Corporate Philosophy
In this drastically changing global business environment, Sumitomo Metal
Mining Co., Ltd. (SMM) constantly reflects back on its beginnings as thefirst Sumitomo group company and intends to reaffirm Sumitomo Business
Principles, which have been in existence for over 300 years. Backed by
Sumitomo Metal Mining Group’s Mission, we will apply all of our employees’ efforts for elevating and strengthening our business structure.

Sumitomo Business Principles
Article 1. Sumitomo shall conduct its business with integrity andsound management, placing prime importance on trust andreliability as the means toward pursuing the sure flourishing of its business operations.

Article 2. Sumitomo shall manage its business operations with positive foresight and flexibility to cope effectively with changing times. At no time shall the company pursue easy gains
or act imprudently.

Sumitomo Metal Mining Group’s Mission
Having Sumitomo Business Principles as its business basics and environmental preservation and safety assurance as its operating basics, SMM
shall aim to maximize its corporate value by establishing a global networkand providing high-quality materials such as non-ferrous metals and electronics materials.

Consolidated Financial Highlights
To Our Shareholders
Special Feature
Progress of Corporate Reform Plan
Mid-term Management Plan (Fiscal Year 2002-2003)
Investment Plan — Five Main Projects
Review of Operations
At a Glance
Mineral Resources and Metallurgy
Electronics Materials and Advanced Materials
Environmental Business
Financial Section
Management’s Discussion and Analysis
Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
SMM Group
Corporate Data/Investor Information
Corporate Officers

1
2
5
6
7
8
9
14
18
19
24
26
28
29
30
31
46
47
48
49

Consolidated Financial Highlights
SUMITOMO METAL MINING CO., LTD.

ofMillions of yen Thousands
U.S. dollars
2002

Years ended March 31, 2002, 2001 and 2000

For the Year :Net sales
Mineral resources
Metallurgy
Electronics & advanced materials
Construction materials & housing
OthersOperating income
Mineral resources
Metallurgy
Electronics & advanced materials
Construction materials & housing
Others
Net income (loss)
Net income (loss) per share (¥/$)
Return on assets (%)
Return on average shareholders’ equity (%)

2001

2000

2002

¥ 330,194 ¥ 375,352 ¥ 360,299 $2,478,004
23,292
23,613
26,326
174,800
197,183
204,827
195,760 1,479,798
110,985
146,333
130,491
832,908
21,61624,88026,987
162,221
19,986
15,074
20,399149,988
1,147
26,930
8,990
8,608
838
2,360
1,268
6,290
3,533
15,421
6,130
26,515(4,388)9,959
1,548(32,931)(266)(1,997)(304)(1,144)
1,826
13,703334
1,079(6,611)
15,103
4,740(49,614)(11.56)(0.09)
26.41
8.29
—
2.81
0.87
—
6.39
2.05

At Year End :Total assets
Shareholders’ equity
Equity ratio (%)

518,756
236,31345.6

530,080
237,47044.8

544,121 3,893,103
235,231 1,773,456
43.2

Notes: 1. U.S. dollar figures are translated, for convenience only, at the rate of ¥133.25=U.S. $1, the effective rate of exchange prevailing on March 31, 2002.
2. Net sales and operating income figures in each segment (Mineral resources, Metallurgy, Electronics & advanced materials, Construction materials & housing, Others) include inter-segment
transactions.
3. The computation of net income (loss) per share is based on the weighted average number of shares of common stock issued during each fiscal year.

Net Sales

Oparating Income

Net Income (Loss)

Billionsof yenBillionsof yenBillionsof yen

500

30

20
15

400
10
20
300

5
0

200
10

-5
100
-10
0

'98

'99

'00

'01

'02

0

'98

'99

'00

'01

'02

-15

'98

'99

'00

'01

'02

Consolidated Financial Highlights

1

To Our Shareholders

Koichi Fukushima, President

In fiscal year 2002 ending March 2003, Sumitomo
Metal Mining Co., Ltd. (“SMM”), initiated its “Mid-termsales environment.
In this business environment, both our net sales and oper-

Management Plan,” aiming to improve its earning

ating income declined in fiscal year 2001. Net sales

power by achieving a strong and globally competitive

decreased ¥45.2 billion (12.0%) from the previous fiscal

corporate structure for the SMM Group. SMM devotes

year, to ¥330.2 billion, mainly due to a decline in non-fer-

all of its efforts to attaining the Plan’s consolidated

rous metal prices for nickel and copper, lower sales volume

financial targets—maintaining an equity ratio exceedingin the Metallurgy segment and a decrease in sales for most

40% and improving ROA (Return on Assets) to 3% orproducts in the Electronics Materials and Advanced

better—by fiscal year 2003.

Materials segment—a result of the worldwide IT recession.
Operating income in fiscal year 2001 fell sharply, a ¥25.8

Consolidated Results for Fiscal Year 2001

billion (95.7%) decrease over the previous fiscal year, toIn fiscal year 2001 (from April 2001 through March 2002),¥1.1 billion. Ordinary loss was ¥1.5 billion, a decrease of

the non-ferrous metals industry experienced a slump due to¥26.6 billion from the previous fiscal year, due to decreased

the slowdown in the U.S. economy, resulting in an increase

equity in earnings of unconsolidated subsidiaries and affili-

in inventories. In the overseas markets, the annual average

ated companies.

price of major non-ferrous metals, with the exception of

As a result, the SMM Group posted a net loss of ¥6.6 bil-gold, declined from the previous fiscal year, although prices

lion, a decline of ¥21.7 billion from the previous fiscal year,

turned upward in the second half of the year. Meanwhile,

partly due to a decrease in gains on the sale of investment

the yen remained relatively weak throughout the year insecurities. This was despite a decrease in extraordinary losses.

spite of temporary revivals. In the electronics-related indus-

In Mineral Resources segment, net sales fell slightly bytries, the worldwide IT recession negatively influenced the¥0.3 billion (1.4%), to ¥23.3 billion, and operating income2

To Our Shareholders

decreased significantly 64.5%, to ¥0.8 billion. This was dueof 3%. We recognize that it is vital for us to continue vigor-

to a decline in the profits of Sumitomo Metal Mining

ously promoting structural reform to gain a strong and glob-

Arizona Inc. (Arizona, USA), which had been adversely

ally competitive corporate structure that will enable us to beaffected by the decrease in copper market prices overseas,

profitable even in harsh business environments.

as well as the rise in electric power prices in the first half of

In February 2002, we created a “Mid-term Management

last year. Higher profits at the Hishikari Mine (Kagoshima)Plan” under the slogan “New Challenges with Wisdom,

were not sufficient to offset this decrease.

Energy and Speed,” and a management vision stating the

In the Metallurgy segment, net sales stood at ¥197 billion,

goal of becoming “an innovative and vital company creating

down ¥7.6 billion (3.7%) over the previous fiscal year.

corporate value on a global scale.” This vision reflects ourOperating income decreased sharply 77.1%, to ¥3.5 billion,

goal of establishing a stronger corporate structure anddue to unsatisfactory results in the copper and nickel busi-

improving earning power.

nesses, and at Sumitomo Metal Mining Brass & Copper Co.,
Ltd. (Tokyo).
In the Electronics Materials and Advanced Materials seg-

Under the Plan, we are accelerating the “select and focus”
strategy within the core businesses. In the Mineral
Resources and Metallurgy segment, we focus on nickel, pre-ment, net sales decreased 24.2% over the previous fiscal

cious metals and copper, and in the Electronic Materials andyear to ¥111 billion, while operating income also fell ¥14.3

Advanced Materials segment, we focus on areas closely

billion, resulting in an operating loss of ¥4.4 billion. This

related to raw materials or materials, with a view to enhanc-

was due to a decrease in sales of most products, with theing our earning power.

exception of copper-clad polyimide film and nickel hydrox-

We are also promoting our environmental business, whichide. This fall in sales was a result of the stagnation in thehas a great deal of potential for growth, by making use of

global semiconductor market and a slump in the opticalthe expertise we have developed in our mineral resources

communication market that was brought on by the econom-

and metallurgy businesses.

ic downturn in the U.S.

As immediate measures to enhance profitability, we will
implement cost structure reforms while focusing on three

Mid-term Management Plan—New Challenges

aspects: introduction of a new management information sys-with Wisdom, Energy and Speedtem and enhancement of an administrative department effi-

Based on the Corporate Reform Plan created in April 2000,

ciency project; a cost reduction project; and a project to

we have been implementing management reforms support-

encourage innovation in procurement.

ed by the concepts of “Reconfirmation and ThoroughWe are also endeavoring to ensure that the new systems

Execution of the Corporate Philosophy,” “Reinforcement of

introduced under the Corporate Reform Plan are successful-

Corporate Organization” and “Reform of Corporate

ly established. By introducing an Executive Officer system in

Culture.” Among the many measures we have implemented,

June 2001, we separated the decision-making and superviso-

we particularly concentrated our management resources onry functions from the execution function. We are active in

two core businesses—Mineral Resources and Metallurgy,

reinforcing both functions and in speeding up our decision-

and Electronics Materials and Advanced Materials—andmaking process by delegating authority to a significant

reduced the number of affiliated companies. However,extent.

affected by unexpectedly rapid environmental changes infiscal year 2001, we were not able to achieve our ROA target

Also, we are introducing a new performance evaluation
system and performance-based reward system in a phased

To Our Shareholders

3manner beginning with top management. These systems

direct investment in overseas mines to achieve stable supply

will improve employee motivation and further clarify

of cost competitive products. Based on this perspective, we

responsibility and accountability. We began operating a risk

are actively engaged in new mine development and refining

management system in August 2001, focusing on legal com-technology development.

pliance and other related matters. As of the end of July

To finance these investments, we plan to utilize borrow-

2002, 36 offices among our 50 principal domestic offices andings from government financial institutions and project

affiliated companies have already acquired certification for

finance. In addition, we will sell real estate holdings andthe ISO14001 environment management system. The num-marketable securities, as well as securitize trade receivables tober of offices and affiliated companies that have acquired

further increase asset efficiency.

this certification is steadily increasing, bringing us closer toour goal of Group-wide introduction.

In fiscal year 2002, on a book value basis, we intend tosell real estate and marketable securities amounting to ¥11billion and securitize trade receivables amounting to ¥5 bil-Investment Planlion. In fiscal year 2003, we plan to sell real estate and mar-To ensure future strong earning power, we will make active

ketable securities amounting to ¥15 billion.

investments in fiscal year 2002, in spite of the Company’s

The outlook of the Japanese economy remains ambigu-

severe financial results. We plan to invest ¥34.7 billion—anous, heavily influenced by the instability of the U.S. econo-

increase of 37% over the previous year on a consolidated

my and the exchange rate. We predict that the businessbasis—intensively in our core businesses. This investment

environment will continue to be severe in fiscal year 2002.

will consist of ¥7.9 billion—an increase of 182% over the

In response, we will cope with such severe circumstances

previous year—to Mineral Resources; ¥17.4 billion—anby thoroughly implementing our Mid-term Management

increase of 91%—to Metallurgy; and ¥5.7 billion—aPlan and striving to achieve ROA over 3%, while maintain-

decrease of 49%—to Electronics Materials and Advanced

ing an equity ratio exceeding 40%. Also, by realizing profits

Materials. Having carefully examined profitability andfrom projects currently in progress, we aim to achieve high-investment efficiency, we have selected projects such as theer level of financial targets in fiscal year 2005 or later, there-

Copper Production Expansion Project (an investment of ¥2.6

by maximizing our corporate value to meet shareholders’billion), the Coral Bay Nickel Project (¥3.9 billion), the Liese

expectations. In the aftermath of the critical accident thatGold Deposit of the Pogo Project (¥2.4 billion) and the Plant

occurred in 1999 at the Tokai Plant of JCO Co., Ltd.—a sub-Construction for New Processes in Precious Metals Refining

sidiary of SMM located in Ibaraki—we continue to lend sup-(¥0.7 billion).

port to JCO to allow it to effectively address safety manage-In addition, in fiscal year 2003 we intend to continue
large-scale investments in Mineral Resources andMetallurgy, such as exploration and the New Nickel Oxide

ment, compensation, and other issues.
We very much appreciate your understanding and support
for our management policies.

Ore Project. We will invest a total of ¥102 billion during thetwo-year period from fiscal year 2002 through 2003.

September 2002

Regrouping of the metal mining companies is progressing
worldwide, resulting in a situation in which a few companies dominate the market. In this environment, it is criticalfor us to secure ore provided by our own mines through4

To Our Shareholders

Koichi Fukushima
President

Special Feature:

Progress of Corporate Reform Plan
Based on the Corporate Reform Plan created in April 2000,
SMM has been implementing management reforms supportedby the concepts of “Reconfirmation and Thorough Executionof the Corporate Philosophy,” “Reinforcement of Corporate
Organization” and “Reform of Corporate Culture.”

1. Reconfirmation and Thorough Execution of the
Corporate Philosophy
To ensure safety management and legal compliance, SMM is
promoting the introduction of the ISO14001 environment management system into the entire Group. By March 2003, SMM
aims to acquire certification for all Group divisions; the number
of offices that have acquired the certification is steadily increasing. As of the end of July 2002, 36 offices (30 domestic and 6
overseas) among our 50 principal domestic offices and affiliatedcompanies have already acquired the certification.

3) Consolidated Financial Targets
While devising the Corporate Reform Plan, SMM also established the following numerical targets: to maintain an equity
ratio of 40% or better and to improve ROA to 3% or better infiscal year 2001 and to 5% or better in fiscal year 2003.
In fiscal year 2001, although we maintained an equity ratio
exceeding 40%, we were not able to achieve our ROA target.
We set the ROA target again in the “Mid-term Management
Plan,” established in February 2002, and continue to strive toreach this target.
4) Establishment of Risk Management
In September 2001, we started operating a risk management
system. To develop the system, we clarified approximately
4,000 risks and compiled a database. We continue to maintain and improve this system to ensure complete risk management and thorough legal compliance.

2. Reinforcement of Corporate Organization
1) Reorganization
SMM has been promoting reorganization and a “select andfocus” strategy to reinforce its corporate structure. The core
concept is to allocate management resources intensively to
its two core businesses—the mineral resources and metallurgy business and electronics materials and advanced materials
business—and to streamline non-core businesses in which
SMM does not have a competitive advantage. We havealready decided to reduce the number of affiliated companies
from 94 to 68 and are committed to fulfilling this objective.
2) Strategy by Business Segment

Mineral Resources andMetallurgy

Electronics Materials

Advanced Materials•

Promote Liese Gold Deposit of the Pogo Project, aiming tostart operations in 2004 (already in progress)•

Promote Coral Bay Nickel Project to ensure a stablesupply of nickel resources (already in progress)•

Expand production capacity of Toyo Smelter & Refinery toachieve 450,000 tons of annual copper production(already in progress)•

Expand production capacity of the Jinglong Copper Co., Ltd.,in China to achieve 150,000 tons of annual copper production•

Expand production capacity of paste•

Expand production capacity of bonding wire
(already in progress)•

Expand production capacity of nickel powder•

Expand production capacity of copper-clad polyimide films

3. Reform of Corporate Culture
To respond to rapid changes in the business environment, wehave been promoting reform of corporate culture to ensure clarified accountability, quick decision-making and a clear-cut
award and disciplinary code.
1) Implementation of an Executive Officer System
In June 2001, we introduced an Executive Officer system. By
separating the decision-making and supervisory functions
from the execution function, SMM improved and reinforced
both functions, and achieved significant delegation of authority. Through these measures, we aim to speed up our decision-making process.
2) Reinforcement of Strategic Meetings
We reinforced the role of strategic meetings. We are taking
advantage of in-depth discussions among meeting participants to improve strategic planning.
3) Remuneration System More Linked to Performance
In accordance with the introduction of an Executive Officer
system that clarifies the range of responsibility, we havebeen introducing a new performance evaluation system andperformance-based reward system since July 2001 to further
clarify accountability, in a phased manner beginning with
top management. By linking performance with evaluation,
we can improve employee motivation significantly. In fiscal
year 2001, the first year when these systems were in force,
they were applied to upper officers, followed by division
heads and presidents of subsidiaries. We will continue toextend these systems further.

Special Feature5

Special Feature:

Mid-term Management Plan (Fiscal Year 2002-2003)
Our “Mid-term Management Plan,” established in February
2002, is designed to improve earning power by forming a strong
corporate structure. To be specific, we promote Business
Structure Reform by further implementing a “select and focus”
strategy within the core businesses—Mineral Resources andMetallurgy, and Electronics Materials and Advanced Materials—
as well as Cost Structure Reform, seeking to maintain over 40%
of equity ratio and achieve over 3% of ROA in fiscal year 2003,
the final year of the Plan.

Business Structure Reform
In Mineral Resources and Metallurgy, we focus on nickel, precious
metals and copper. We concentrate our management resources onfive main projects (see the next page), including the Coral Bay
Nickel Project in the Philippines and the Liese Gold Deposit of the
Pogo Project, with a view to enhancing our earning power andexpanding our market share of copper and other metals in thegrowing China market.
In Electronic Materials and Advanced Materials, we focus onareas closely related to raw materials or materials, such as nickel
paste and bonding wire, in which we have a competitive edge.
In the zinc operation, we jointly established MS Zinc Co., Ltd.
(Tokyo), with Mitsui Mining & Smelting Co., Ltd., in July 2002, in
pursuit of stronger global competitiveness with our zinc business.
In April 2002, we spun off the IC packaging materials business,
including lead frame, and established Sumitomo Metal Mining
Package Materials Co., Ltd. (Tokyo), enabling the new company
to control all domestic and overseas businesses and to make thebest use of existing networks.
In addition, we intend to reduce affiliated companies to lessthan 60 by the end of fiscal year 2003 as part of our “select andfocus” strategy.

management information system to promote standardized andefficient operations and shared information. Also, we target cost
reductions of approximately ¥1 billion annually by reviewing various systems and customs, and approximately ¥5 billion annuallyby reviewing materials purchased and procurement methods. As
for personnel reduction, we have already reduced approximately
800 employees from Group companies. We plan to further
reduce 200 employees from SMM and 300 from Group companies, as well as introduce outsourcing. We will also cut down on
remuneration for directors and executive officers by 20 to 30%.
Through these measures, we seek to achieve cost reductions
amounting to ¥4 billion in fiscal year 2002 and ¥10 billion in fiscal year 2003.
Summary of Mid-term Management Plan
Business Structure Reform
Core Business• Mineral Resources and Metallurgy, Electronic Materials and Advanced Materials,
Environmental Business
Alliance• Zinc operation (with Mitsui Mining & Smelting Co., Ltd.)
Reform of Organization• Streamline Electronics Division• Spin off IC packaging materials business from Electronics Division
Cost Structure Reform—Three Projects etc.
Management Information System and Administrative Department Efficiency Project• Reduce administrative department costs by 30%
Cost Reduction Project• Reduce approximately ¥1 billion annually
Procurement Innovation Project• Reduce approximately ¥5 billion annually

Cost Structure Reform

Personnel reduction

We aim to reduce administrative department costs of the SMM
Group by 30% in and after fiscal year 2004 by introducing a new

Cut down on remuneration for directors and executive officers

Operating Income, Net Income and ROA

Total Assets, Shareholders’ Equity and Equity Ratio

Billionsof yen%Billionsof yen

30

4

600

60

15

2
400

40

200

20

Net income

ROA

0

0

-15

-2

-30

6

Operating income'98

Special Feature

'99

'00

'01

'02

-4

0

Total assets'98

Shareholders’ equity

'99

'00

Equity ratio

'01

'02

%

0

Special Feature:

Investment Plan—Five Main Projects
Based on our “Mid-term Management Plan,” we plan to invest¥102 billion in total mainly in our Mineral Resources andMetallurgy segments during a two-year period spanning fiscal
year 2002 and 2003. In particular, ¥45 billion in investments—¥16 billion in the Mineral Resources and ¥29 billion in the
Metallurgy—are focused on the following five main projects.

securing future material for nickel production and establishinglaterite processing technology through this project, we aim totake an initiative in the global nickel refining business. Total
investment of the project amounts to approximately US$170
million (¥21 billion), and we plan to invest ¥9.9 billion during
the two-year period.

Investment Plan in Fiscal Year 2002 and 2003

New Nickel Oxide Ore Project (Metallurgy)

Mineral resources
Metallurgy
Electronics & advanced materials
OthersTotal¥ 21 billion
51 billion
20 billion
10 billion¥102 billion

Liese Gold Deposit of the Pogo Project(Mineral Resources)
The Liese Deposit of the Pogo project in Alaska, USA, is a joint
venture with Teck Cominco of Canada and SC Minerals
America (a U.S. subsidiary of Sumitomo Corporation). Annual
gold production is expected to be approximately 12 tons. SMM
plans to invest ¥7 billion in the two-year period from fiscal year
2002 through 2003. Currently, the project is in the process ofacquiring environmental certification.

We are in negotiation with Inco in Canada, a world-class nickel
manufacturer, to participate in the Goro Project in New
Caledonia. This large-scale project receives worldwide attention
with its HPAL (High Pressure Acid Leach) process. Total investment amounts to approximately US$1.4 billion (¥175 billion).
We have been negotiating for 25% capital participation withother partners for several years. We have developed a cooperative relationship with Inco, including capital participation in
P.T. Inco (Indonesia).
Through the Coral Bay Nickel Project, we aim to achieve stable supply to meet an expected increase in demand fromdomestic metal alloy manufacturers. In addition to this project,
we seek to establish a stable supply of stainless steel materials
to meet not only domestic but also overseas demand—especially in Southeast Asia, by achieving participation in the Goro
Project.

Exploration (Mineral Resources)
To ensure stable supply of copper concentrates and meet annual copper production capacity of 450,000 tons, it is vital for us
to secure concentrates provided by our own mines throughdirect investments in overseas mines. We plan to invest ¥9.1
billion during the two-year period in new mine development,such as the Tropico Copper–Platinum Group Metal Project inSinaloa, Mexico. The exploration team of SMM continues topursue global exploration opportunities.

Copper Production Expansion (Metallurgy)
We plan to invest ¥11 billion during the two-year period toincrease annual copper production capacity at the Toyo Smelter& Refinery from the current 270,000 tons to 450,000 tons.
By enhancing cost competitiveness through economies of scale,
we focus on expanding our share in Asian markets, such as the
rapidly growing China market. At the Toyo Smelter & Refinery,
we have already acquired enough space to enable us to expand
capacity effectively. We aim to achieve 300,000 tons of annual
production capacity during fiscal year 2003. The production
capacity then will be increased to 450,000 tons in response tolater growth in demand.

Coral Bay Nickel Project (Metallurgy)
In the Coral Bay Nickel Project, we plan to construct a plant in
the southern part of Palawan Island, the Philippines, and produce an intermediary product of the nickel refining processfrom laterite low-grade nickel oxide ore.
We maintain leadership of the project with a 54% share. By

Liese Gold Deposit of the Pogo ProjectSpecial Feature

7

Review of Operations:

At a Glance
Net Sales by Segment (Consolidated)%

5.0

Mineral resources

4.6

Metallurgy

6.1

Electronics &advanced materials
Construction materials &housing
OthersNet Sales: ¥330 Billion

32.5

51.8
Note: Proportion is calculated by
net sales of each segment
which does not include
inter-segment transactions.

Operating Income and Net Cash Provided by Operating Activities

Capital Expenditures (left) and Depreciation (right)

Billionsof yenBillionsof yenBillionsof yen60

35

Mineral resources

Metallurgy

Construction materials & housing

30

Electronics & advanced materials
OthersNet cash provided by operating activities (right axis)

Mineral resources

Metallurgy

Construction materials & housing

Electronics & advanced materials
Others

30
20

40

10

20

25
20
15

0

10

0

5
-10

'98

'99

'00

'01

'02

0

-20

Note: Operating income of Advanced Materials prior to fiscal year ended March 1999 is includedin Metallugy.

'98

'99

'00

'01

'02

Note: Capital expenditures and depreciation of Advanced Materials prior to fiscal year ended
March 1999 is included in Metallugy.

Business Profile
Business Segment

Principal Activities

Main Products

・Exploration, development, production, and sales of non-ferrous metal
resources, domestically and overseas

Gold and silver ore, Copper concentrates

Mineral Resources

・Geological consulting utilizing mineral resource developing techniques
Metallurgy

Electronics Materials

Advanced Materials

8

Review of Operations

・Refining and sales of base metals such as copper, nickel, and precious
metals

Copper, Nickel, Zinc, Lead, Precious metals such as gold, silver, platinum,etc.

・Manufacturing, processing and sales of IC packaging materials,
electronics materials, crystal materials, etc.

Lead frame, TAB tape, Bonding wire, Nickel paste, Crystal material (GaP:
Gallium Phosphide, LN: Lithium Niobate, LT: Lithium Tantalate),
Printed Wiring Board (PWB), Optical components (Faraday Rotator, Optical
Isolator and High frequency device).

・Manufacturing and sales of optical communication materials andcomponents, devices, connectors, switches, photo conductive cells,
silicon photodiode, TV frames, etc.
・Manufacturing, processing, and sales of metal powders (nickel, palladium),
circuit board materials, materials for batteries, materials for magnets,
lubricant, etc.

Nickel powder, Copper-clad polyimide film, Materials for rechargeable
batteries (nickel hydroxide, lithium cobaltate), Rare earth metal bonded
magnets

Review of Operations:

Mineral Resources and Metallurgy
Results of Mineral Resources Segment andMetallurgy Segment in Fiscal Year 2001
The Mineral Resources segment posted net sales of ¥23.3 billion, the same level as the previous fiscal year, and operating
income of ¥0.8 billion, a 64.5% decrease from the previous fiscal year. This was mainly due to the decline in overseas copper
prices. The annual average copper price fell from ¢82.3/lb in
calendar 2000 to ¢71.6/lb in calendar 2001.
The Metallurgy segment posted net sales of ¥197.2 billion, thesame level as the previous fiscal year, and operating income of¥3.5 billion, a 77.1% decrease from the previous year. This was
mainly due to the decline in the sales volume of nickel, which
had benefited from favorable demand for use as electronics
material in the previous fiscal year. This sales decline was dueto the severe slowdown in IT-related demand and the fall ofnickel’s market price overseas.

Net Sales by Product (Non-consolidated)
Billions Mineral Resourcesof yen250

The Mineral Resources and Metallurgy segments have consistently been our core business, accounting for 60% of entire
sales. Regrouping of the metal mining companies is progressing
worldwide, resulting in oligopolistic situation of the market. In
this environment, to achieve stable supply of cost competitive
products, it is vital for us to secure ore provided by our own
mines through direct investments in overseas mines.
In the “Mid-term Management Plan,” we position nickel, precious metal and copper as core businesses and aim to further
strengthen an integrated production system encompassing
everything from mineral resources development to refining on a
global basis and enhance competitiveness worldwide.
Core BusinessIn the middle to long term, nickel demand is expected to
expand steadily for use in stainless steel and electronics materials. SMM aims to further reinforce its nickel business as a comprehensive nickel manufacturer providing various nickel products, including electrolytic nickel and ferro-nickel. To ensurestable supply of nickel resources, we are engaged in the Coral
Bay Nickel Project (former Rio Tuba Project) in the Philippines.
Although domestic copper market is regarded as having
matured, we see a growing demand for copper in the Asianmarkets. Among the many companies making inroads in the
China market, SMM has the competitive edge with its almost
50% of ore supplied from its own mines, which ensures stableprocurement, and its accumulated business experience in
China. In copper production, SMM plans to raise production
capacity at the Toyo Smelter & Refinery located in Ehime, toachieve a capacity of 450,000 tons per year. The Jinglong
Copper Co., Ltd. (China), in which SMM is investing, also plans
to increase in production capacity from the current 100,000
tons per year to 150,000 tons, and to 300,000 tons in the longterm. In mineral exploration, SMM decided to participate in the
Tropico Copper – Platinum Group Metal Project in Sinaloa,
Mexico, in October 2001.

NickelCopperGold

Zinc

Others

200

150

100

50

0

Focus on Nickel, Precious Metals and Copper toEnhance Profitability

Metallurgy

'98

'99

'00

'01

'02

In precious metals, SMM continues its stable operation of
the Hishikari Mine, one of the world highest gold grade mine.
SMM also promotes the Liese Gold Deposit of the Pogo Projectin Alaska, USA, aiming to start operation in 2004. Furthermore,
SMM plans to introduce a new process for the refining of precious metals in fiscal year 2003 to enhance efficiency. This newprocess enables it to more efficiently collect gold, silver, platinum, palladium and rhodium, as well as rare/precious metals
such as iridium and ruthenium that are normally difficult to be
recovered through conventional processes.
Alliance
In zinc operation, SMM established MS Zinc Co., Ltd. (Tokyo),with Mitsui Mining & Smelting Co., Ltd., in July 2002. Throughvarious joint operations at MS Zinc, ranging from procurement
to product sales, technology development and mineral
resources development, we strengthen the global competitiveness of our zinc business.
Reform of Organization
The Metallurgy segment reformed its organization in October
2001 and introduced a new system reorganizing sectors by
product line—“Copper and Precious Metals,” “Nickel” and“Zinc and Lead.” This new system enables us to clarify authority and responsibility in each sector and to reinforce organization to further improve cost competitiveness of each product.

Review of Operations

9

SMM’s Worldwide Mines and Refineries
Mine/ SMM's interest (%)
Refinery / Production capacity per year (ton)Pogo (Gold – under exploration)/ 51% (currently 85%)

Morenci (Copper) / 12%

Jinglong Copper Co., Ltd.
/ Copper: 150,000ｔons (300,000 tons in future)
Coral Bay (Nickel/Cobalt mixed sulfide – under development)
Soroako(Nickel) / 20.1%
Batu Hijau (Copper, Gold) / 5%
Figesbal (Nickel) / 20.9%
La Candelaria
Northparks (Copper) / 13.3%(Copper) / 16%

Harima Smelter / Zinc: 90,000 tons, Lead : 30,000 tons
Toyo Smelter & Refinery / Copper : 270,000 tons (450,000 tons in future)/ Gold : 36 tons (60 tons in FY 2003), Silver : 300 tons (360 tons in future)
Niihama Nickel Refinery / Nickel : 36,000ｔons (60,000 tons in future)
Shisaka Plant / Zinc oxide : 120,000 tons (processing capacity)
Hyuga Smelting Co., Ltd. / Ferro-nickel : 21,000 tons (24,000 tons in future)
Hishikari Mine Dept. (Gold) / 100%

SMM’s Metal Share and Value by Mine
Thousandsof ton1,200

SMM's Metal Share (left axis)

CopperGold

NickelMillions of
U.S. Dollars

CobaltAppraised Value (right axis)

3,000

1,000

2,500

800

2,000

600

1,500

400

1,000

200

500

0

Morenci

Northparks

La Candelaria

Figesbal
SoroakoPogo
Batu Hijau

Notes : 1. Only the Company’s own mines are covered.
2. SMM's metal share = Ore reserves (ton) x Metal grade x SMM's interest of mine (%)
3. Appraised value = SMM's metal share (ton) x Standard metal price
4. Standard metal price = Gold:290$/toz, Nickel:3.00$/lb, Copper:75¢/lb, Cobalt:7.5$/lb

10 Review of Operations

Coral Bay
Hishikari0Strategy by Metal

NickelIn fiscal year 2001, SMM’s sales of nickel, which showed favorable results in the previous fiscal year, decreased due to a slowdown in IT-related demand and lower prices. However, from a
middle- to long-term perspective, demand for nickel is expected
to expand, because nickel is indispensable for stainless steel
and electronics materials.
SMM is the only domestic manufacturer of electrolytic nickel.
Also, it manufactures ferro-nickel, raw material of stainlesssteel. In our “Mid-term Management Plan,” we aim to expand
production capacity of electrolytic nickel from 36,000 tons per
year to 60,000 tons and ferro-nickel from 21,000 tons to 24,000
tons in the long term, by ensuring stable raw material supply
overseas.
In procurement, SMM has capital participation in P.T. Inco
(Indonesia) and has a long-term matte purchase agreementwith WMC (Australia), to establish a stable supply network fornickel. Furthermore, SMM is promoting the Coral Bay Nickel
Project to ensure stable procurement for the future.

Coral Bay Nickel Project
The Coral Bay Nickel Project employs the HPAL (High Pressure
Acid Leach) method, which produces nickel/cobalt mixed sulfide (MS), an intermediary product in the nickel refining
process, from laterite low-grade nickel oxide ore. The project isplanned to construct processing plant at Rio Tuba in southernpart of Palawan Island, the Philippines, and process10,000 tonsof nickel and 700 tons of cobalt annually. SMM will purchaseall of the MS produced there and refine it to create the final
product at a nickel refinery in Ehime.
To advance the project, in July 2002, SMM concluded a joint
venture agreement to establish Coral Bay Nickel Co., Ltd. in thePhilippines with Mitsui & Co., Ltd., Nissho Iwai Corporation
and Rio Tuba Nickel Mining Corporation (the Philippines).
Also, in July, we acquired the Environmental Compliance

Certificate required to initiate the project from the Philippines
government, and started full-fledged plant construction.
The Coral Bay Nickel Project has great significance for us.
This is a large-scale overseas project in which we can take leadership with our non-ferrous refining operation. By establishinglaterite processing technology, we aim to take initiative in the
global nickel refining business.
Unlike the conventional nickel production using nickel sulfide
ore or high-grade nickel oxide ore (Garnierite), the recently
developed HPAL method enables us to realize low-cost production by using laterite. There is a wide and abundant supply of
laterite in the Philippines, Indonesia, Australia, Africa, andCentral and South America. Successful establishment of laterite
processing technology is the key to securing future material fornickel production.
Total investment of the project amounts to approximately
US$170 million. Operations are planned to last almost 20 years.
By acquiring know-how of the HPAL method through this project, SMM will seek further opportunities to challenge itself withlarger scale projects.
Furthermore, this project is expected to generate demand forsulfuric acid—a by-product of our copper refining process—totaling approximately 260,000 tons per year. This will facilitate
us to reinforce copper production capacity, providing a solid
consumption of its by-product.

Nickel Price (LME)
$/lb

5

4

3

2

0

4

7

10

'01/1

4

7

10

'02/1

4

Review of Operations 11

Copper
Asian countries such as China, Taiwan and South Korea arepromising markets for copper that are likely to generate solid
demand.
In particular, in China, where economic growth calls for rapid
improvement in infrastructure, consumption of copper for use
in electric wire, brass products and other applications is
expanding. However, local smelters in China are unable toenhance production capacity in response to the growing
demand, enlarging the supply-demand gap. Domestic copper
demand in China is expected to grow to approximately 2.5 million tons in ten years, 1.3 million tons of which will be filled byimports. Reflecting this trend, our exports to China have been
expanding, increasing our export ratio from approximately 40%
in fiscal year 2001, to over 50% in fiscal year 2002.
To respond to growing needs for copper in Asian countries,
SMM focuses on expansion of copper production capacity. At
the Toyo Smelter & Refinery in Ehime, we are implementing
phased expansion of its capacity from the current 270,000 tons
per year to 450,000 tons per year in the future. During fiscal
year 2003, we aim to achieve production of 300,000 tons. The
Jinglong Copper Co., Ltd. (China), in which SMM is investing,also plans to achieve production of 150,000 tons per year in fiscal year 2002, and further expand to 300,000 tons in the future.
In January 2002, we decided to reduce our copper production
temporarily by 30,000 tons per year from 270,000 tons per year,
in light of the currently stagnant copper prices and unfavorable
conditions for material procurement due to considerably
reduced production at major copper mines overseas. We areconvinced that, under these circumstances, it is important firstand foremost to seek an upturn in price by reducing production. Meanwhile, we continue to apply our basic strategies toestablish a supply network in Asian markets capable of meeting
expanding demand in the region, including China. We promote
our capacity expansion scheme in the middle- to long-term,

Copper Price (LME)
¢/lb

90

80

70

60

0

4

7

10

12 Review of Operations

'01/1

4

7

10

'02/1

4

flexibly responding to changes in the business environment.
The copper refining process produces large amounts of sulfuric acid as a by-product. The Toyo Smelter & Refinery produces
700,000 tons of sulfuric acid annually. Selling it effectively inJapan and neighboring countries is the key to increasing copper
production.
The Coral Bay Nickel Project, a nickel refining project, is
expected to consume approximately 260,000 tons of sulfuric
acid. In addition, we are endeavoring to attract new customers
for sulfuric acid in Asia. Particularly in China, rapid growth of
the fertilizer industry is expected to absorb the surplus amountof sulfuric acid in Japan within a few years. We are strengthening our sales network by developing transportation that willreach inland China.

Tropico Copper - Platinum Group Metal Project
In September 2001, SMM decided to participate in the copperand precious metals exploration project in the state of Sinaloa,
Mexico, called Tropico Project, in which the Canadian companies Santoy Resources Ltd. and Almaden Minerals Ltd. jointly
hold interest.
SMM acquires 51% of the interest with the commitment tofund totaling US$3 million over three years. Also, the agreement permits SMM to increase its interest up to 70%.

Gold

Zinc

The Hishikari Mine, which is famous for one of the world’s
highest-grade gold, will maintain annual gold production in therange of 7 to 8 tons. The Liese Gold Deposit of the Pogo Projectin Alaska, USA, a joint venture with Teck Cominco of Canada
and SC Minerals America (a U.S. subsidiary of Sumitomo
Corporation) in which SMM holds a majority interest, is expected to start operations within 2004. The Liese deposit, the mainore body at the Pogo, is expected to hold ore reserves of 9.7
million tons, an average gold grade of 18.0g per ton, gold
reserves of 174 tons and gold output of approximately 12 tons
per year. Currently, this project is in the process of acquiring
environmental certification.

New Joint Venture in Zinc Operation

New Process for Precious Metals Refining
Precious metals such as gold, silver and the platinum group arecollected in the copper refining process. In line with expansionof copper production, we need to increase the refining capacityof these precious metals. SMM plans to introduce a newprocess for the refining of precious metals in fiscal year 2003 toenhance both capacity and efficiency. This process was developed by SMM after 20 years of development efforts. Unlike conventional processes in which gold and other valuable metals
are collected at the final stage of the process, our new process
enables us to collect these metals first. This allows us to shorten the collection period for gold from one and a half months to
one week, and thus reduce our production costs, including costof working capital. In addition to gold, silver, platinum, palladium and rhodium, this new process facilitates the collection ofrare/precious metals such as iridium and ruthenium that arenormally difficult to recover in conventional processes. By
introducing this process, our annual refining capacity of gold is
expected to increase from 36 tons to 60 tons, and that of silver
from 300 tons to 360 tons.

Gold Price (COMEX)In January 2002, SMM and the Mitsui Mining & Smelting Co.,
Ltd. agreed to a business alliance that will align their zinc operations, and jointly established MS Zinc Co., Ltd. in July.
The domestic zinc business is faced with severe price competition, since more and more low-priced products are imported
from neighboring countries such as China and South Korea. To
cope with this situation, we decided to merge operations ofboth companies to achieve larger scale of business and maximize cost reduction effects. At the new company, we aim toestablish a solid business structure that will enable us to overcome intense global competition, through wide-ranging cooperation in everything from materials procurement to distribution,
sales, technology development and mineral resources development. We expect ¥1.5 billion of integration effects annually.

Zinc Price (LME)

$/toz

$/t

325

1,250

300

1,000

275

750

250

500

0

4

7

10

'01/1

4

7

10

'02/1

4

0

4

7

10

'01/1

4

7

10

'02/1

4

Review of Operations 13

Review of Operations:Electronics Materials and Advanced Materials
Results of Electronics Materials and Advanced
Materials Segment in Fiscal Year 2001
During fiscal year 2001, the semiconductor market entered adecline, although it had been favorable in the previous fiscal
year. In addition, the optical communication market slumped dueto the pullback of excessive investment in backbone systems in
the U.S., despite rapid growth in the previous fiscal year. The
overall economic downturn in the U.S. also exerted a negative
effect.
In this environment, net sales in the Electronics Materials andAdvanced Materials segment decreased 24.2% over the previous
fiscal year, to ¥110 billion. Operating income also fell substantially from a profit of ¥10 billion in the previous year to a loss of ¥44
billion.
In the electronics materials business, most products—with the
exception of thin film materials—saw decreases in sales. In theadvanced materials business, nickel hydroxide used for the batteries in hybrid cars and copper-clad polyimide films for wiring
materials in liquid crystal displays doubled sales. Sm-Fe-N(Samarium Ferrous Nitrogen) products—a magnetic material
made from rare earth metal—also boosted sales. However, metal
powders including nickel powder—the Company’s core product—and lithium cobaltate saw lower sales.

“Select and Focus” Strategy to Reinforce Business
Structure
In our “Mid-term Management Plan,” we aim to further reinforce
the business structure by implementing a “select and focus” strategy within the core businesses.
In the electronics materials business, we will concentrate onareas closely related to raw materials or materials, capitalizing on
our technological strengths. Specifically, these materials will
include (1) paste, a material used in chip components such as
resistors and multilayer ceramic capacitors; (2) bonding wire, amaterial used for semiconductor packaging; and (3) telecommunication devices, an optical telecommunications component.
In the advanced materials business, we will emphasize metal
powders such as nickel powder for multilayer ceramic capacitorsand copper-clad polyimide films for liquid crystal drivers as coreareas and focus allocation of management resources in theseareas.

Electronics Materials Business Strategy
We restructured the IC packaging materials business to make thechanges necessitated by intensifying price competition.
In lead frame, a material for IC packaging, we discontinued theplating process at domestic production facilities and eliminatedpersonnel in overseas subsidiaries, as part of the Company’s
emergency countermeasures intended to address its stagnant performance. As a result, we achieved cost reduction effects totaling¥2.3 billion.
Recently, the main battlefield in the fight for dominance of thelead frame business is shifting from Southeast Asia to China. To
implement our strategies in East Asia, including China, swiftlyand dynamically, in April 2002 we established Sumitomo Metal

14 Review of Operations

Mining Package Materials Co., Ltd. (Tokyo) by spinning off our
IC packaging materials business, including lead frame and tapematerials. The new company is responsible for the entire IC packaging materials business. On the other hand, Sumitomo Metal
Mining Asia Pacific Pte. Ltd. in Singapore is responsible for all
domestic and overseas lead frame operations in the drive todevelop a business centered on overseas markets.
To streamline the structure of the Electronics Division, in April
2002 we abolished the conventional division system and reallocated departments by product line directly under the Division.
This new system enables us to delegate more authority andresponsibilities to the head of departments and to achieve
focused allocation of management resources with prompt decision-making.

Advanced Materials Business Strategy
We expect sales in the advanced materials business amounting
to ¥25 billion in fiscal year 2005 and ¥50 billion in fiscal year
2010. We aim to reinforce this profitable area as a core business.
Since demand for advanced materials changes rapidly, we need asystem that can provide products that meet customer needs in atimely fashion. To reinforce production of nickel powder and copper-clad polyimide films at the Isoura Plant (Ehime), we achieved
shortened manufacturing periods which enable us to cope withrelatively short product cycles, and established a responsive andflexible supply system at an early stage. In research and development, we aim for faster commercialization through closer cooperation with the Central Research Laboratories (Chiba) and theNiihama Research Laboratories (Ehime).

SMM's Worldwide Production Facilities for Advanced Materials / Electronics Materials
Electronics Materials
Advanced Materials

Kunitomi District Div.
Crystal materials,
Material for magnet

SMM Precision Co., Ltd.
Optical components
Ajimu Electronics
Co., Ltd.
Solder plating of IC
Shinko Co., Ltd.
Printed Wiring Board

Sumitomo Metal Mining Electronics Parts Suzhou Co., Ltd.
Electronics component such as switches

Electronics Division(Headquarters of Division)
Bonding wire, Paste,
Crystal materials and so on.
Sumitomo Metal Mining
Package Materials Co., Ltd.
Lead frame, Tape materials
Isoura Plant
Metal powder, Circuit board
material, Material for rechargeable
battery and so on.
Sumiko STF Co., Ltd.
TV frame
Niihama Electronics Co., Ltd.
Lead frame
Sumitomo Metal Mining
Package Materials Co., Ltd.
Ohkuchi Plant
TAB tape
Ohkuchi Electronics Co., Ltd.
Lead frame, Bonding wire,
Recovery and recycling of
precious metals

Shanghai Sumiko Electronic Paste Co., Ltd.
Paste
Sumiko Leadframe Chengdu Co.,Ltd.
Lead frame

Sumiko Leadframe (Thailand) Co., Ltd.
Lead frame

Sumiko Electronics Taiwan Co., Ltd.
Lead frame
Taiwan Sumiko Materials Co., Ltd.
Bonding wire

P.T.SUMIKO LEADFRAME BINTAN Lead frame
Sumitomo Metal Mining Asia Pacific Pte. Ltd.
(Regional Headquarters of overseas lead frame operations)
Sumiko Leadframe Singapore Pte. Ltd. Lead frame
SMM Electronics Parts Pte. Ltd. TV frame
M-SMM Electronics SDN. BHD. Lead frame
Malaysian Electronics Materials SDN. BHD. Bonding wire, Paste
SMM U.S.A. Inc.
TV frame

Review of Operations 15

Electronics Materials Business Strategy

Paste
Chip components that use paste are installed in a wide varietyof electronic equipment, including home electric appliances andcomputers. SMM has been highly praised for its outstanding
paste production technology, which provides a wide variety of
paste products. However, in the near future, competition in thepaste market will be intensified as China emerges as a global
supply center for electronic components.
SMM aims to improve profitability in its paste business byfocusing on nickel paste, an area in which we boast an integrated production system encompassing all steps from materials to
the final product.
In the Electronics Division in Tokyo, we completed expanding
the plant at the end of 2001, ensuring sufficient production
capacity to meet future demand expansion. Through thesemeasures, we strive to be a top supplier of multilayer ceramic
capacitor-related materials.
In addition, we seek over 50% share in the Chinese market
by capitalizing on our production facility in Shanghai. We arealso promoting new product development such as resin pasteand lead-free compatible paste.

Paste

Bonding Wire
Bonding wire connects electrodes of semiconductor chips andlead frame. In the medium term, sales volume of bonding wire is
expected to expand due to the spread of the BGA (Ball Grid
Array) packaging method, which uses a large amount of bonding
wire. However, its price is being undercut by low-price products
form Korean manufacturers. SMM aims to reinforce cost competitiveness by transferring its domestic production to Malaysia andtripling production capacity there by fiscal year 2004
In Taiwan, we have established a new processing facility thatenables us to reduce production costs and improve services for
local semiconductor manufacturers. Through these measures, we
aim to expand our share of bonding wire for BGA packaging in
Taiwan. The facilities in Taiwan will be a foothold leading to further inroads in the growing China market. In addition, we areplanning to open a sales office in Shanghai in 2002. Throughtimely implementation of these strategies, we strive to acquire
top share in the growing worldwide markets.

Telecommunication Devices
The Optical Isolator, which is necessary for WDM (Wavelength
Division Multiplexing) systems for optical fiber, and its main
component, the Faraday Rotator, are our core products. The
Optical Isolator is necessary for backbone lines that connect cities
at 2.5 50 to 10 Gbps. It is predicted that these kind of short- to
middle-distance lines will represent the mainstream for telecommunication devices. Taking this trend into account, we focus on
products in which we have expertise.
With the Faraday Rotator, we will strengthen technology development and marketing activities, especially for the
PDOI (Polarization Dependent Optical Isolator) and the
PIOI (Polarization Independent Optical Isolator), making use of

16 Review of Operations

Bonding Wire

our technological expertise in crystal materials. Regarding the
Optical Isolator, we pursue cost reductions by introducing autoassembly and inspection machinery and product differentiation
with the launch of new products boasting high performance andlow price. Also, we aim to enter the business for high frequency
components for backbone line base stations, such as duplexers
for wireless base stations.

Advanced Materials Business Strategy

Nickel Powder
Nickel power is a material used for the internal electrodes of
MLCCs (multilayer ceramic capacitors), indispensable for all
categories of electronic equipment. Although most conventional
MLCCs use precious metals such as palladium, demand fornickel as a substitute material rose when the prices of precious
metals soared. SMM is highly praised for its integrated production process covering materials to pastes, and all the major
MLCC manufacturers worldwide have adopted our product.
In May 2001, we achieved production capacity of 40 tons permonth, doubling that of conventional production. In addition,
we will market new products of functional powders and seek
top share by fiscal year 2005.

Copper-clad Polyimide Film
Copper-clad polyimide film is a flexible board material. Liquid
crystal drivers, used in mobile phones and other electronicequipment, mostly adopt the COF (Chip On Film) method,which uses copper-clad polyimide film. Recently, large TFTs
(Thin Film Transistors) used for notebook computers are also
increasingly employing the COF method, causing our sales ofthe product to double with a market share of 50%. We aim toacquire a 60% share in the COF market in fiscal year 2003, andbecome a de facto standard in COF-equipped substrates for liquid crystal drivers.
For this purpose, we completed expansion of production lines
in the Isoura Plant in December 2001 and acquired production
capacity of 0.6 million square meters per year, 1.5 times capacity than before. Also, we secured space for additional lines toachieve 1.2 million square meters per year in response to future
demand growth.

Nickel Powder Production Process

Materials for Batteries
Our products include lithium cobaltate and lithium nickel oxide
for lithium batteries, and nickel hydroxide for nickel hydrogenbatteries. Both nickel hydrogen batteries and lithium batteries are
so-called rechargeable batteries. SMM products are used as materials for the positive electrode of these batteries. SMM’s strengthlies in its ability to ensure stable procurement of raw materials,
combined with an integrated production process. As an immediate goal, we aim to acquire over 10% share in each product.
SMM’s nickel hydroxide was adopted in batteries for the HEV(Hybrid Electric Vehicle) made by Toyota Motor Corporation anddoubled its sales in fiscal year 2001. SMM intends to secureorders from Toyota Motors, since Toyota plans to manufacture
300,000 HEVs in fiscal year 2005, seven times as much as 42,000
in fiscal year 2001.
Also, we will be engaged in developing functional lithium batteries with light-weight and high-volume properties to meetgrowing demand centered on mobile phones.

Copper-clad Polyimide Filmsince fiscal year 2000 when full-fledged sales first started.
Sm-Fe-N is widely used in many kinds of devices, such as
portable information devices and automotive components that
require light and small-scale materials, because it has stronger
magnetic power than other magnets of the same weight.
Application of Sm-Fe-N will be dramatically broadened when
it is used for flexible magnets (rubber magnets) and compounded with ferrite magnets. SMM is intensively reinforcing Sm-Fe-N
as a strategic product and expanding its business base for thisproduct.

Materials for Magnets
Sm-Fe-N (Samarium Ferrous Nitrogen), a functional material formagnets developed by the Company, has tripled its sales volume

Review of Operations 17

Review of Operations:

Environmental Business

Oil-Contaminated Soil Cleaning Equipment

Dioxin Analyzing

Increasing attention to environmental matters and related government
regulations are bringing about an expansion in the environmental
business market. We has been involved in many environmentrelated business fields by making use of the expertise we havedeveloped through our mineral resources and metallurgy businesses. We will further promote recycling business related to
SMM Group’s products and reinforce the environmental improvement business by offering advanced engineering and services.
In the recycling business, we collect metals from used products
and scrap generated in the production process of our customers.
For example, in our metallurgy business, we collect zinc from electricarc furnace (EAF) dust, copper and nickel from the effluent in thecoating process, and precious metals from electronics materials scrap.
Also, Nippon Catalyst Cycle Co., Ltd., our subsidiary, collects
molybdic and vanadium from the used catalyst resulting from theoil refining process.
As for the environmental improvement business, we pursue synergistic effects through centralized control of our group companies
by our Energy & Environment Business Division. These groupcompanies include, Sumicon Certech Co., Ltd., providing environmental assessment and remediation services for soil and groundwater contamination; Sumiko Eco-engineering Co., Ltd., involvedin environment-related engineering for electronic dust collectors
and fuel-gas treatment equipment and corrosion prevention for
harbor facilities; Sumiko Techno-Research Co., Ltd., focusing on
environmental research and analysis; and Japan Irradiation Service
Co., Ltd., working in radiation treatment for sterilization of foodwrapping materials and medical tools and for use in materialreforming. In the rapidly changing environmental business, we
focus on technology areas that will ensure our competitiveness.
In our “Mid-term Management Plan,” we position our environment-related business as an area to actively promote. We aim toachieve ¥24 billion in sales in fiscal year 2003, an increase from
¥16 billion in fiscal year 2001. The targeted sales comprise ¥12billion from the recycling business and another ¥12 billion fromthe environmental improvement business.

Launch of Oil-Contaminated Soil Cleaning Businessat Sumicon Certech

18 Review of Operations

In fiscal year 2002, Sumicon Certech Co., Ltd., and SMM jointly
launched an oil-contaminated soil cleaning business using “Cerwashing Oil” cleaning equipment, which has been adopted by the
New Energy and Industrial Technology Development Organization(NEDO) as their research and development project, “Developmentof Soil Remediation Technology as Environmental Improvement.”
This equipment contributes to substantial cost reductions with
its ability to process as much as 100 tons of contaminated soil per
day, separating 70% of cleaned soil from contaminated soil andbringing it back to the site.
Sumicon Certech is the only specialized company in Japan providing total solutions for soil and groundwater contamination, covering every step from research, implementation and monitoring.
Sumicon Certech is also highly praised for its development of acyanide contamination treatment process using biotechnologies,
which was the first in the world. With these advantages, Sumicon
Certech, in cooperation with SMM, expands its business by further
strengthening its technical capability.

Sumiko Techno-Research accredited as Dioxin
Analysis Laboratory
In February 2002, Sumiko Techno-Research Co., Ltd. was accredited with laboratory accreditation ISO/IEC17025 as an environmental analysis laboratory for dioxins research.
This accreditation testifies to Sumiko Techno-Research’s high-leveltechnologies, because only approximately ten companies in Japan
have acquired accreditation in the environmental analysis area.
Demand for environmental research and analysis is expected togrow, centering on soil and groundwater contamination research,
indoor environmental research, dioxins and environmental hormones measurement and analysis, and other assessments.
Sumiko Techno-Research plans to expand its facilities, such as
high resolution spectrometer (HRGC/HRMS) to measure minimal
quantities of chemical substances.

Financial Section:

Management’s Discussion and Analysis
Introduction
Business enterprises at Sumitomo Metal Mining Co., Ltd. (SMM),
include the Company, 70 subsidiaries and 12 affiliate companies.
Operations consist of three core segments and two peripheral
segments.
The three core segments are (1) Mineral Resources, which pertains to metal mining for gold, silver and copper; (2) Metallurgy,
which involves the smelting business centered on gold, copper,
nickel and zinc, and the metal processing business, which manufactures copper elongation products; and (3) Electronics
Materials and Advanced Materials, pertaining to the advanced
materials business—which manufactures IC packaging materials,
crystal materials, printed circuit boards and electronic components—and the electronics materials business, which manufactures powders from nickel and palladium, and battery and magnetic materials. The two peripheral segments are (1)Construction Materials & Housing, involved with the manufacturing of Siporex (autoclaved lightweight concrete, or ALC) and theconstruction of residential buildings, and the Others segment,
pertaining to nuclear engineering operations. Consolidated results
described in this Annual Report are the consolidated results of
the Company, 39 domestic and overseas consolidated subsidiaries and five affiliates accounted for by the equity method.

Consolidated Statements of Income
Net Sales
Net sales in fiscal year 2001 (the year ended March 31, 2002)
decreased ¥45,158 million (12.0%) from the previous fiscal year,to ¥330,194 million (US$2,478 million). The Metallurgy segment
accounted for 59.7% of net sales. The core enterprise of this segment is smelting; however, this business is heavily affected byforeign exchange rates and trends in non-ferrous metal prices.
In the first half of fiscal year 2001, prices of non-ferrous metals
declined, with the exception of gold in overseas markets.
Although prices rose in the second half of the year, the annual
average price of major non-ferrous metals such as copper andnickel declined from the previous fiscal year. Meanwhile, the yen
was temporarily strong after the September 11, 2001, terrorist

attacks in the U.S., but weakened throughout the year.
As a result, in the Metallurgy segment the decline in non-ferrous metal prices such as nickel and copper and the lower sales
volume—caused by the severe decline in IT- related materials—
led to reduced sales. Furthermore, in the Electronics Materials
and Advanced Materials segment, there were decreases in sales
for most products due to the negative influence of the worldwide
IT recession on the sales environment.
Cost and Expenses
Cost of sales in fiscal year 2001 fell ¥19,938 million (6.4%) fromthe previous fiscal year, to ¥292,042 million (US$2,192 million).
However, due to the larger decline in net sales, the gross margindecreased from 16.9%, to 11.6%.
Sales, general and administrative (SGA) expenses rose ¥563
million from the previous fiscal year, to ¥37,005 (US$278 million).
Sales, transportation and overhead expenses, which accounted
for 31.4% of SGA expenses, were approximately the same as theprevious fiscal year. Research and development (R&D) expenses,
which accounted for 11.4% of SGA expenses, rose 21.6% fromthe previous fiscal year, mainly due to the increase in researchmaterials expenses.
Operating Income
Operating income in fiscal year 2001 fell sharply 95.7% over theprevious fiscal year, to ¥1,147 million (US$9 million). The
Metallurgy segment fell substantially due to deterioration in themetal business of the Company. The main factor was lower volume in nickel sales and a drop in price, which had been favorable in the previous fiscal year. In the Electronics Materials andthe Advanced Materials segment, the Electronics Materials business changed to substantial negative growth, in contrast to theprevious fiscal year. Although demand for bonding wire andpastes gradually recovered from the middle of the fiscal year,
demand for most products fell throughout the period, except forthin film materials. In the Advanced Materials business, althoughadoption for the large-sized TFT liquid crystals helped net salesof copper-clad polyimide films double, the sale of metal pow-

Net Sales

Gross Profit

Billionsof yenBillionsof yen

500

80

20

60

15

40

10

20

5

Gross Margin

%

400

300

200

100

0

'98

'99

'00

'01

'02

0

'98

'99

'00

'01

'02

0

Financial Section 19

ders—including nickel powder—substantially decreased. With
the exception of the Other segment and Construction Materials &Housing segment, all three core segments—Mineral Resources,
Metallurgy, and Electronics Materials and Advanced Materials—
resulted in decreased profitability.
Other Income (Expenses)
In other income (expenses) in fiscal year 2001, the deficit
amount rose from the previous fiscal year by ¥2,376 million(20.9%), resulting in a loss of ¥13,735million (US$103 million).
There were several factors involved in these changes. First, in fiscal year 2001, the Company posted a shortfall of ¥5,858 million(US$44 million) in pension funds, which was written off as a
one-time charge, this liability having arisen when new accounting standards for calculating retirement benefits were introducedin fiscal 2001. The previous fiscal year also saw losses related toa nuclear fuel reprocessing accident at subsidiary JCO Co., Ltd.,
totaling ¥2,328 million (US$17 million). Fiscal year 2001 had nosimilar losses. However, gain on the sale of investment securities
fell from ¥6,112 million (US$46 million) in the previous fiscal
year, to ¥1,094 million (US$8 million) in the fiscal year underreview. Further, valuation losses on investment securities totaled¥8,431 million (US$63 million), ¥5,016 million more than in theprevious fiscal year. Finally, additional expenses related to
streamlining amounted to ¥3,434 million (US$26 million) in thefiscal year under review.
Tax-effect accounting has been applied since fiscal year 1999,
and a negative tax adjustment of ¥5,968 million (US$45 million)
was posted. Net financial expenses decreased ¥354 million, to¥1,775 million (US$13 million), compared to ¥2,129 (US$16 million) million in the previous fiscal year.
Net Income (Loss)
In fiscal year 2001, the SMM Group posted a net loss of ¥6,611
million (US$50 million), a substantial decline of ¥21,714 million(143.8%), from ¥15,103 million (US$113 million) in the previous fiscal year. Net loss per share in fiscal year 2001 was¥11.56 (US$0.09), as opposed to net income of ¥26.41(US$0.20) in the previous fiscal year.
Impact of Exchange Rate Fluctuations
Non-ferrous metal operations are closely linked to foreignexchange rates, which affect the entire process, from the procurement of ores to the sale of finished products. Although a weak
yen brings with it the disadvantage that SMM must pay higher
prices for the procurement of ores, the yen-denominated selling
prices of finished products rose as well. In general, a weak yen isa positive factor in SMM’s earnings, mainly due to the fact thatsmelting margins, which are calculated in U.S. dollars, rise whentranslated into yen. The average exchange rate in fiscal year 2001
was ¥125.13 to the U.S. dollar, compared to ¥110.58 in the previous fiscal year. The yen was weak throughout the fiscal year.
The Company has announced that the weakening of theJapanese currency by ¥1 against the U.S. dollar contributes to an
upturn of ¥350 million, in terms of gross income, operating profit, and recurring profit, on a non-consolidated basis.
Results by Business Segment
The following results are based on segment information, and net
sales and operating income in each field include inter-segment
transactions.
Mineral Resources
Despite sales increases in the Hishikari Mine and Sumitomo
Metal Mining Oceania Pty. Ltd., net sales in this segment fell
¥321 million (1.4%), to ¥23,292 million (US$175 million), due tothe withdrawal of Sumiko Development and Construction Co.,
Ltd., from the urban civil engineering business and decreasedorders for geological surveys at Sumiko Consultants Co., Ltd.
Despite the increase in sales at the Hishikari Mine, operating
income in Mineral Resources decreased ¥1,522 million (64.5%),
to ¥838 million (US$6 million), mainly due to the declining profits of Sumitomo Metal Mining Arizona Inc. Although Sumitomo
Metal Mining Arizona completed the switchover to the solvent
extraction/electrowinning (SX-EW) process in March 2001 andwas able to launch the operation smoothly, it was adversely

Oparating Income

Net Income (loss)

Billionsof yen%Billionsof yen7.5

20

Operating Margin

30

15
10
20

5.0
5
0

10

2.5
-5
-10

0

'98

20 Financial Section

'99

'00

'01

'02

0.0

-15

'98

'99

'00

'01

'02

affected by the decrease in copper market prices overseas, aswell as the rise in electric power prices in the first half of lastyear.
Metallurgy
Net sales stood at ¥197,183 million (US$1,480 million), down
¥7,644 million (3.7%) over the previous fiscal year. Operating
income decreased sharply ¥11,888 million (77.1%), to ¥3,533
million (US$27 million). This decrease was due to unfavorable
sales of copper and nickel, and unsatisfactory results at
Sumitomo Metal Mining Brass & Copper Co., Ltd. The maincause of the decrease in operating income was deterioration in
the metal business. In particular, the sales volume of nickel,
which was favorable in the previous fiscal year, decreased due tothe severe slowdown in IT-related demand. The market price ofnickel also reduced overseas.
Electronics Materials and Advanced Materials(This section includes results of the advanced materials business,
which became an independent segment in June 2000.)
Net sales in this segment decreased ¥35,348 million (24.2%) overthe previous fiscal year, to ¥110,985 million (US$833 million).
Operating income also fell substantially ¥14,347 million(144.06%), resulting in an operating loss of ¥4,388 million(US$33 million). The major factors were the stagnation in the
global semiconductor market during fiscal year 2001; a slump in
the optical communication market caused by the rebound ofexcessive investment in mission-critical systems in the U.S.,
which had grown rapidly in the previous fiscal year, as well as
overall economic downturn in the U.S. In this market environment, demand for most products decreased over the year withthe exception of thin film materials, although there were signs ofrecovery in demand for bonding wire and paste in the middle ofthe fiscal year.
Sales of metal powders, including nickel powder for multilayer
ceramic capacitors—the core product in Advanced Material segment—decreased sharply. Also, sales of lithium cobaltate used
for batteries of electric portable devices decreased substantially.

Meanwhile, sales of nickel hydroxide doubled with the growing
use of batteries in hybrid cars. Sales of copper-clad polyimide film
used in the wiring material of liquid crystal displays also doubled,
due to its full-fledged application in large-sized TFT liquid crystal
displays. Sales of SFN (Samarium Ferrous Nitrogen)—rare earthmaterials—also increased. However, the Company and most of
its subsidiaries posted decreased sales and operating income.
Construction Materials & Housing
Igeta Heim Co., Ltd., completed the reduction plan for its heavyweight steel-frame housing business. Sumiko Tatsumi
Construction Materials Co., Ltd., was affected by the sluggish
demands of construction aggregates. As a result, net sales
decreased ¥3,264 million (13.1%), to ¥21,616 million (US$162
million). At Sumitomo Metal Mining Siporex Co., Ltd., ALC(autoclaved lightweight concrete) faced a more severe sales environment than in the previous fiscal year. However, its net sales
were maintained at the same level as the previous fiscal year,
and operating income achieved a turnaround due to efforts to
expand sales and reduce costs.
Capital Expenditures and Depreciation
Capital expenditures for fiscal year 2001 amounted to ¥25,379
million (US$190 million), of which Electronics Materials andAdvanced Materials accounted for ¥11,236 million (44.3%) and
Metallurgy for ¥9,336 million (36.8%).
Major construction completed during the year included the
expansion and renewal of production facilities for nickel powder and copper-clad polyimide film in the Electronics Materials
and Advanced Materials segment, and the expansion, renewal
and rationalization of copper smelting facilities in the
Metallurgy segment.
Depreciation increased ¥1,048 million (6.2%), to ¥17,822 million (US$134 million).
Research and Development Expenses
Research and development expenses for fiscal year 2001 were
¥4,237 million (US$32 million). The Mineral Resources segment

Yen-Dollar Exchange Rate (Year-End)
Yen

140

130

120

110

100

0

'98

'99

'00

'01

'02

Financial Section 21

Millions of yen

Short-term Interest-bearing debt due after one year
Long-term Interest-bearing debt due after one year
Total Shareholders’ equity
Total assets

2000

2001

2002

As of March 31¥ 93,105 (17.9) ¥ 93,159 (17.6 ) ¥ 90,358 (16.6)
83,839 (15.8) 107,266 (19.7)
73,972 (14.3)
236,313 (45.6) 237,470 (44.8) 235,231 (43.2)¥518,756 (100.0) ¥530,080 (100.0) ¥544,121 (100.0)*Percentage to Total assets = 100.

developed a concentration process for non-ferrous raw material
ores and various types of leaching technology. The Metallurgy
segment focused mainly on the development of non-ferrous
smelting and electrolysis technology. The Electronics Materials
and Advanced Materials segment concentrated on developing
technology in electronics materials, principally new semiconductor
packaging materials. The Construction Materials & Housing segment focused on developing new product processing technologies and new products such as long-lasting Siporex technology.

Financial Position and Liquidity
Financial Position
Total assets as of March 31, 2002 stood at ¥518,756 million(US$3,893 million), down ¥11,324 million (2.1%) from the endof the previous fiscal year. Current assets fell ¥13,276 million(6.6%), to ¥187,048 million (US$1,404 million). Trade notes andaccounts receivable fell by ¥19,643 million, in line with thedecrease in net sales.
Net property, plant and equipment stood at ¥179,541 million(US$1,347 million), up ¥4,789 million from the end of the previous fiscal year, due to a ¥6,570 million increase in machineryand equipment. This was despite a ¥3,373 million decrease inconstruction in progress.
Investments and long-term receivables stood at ¥143,329 million (US$1,076 million), down ¥5,264 million. The reason for thiswas a ¥3,819 million decrease in the balance due to repayment oflong-term loans.
Meanwhile, current liabilities decreased ¥3,388 million (2.0%)

from the end of the previous fiscal year, to ¥163,677 million(US$1,228 million). The major factors for this decline were the¥2,500 million decrease in the outstanding amount of commercial
paper and the ¥1,554 million fall in short-term bank loans. By
contrast, corporate bonds due within one year increased ¥4,000
million. As a result, the working capital ratio decreased from 1.20
to 1.14 times.
Long-term debts due after one year decreased ¥9,867 million
from the end of the previous fiscal year, to ¥73,972 million(US$555 million). This was mainly the result of efforts to transfer
to corporate bonds due within one year and to reduce interestbearing liabilities. Consequently, total liabilities excluding minority interest decreased ¥10,492 million to ¥276,004 million(US$2,071 million).
Total shareholders’ equity decreased ¥1,157 million (0.5%)
from the end of the previous fiscal year, to ¥236,313 million(US$1,773 million). This resulted from a ¥10,081 million decrease
in retained earnings, most of which was accounted for by the¥6,611 million net loss in the period under review. As a result, theequity ratio rose from 44.8% in the previous fiscal year, to 45.6%.
Consolidated Statement of Cash Flows
Cash and cash equivalents, including the effect of changes in theforeign exchange rate, stood at ¥22,763 million (US$171 million)at the end of the year, up ¥ 3,957 million (21.0%) from the
beginning of the year.
Net cash flows from operating activities in fiscal year 2001
improved by ¥10,031 million over the previous fiscal year, reaching ¥33,370 million (US$250 million). This can be attributed to a

Shareholders’ Equity

Long-Term Debt Due After One Year

Billionsof yenBillionsof yen

250

125

1.0

200

100

0.8

150

75

0.6

100

50

0.4

50

25

0.2

0

'98

22 Financial Section

'99

'00

'01

'02

0

Debt to Equity Ratio

'98

Times

'99

'00

'01

'02

0.0

¥19,756 million increase in collection of receivables, as well as adecrease in indemnity payments and in restructuring costs that
resulted in a ¥4,485 million improvement, despite the impact of a
sharp decline in consolidated operating income.
Net cash flows from investing activities saw outflows totaling¥16,246 million (US$122 million), a ¥11,998 million increase in
expenditures over the previous fiscal year. Net cash outflows
stemmed from the use of ¥2,856 million (US$21 million) in cash
for the acquisition of property, plant and equipment, and also adecrease of ¥9,410 million (US$71 million) in dividend income
due to the sale of investment securities.
Net cash outflows from financing activities decreased ¥11,822
million from the previous fiscal year, to net outflow of ¥14,267
million (US$107 million), mainly due to a ¥8,161 million increasein long-term bank loans and a ¥2,000 million increase due to thedifference between issuance price and redemption price of bonds.
As a result, cash and cash equivalents at year end, including
the effect of changes in the foreign exchange rate and a new consolidated subsidiary, increased ¥3,957 million from the beginning of the year to a year-end balance of ¥22,763 million(US$171 million).
Risk Management
The operations of SMM are exposed to various risks such as fluctuations in metal prices, exchange rates, and interest rates. To
effectively hedge against these risks, SMM engages in financial
derivatives transactions. In commodities, forward contracts areused to hedge against fluctuations in ingot prices; forward foreign exchange contracts and currency swaps are used to hedge
currency fluctuations, and interest rate swaps are used to hedge
interest rate fluctuations. Whatever the case, we carry out derivative transactions within limits based on real demand in production and sales activities, and on actual amount payable or receivable, and do not engage in transactions for speculative purposes.
Further, in view of the accident at JCO Co., Ltd., we are acutely aware of the importance of risk management, and as a central
mechanism for mitigating and managing risk, we set up a Risk
Management Committee in July 2000 to spearhead risk manage-

ment. Since then, we have been examining a framework for risk
mitigation and management throughout the group. We started
operating a risk management system, which acts as a guideline
for thorough compliance, in August 2001.
At the same time, SMM is aiming to go back to the basics ofmanufacturing, while addressing the issues of safety and theenvironment. As part of these initiatives, SMM is carrying out an
ISO 14001 environment management system for the whole groupand building an environmental management system, which is
becoming increasingly important.
Accounting for Financial Instruments
Accounting for Financial Instruments, one of the new accounting
standards in Japan, has been applied to the following procedures
since fiscal year 2000: standards for write-off of allowance for
doubtful accounts, changes in accounting procedures for derivative transactions, arrangements for the holding purpose of marketable securities, and revised standards for accounting procedure governing foreign currency transactions and others.
Since fiscal year 2001, accounting for financial instruments has
been applied to available-for-sale securities, which are measured
by fair market value; prices will be adjusted to reflect market
value at the end of the fiscal year.
As a result, investment securities increased ¥4,230 million,
while ¥2,403 million in net unrealized holding gains (losses) on
available-for-sale securities, ¥1,827 million in deferred tax liabilities and ¥0 in minority interests were posted.

Net Cash Provided by Operating Activities
Billionsof yen

50
40
30
20
10
0
-10

'98

'99

'00

'01

'02

Financial Section 23

Eleven-Year Summary
SUMITOMO METAL MINING CO., LTD.

For the Year:Net sales
Gross profit
Operating income
Other income (expense)
Net income (loss)
Net income (loss) per share (¥)
Dividends per share (¥)
Return on average shareholders’ equity (%)
Net cash provided by (used in) operating activities
Capital expenditures
Depreciation

2002

2001

2000

1999

¥330,194
38,152
1,147(13,735)(6,611)(11.56)
4.00—
33,37025,37917,822¥375,352
63,372
26,930(11,359)
15,103
26.41
6.00
6.39
23,33928,078
16,774¥360,299
45,061
8,990(4,342)
4,740
8.29
5.00
2.05
(800)
20,49016,611¥350,288
41,190858(12,932)(12,495)(21.85)
3.00—
22,91232,49923,095¥518,756
236,31345.6
73,972167,077
0.71
23,371
1.14¥530,080
237,470
44.8
83,839176,998
0.75
33,2591.20¥544,121
235,23143.2
107,266
197,6240.84
38,9101.23¥544,519
226,795
41.7
124,535
207,8210.92
50,5181.31

For the Year:

Total assets
Shareholders’ equity
Equity ratio (%)
Long-term debt due after one year
Total debt
Debt to equity ratio (times)
Working capital
Working capital ratio (times)
Note: “N/A” indicates that figures have not been disclosed.

24 Financial Section

Millions of yen

1998

1997

1996

1995

1994

1993

1992

¥431,950
62,641
24,622(3,605)
10,157
17.77
6.00
4.22
43,05627,96821,638¥525,076
57,836
21,665(4,294)
12,884
22.65
6.00
5.56
43,13524,73020,702¥511,887
55,904
19,947(7,553)
10,683
19.18
6.00
4.95
6,100
25,722
19,889¥464,843
40,2625,169(2,384)
1,292
2.32
5.00
0.62
721
N/A
20,917¥446,712
28,914(3,934)
3,543
1,902
3.49
5.00
0.97
17,780N/A
20,522¥507,951
45,018
8,550
2,377
6,197
12.33
7.00
3.45
23,684
N/A
N/A¥539,122
55,344
20,330(2,635)
10,141
20.22
7.00
5.76
38,155
N/A
N/A¥566,088
243,43643.0
82,356
201,5150.83
26,5291.13¥586,948
238,05640.6
117,021
224,736
0.94
62,7261.31¥624,419
225,29636.1
171,596285,871
1.27
104,854
1.53¥591,446
205,940
34.8
197,884
277,289
1.35
101,1101.63¥594,982
210,90235.4
228,255
281,073
1.33
131,6442.02¥616,672
179,926
29.2
221,926
321,131
1.78
105,878
1.58¥670,519
178,91926.7
214,195
371,093
2.07
126,651
1.52

Financial Section 25

Consolidated Balance Sheets
SUMITOMO METAL MINING CO., LTD.

ASSETS
Millions of yen
As of March 31, 2002 and 2001

Current assets:
Cash and cash equivalents (Note 13)
Time deposits
Marketable securities (Note 3)
Receivables:
Notes and accounts receivable (Notes 6 and 13) :Trade
Non-consolidated subsidiaries and affiliated companies
Loans and others:
Non-consolidated subsidiaries and affiliated companies
OthersAllowance for doubtful accounts
Inventories (Note 5)
Deferred tax assets (Note 7)
Other current assets
Total current assets
Investments and long-term receivables:
Investment securities (Notes 3 and 6):
Non-consolidated subsidiaries and affiliated companies
OthersAllowance for losses on investments
Loans:
Non-consolidated subsidiaries and affiliated companies
OthersOther long-term receivables
Allowance for doubtful accounts

Property, plant and equipment (Note 6):Land
Buildings and structures
Machinery and equipment
Construction in progress
Accumulated depreciation
Net property, plant and equipment
Deferred tax assets (Note 7)
Other assets
The accompanying notes are an integral part of those balance sheets.

26 Financial Section

2002¥ 22,763
342
—

2001

Thousands of
U.S. dollars(Note1)

2002¥ 18,806 $ 170,829
5
2,567
102
—

62,182360

81,178
1,007

466,657
2,702

3,274
5,821
(673)
77,7004,480
10,799187,048

3,434
24,5704,306
43,685(1,059)(5,051)73,927583,114
3,363
33,621
15,25581,043200,324 1,403,737

64,83375,120(1,068)59,656
82,135
—

419
704
4,820
(1,499)143,329

3,737
3,144
1,205
5,283
4,311
36,173(11,250)(2,451)
148,593 1,075,639

486,552
563,752(8,015)32,24330,695
241,974
130,421127,029
978,769
268,890
254,282 2,017,936
2,680
6,053
20,113434,234
418,059 3,258,792(254,693) (243,307) (1,911,392)
179,541
174,752 1,347,400
4,228
2,117
31,7304,610
4,294
34,597¥ 518,756 ¥ 530,080 $3,893,103

LIABILITIES AND SHAREHOLDERS’ EQUITY
Millions of yen
As of March 31, 2002 and 2001

Current liabilities:
Bank loans (Note 6)
Commercial paper
Long-term debt due within one year (Note 6)
Notes and accounts payable:(Note 13)
Trade
Non-consolidated subsidiaries and affiliated companies
Others
Accrued income taxes (Note 7)
Accrued expenses
Advances received
Deferred tax liabilities (Note 7)
Other current liabilities
Total current liabilities

Long-term debt (Note 6)
Deferred tax liabilities (Note 7)
Accrued retirement benefits (Note 8)
Accrued restructuring charges
Accrued indemnification of damages caused by a consolidated subsidiaryAccrued liquidation of subsidiaries
Accrued realignment of operations
Other long-term liabilities
Total long-term liabilities
Minority interest

2002

2001

Thousands of
U.S. dollars(Note1)

2002¥ 62,684 ¥ 64,333 $ 470,424
—
2,500
—
30,421
26,326228,300
28,338
1,791
4,828
1,048
4,460
884
25
29,198
163,677

29,936
992
7,071
1,484
5,653
5,522
14
23,234
167,065

212,668
13,441
36,233
7,865
33,471
6,634
187
219,122
1,228,345

73,972533
23,104
2,491
1,329
1,724
3,108
6,066
112,327
6,439

83,8391,435
22,127
2,823
1,771
1,347
—
6,089
119,4316,114

555,1394,000
173,388
18,694
9,974
12,93823,32445,522
842,979
48,323

Contingent liabilities (Note 12)

Shareholders’ equity (Note 11):
Common stock
Authorized - 1,000,000,000 shares
Issued - 571,872,794 shares
Additional paid-in capital
Retained earnings (Note 10)
Net unrealized holding gains (losses) on available-for-sale securities
Foreign currency translation adjustments
Treasury stock, at cost
Total shareholders’ equity

88,35588,355663,077
81,184
81,184609,261
67,856
77,937509,2382,344(48)
17,591(3,391)(25,448)(9,956)236,348
237,472 1,773,719
(35)
(263)
(2)
236,313
237,470 1,773,456¥ 518,756 ¥ 530,080 $3,893,103

Financial Section 27

Consolidated Statements of Operations
SUMITOMO METAL MINING CO., LTD.

Millions of yen
Years ended March 31, 2002, 2001 and 2000

Net sales (Note 14)
Costs and expenses (Note 14):
Cost of sales
Selling, general and administrative (Note 9)
Operating income (Note 14)
Other income (expenses):
Interest and dividend income
Interest expense
Gain on sale of marketable securities
Gain on sale of investment securities
Write-down of investment securities
Write-down of subsidiary securities
Gain (Loss) on sale and disposal of property, plant and equipment
Gain on insurance
Loss on liquidation of subsidiaries
Provision for doubtful accountLoss on investments
Restructuring charges
Loss from realignment of operations
Loss from indemnification of damages caused by a consolidated subsidiary
Loss from suspension of operating activity of a consolidated subsidiary
Loss from disposal of inventories
Casualty loss
Amortization of net transition obligation (Note 8)
Loss on penalty for specific contracts of a consolidated subsidiary
Amortization of consolidation difference
Equity in earnings of unconsolidated subsidiaries and affiliated companies
Other, net
Income (Loss) before income taxes
Income taxes (Note 7):
Current
Deferred

Minority interest in net income of consolidated subsidiaries
Net income (loss)

2002

2001

2000

¥330,194¥375,352¥360,299 $2,478,004

292,042
37,005
329,047
1,147

311,980
36,442
348,422
26,930315,238
36,071
351,309
8,990

2,191,685
277,7112,469,396
8,608

1,700
(3,475)—958(8,431)
(335)
3,370
—
(1,341)
(510)
(424)
(857)
(3,434)—(1,144)
(777)
(442)
—
—
129
1,535
(257)
(13,735)(12,588)2,241(4,370)—5,867(3,415)
—
5,153
1,000
(1,045)(1,433)—(8,195)—(2,328)(1,621)——(5,858)
(665)
131
4,078
(899)
(11,359)
15,571

2,383(4,875)
7,817
12,866(1,627)—(1,201)—(163)(3,462)—(1,356)—(13,908)(1,620)
—
—
—
—
98
2,406
(1,700)(4,342)
4,648

12,758(26,079)—
7,189(63,272)(2,514)25,291—(10,064)(3,827)(3,182)(6,432)(25,771)—(8,585)(5,831)(3,317)——968
11,520(1,929)(103,077)(94,469)

The accompanying notes are an integral part of those statements.

28 Financial Section

2002

437
945
797
(694)
(5,968)(484)
251(5,531)313
15,320(7,057)
4,335
446
(217)
405
¥ (6,611) ¥ 15,103 ¥ 4,740 $YenAmounts per share of common stock:
Net income (loss)
Cash dividends applicable to the year

Thousands of
U.S. dollars(Note1)¥ (11.56) ¥
4.00

26.41
6.00

¥

3,280
(44,788)(41,508)(52,961)
3,347(49,614)

U.S. dollars(Note1)

8.29 $
5.00(0.09)
0.03

Consolidated Statements of Shareholders' Equity
SUMITOMO METAL MINING CO., LTD.

Millions of yen
Years ended March 31, 2002, 2001 and 2000

Balance at March 31, 1999
Net income
Cumulative effect of adopting deferredincome tax accounting (Note 7)
Treasury stock
Balance at March 31, 2000
Net income
Adjustments from translation of foreign
currency financial statements
Adoption of new accounting standard
for financial instruments
Treasury stock
Cash dividends paid (¥5.00 per share)
Balance at March 31, 2001
Decrease due to change in consolidation ofsubsidiaries
Net income
Adjustments from translation of foreign
currency financial statements
Adoption of new accounting standard
for financial instruments
Treasury stock
Cash dividends paid (¥6.00 per share)
Balance at March 31, 2002

Shares ofcommon stock(thousands)

Commonstock

571,873 ¥ 88,355

unrealized Foreign currency
Additional
Retained Net
holding losses translation
paid-in capital earnings on securities
adjustments¥ 81,184 ¥ 57,258
4,740

¥ —

¥

Treasury
stock

—

¥(2)

—

1
(1)

3,695
571,873

88,355

81,18465,693
15,103—(9,956)(48)(1)
571,873

88,355

81,184(2,859)77,937(48)(9,956)(2)(39)(6,611)
6,565
2,392
(33)
571,873 ¥ 88,355(3,431)¥ 81,184 ¥ 67,856¥ 2,344¥(3,391)¥(35)

Thousands of U.S. dollars (Note 1)
Years ended March 31, 2002, 2001 and 2000

Balance at March 31, 2001
Decrease due to change in consolidationof subsidiaries
Net income
Adjustments from translation of foreign
currency financial statements
Adoption of new accounting standard
for financial instruments
Treasury stock
Cash dividends paid ($0.05 per share)
Balance at March 31, 2002

Commonstock

unrealized Foreign currency
Additional
Retained Net
holding losses translation
paid-in capital earnings on securities
adjustments$663,077 $609,261 $584,893$ (360)$(74,716)

Treasurystock$ (15)(293)(49,613)49,268
17,951(248)(25,749)$663,077 $609,261 $509,238$17,591$(25,448)$(263)

The accompanying notes are an integral part of those statements.

Financial Section 29

Consolidated Statements of Cash Flows
SUMITOMO METAL MINING CO., LTD.

Millions of yen

Thousands of
U.S. dollars(Note1)

2002

2001

2000

2002

¥(12,588)¥15,571¥ 4,648$(94,469)

17,822—(3,370)
(958)
8,431
1,403
(1,338)1,180(1,700)3,475(1,535)
3,434
315
442
247
1,144
2,280
17,018(3,280)3,249
1,877
37,5483,001(3,649)(326)

16,774—(5,153)(5,867)
3,415
—
(391)
6,278
(2,241)
4,370(4,078)
—
8,830
—
2,328
1,621
2,481
(2,738)(5,921)(3,300)(246)
31,733
3,559(4,446)—

16,611(7,817)1,201(12,866)
1,627
—
3,445
923
(2,383)
4,875(2,406)———
13,9081,620
163(17,883)
5,356
4,468
3,410
18,9003,016(4,408)—

133,749—(25,291)(7,189)63,272
10,529(10,041)8,856(12,758)
26,079(11,520)
25,771
2,364
3,317
1,854
8,585
17,110127,715(24,615)
24,38314,085
281,786
22,522(27,385)(2,447)(1,075)
(315)
(442)
(247)
(905)
(220)
33,370(1,525)(975)—(4,072)(881)(54)
23,339(1,156)(4,609)—(12,131)
(412)
—
(800)

(8,068)(2,364)(3,317)(1,854)(6,792)(1,649)250,432

Years ended March 31, 2002, 2001 and 2000

Cash flows from operating activities:
Income (Loss) before income taxes
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation
Gain on sale of marketable securities
Loss (Gain) on sale and disposal of property, plant and equipment
Gain on sale of investment securities
Write-down of investment securities
Write-down of investments in subsidiaries
Provision for (Reversal of) doubtful accounts
Increase in retirement benefits
Interest and dividend income
Interest expense
Equity in earnings of non-consolidated subsidiaries and affiliated companies
Loss from realignment of operations
Restructuring charges
Casualty loss
Loss from indemnification of damages caused by a consolidated subsidiary
Loss from suspension of operating activity of a consolidated subsidiary
Loss on liquidation of subsidiaries
Decrease (Increase) in trade receivables
Decrease (Increase) in inventories
Increase (Decrease) in trade payables
Others
Sub total
Proceeds from interest and dividend income
Payments for interest paid
Payments for additional retirement benefits by realignment of operations
Payments for suspension of operating activity in aconsolidated subsidiary
Payments for restructuring charges
Payments for recovery costs
Payments for indemnification of damages caused by a consolidated subsidiary
Payments for income taxes
Other
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Payments for purchases of marketable securities
Proceeds from sale of marketable securities
Payments for acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for purchases of investment securities
Proceeds from sale of investment securities
Payments for acquisition of newly consolidated subsidiary’s stock
Increase in loans receivableCollection of loans receivable
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt
Repayments of long-term debt
Net decrease in bank loans
Net increase (decrease) in commercial paper
Proceeds from issuance of bonds
Payments for redemption of bonds
Proceeds from issuance of bonds
Increase in treasury stocks
Cash dividends paid
Other
Net cash provided by (used in) financing activities
Effect of changes in exchange rate on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash due to change in consolidated subsidiaries
Cash and cash equivalents at end of year
The accompanying notes are an integral part of those statements.

30 Financial Section—
53(26,778)
5,080
(456)
4,198
—
(2,633)
4,894(604)(16,246)¥—267(23,922)
9,388(84)
13,608(481)(5,014)3,300(1,310)(4,248)¥ (583)
16,812(20,882)
4,339(14,933)
20,038—(2,732)
1,878
206
4,143

$

12,264(11,134)(1,807)(2,500)—(18,000)
10,000(33)(3,434)377(14,267)

4,103(9,604)(428)(7,500)—(10,000)—(1)(2,866)207(26,089)

5,600(13,873)(517)
10,000—(10,000)
—
—
(6)
(290)
(9,086)

92,038(83,557)(13,561)(18,762)—(135,084)
75,047(248)(25,771)
2,829(107,069)

686
3,543
18,806414¥ 22,763

945(6,053)24,859—¥18,806(885)(6,628)31,487—¥24,859

5,147
26,589141,133
3,107$170,829¥—
398(200,961)
38,124(3,422)31,505—(19,760)
36,728(4,533)(121,921)

Notes to Consolidated Financial Statements
SUMITOMO METAL MINING CO., LTD.

1. Basis of presenting consolidated financial statements
The Company, a Japanese corporation, and its consolidated
domestic subsidiaries maintain their accounts and records inaccordance with the provisions set forth in the JapaneseCommercial Code and the Securities and Exchange Law and in
conformity with accounting principles and practices generally
accepted in Japan,. The accounts of consolidated overseas subsidiaries are based on their accounting records maintained inconformity with generally accepted accounting principles andpractices prevailing in the respective countries of domicile.
Certain accounting principles and practices generally acceptedin Japan are different from International Accounting Standards
and standards in other countries in certain respects as to application and disclosure requirements. Accordingly, the accompanying financial statements are intended for use by those whoare informed about Japanese accounting principles and practices.
The accompanying consolidated financial statements are atranslation of the audited consolidated financial statements of
the Company which were prepared in accordance with accounting principles and practices generally accepted in Japan fromthe accounts and records maintained by the Company and its
consolidated subsidiaries and were filed with the appropriate
Local Finance Bureau of the Ministry of Finance as required by
the Securities and Exchange Law.
In preparing the accompanying consolidated financial statements, certain reclassifications have been made in the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside
Japan. The consolidated statements of shareholders’ equity for
2002, 2001 and 2000 have been prepared for the purpose ofinclusion in the accompanying consolidated financial statements, although such statements were not required for domestic purposes and were not filed with the regulatory authorities.
The translation of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of readers, using theprevailing exchange rate at March 31, 2002, which was ¥133.25
to U.S.$1.00. The convenience translations should not be construed as representations that the Japanese yen amounts havebeen, could have been, or could in the future be, converted into
U.S. dollars at this or any other rate of exchange.
2. Summary of significant accounting policies
Consolidation—The consolidated financial statements include
the accounts of the Company and its significant subsidiaries (39subsidiaries in 2002 and 2001 and 38 subsidiaries in 2000). All
significant intercompany balances and transactions have been
eliminated.
Investments in significant affiliated companies (5 affiliatedcompanies in 2002, 2001 and 2000) are accounted for using theequity method. Investments in non-consolidated subsidiaries
and affiliates over which the Company has the ability to exercise significant influence over operating and financial policies of
the investees, are accounted for by the equity method.
In the elimination of investments in subsidiaries, the assets

and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are recorded based on the fairvalue at the time the Company acquired control of the respective subsidiaries.
The consolidation difference between the cost of an investment
and the underlying equity in its net assets at the date of acquisition is being amortized over five years with minor exceptions.
Cash and cash equivalents and cash flow statements—For
the purpose of the consolidated statements of cash flows, theCompany and its consolidated subsidiaries classify cash on
hand, readily-available bank deposits and short-term highly liquid investments with maturities of not exceeding three months
at the time of purchase as cash and cash equivalents.
Allowance for doubtful accounts—The Company and its consolidated domestic subsidiaries provide a general allowance for
doubtful accounts. Calculation of this allowance is based on
actual collection losses incurred in the past. Additionally, foraccounts receivable considered at risk (bankruptcy, companies
under rehabilitation plan), an allowance is booked based on an
estimation of the uncollectible amount, on a case by case basis.
Marketable securities and investment securities—Effectivefrom the year ended 31, 2002, the Company adopted new
accounting standards for financial instruments prospectively,
recorded ¥2,403 million ($ 18,034 thousand) of net unrealized
losses on available–for-sale securities as a separate componentof shareholders’ equity on a net of tax basis. Under the newstandards, unrealized gains and losses on securities classified asavailable-for-sale with readily-determinable fair values, arereported in a separate component of shareholders’ equity, netof applicable income taxes.
Securities issued by non-consolidated subsidiaries and affiliated companies are stated at moving average costs.
Prior to April 1, 2001, securities were stated at moving average cost.
Derivatives and hedge accounting—The new accounting
standard for financial instruments, effective from the year
ended March 31, 2001, requires companies to state derivativetransactions at fair value and to recognize changes in the fairvalue as gains or losses unless derivative transactions are used
for hedging purposes.
If derivative transactions are used as hedges and meet certain
hedging criteria, the Company and its domestic consolidated
subsidiaries defer recognition of gains or losses resulting fromchanges in fair value of derivative transactions until the related
losses or gains on the hedged items are recognized.
However, in cases where forward foreign exchange contracts
are used as hedges and meet certain hedging criteria, forward
foreign exchange contracts and hedged items are accounted forin the following manner:(1) If a forward foreign exchange contract is executed to hedge
an existing foreign currency receivable or payable,

Financial Section 31

(a) the difference, if any, between the Japanese yen amountof the hedged foreign currency receivable or payabletranslated using the spot rate at the inception date of thecontract and the book value of the receivable or payable
is recognized in the income statement in the period
which includes the inception date, and(b) the discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract
translated using the contracted forward rate and thattranslated using the spot rate at the inception date of thecontract) is recognized over the term of the contract.
(2) If a forward foreign exchange contract is executed to hedge
a future transaction denominated in a foreign currency, thefuture transaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreignexchange contract are recognized.
Also, if interest rate swap contracts are used as hedge andmeet certain hedging criteria, the net amount to be paid or
received under the interest rate swap contract is added to or
deducted from the interest on the assets or liabilities for which
the swap contract was executed.
The Company evaluates hedge effectiveness monthly by comparing the cumulative changes in cash flows from or thechanges in fair value of hedged items and the corresponding
changes in the hedging derivative instruments.
Foreign currency translation—Receivables and payables
denominated in foreign currencies are translated into Japanese
yen at the year-end rates.
Balance sheets of consolidated overseas subsidiaries aretranslated into Japanese yen at the year-end rates except forshareholders’ equity accounts, which are translated at the historical rates. Income statements of consolidated overseas subsidiaries are translated at average rates except for transactions
with the Company, which are translated at the rates used by
the Company. Prior to April 1, 2000, long-term receivables andpayable denominated in foreign currencies were translated athistorical rates.
Effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the revised accounting standard
for foreign currency translation, “Opinion Concerning Revisionof Accounting Standard for Foreign Currency Translation”,
issued by the Business Accounting Deliberation Council on
October 22, 1999 (the “Revised Accounting Standard”). Under
the Revised Accounting Standard, long-term receivables andpayables denominated in foreign currencies are also translated
into Japanese yen at the year-end rate.
The effect on the consolidated income statement of adopting
the Revised Accounting Standard is a decrease in income before
income taxes by ¥129 million compared with what would havebeen recorded under the previous accounting standard..
Due to the Revised Accounting Standard adopted from theyear ended March 31, 2001, the Company and its domestic subsidiaries have reported foreign currency translation adjustments

32 Financial Sectionin the shareholders’ equity and minority interests. The
amounts prior to the year ended March 31, 2000, which areincluded in assets, are not reclassified.
Inventories—(1) Merchandise, finished products, semi-finished products,
work in process and raw materials— Merchandise, finished products, semi-finished products, work in process andraw materials of precious metals and of electronics materials
are stated at cost based on the first-in, first-out (FIFO)
method. Others are stated at cost based on the last-in, firstout (LIFO) method.
(2) Supplies—Supplies are stated at the weighted average cost.
Property, plant and equipment—Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is computedby the straight-line method, based on the estimated useful livesof the assets.
Retirement benefits —Under the terms of the Company's
retirement plan, substantially all employees are entitled to a
lump-sum payment at the time of retirement. The amount of
retirement benefits is, in general, based on the length of service, base salary at the time of retirement or severance and thecause thereof. Prior to April 1, 2000, the Company provided forthe full amount (40% of the amount which was required if alleligible employees voluntarily retired as of the balance sheet
date in case of consolidated domestic subsidiaries) which
would be required to be paid if all eligible employees voluntarily retired as of the balance sheet date less the estimated amountof the Company’s trusted pension assets.
The Company and some consolidated domestic subsidiaries
also have a non-contributory funded pension plan, which covers substantially all employees. Prior to April 1, 2000, annual
contributions, which consisted of normal contribution andamortization of prior service cost , were charged to income
when paid.
The Company and its consolidated domestic subsidiaries provided allowance for employees’ severance and retirement benefits at March 31, 2002 and 2001 based on the estimatedamounts of projected benefit obligation and the fair value of theplan assets at those dates.
The excess of the projected benefit obligation over the total of
the fair value of pension assets as of April 1, 2000 and the liabilities for severance and retirement benefits recorded as ofApril 1, 2000 (the “net transition obligation”) amounted to¥5,858 million. The entire net transition obligation arising fromadoption of the new accounting standard for employees’ severance and retirement benefits issued by the Business Accounting
Deliberation Council effective April 1, 2000, was fully recognized in expenses in the year ended March 31, 2001. Actuarial
gains and losses are recognized in expenses using the straightline method over the average of the estimated remaining service lives of ten years commencing with the following period.

As a result of the adoption of the new accounting standard, inthe year ended March 31, 2001, severance and retirement benefit
expenses increased by ¥5,426 million and income before income
taxes decreased by ¥5,523 million compared with what would
have been recorded under the previous accounting standard.
Retirement benefits in the consolidated balance sheets also
include estimated liabilities for the unfunded lump-sum benefit
plan covering directors and corporate auditors.
Research and development—Research and development costs
are charged to income as incurred.
Bond issue expense—Bond issue expense is charged toincome as incurred.
Accounting for certain lease transactions—Finance leases
which do not transfer ownership to lessees are accounted for in
the same manner as operating leases.
Income taxes—The Company and its consolidated domestic
subsidiaries provided income taxes at the amounts currently
payable for the year ended March 31, 1999. Effective April 1,
1999, the Company and its consolidated domestic subsidiaries
adopted the new accounting standard, which recognizes tax
effects of temporary differences between the financial statement
basis and the tax basis of assets and liabilities. Under the new
accounting standard, the provision for income taxes is computed based on the pretax income included in the statement ofoperations. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future tax

3. Securities
Marketable securities and investment securities at March 31,
2002 and 2001 consisted of available–for-sale securities.
Available-for-sale securities are recorded at fair value, with net
unrealized holding gains and losses excluded from income andincluded as a component of stockholders’ equity, net of applicable income taxes.

consequences of temporary differences.
The amount of deferred income taxes attributable to the net
tax effects of the temporary differences at April 1, 1999 isreflected as an adjustment of ¥3,695 million to the retained
earnings brought forward from the previous year.
The effect for the year ended March 31, 2000 was to increase
net income by ¥484 million and retained earnings by ¥4,179
million compared with what would have been recorded under
the previous accounting standard.
Sales—Sales of merchandise and finished products are recognized when the products are shipped to customers.
Bonuses to directors and corporate auditors—Bonuses todirectors and corporate auditors, which are subject to shareholders' approval at the annual shareholders' meeting under
the Commercial Code of Japan, are accounted for as an appropriation of retained earnings.
Amounts per share of common stock—Net income per shareis computed based on the weighted average number of sharesof common stock in issue during each fiscal year.
Cash dividends per share represent the actual amount applicable to the respective fiscal year.
Reclassifications—Certain prior year amounts have been
reclassified to conform to the 2002 presentation. These changes
had no impact on previously reported results of operations orshareholders’ equity.

(1) The following tables summarize acquisition costs, book values and fair value of securities with available fair values asof March 31, 2002 (This disclosure has been required fromfiscal year 2002):

Available-for-sale securities
Securities with book values exceeding acquisition costs
Millions of yen

Equity securities
Bonds
Total

Thousands of U.S. dollars

Acquisition
cost

Book value

Difference

Acquisition
cost

Book value

Difference¥26,862
16¥26,878¥36,938
16¥36,954¥10,0760¥10,076$201,590
120$201,710$277,208120$277,328$75,618
0$75,618

Financial Section 33

Other securities
Millions of yen

Thousands of U.S. dollars

Acquisition
cost

Book value

Difference

Acquisition
cost

Book value

Difference¥37,648
102¥37,750¥31,83965¥31,904¥(5,809)(37)¥(5,846)$282,537
765$283,302$238,942
488$239,430$(43,595)(277)$(43,872)

Equity securities
OthersTotal(2) The following tables summarize book values of securities
with no available fair values as of March 31, 2002 and 2001:
Available-for-sale securities

ofMillions of yen Thousands
U.S. dollars

Non marketable equity securities
Non marketable foreign bonds

2002

2001

Book value¥6,067—¥6,189550$45,531—(3) Available-for-sale securities with maturities are as follows:
As of March 31, 2002
Millions of yen
Within one year

Bonds
Others
Total

¥—
¥—

Over one year
but within five
years

Over five years
but within ten
years

Total

¥16
—
¥16

¥—
65
¥65

¥16
65
¥81

Over one year
but within five
years

Over five years
but within ten
years

Total

$120
—
$120

$ —
488
$488

$120
488
$608

Thousands of U.S. dollars
Within one year

Bonds
Others
Total

$—
$—

As of March 31, 2001
Millions of yen

Bonds
OthersTotal(4) Total sales of available-for-sale securities sold in the year
ended March 31, 2002 amounted to ¥4,188 million ($31,430
thousand) and the related gains and losses amounted to¥1,097 million ($8,233 thousand) and ¥131 million ($983
thousand), respectively.

34 Financial Section

Within one year

Over one year
but within five
years

Over five years
but within ten
years

Total

¥ —
102
¥102

¥66
—
¥66

¥—
10
¥10

¥ 66
112
¥178

Total sales of available-for-sale securities sold in the year
ended March 31, 2001 amounted to ¥13,845 million and therelated gains and losses amounted to ¥5,842 million and¥218 million, respectively.

4. Derivative transactions
Status of derivative transactions—The Company and its consolidated subsidiaries utilize derivative transactions in order tohedge various risks, such as fluctuation of metal prices,
exchange rates and interest rates, in the normal course of business; such as futures contracts for hedging fluctuation of international price of metals, forward foreign exchange contracts andcurrency swaps for hedging fluctuation of exchange rates, andinterest swaps for hedging fluctuation of interests of floating-ratebonds and term loans payable.
Derivative transactions of the Company and its consolidated
subsidiaries cause market risk and credit risk. Market risk is thepotential loss the Company and its consolidated subsidiaries
may incur as a result of changes in the market value. The
Company’s and its consolidated subsidiaries’ exposure to market
risk are determined by a number of factors, including fluctuationof market prices, exchange rates and interest rates. Credit risk is
the potential loss the Company and its consolidated subsidiaries
could incur if the counterparties made default on their obligation. The derivative transactions are solely made with highly
rated financial institutions, their subsidiaries or LME brokers
guaranteed by banks, so that the Company and its consolidated
subsidiaries might reduce the risk of default on an obligation.
Each department of the Company and its consolidated subsidiaries involving derivative transactions have their own rules
for derivative transactions which stipulate purposes and scopeof using derivatives, standards for choosing transaction counterparties, and procedures of reporting and administration. The
derivative transactions are subject to approval by the General
Manager of the department in charge after consulting with related departments. Based on these rules, the person in charge sets
up the position. Then, the results are reported to the Directors
monthly.
The derivative positions are confirmed semi-annually with thetransaction counterparties. Also, the internal audit departmentof the Company regularly examines derivative transactions.
The Company and its consolidated subsidiaries are notexposed to market risk arising from commodity derivative transactions, because the risk of fluctuation of market prices, that iscaused by time lag between purchase and sale of materials andproducts, is hedged by the corresponding future contracts. The
Company and its consolidated subsidiaries also utilize currency
derivative transactions to hedge market risk of exchange rates
or interest rates. Taking receivables and payables denominatedin foreign currencies into account, the Company and its consolidated subsidiaries are not exposed to market risk.
The contracted amount of interest swap is the notionalamount only, and not to be considered as an index for measuring market risk or credit risk of the Company and its consolidated subsidiaries.

The following tables summarize market value information as ofMarch 31, 2002 and 2001 of derivative transactions for which
hedge accounting has not been applied:
Millions of yen

2002
Contracted amountOver one
Total
year

Currency:
Forward contracts:
Sell position U.S. dollars
Buy position U.S. dollars

Interest:
Pay fixed , receive variable:

¥

51

¥—

2,410
¥2,461

—
¥—

¥

¥—

—

¥

2001
Contracted amountOver one
Total
year

Marketvalue

Recognized
gains(losses)

52

¥(1)

¥

37

¥

—

¥

38

¥ (1)

2,434

24
¥23

2,108
¥2,145

—
—

2,214

¥

106
¥105

¥—

¥2,539¥2,116¥¥

Marketvalue

6

Recognized
gains(losses)6

Financial Section 35

Thousands of U.S. dollars

2002
Contracted amountOver one
Total
year

Currency:
Forward contracts:
Sell position U.S. dollars
Buy position U.S. dollars

Interest:
Pay fixed, receive variable:

$

383

$—

18,086$18,469

—
$—

$

$—

—

$

$

Marketvalue

Recognized
gains(losses)

390

$ (7)

18,266

180
$173

—

$ —

5. Inventories
Inventories at March 31, 2002 and 2001consisted of the following:
Millions of yen

Merchandise
Finished products
Semi-finished products and work in process
Raw materials and supplies

36 Financial Section

2002

2001

¥ 888
19,352
34,05523,405¥77,700¥ 1,266
18,768
12,77941,114¥73,927

Thousands of
U.S. dollars

2002

$

6,664
145,231255,572
175,647$583,114

6. Bank loans and long-term debt following:
Bank loans are generally represented by short-term notes (mostof which are unsecured) and bank overdrafts, and bore interest
at annual rates of 0.43% to 5.11% and 0.38% to 8.30% at
March 31, 2002 and 2001, respectively.
Long-term debt at March 31, 2002 and 2001 consisted of the following:
Millions of yen

Long-term loans from:
Banks, insurance companies and other financial institutions, maturing through2007 at interest rates of 0.8425% to 7.79%:
SecuredUnsecured
Government owned banks and government agencies, maturing through 2015 atinterest rates of 1.15% to 7.04%:
SecuredUnsecured
3.0% domestic bonds due in 2001
2.4% domestic bonds due in 2002
1.75% domestic bonds due in 2002
2.2% domestic bonds due in 2004
1.825% domestic bonds due in 2002
2.225% domestic bonds due in 2004
2.0% domestic bonds due in 2005
1.6% domestic bonds due in 2003
0.88% domestic bonds due in 2006
Amount due within one year

Thousands of
U.S. dollars

2002

2001

2002

4,630
18,717¥ 7,843
10,167$ 34,747
140,465

12,801
15,810245
345—
10,000
—
8,000
7,000
7,000
6,000
6,000
15,00015,00010,00010,00010,00010,00010,00010,00010,000—104,393
110,165(30,421) (26,326)¥ 73,972 ¥ 83,839

96,0681,839——
52,53345,028112,57175,04775,04775,04775,047
783,439(228,300)$555,139¥

The 3.0% and 2.4% domestic bonds were redeemed during theyear ended March 31, 2002.
Long-term debt at March 31, 2002 and 2001 consisted of the following:
The aggregate annual maturities of long-term debt at March 31,
2002 were as follows:Year ending March 31,

2003
2004
2005
2006
2007
Thereafter

Millions of yen

Thousands of
U.S. dollars¥30,421
20,10018,980
11,636
21,383¥ 1,873$228,300
150,844
142,439
87,325
160,473$ 14,058

Assets pledged as collateral for bank loans and long-term debt
at March 31, 2002 were as follows:
Millions of yen

Notes and accounts receivable
Trade
Investment securities
Subsidiaries
Other
Property, plant and equipment,
at net book value¥

953

Thousands of
U.S. dollars

$

7,152

131
9,839

983
73,83942,640¥53,563

320,000$401,974

Financial Section 37

7. Income taxes
Income taxes in the accompanying statement of operations
comprise corporation tax, inhabitants taxes and enterprise tax.
The aggregate statutory tax rate in Japan was approximately

42.1% for the year ended March 31, 2002, 2001 and 2000.
Consolidated overseas subsidiaries are subject to income
taxes of the countries in which they domicile.

The following table summarizes the significant differences
between the statutory tax rate and the Company’s and its consoli-

dated subsidiaries’ effective tax rate for financial statement purposes for the year ended March 31 2001 and 2000:

Statutory tax rate
Equity in earnings of unconsolidated subsidiaries and affiliated companies
Effect of elimination of counterparty dividends received
Difference in tax rates among the Company and its consolidated subsidiaries
Permanently nondeductible expenses
Permanently nontaxable dividends received
Per capita inhabitant tax
Decrease in valuation allowance
Others
Effective tax rate
The Company has not recorded the significant differences
between the statutory tax rate and the Company’s and its consolidated subsidiaries’ effective tax rate for the year ended

2001

2000

42.1 %
(9.8)
3.8
(0.6)
1.9
(6.0)
0.6
(29.3)(1.1)
1.6 %

42.1 %(20.5)
11.0
(2.4)
4.8
(12.1)
1.9(24.9)
6.8
6.7 %March 31, 2002 because it has incurred a loss before income
taxes and minority interests.

Significant components of the Company’s and its consolidated
subsidiaries’ deferred tax assets and liabilities as of March 31,
2002 and 2001 are as follows:
Millions of yen

Thousands of
U.S. dollars

2002

2001

2002

Deferred tax assets:
Net operating loss carry forwards
Retirement benefits
Write-off of investment securities
Accrued realignment loss of operations
Allowance for bonus payable
Depreciation
Accrued restructuring charges
Accrued loss on downsizing affiliates
Accrued indemnification loss of damages caused by a consolidated subsidiary
Allowance for doubtful accounts
OthersGross deferred tax assets
Less valuation allowance
Deferred tax assets-less valuation allowance¥10,310
6,798
2,186
1,304
1,078
1,051
1,042
726
525
—
2,536
27,556(7,293)
20,263¥ 8,726
6,459
—
—
—
1,008
1,160
—
739
482
4,077
22,651(7,184)
15,467$ 77,373
51,017
16,405
9,786
8,090
7,888
7,820
5,448
3,940
—
19,032
206,799(54,732)
152,067

Deferred tax liabilities:
Net unrealized holding gain on available-forsales securities
Reserve for losses on overseas investment
Accrual for special depreciation of fixed assets
Deferred gains on properties for tax purpose
Reserve for explorations
Depreciation
Allowance for doubtful accounts
Accumulated earnings of overseas subsidiaries
OthersDeferred tax liabilities(1,827)(355)(172)(3,926)(977)(2,404)(968)(1,166)(318)(12,113)

—
(380)
(251)
(3,386)(1,212)(2,706)(1,807)(1,325)(369)(11,436)(13,711)(2,664)(1,291)(29,463)(7,332)(18,041)(7,265)(8,750)(2,387)(90,904)

Net deferred tax assets¥ 8,150¥ 4,031$ 61,163

38 Financial Section

8. Retirement benefits and pension costs
As explained in Note 2. Significant Accounting Policies, effective April 1, 2000, the Company and its domestic subsidiaries
adopted the new accounting standard for employees’ severance

and retirement benefits, under which the liabilities and expenses for severance and retirement benefits are determined basedon the amounts obtained by actuarial calculations.

The liabilities for severance and retirement benefits included in
the liability section of the consolidated balance sheet as ofMarch 31, 2002 and 2001 consists of the following:
Millions of yen

Projected benefit obligation
Fair value of pension assets
Excess of projected benefit obligation over pension assets
Unrecognized actuarial differences
Net pension liability recognized in the consolidated balance sheet
Prepaid pension expenses
Retirement benefits
Retirement benefits in the consolidated balance sheets as ofMarch 31, 2002 and 2001 also include estimated liabilities forthe unfunded lump-sum benefit plan covering directors andThousands of
U.S. dollars

2002

2001

2002

¥(45,566)
17,390¥(28,176)
5,362¥(22,814)30¥(22,844)¥(41,488)
17,139¥(24,349)
2,703¥(21,646)
18¥(21,664)$(341,959)
130,507$(211,452)
40,240$(171,212)
225$(171,437)

corporate auditors (¥260million ($1,951 thousand) and ¥463
million, respectively.).

Included in the consolidated statement of income for the year
ended March 31, 2002 and 2001 are severance and retirement
benefit expenses comprised of the following:
Millions of yen

Service cost–benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial differences
Amortization of entire net transition obligation

The discount rate and the rate of expected return on plan assets
used by the Company are primarily 2.5 % in fiscal 2002 (3.0%
in 2001) and 3.5 %, respectively. The estimated amount of all
retirement benefits to be paid at the future retirement date isallocated equally to each service year using the estimated number of total service years. Actuarial gains and losses are recog9. Research and development expense
Research and development expense included in selling, generaland administrative expenses for the years ended March 31,
10. Special reserves
For the purpose of obtaining tax benefits, the Company andsome consolidated subsidiaries have set up special reserves
mainly for losses on overseas investments and explorations inaccordance with the Special Taxation Measures Law of Japan.

Thousands of
U.S. dollars

2002

2001

2002

¥2,573
1,055
(481)
270
—
¥3,417¥2,212
982
(507)
—
5,858
¥8,545$19,310
7,917(3,610)2,026—$25,643

nized in income statement using the straight-line method in ten
years.
Prior to April 1, 2000, the charges to income with respect toretirement benefits and pension costs amounted to ¥4,078 million, for the year ended March 31, 2000.

2002, 2001 and 2000 were ¥4,237 million ($31,797 thousand),¥3,484 million and ¥4,830 million, respectively.

Such reserves included in retained earnings at March 31, 2002
and 2001 were ¥7,331million ($55,017 thousand) and ¥6,213
million, respectively.

Financial Section 39

11. Shareholders' equity
The diluted net income per share for the years ended March 31,
2002 and 2001 are not calculated because there were no securities with dilutive effect. For calculating diluted net income pershare, the number of shares outstanding were adjusted byassuming full conversion of the outstanding convertible bonds
and full exercise of the outstanding warrants.
Under the Commercial Code of Japan (the “Code”), at least
50% of the issue price of new shares, is required to be designated as stated capital. The portion which is to be designated asstated capital is determined by resolution of the Board of
Directors. Proceeds in excess of the amounts designated as stated capital are credited to additional paid-in capital.
Under the Code, certain amounts of retained earnings equal
to at least 10% of cash dividends and bonuses to directors andcorporate auditors must be set aside as a legal reserve until theaggregate amount of additional paid-in capital and legal reserve
equals 25% of common stock. The legal reserve and additional
paid-in capital may be used to eliminate or reduce a deficit byresolution of the shareholders’ meeting or may be capitalized
by resolution of the Board of Directors. On condition that the

total amount of legal reserve and additional paid-in capitalremains equal to or exceeds 25% of common stock, it is available for distributions by the resolution of the shareholders’meeting. The legal reserve is included in the retained earnings.
At the June 26, 1998 annual meeting, the Company’s shareholders approved certain changes in the articles of incorporation of the Company including an article of treasury stock purchase program, so that the Company could retire its own sharesacquired in a timely manner by offsetting the cost of the treasury stock against retained earnings within the maximum limitof 57,100 thousand shares by resolution of the Board of
Directors. There was no acquisition of treasury stock for thispurpose during the year ended March 31,2001.
At the June 27,2002 annual meeting, the Company’s shareholders approved the deletion of this clause in accordance withthe abolition of the related law.
The maximum amount that the Company can distribute as
dividends is calculated based on the non-consolidated financial
statements of the Company and in accordance with the Code.

12. Contingent liabilities
Contingent liabilities at March 31, 2002 were as follows:

As endorser of notes receivable discounted
As guarantor for loans of:Non-consolidated subsidiaries and affiliated companies
Other

13. Effect of bank holiday on March 31, 2002
As financial institutions in Japan were closed on March 31,
2002 and 2001 due to holidays amounts that would normally besettled on March 31, 2002 and 2001 were collected or paid on
the following business day, April 1, 2002 and April 2, 2001 andNotes receivable trade
Notes payable trade
Notes payable otherNotes receivable discounted

40 Financial Section

Thousands of
U.S. dollars¥ 2,129$ 15,977

7,002
4,813
¥13,944

52,54836,120$104,645

the company and its consolidated subsidiaries accounted foraccordingly. The effects of the settlements on April 1 and April
2 as compared with what would have been settled on March 31
are summarized below:
2002

Cash and cash equivalents

Millions of yen

2001

Decreased by ¥403 million
Decreased by ¥97 million($728 thousand)Increased by ¥1,751 mil- Increased by ¥2,091 million
lion ($ 13,141 thousand)Increased by ¥1,313 mil- Increased by ¥1,634 million
lion ($ 9,854 thousand)Increased by ¥54 million
Increased by ¥341 million($ 2,559 thousand)Increased by ¥692 million
Increased by ¥434 million($ 3,257 thousand)14. Segment information
Business segment information— The primary business segments of the Company and its consolidated subsidiaries include
mineral resources, metallurgy, electronics and advanced materials, construction materials & housing and others.
(Change in the business segment information)

In the year ended March 31, 2002, the Company and its consolidated subsidiaries changed the grouping of business segments
due to the change of the business operation. The Company andits consolidated subsidiaries converted advanced materials frommetallurgy to electronics materials which was changed its nameto electronics & advanced materials.
The change was made for better presentation of segment
information in line with the current business operation.
Segment information for the year ended March 31, 2001 and2000 have been restated to conform to the 2002 segmentation
as follows:

2002

Millions of yen
MineralResources

Electronics Construction
Metallurgy & advanced materials
materials& housing

Net sales:
Outside customers
Inter segment
Total¥15,351
7,941
23,292¥171,150 ¥107,331
26,033
3,654
197,183 110,985¥19,997
1,619
21,616

Costs and expenses
Operating income (loss)
Identifiable assets
Depreciation expense
Capital expenditures

22,454¥ 838¥54,710
3,217
2,794

193,650 115,373¥ 3,533 ¥ (4,388)¥178,033 ¥119,151
3,978
8,675
9,336
11,236

21,882
18,160 (42,472) 329,047¥ (266) ¥ 1,826 ¥ (396) ¥ 1,147¥19,593 ¥38,771 ¥108,498 ¥518,756
690
713
549
17,822
1,080
515
418
25,379MineralResources

Electronics Construction
Metallurgy & advanced materials
materials& housing

Net sales:
Outside customers
Inter segment
Total¥16,987
6,626
23,613¥177,795 ¥143,058
27,032
3,275
204,827 146,333¥24,82852
24,880¥12,684
2,390
15,074—(39,375)(39,375)¥375,352—
375,352

Costs and expenses
Operating income (loss)
Identifiable assets
Depreciation expense
Capital expenditures

21,253¥ 2,360¥57,258
2,956
4,420

189,406 136,374¥ 15,421 ¥ 9,959¥173,208 ¥128,184
3,953
7,982
7,387
14,962

25,184¥ (304)¥25,222746
243

14,740(38,535)¥ 334 ¥ (840)¥45,382 ¥100,826
588
549
784
282

348,422¥ 26,930¥530,080
16,77428,078Others Eliminationor corporate Consolidated¥16,365 ¥— ¥330,194
3,621 (42,868)—
19,986 (42,868) 330,194

2001

Millions of yen
Others Eliminationor corporate Consolidated

¥

2000

Millions of yen
MineralResources

Electronics Construction
Metallurgy & advanced materials
materials& housing

Net sales:
Outside customers
Inter segment
Total¥18,9387,388
26,326¥168,302 ¥128,008
27,458
2,483
195,760 130,491¥26,940
47
26,987¥18,111
2,288
20,399—(39,664)(39,664)¥360,299—
360,299

Costs and expenses
Operating income (loss)
Identifiable assets
Depreciation expense
Capital expenditures

25,058¥ 1,268¥54,899
3,764
1,635

189,630 128,943¥ 6,130 ¥ 1,548¥165,796 ¥111,885
4,155
6,738
3,121
13,05628,131¥ (1,144)¥25,064
1,091
856

19,320(39,773)¥ 1,079 ¥109¥47,437 ¥139,040
363
500
864
958

351,309¥ 8,990¥544,121
16,611
20,490

Others Eliminationor corporate Consolidated¥

Financial Section 41

2002

Thousands of U.S. dollars
MineralResources

Electronics Construction
Metallurgy & advanced materials
materials& housing

Others Eliminationor corporate Consolidated

Net sales:
Outside customers
Inter segment
Total$115,205 $1,284,428 $805,486 $150,071 $122,814 $— $2,478,004
59,595
195,370
27,422
12,15027,174 (321,711)—
174,800 1,479,798 832,908 162,221 149,988 (321,711) $2,478,004

Costs and expenses
Operating income (loss)
Identifiable assets
Depreciation expense
Capital expenditures

168,510 1,453,283 865,839 164,218 136,285 (318,739) 2,469,396$ 6,290 $ 26,515 $(32,931) $ (1,997) $ 13,703 $ (2,972) $8,608$410,582 $1,336,083 $894,191 $147,039 $290,964 $814,244 $3,893,103
5,178
24,14329,854
65,103
5,351
4,120
133,749
8,105
20,96870,06484,323
3,865
3,137
190,462(1) Retirement benefits and pension costs (in the year ended
March 31, 2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Companies and its consolidated
domestic subsidiaries adopted the new accounting standard
for employees’ severance and retirement benefits. The effectof this change on the segment information were to increase
operating income of mineral resources, metallurgy, electricand advanced materials and others by ¥15 million, ¥110
million, ¥211 million and ¥76 million and decrease operating income of construction materials & housing by ¥17 million, in the year ended March 31, 2001,respectively.
(2) Financial instruments (in the year ended March 31, 2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Companies and its consolidated
domestic subsidiaries adopted the new accounting standard
for financial instrument. The effect of this change on thesegment information was to increase identifiable assets ofmetallurgy by ¥939 million in the year ended March 31,
2001.

(3) Foreign currency translation (in the year ended March 31,
2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Companies and its consolidated
domestic subsidiaries adopted the new accounting standard
for foreign currency translation. The effect of this change on
the segment information was to decrease identifiable assetsof elimination or corporate by ¥10,861 million in the year
ended March 31, 2001.
(4) Financial instruments (in the year ended March 31, 2002)
As explained in Note 2 Significant Accounting Policies,
effective from the year ended 31, 2002, the Company adopted new accounting standards for financial instruments. The
effect of this change on the segment information were to
decrease identifiable assets of metallurgy by ¥110 million($826 thousand) and increase identifiable assets of electronics & advanced materials by ¥19 million ($143 thousand),
construction materials & housing by ¥2 million ($15 thousand) and elimination or corporate by ¥4,319 million($32,412 thousand) in the year ended March 31, 2002.

Geographic segment information— Geographic segment information for the years ended March 31, 2002, 2001 and 2000 are
summarized as follows:
2002

Millions of yen
Domestic

North
AmericaSoutheast
Asia

Net sales:
Outside customers
Intersegment
Total¥291,605
9,225
300,830¥13,50410
13,514¥17,772 ¥ 7,313
524
1,421
18,2968,734¥— ¥330,194(11,180)—(11,180) 330,194

Costs and expenses
Operating income
Identifiable assets

296,322¥ 4,508¥360,839

15,717¥(2,203)¥36,245

19,3538,861¥(1,057) ¥ (127)¥19,118 ¥13,930(11,206) 329,047¥
26 ¥ 1,147¥88,624 ¥518,756

42 Financial Section

Others Eliminationor corporate Consolidated

2001

Millions of yen
Domestic

North
AmericaSoutheast
Asia

Others Eliminationor corporate Consolidated

Net sales:
Outside customers
Intersegment
Total¥328,608
10,334
338,942¥14,92218
14,940¥23,663718
24,381¥ 8,159
1,155
9,314

¥
—
(12,225)(12,225)¥375,352—
375,352

Costs and expenses
Operating income
Identifiable assets

313,854¥ 25,088¥376,180

14,766¥ 174¥36,099

23,407¥ 974¥19,900

8,711
¥ 603
¥12,095(12,316)¥
91¥85,806

348,422¥ 26,930¥530,080

2000

Millions of yen
Domestic

North
AmericaSoutheast
Asia

Net sales:
Outside customers
Intersegment
Total¥318,397
2,920
321,317¥14,066
13
14,079¥21,216781
21,997¥ 6,620
1,425
8,045

—
(5,139)(5,139)¥360,299—
360,299

Costs and expenses
Operating income
Identifiable assets

312,585¥ 8,732¥361,881

15,253¥(1,174)¥32,605

20,724¥ 1,273¥15,299

7,967(5,220)81¥
78 ¥¥10,912 ¥123,424

351,309¥ 8,990¥544,121

2002

Others Eliminationor corporate Consolidated¥

Thousands of U.S. dollars
Domestic

North
AmericaSoutheast
Asia

Others Eliminationor corporate Consolidated

Net sales:
Outside customers
Intersegment
Total$2,188,405 $101,343 $133,374 $ 54,882 $— $2,478,004
69,23175
3,932
10,664 (83,902)—
2,257,636 101,418 137,306
65,546 (83,902) 2,478,004

Costs and expenses
Operating income
Identifiable assets

2,223,805 117,951 145,239
66,499 (84,098) 2,469,396
196 $$ 33,831 $(16,533) $ (7,933) $ (953) $8,608$2,707,985 $272,007 $143,475 $104,540 $665,096 $3,893,103(The effects of changes in accounting policies on segment information)(1) Retirement benefits and pension costs (in the year ended
March 31, 2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the new accounting standard
for employees’ severance and retirement benefits. The effectof this change on the segment information was to increase
operating income of Japan by ¥395 million in the year ended
March 31, 2001.
(2) Financial instruments (in the year ended March 31, 2001)
As explained in Note 2. Significant Accounting Policies, effective April 1, 2000, the Company and its consolidated domestic

subsidiaries adopted the new accounting standard for financial instrument. The effect of this change on the segment
information was to increase identifiable assets of Japan by¥939 million in the year ended March 31, 2001.
(3) Foreign currency translation (in the year ended March 31,
2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Companies and its consolidated
domestic subsidiaries adopted the new accounting standard
for foreign currency translation. The effect of this change on
the segment information was to decrease identifiable assetsof elimination or corporate by ¥10,861 million in the year
ended March 31,2001.

Financial Section 43

(4) Financial instruments (in the year ended March 31, 2002)
As explained in Note 2 Significant Accounting Policies,
effective from the year ended 31, 2002, the Company adopted new accounting standards for financial instruments. The
effect of this change on the segment information were to

decrease identifiable assets of domestic by ¥89 million ($668
thousand) and increase identifiable assets of elimination or
corporate by ¥4,319 million ($32,412 thousand) in the year
ended March 31, 2001.

Information for overseas sales
2002

Millions of yen
North
America

Overseas net sales
Consolidated net sales
Share of overseas net sales

Southeast
Asia

East
Asia

Others¥17,158¥17,993¥52,590¥3,770
—
—
—
—
5.2%
5.5%
15.9 %
1.1%

2001

Total

¥ 91,511¥330,194
27.7%
Millions of yen

North
America

Overseas net sales
Consolidated net sales
Share of overseas net sales

Southeast
Asia

East
Asia

¥18,736¥21,681
—
—
5.0%
5.8%

OthersTotal¥53,258¥5,278——14.2 %
1.4%

2000¥ 98,953¥375,352
26.4%
Millions of yen

North
America

Overseas net sales
Consolidated net sales
Share of overseas net sales

Southeast
Asia

East
Asia

¥17,240¥20,021
—
—
4.8%
5.6%

Others¥43,271¥4,191——12.0 %
1.1%

2002

Total

¥ 84,723¥360,299
23.5%

Thousands of U.S. dollars
North
AmericaSoutheast
Asia

East
Asia

Others

Total

Overseas net sales
Consolidated net sales
Share of overseas net sales$128,765 $135,032 $394,672 $28,293 $ 686,762———— $2,478,004
5.2%
5.5%
15.9 %
1.1%
27.7%

15. Information for certain leases
As a lessee— A summary of assumed amounts inclusive ofinterest of acquisition cost, accumulated depreciation and net

book value of finance leases accounted for in the same manneras operating leases at March 31, 2002 and 2001 were as follows:
Millions of yen

Thousands of U.S. dollars

2001

2002

2002
Acquisition Accumulated
cost
depreciation

Machinery and equipment
OthersTotal

44 Financial Section¥2,164334¥2,498¥1,172247¥1,419Net book
value

¥ 992
87
¥1,079Acquisition Accumulated
cost
depreciation¥2,494351¥2,845¥1,190179¥1,369Net bookvalue

Acquisition Accumulated
cost
depreciation

Net bookvalue¥1,304172¥1,476$16,240
2,507$18,747$7,445653$8,098$ 8,795
1,854$10,649

Future lease payment, inclusive of interest at March 31, 2002
and 2001, under such leases were as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of
U.S. dollars

2002

2001

2002

¥ 445
634
¥1,079¥ 517
959¥1,476$3,3404,758$8,098Millions of yen

Thousands of
U.S. dollars

Total expenses and assumed depreciation charges for the years
ended March 31, 2002, 2001 and 2000 were as follows:

Years ended March 31, 2002, 2001 and 2000

2002

2001

2000

2002

Total expenses
Assumed depreciation charge

¥555
¥555

¥591
¥591

¥680
¥680

$4,165$4,165

As a lessor— A summary of acquisition cost, accumulated
depreciation and net book value at March 31, 2002 and 2001
were as follows:
Millions of yen

Thousands of U.S. dollars

2001

2002

2002
Acquisition Accumulated
cost
depreciation

Machinery and equipment
Others
Total

¥423
1
¥424

¥151
0
¥151

Net book
value

¥272
1
¥273

Acquisition Accumulated
cost
depreciation

¥510
1
¥511

¥164
0
¥164

Net book
value

¥346
1
¥347

Acquisition Accumulated
cost
depreciation$3,1748$3,182$1,1330$1,133

Net bookvalue$2,0418$2,049Future lease receipt, inclusive of interest, at March 31, 2002 and2001 under such lease were as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of
U.S. dollars

2002

2001

2002

¥ 45
246
¥291

¥ 65
301
¥366

$ 338
1,846
$2,184

Millions of yen

Thousands of
U.S. dollars(Note1)

Total revenue and Depreciation charges for the years ended
March 31, 2002, 2001, and 2000 were as follows:

Years ended March 31, 2002, 2001 and 2000

2002

2001

2000

2002

Total revenues
Depreciation charge

¥58
¥36

¥51
¥24

¥55
¥21

$435
$270

16. Subsequent events
On June 27, 2002 the shareholders of the Company approved
payment of an annual cash dividend of ¥4.0 ($0.03) per shareor total of ¥2,287 million ($17,163 thousand) to shareholders ofrecord at March 31, 2002.

Financial Section 45

Report of Independent Public Accountants

To the Shareholders and the Board of Directors of
Sumitomo Metal Mining Co., Ltd. :We have audited the accompanying consolidated balance sheets of Sumitomo Metal Mining Co., Ltd. (a Japanese corporation) and subsidiaries as of March 31, 2002 and 2001, and the related consolidated statements of operations, shareholders'equity and cash flows for each of the three years in the period ended March 31, 2002, expressed in Japanese yen. Our
audits were made in accordance with generally accepted auditing standards in Japan and, accordingly, included such testsof the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position of
Sumitomo Metal Mining Co., Ltd. and subsidiaries as of March 31, 2002 and 2001, and the consolidated results of theiroperations and their cash flows for each of the three years in the period ended March 31, 2002 in conformity with accounting principles generally accepted in Japan (Note 1) applied on a consistent basis during the periods, except as noted in thefollowing paragraph.
As explained in Note 2, Sumitomo Metal Mining Co., Ltd. and consolidated domestic subsidiaries adopted, on a prospective basis in all cases, new Japanese accounting standards for financial instruments effective April 1, 2001, for financial
instruments, employees’ severance and retirement benefits and foreign currency translation effective April 1, 2000, and forconsolidation and income taxes effective April 1, 1999.
Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated financial statements have been translated
from Japanese yen on the basis set forth in Note 1.

Tokyo, Japan
June 27, 2002

46 Report of Independent Public Accountants

SMM Group
Branches, Divisions & Laboratories

Principal Affiliated Companies

Overseas Affiliated Companies

Head Office11-3, Shimbashi 5-chome
Minato-ku, Tokyo 105-8716, Japan
Phone : 81-3-3436-7701
Facsimile : 81-3-3434-2215

MINERAL RESOURCES
Sumiko Consultants Co., Ltd.*

Sumitomo Metal Mining
America Inc.*
900 Fourth Avenue, Suite 3950
Seattle, WA 98164, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814

Osaka Branch
5-33, Kitahama 4-chome
Chuo-ku, Osaka 541-0041, Japan
Phone : 81-6-6223-7718
Facsimile : 81-6-6223-7755
Nagoya Branch
1-6, Higashi-Sakura 1-chome
Higashi-ku, Nagoya 461-0005, Japan
Phone : 81-52-963-2360
Facsimile : 81-52-963-2365
Fukuoka Branch
10-1, Kami-gofukumachi
Hakata-ku, Fukuoka 812-0036,
Japan
Phone : 81-92-282-8620
Facsimile : 81-92-282-8631
Besshi-Niihama District Div.
5-3, Nishibara-cho 3-chomeNiihama, Ehime 792-8555, Japan
Phone : 81-897-37-4800
Facsimile : 81-897-37-4804
Harima Smelter346-4, Miyanishi
Harima-cho, Kako-gun
Hyogo 675-0145, Japan
Phone : 81-794-37-8651
Facsimile : 81-794-37-0223
Kunitomi District Div.
Kunitomi, Kyowa-cho
Iwanai-gun, Hokkaido
048-2143, Japan
Phone : 81-135-72-1211
Facsimile : 81-135-72-1015
Electronics Div.
6-1, Suehiro-cho 1-chome
Ome, Tokyo 198-8601, Japan
Phone : 81-428-31-1181
Facsimile : 81-428-31-9170
Hishikari Mine Dept.
3844, Maeme, Hishikari-cho
Isa-gun, Kagoshima 895-2701, Japan
Phone : 81-9952-6-3111
Facsimile : 81-9952-6-4130
Central Research Laboratories
18-5, Nakakokubun 3-chome
Ichikawa, Chiba 272-8588, Japan
Phone : 81-47-372-7221
Facsimile : 81-47-372-9133
Niihama Research Laboratories
17-5, Isoura-cho
Niihama, Ehime 792-0002, Japan
Phone : 81-897-37-7171
Facsimile : 81-897-37-7173

METALLURGY ANDMETAL FABRICATION
Hyuga Smelting Co., Ltd.*SMM Trading Co., Ltd.*
Sumitomo Metal Mining Brass &Copper Co., Ltd.*
Taihei Metal Industry Co., Ltd.*ELECTRONICS AND ADVANCED
MATERIALS
Ohkuchi Electronics Co., Ltd.*
Shinko Co., Ltd.*
Sumitomo Metal Mining
Package Materials Co., Ltd.*
Niihama Electronics Co., Ltd.*
Ajimu Electronics Co., Ltd.*
Maruzen Industry Co., Ltd.*
Sumiko Tec Co., Ltd.*
Fuji Electronics Industries Co., Ltd.*
Sumico Lubricant Co., Ltd.*
Nittosha Co., Ltd.*CONSTRUCTION MATERIALSAND HOUSING
Sumitomo Metal Mining Siporex
Co., Ltd.*
Igeta Heim Co., Ltd.*
Sumiko Tatsumi Construction
Materials Co., Ltd.*OTHER SERVICES
Sumiko Eco-engineering Co., Ltd.*
Igeta Auto Industries Co., Ltd.*
Sumiko Technical Service Co., Ltd.*
Sumiko Information Systems
Co., Ltd.*N. E. Chemcat Corporation
Nippon Ketjen Co., Ltd.
Overseas OfficeLondon OfficeVintners Place
68 Upper Thames Street
London EC4V 3BJ, U.K.
Phone : 44-020-7246-3865
Facsimile : 44-020-7246-3931
Shanghai Office
RM1105,11th Floor
Shanghai International Trade Center
2201 Yan An Road WestShanghai, China
Phone : 86-21-6219-4077
Facsimile : 86-21-6219-0466

Sumitomo Metal Mining
Arizona Inc.*
900 Fourth Avenue, Suite 3950
Seattle, WA 98164, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814
SMMA Candelaria Inc.*
Corporation Trust Center, 1209
Orange Street, Wilmington,
Delaware, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814
Sumitomo Metal Mining
Canada Ltd.*602-700 West Georgia Street
P.O. Box 10150
Pacific Center, Vancouver
B.C. V7Y1C6, Canada
Phone : 1-604-685-3274
Facsimile : 1-604-685-3276
Sumitomo Metal Mining
Oceania Pty. Ltd.*
Level 21, Governor Phillip Tower
1 Farrer Place, Sydney
N.S.W. 2000, Australia
Phone : 61-2-9247-6511
Facsimile : 61-2-9247-6599

Malaysian Electronics
Materials SDN. BHD.*
Lots 7 & 9, Jalan Ragum 15/17
40200 Shah Alam Selangor
Darul Ehsan, Malaysia
Phone : 60-3-5519-8302
Facsimile: 60-3-5519-8305
Sumiko Electronics Taiwan
Co., Ltd.*
16. East 7th St., N.E.P.Z.
Kaohsiung, Taiwan, R.O.C.
Phone : 886-7-365-3592
Facsimile : 886-7-361-2458
Sumiko Leadframe (Thailand)Co., Ltd.*
1/49 Rojana Industrial Park Moo 5,
Tambol kanham, Ampbur Utai,
Ayutthaya 13210, Thailand
Phone : 66-35-226303
Facsimile : 66-35-226309
P.T.SUMIKO LEADFRAME BINTAN*
Lots D6&D7, Bintan Industrial
Estate, Lobam/Bintan, Riau
Province, Indonesia
Phone : 62-770-696020
Facsimile: 62-770-696025
Sumiko Leadframe Singapore
Pte.Ltd.*
No.35/41 Kallang Place, Singapore
339163
Phone : 65-6293-4377
Facsimile: 65-6294-6482

COMPAÑIA CONTRACTUALMINERA CANDELARIAAVENIDA APOQUINDO 4499 4˚
PISO SANTIAGO CHILE
Phone : 56-2-251-1200
Facsimile : 56-2-251-1290

Sumiko Leadframe Chengdu
Co., Ltd.*
No: 7,Xin Yuan Nan,Er Lu,
Singapore Industrial Park, Chengdu
Hi-Tech Development Zone,
Sichuan, China.
Phone : 86-028-515-5577
Facsimile: 86-028-518-0228

P.T. International Nickel
Indonesia
Bapindo Plaza II, 22nd Floor
Jalan Jend Sudirman Kav 54-55
Jakarta, Indonesia
Phone : 62-21-5249000
Facsimile : 62-21-5249020

SMM U.S.A.Inc.*
4055 Calle Platino, Oceanside,CA
92056,U.S.A.
Phone : 1-760-941-4500
Facsimile: 1-760-941-0900

FIGESBAL
21-23, rue de L'Alma
BP C4 Noumea Cedex
New Caledonia
Phone : 687-27-2031
Facsimile : 687-27-2922

SMM Electronics Parts Pte. Ltd.*No. 6 Tuas Avenue 20
Singapore 638820
Phone : 65-6863-1123
Facsimile : 65-6863-2062*Consolidated subsidiaries

Sumitomo Metal Mining
Asia Pacific Pte. Ltd.*
No. 35/41, Kallang PlaceSingapore 339163
Phone : 65-6293-4377
Facsimile : 65-6294-8658
M-SMM Electronics SDN. BHD.*
Lots 7 & 9, Jalan Ragum 15/17
40200 Shah Alam Selangor
Darul Ehsan, Malaysia
Phone : 60-3-5519-8140
Facsimile : 60-3-5519-8110

SMM Group 47

Corporate Data/Investor Information
As of March 31, 2002

Corporate Data
FOUNDED
1590

PAID-IN CAPITAL¥88.3 billion

INCORPORATED1950

NUMBER OF EMPLOYEES
2,637

HEAD OFFICE
11-3, Shimbashi 5-chome, Minato-ku, Tokyo 105-8716, Japan

Investor Information
CLOSING DATEThe Company’s books are closed on March 31 each year.

STOCK TRANSACTION UNITS
1,000-share units

REGULAR GENERAL MEETING
The regular general meeting of shareholders is held in June eachyear. The 2001 regular general meeting was held on June 28.

STOCK TRANSFER AGENTThe Sumitomo Trust and Banking Company, Limited
Head office:5-33, Kitahama 4-chome, Chuo-ku, Osaka

COMMON STOCK
Number of authorized shares:
1,000,000,000 shares
Number of issued and outstanding shares:
571,872,794 shares
LISTING OF SHARESTokyo, Osaka, Nagoya, Fukuoka, and Sapporo stock
exchanges

Stock Transfer Agency Department:
4-4, Marunouchi 1-chome, Chiyoda-ku, Tokyo
PUBLIC NOTICESThe Company’s public notices appear in the Nihon Keizai
Shimbun published in Tokyo, Japan.
INDEPENDENT PUBLIC ACCOUNTANTS
Asahi & Co.
1-2, Tsukudo-cho, Shinjuku-ku, Tokyo

PRINCIPAL SHAREHOLDERS
Number of shares held
(thousands)
The Mitsubishi Trust and Banking Corporation (Trust accounts)
Japan Trustee Services Bank, Ltd. (Trust accounts)
UFJ Trust Bank, Limited.(Trust accounts "A")The Sumitomo Mitsui Banking Corporation
Separately managed money trustee, Mitsui Asset Trust and Banking Company, Limited "1"
Pension trustee, Mitsui Asset Trust and Banking Company, Limited "2"Japan Trustee Services Bank, Ltd./The Sumitomo Trust and Banking Co., Ltd.
(Retirement benefit trust account)
Sumitomo Life Insurance Company
Separately managed money trustee, Mitsui Asset Trust and Banking Company, Limited "B"
Separately managed money trustee, Mitsui Asset Trust and Banking Company, Limited "A"

48 Corporate Data/Investor Information

Percentage of total
shares outstanding

36,26734,51625,204
20,39818,02616,148

6.3%
6.0
4.4
3.6
3.2
2.8

14,00012,108
11,827
11,000

2.4
2.1
2.1
1.9

Corporate Officers

DIRECTORDIRECTOR

Yuji Yokoyama

Nobuto Yamaguchi

DIRECTOR

Takeshi Yamane

REPRESENTATIVE DIRECTOR

REPRESENTATIVE DIRECTOR

DIRECTOR

Chitsura Arakawa

Koichi Fukushima

Hirosuke Chihara

DIRECTORS AND AUDITORSEXECUTIVE OFFICERS(As of June 27, 2002)(As of August 1, 2002)

REPRESENTATIVE DIRECTORSPRESIDENT

Koichi Fukushima
Chitsura Arakawa
DIRECTORS
Hirosuke Chihara
Yuji Yokoyama

Koichi Fukushima

Ryoichi Suzuki

SENIOR MANAGING EXECUTIVE

Yukio Ishikawa

OFFICER

Takuro Mochihara

Chitsura Arakawa
MANAGING EXECUTIVE OFFICERS

Nobuto Yamaguchi

Hirosuke Chihara

Takeshi Yamane

Akira Ichinose

AUDITORSEXECUTIVE OFFICERS

Kenji Fujimura
Susumu Makino
Masashi Koike

Koji Aiba

Isao Shima

Yuji Yokoyama

Masahide Tsuno

Nobuto Yamaguchi

Setsuya Kuroda

Takeshi Yamane

Hajime Ohta

Corporate Officers 49