on an individual workplace basis, with each workplace identifying its current work style and making improvements accordingly. As a result of these activities, average total annual actual working hours have been steadily decreasing, and we will continue our efforts to reduce the number of employees working long hours.

Furthermore, as part of our efforts to create workplaces where diverse human resources can play vibrant and active roles, we conduct Group-wide human rights training, programs aimed at promoting understanding of LGBT issues, and training for new employees and newly appointed site managers to promote a deeper understanding of the need for promotion of diversity, and we confirm the effectiveness of these programs through questionnaires and employee engagement surveys following their implementation. In April 2021 we established a new "Work-Life Support Desk" which handles consultations and helps resolve issues in a wide range of areas including human rights and harassment, workplace relations, balancing work with childcare and nursing care, and career counseling. 18 consultations were responded to in fiscal 2022.

For information on our related approaches, policies and initiatives, refer to the Company's Sustainability Report below.

URL:https://www.smm.co.jp/en/sustainability/library/sustainability_report/

Principle 2.6: Roles of corporate pension funds as asset owners

The Company has established the Asset Management Committee and a structure to ensure appropriate investment and management of corporate pensions. The committee advises the president, who has responsibility for pension management, in such areas as the

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formulation and revision of basic management policy and the strategic asset mix, and the evaluation of asset managers. The committee also endeavors to enhance the expertise of secretariat personnel by such means as having them participate in pension-related seminars.

Principle 3.1: Full disclosure

1. Business principles and strategies

The SMM Group Corporate Philosophy and its source, Sumitomo Business Spirit, the SMM Group Management Vision, which delineates what the Company aims to become on the basis of the corporate philosophy, and the SMM Group Code of Conduct, which sets out the standards of conduct required of officers and employees to fulfill its corporate philosophy, are displayed publicly on the Company's website at the addresses below.

SMM Group Corporate Philosophy

URL: https://www.smm.co.jp/en/corp_info/philosophy/principle/

The Sumitomo Business Philosophy

URL: https://www.smm.co.jp/en/corp_info/philosophy/sumitomo/

SMM Group Management Vision

URL: https://www.smm.co.jp/en/corp_info/philosophy/vision/

SMM Group Code of Conduct

URL: https://www.smm.co.jp/en/corp_info/philosophy/conduct/

Also, the 2021 3-Year Business Plan, which covers the period from fiscal 2022 through fiscal 2024, is displayed publicly on the Company's website at the address below.

URL: https://www.smm.co.jp/en/ir/management/plan/

1. Basic views and basic policy on corporate governance

The basic policy on corporate governance, including the basic philosophy on corporate governance, has been compiled as the "Corporate Governance Basic Policy" and is displayed publicly on the Company's website at the address below.

URL: https://www.smm.co.jp/en/ir/management/governance/

1. Basic policies and procedures for the remuneration of senior management and directors

The policy regarding the determination of remuneration, etc. of individual directors (including directors who concurrently serve as Executive Officers) is as follows.

1. Basic Policy

Remuneration for Directors of the Company is linked to the business performance of the Company, and designed to motivate Directors to achieve mid to long-term goals, based on the business structure of the Company, so that it functions as a sufficient incentive to contribute to sustainable growth, increase the corporate value of the Group over the mid to long term, and to strengthen and maintain the management base. When determining the remuneration of individual Directors, the amount of remuneration is calculated using a predetermined formula in order to ensure fairness,

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and the Company maintains a basic policy of setting remuneration at an appropriate level based on the responsibilities of each Director.

Specifically, the remuneration for Directors (excluding a Chairman and Director and Outside Directors) shall consist of basic remuneration and bonuses. Basic remuneration shall consist of fixed remuneration (remuneration which is neither performance-based nor non-monetary) and performance-based remuneration, etc., while bonuses shall be performance-based remuneration, etc. A Chairman and Director and Outside Directors shall receive only basic remuneration and no bonuses. Basic remuneration is calculated on an annual basis for each individual and paid each month in monthly installments, while bonuses are paid once annually after approval is obtained at the ordinary general meeting of shareholders.

2. Basic Remuneration

1. Policy on determination of remuneration, etc. for the President and

Representative Director

Basic remuneration for the President and Representative Director is composed of fixed remuneration and performance-based remuneration.

The amount of fixed remuneration will be a basic amount for calculation set by referencing the remuneration trends of domestic companies in the same industry and domestic manufacturing companies of the same size as the Company ("Basic Amount for Calculation of Fixed Remuneration") multiplied by a predetermined position-specific coefficient.

As an evaluation of corporate management performance, performance-based remuneration, etc., is paid as an amount calculated in accordance with the degree of achievement of targets for net income attributable to owners of the parent and safety during the previous fiscal year.

1. Policy on determination of remuneration, etc. for a Chairman and

Representative Director

Basic remuneration for a Chairman and Representative Director is composed of fixed remuneration and performance-based remuneration.

The amount of fixed remuneration will be the Basic Amount for Calculation of Fixed Remuneration multiplied by a predetermined position-specific coefficient.

As an evaluation of corporate management performance, performance-based remuneration, etc., is paid as an amount calculated in accordance with the degree of achievement of a target for net income attributable to owners of the parent during the previous fiscal year.

1. Policy on determination of remuneration, etc. for a Chairman and Director and Outside Directors

Basic remuneration for a Chairman and Director and Outside Directors is composed of fixed remuneration.

The amount of fixed remuneration will be the Basic Amount for Calculation of Fixed Remuneration multiplied by a predetermined position-specific coefficient.

In the event that the Chairman and Director or an Outside Director concurrently

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serves as the chairperson of the Board of Directors, a predetermined amount of fixed remuneration shall be paid in addition to the basic remuneration above.

1. Policy on determination of remuneration, etc. for Directors who concurrently

serve as Executive Officers with special titles (Executive Vice President, Senior Managing Executive Officers, Managing Executive Officers)

Basic remuneration for directors who concurrently serve as executive officers with special titles is composed of fixed remuneration and performance-based remuneration.

The amount of fixed remuneration will be the Basic Amount for Calculation of Fixed Remuneration multiplied by a predetermined position-specific coefficient.

The amount to be paid as a performance-based remuneration will be determined taking into account job responsibilities, departmental performance, and individual performance evaluations.

Representative Directors who concurrently serve as Vice President or Senior Managing Executive Officers and Directors who concurrently serve as Managing Executive Officers shall be paid fixed remuneration predetermined in consideration of their positions and responsibilities in addition to the basic remuneration above. The amount of such fixed remuneration shall not exceed 10% of basic remuneration.

1. Policy on determination of remuneration, etc., for Directors who concurrently serve as Executive Officers (excluding Executive Officers with special titles)

Basic remuneration for Directors who concurrently serve as Executive Officers shall be composed entirely of fixed remuneration predetermined in consideration of their positions and responsibilities and other factors. However, the basic remuneration for their role as an executive officer shall be paid separately as an employee salary.

3. Bonuses

Bonuses for Directors shall be paid to Directors, excluding a Chairman and Director and Outside Directors, as a reward for their performance in the corresponding fiscal year, and shall be proposed and deliberated at the ordinary general meeting of shareholders for the corresponding fiscal year in the case that net income attributable to owners of the parent exceeds a certain amount.

The bonus amount for the President and Representative Director, Chairman of the Board and Representative Director, and Directors who concurrently serve as Executive Officers shall be calculated by multiplying the base amount, which is determined by the degree of achievement of the target for net income attributable to owners of the parent for the corresponding fiscal year, by a position-specific coefficient, etc..

The specific amount paid to each individual will be determined by reflecting the individual performance evaluation of each Director.

4. Policy on determination of ratio of fixed remuneration and performance-based

remuneration, etc.

The ratio of fixed remuneration and performance-based remuneration, etc. for each director is determined according to the calculation method for each of the above remuneration types. However, the ratio of remuneration is determined in a manner that provides an appropriate incentive to increase corporate value based on

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