Annual
AnnualReport
Report2008
2008
ForFor
The
The
Year
Year
Ended
Ended
March
March
31,
31,
2008
2008

CONTENTS

2 Consolidated Financial Highlights
A Message from the Chairman:

4 Aiming to be a World-Class Player
6 External Environment and Business Strategy
President’s Message: My mission is to carry out

18 the FY2007–9 Medium-term Business Plan.
24 Review of Operations

34 Sustainable Growth Through Sound Business
The Inherent Strengths Supporting
40 Feature:
Our Business Strategy

48 Corporate Officers

Notes to Readersn Explanations of technical terms• Please refer to the Glossary (p.86) for ex­plana­tions of those words marked with asterisks inthe text.
• The Glossary (p.87) also contains descriptionsof some other metals-related terminology (theLME, London fixing, copper concentrates andelectrolytic nickel/ferronickel).

n Organizational rearrangement

49 Financial Section

In line with an organizational change, theElectronics and Advanced Materials Division
was renamed the Semiconductor andAdvanced Materials Division in October 2008.

86 Glossaryn Change in business segment

88 SMM Group89 Corporate Data and Investor Information

From fiscal 2007 (the year ended March 31,2008), the Housing and Construction Materials
Division was merged into the Others Division.
To aid comparability, business segment-related
information disclosed in this Annual Reportpresents these figures together under the
Others Division for all past fiscal years (except
in the Financial Section).

Unless specifically stated otherwise, information in this annual report is as of August 31, 2008.
Forward-looking Statements
Statements made in this annual report with respect to plans, strategies and future performance that are not historical facts are forwardlooking statements. SMM cautions that a number of factors could cause actual results to differ materially from those discussed in theforward-looking statements.

SMM Group Corporate Philosophy• Sumitomo Metal Mining Co., Ltd. (SMM), in accordance with the Sumitomo BusinessSpirit, shall, through the performance of sound corporate activities and the promotion ofsustainable co-existence with the global environment, seek to make positive contributions to society and to fulfill its responsibilities to its stakeholders, in order to win evergreater trust.
• S MM shall, based on respect for all individuals and recognizing each person’s dignity andvalue, seek to be a forward-minded and vibrant company.

SMM Group Management Vision• By developing and employing innovative technology, we shall fulfill our social responsibilities as a manufacturing enterprise.
• Based on the principles of compliance, environmental protection and operational safety,
the Sumitomo Metal Mining Group shall pursue maximum corporate value through theprovision, via its global network, of high-quality materials such as non-ferrous metals andelectronics and advanced materials.

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

1

002

003

SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Millions of yen(Except per share amounts and key ratios)

FY2005

FY2004

FY2003

FY2002

FY2001

FY2000

FY1999FY1998FY1997

1,132,372
155,394
217,866
137,808
73,956
65,14530,505
157,383(126,413)
55,72730,970966,764
162,632
205,285
126,054
46,70851,567
25,693
95,985(77,429)(10,073)
18,556

625,579
82,756
99,71662,80021,91550,56822,951
70,772(102,384)
28,723(31,612)484,585
47,89354,48637,017
13,51336,48820,57840,150(31,725)
6,097
8,425

402,131
22,77827,811
19,882
7,112
46,54017,82432,324(17,448)(9,293)
14,876355,242
16,593
14,559(1,172)
3,400
18,92718,283
26,105(21,246)(14,163)4,859

330,194
1,147(1,477)(6,611)
1,535
25,37917,82233,370(16,246)(14,267)
17,124375,352
26,93025,14015,103
4,078
28,078
16,77423,339(4,248)(26,089)
19,091

360,2998,990
11,9124,740
2,406
20,49016,611(800)
4,143(9,086)3,343

350,288858
1,686(12,495)
326
32,49923,09522,912(23,287)
4,047
(375)

431,950
24,622
20,440
10,157(2,599)27,96821,63843,056———

1,091,716
640,345589,640
169,394
258,054929,208
528,921495,844
93,800189,910772,562
394,899373,752
114,405
190,891

573,925—
283,897
109,777
160,533

517,930—
253,071
86,437
148,351

470,774—
223,341
76,470154,799

518,756—
236,31373,972167,077

530,080—
237,470
83,839176,998

544,121—235,231
107,266
197,624544,519—
226,795
124,535
207,821566,088—
243,436
82,356
201,515238.13
1,017.96
30.0

220.49859.8227.0

109.96654.1514.0

64.77
497.578.0

34.76
443.296.0(2.05)
391.145.0(11.56)413.284.0

26.41
415.256.0

8.29
411.345.0(21.85)396.593.0

17.77
425.68
6.0

13.64
25.39

14.81
28.99

9.33
19.10

6.78
13.79

4.02
8.35

—
—

—
—

2.81
6.39

0.87
2.05

—
—

1.76
4.22

54.0
0.44

53.4
0.38

48.4
0.51

49.5
0.57

48.9
0.59

47.4
0.69

45.6
0.71

44.8
0.75

43.2
0.84

41.7
0.92

43.0
0.83

*1 Shareholders’ equity are defined as following equation.
Shareholders’ equity = Total shareholders’ equity + total valuation and translation adjustment

Net sales

Operating income and operating margin(Billions of yen)
1,500(Billions of yen)
200

1,200

（％）
20

150

15

900
100

50

0

5

0
2003

2004

2005

2006

2007 (FY)Net income

Total assets, shareholders’ equity and equity ratio

Interest-bearing debt, long-term debt due
after one year and debt-to-equity ratio(Billions of yen)
250

(Billions of yen)
150

(Billions of yen)
1,200(Billions of yen)
300

200

120

150

90

100

60

50

30

0
2003

2004

■ Mineral Resources ■ Metals ■ Electronics and Advanced Materials ■ Others

2005

2006

2007

0

0

(FY)

2003

2004

2005

2006

2007

(FY)

2004

2005

2006

Capital expenditures and depreciation

Cash flows

Free cash flows(Billions of yen)
80

(Billions of yen)
200

(Billions of yen)
35.0

(%)
30

20

50
40

15

0
2003

2004

2005

2006

2007

0.5

100

0.4

0

■ Shareholders’ equity

0.3
2003

2004

■ Interest-bearing debt
Debt-to-equity ratio

(Yen)
250

(Yen)
30

200

25

150

20

100

15

50

10

2005

2006

2007

(FY)

■ Long-term debt due
after one year

Shareholders’ equity per share
(Yen)
1,200

900

600
10

-17.5

-100

200

(FY)

0

0
-50

20

300

Net income per share and cash dividends per share

ROA and ROE

17.5

100

30

■ Total assets
Equity ratio

150
60

600

2007 (FY)(Times)
0.6

45

0
2003

■ Recurring profit ■ Equity in earnings ofaffiliated companies

Operating margin

(%)
60

900

10

600
300

Recurring profit and equity in earnings ofaffiliated companies

300

-150
0
2004

■ Capital expenditures

2005

2006

■ Depreciation2007 (FY)

0

-35.0

-200
2003

2003

2004

2005

2006

2007

■ Net cash flows from operating activities■ Net cash flows from investing activities■ Net cash flows from financing activities

(FY)

2003

2004

2005

2006

2007

(FY)

0
2003
ROA

2004

2005

ROE

2006

2007 (FY)

0

5
2003

2004

■ Net income per share

2005

2006

2007

(FY)

2003

2004

2005

2006

2007

(FY)

Cash dividends per share

Note: Net sales and operating income of business segments include inter-segment transactions.

2

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

SUMITOMO METAL MINING CO., LTD. Annual Report 20083

天地 297- 左右 395

FY2006仕上がり

Equity ratio (%)*1
Debt-to-equity ratio (times)*1

FY2007

山下

Results for the year:
Net sales
Operating income
Recurring profit
Net income (loss)
Equity in earnings of affiliated companies
Capital expenditures
Depreciation
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Free cash flows
Financial position at year-end:
Total assets
Net assets
Shareholders’ equity*1
Long-term debt due after one year
Interest-bearing debt
Amounts per share (Yen):
Net income (loss)
Shareholders’ equity*1
Cash dividends
Key ratios:
ROA (%)ROE (%)*1

2008 年 09 月 17 日 10 時 40 分

08116-1387 住友金属鉱山 2008AR 英文 再校 F9000 Comp_M45_175 線

Consolidated Financial Highlights

A Message from the Chairman

Chairman and
Representative Director:
Koichi Fukushima

4

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

President andRepresentative Director:
Nobumasa Kemori

The social role and raison d’être of the SMM Group amid intensifying
competition for resources and growing environmental problems
Demand for non-ferrous metals is growing. The BRICs economies that are supporting this expansion in demand arelikely to continue growing at rapid rates. We are seeing the impact of this trend in terms of higher non-ferrous metals prices and increasingly fierce competition to secure global resources.
Looking to the future, the resource sector will certainly be a growth industry. Amid increasingly fierce competition for resources, our raison d’être is to secure sources of copper, nickel, gold and other non-ferrous metals sothat we can maintain a high-quality supply of such materials and fabricated items. We have a vital role to play incontinued industrial development and economic growth by maintaining consistent supplies of materials to industries that lead the global economy such as the electrical machinery and automotive sectors.
Mounting global interest in environmental issues provides companies with an opportunity to make a greater
contribution to society by upgrading efforts to tackle environmental problems. If we look at the SMM Group’s
semiconductor and advanced materials business, our portfolio of technologies and products contains numerous
promising materials that offer good environment-related business development opportunities. Our battery materials
for hybrid vehicle applications provide an excellent example. We are investing aggressively to develop technologies
and products in a number of areas with potential so that we can expand our presence in environment-related fields.
I believe that it is important from a management perspective for us to take another look at our existing materials
operations with a view to refocusing our R&D activities on the most promising areas.

Building a stronger platform for future growth as the main theme of
our FY2007–9 Medium-term Business Plan
Our previous three-year Medium-term Business Plan (FY2004–6) comprised five major projects*1 that were aimed atsecuring resources on a number of fronts. We were able to make progress and deliver good results based on thisplan even as huge changes occurred in our operating environment over the course of the plan period. The main
theme of the FY2007–9 Medium-term Business Plan that we initiated last year is to build on the earlier progress sothat we can create a stronger platform for future growth.
We are therefore focusing our efforts on developing the human resources to enable us to realize our objectives. We recognize that this will necessitate a fundamental revision of our personnel development systems.

Aiming to build greater trust as a company based on the Sumitomo
Business Spirit
It has been a year since I was appointed Chairman of the Board. I believe that the transition to my successor aspresident, Nobumasa Kemori, has been a smooth one. In addition to Mr. Kemori’s character, this reflects the factthat SMM’s business strategy and policies have permeated successfully from top management all the way down thecompany, which has meant that everyone has a firm grasp of the direction in which the SMM Group is headed.
In accordance with the Sumitomo Business Spirit, the SMM Group Corporate Philosophy and Management
Vision exhort us to undertake sound corporate activities so that we can make a positive contribution to society andfulfill our responsibilities to stakeholders. Based on this solid business platform, going forward we will strive tomaximize enterprise value and earn the continued trust of society.
August 2008

Koichi Fukushima
Chairman and Representative Director

SUMITOMO METAL MINING CO., LTD. Annual Report 20085

External Environment and Business Strategy

Global Non-Ferrous
Metals Industry Overview
Rising demand plus fiercer competition to secure resources

Prices of non-ferrous metals such as copper and nickel have been rising fast since2003. Underpinning this boom has been strong economic growth within the BRICs
emerging nations, which collectively account for about 40% of the world’s population and 10% of global GDP. Supply has failed to keep up with the sharp increase indemand for non-ferrous metals, which has pushed up prices. Economic growth isprojected to remain robust in BRICs nations going forward and these major emerging markets are expected to continue to drive growth in global non-ferrous metals
demand. This undercurrent of the major expansion in demand has been a distinctive
feature of the surge in prices.
As the upward trend in non-ferrous metals prices has developed, we have also
seen the emergence of resource nationalism and national strategies to secure resources. At the same time, the major mining firms based outside Japan have engaged in a series of mergers and acquisitions. The resulting consolidation of the industry is leading to the world’s mineral resources being controlled by ever fewer
players. The global deployment of huge amounts of capital and the increasing involvement of nation states are expected to lead to fiercer competition to secure resources in the future.
Amid rising demand and intense competition for mineral resources, industrial
action by miners, production stoppages and various other factors have added tosupply uncertainties. An influx of speculative trading funds into commodity markets
has been an additional factor. Overall, the trends seen in non-ferrous metals prices
have been unlike anything recorded in the past.

6

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

External Environment and Business Strategy(Thousands of tonnes)

20,000Global and BRICs demand for copper (forecast)Global(Thousands of tonnes)

20,00015,000Global

15,00010,000BRICs
10,000
5,000
BRICs
5,000
0

0

2004

2005

2006

2007

2008

2009

2010 (CY)

2004

2005

2006

2007

2008

2009

2010 (CY)
Source: BROOK HUNT

Global nickel production volume and China’s stainless steel production volume(Thousands of tonnes)

1,500(Thousandsof tonnes)
1,200

1,500

Global nickel production volume (left scale)

China's stainless steel production volume (right scale)(Thousands of tonnes)

Global nickel production volume (left scale)

China's stainless steel production volume (right scale)(Thousandsof tonnes)
12,00015,00015,000

900
1,200

9,000
12,000

600
900

6,000
9,000

300
600

3,000
6,000

0
300

2002

2003

2004

2005

2006

2007

0
(CY) 3,000

Source: Estimate by SMM

0

2002

2003

2004

2005

SUMITOMOMETAL MINING CO.,LTD. Annual Report
2006
2007
(CY)2008

07

Trends in Non-Ferrous Metals Markets
Copper: Prices continue tosurge while production falters as
the result of lower-quality ores andmine obsolescence

The quality of ore extracted from many of the world’s major copper mines has fallen noticeably in recent years. Usually these ores contain about 1–2% of copper by weight, but
recently the amounts of ores with grades of less than 1% have been increasing. This trendmeans that production output of metal falls unless higher volumes of copper ores are processed, putting pressure on smelting firms to raise production. It is also one of the factors
spurring the expanded use of recycled raw materials as secondary sources of copper.
While many mines are increasingly approaching obsolescence, little progress is being
made in terms of developing new sources of copper. Impeding factors include rising development costs and a trend toward using M&A to control existing resources rather thanfocusing on development of new mines. The emergence of resource nationalism has also
prompted countries to tighten rules and exert more authority over state-controlled mineral resource assets.
Copper prices have risen sharply since late 2003. In part this reflects supply constraints due to the suspension or termination of production at high-cost mines in response to the depressed prices recorded prior to the current boom. However, a major
cause is the rise in demand from countries such as China. A relative lack of supply has
been the main factor pushing up market prices.

Nickel: Prices expected toStainless steel accounts for more than 60% of global demand for nickel. While demand forrise in reflection of robust demand,
particularly from China

in China have contributed to fast growth in demand for stainless steel. Global demand has

nickel has stayed buoyant in Western countries, consistently high rates of economic growthgrown substantially as a result. China has now overtaken Japan as the world’s leading
source of demand.
Applications related to energy and power generation are also creating strong growthin demand for nickel-rich specialty steels and alloys. For example, due to the high price ofoil, companies are increasingly looking to exploit deep-well technology to develop deepsea oil and natural gas reserves in projects that had been previously overlooked owing to
the high costs involved. This is one of the factors pushing up demand for nickel-rich alloys,
whose high resistance to corrosion is useful in extreme operating environments. Led by the
BRICs economies, global energy demand is projected to increase in the future, thus continuing to push up demand for nickel.

8

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

($/tonne)
10,000External Environment and Business Strategy

8,000($/tonne)
10,000
CopperPrice (LME)($/tonne)
6,000
10,000
8,000
4,000
8,000
6,000
2,000
6,000
4,000
0
4,000
2,000 2000/1

2001/1

2002/1

2003/1

2004/1

2005/1

2006/1

2007/1

2008/1 2008/7

2000/1

2001/1

2002/1

2003/1

2004/1

2005/1

2006/1

2007/1

2008/1 2008/7

2000/1

2001/1

2002/1

2003/1

2004/1

2005/1

2006/1

2007/1

2008/1 2008/7

2001/1

2002/1

2003/1

2004/1

2005/1

2006/1

2007/1

2008/1 2008/7

2001/1

2002/1

2003/1

2004/1

2005/1

2006/1

2007/1

2008/1 2008/7

Gold Price
Fixing)2000/1 (London
2001/1
2002/1

2003/1

2004/1

2005/1

2006/1

2007/1

2008/1 2008/7

2006/1

2007/1

2008/1 2008/7

2,000
0

0
($ /lb)25

Nickel Price (LME)
($20
/lb)
25
($15
/lb)
25
20
10
20
15
5
15
10
0
10
5 2000/1

5
02000/10($ /TOZ)
1,000($ /TOZ)
800
1,000($ /TOZ)
1,000
600
800

800
400
600

600
200
400

2000/1

2001/1

2002/1

2003/1

2004/1

2005/1

2000/1

2001/1

2002/1

2003/1

2004/1

2005/1400

SUMITOMO METAL MINING CO., LTD. Annual Report 2008200

2006/1

2007/1

2008/1 2008/7

9

The market for nickel is small compared with those for other base metals such as copper and aluminum. This tends to make nickel prices more susceptible to changes in the
supply-demand balance or to an influx of speculative trading capital. Nickel prices soared
rapidly in response to the sharp rise in demand from China and an influx of trading capital,
but retreated after the London Metal Exchange (LME) imposed restrictions on speculationin June 2007. Although nickel prices have since fallen sharply to levels less than half of thepeak, prices are still high relative to those recorded in 2003 prior to the surge. The residual pricing differential reflects the impact of rising demand for the metal from emerging
markets.

Gold: Prices remain elevatedamid robust demand, with China
taking over the mantle of top
global producer

While the gold production output of major producing nations such as South Africa, theUnited States and Peru has been declining, annual output in China has been on the increase. Replacing South Africa, China assumed the mantle of top global producer in 2007.
Production in South Africa has halved over the past ten years, reflecting the depletion of
productive veins and problems with retaining technical personnel and mine laborers. Although major gold mining companies based in North America and South Africa have actively entered into mergers, acquisitions and strategic alliances, production output has
failed to generate any significant growth. On the demand side, countries such as China
and India now account for around 30% of total global demand for gold used in fabrication, mainly in jewelry and electronics-related applications.
The cross-cultural value of gold means that price formation in this market is not governed
purely by supply and demand. The price of gold has traditionally also reflected other factors such as global geopolitical or financial conditions. The metal is often regarded as astore of value in times of trouble, meaning that its price tends to rise during periods ofpolitical or financial uncertainty. Gold is also seen as an inflation hedge: any uncertainty
concerning inflation due to factors such as high oil prices tends to support the price ofgold.
Funds have flowed into the gold market following the depreciation of the U.S. dollar andthe economic volatility sparked by the subprime loan crisis. The price of gold has also exhibited a robust upward trend as gold producers have curtailed their earlier hedging practice of forward-selling projected output in the commodity futures markets.

10

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

External Environment and Business Strategy

SUMITOMO METAL MINING CO., LTD. Annual Report 200811

Overview of Semiconductor andAdvanced Materials Markets
Semiconductors:
Demand growth driven by digitalappliances and the automotive sector

The global semiconductor market has expanded consistently to date and is forecast tocontinue growing over the medium and long term.
Emerging trends include ongoing growth in demand for mobile phones and othertypes of electronic equipment in developing countries and the projected replacement demand within developed markets for laptop PCs and 3G mobile handsets with advanced
functionality. At the same time, the automotive sector is also expected to generate significant demand growth. Vehicles are rapidly incorporating more electronic components inthe form of engine controls and various types of sensors. The proportion of semiconductor
demand derived from automotive applications is set to rise above 20% within the near
future.

LCDs: Taiwan emerging as a
key market amid rising demand

Global demand for flat-screen televisions is rising quickly. Falling sales prices for theseproducts are promoting consumer uptake in emerging markets such as China. Anothermajor demand driver is an ongoing shift in Japan and other developed country markets
toward full high-definition models.
In recent years, companies in South Korea and Taiwan have emerged as a force in LCD
panel materials, which traditionally has been an area of specialty for Japanese producers.
For example, Taiwanese firms with manufacturing bases in coastal China now account for
40% of global output in LCD driver ICs.*5 This makes Taiwan one of the leading producer
markets within this sector. The market is projected to continue growing amid broader
competition between companies in terms of both technology and price.

Battery materials:
Prospects broaden for next-generation batteries as development
accelerates

Technical progress is accelerating the evolution of rechargeable secondary batteries,*11 andthe market for these products has expanded as the range of applications has broadened.
Secondary lithium-ion batteries combining high power output with low weight and superior cost performance power many of the latest PCs and mobile handsets.
Automotive applications for rechargeable secondary batteries are expected to increasein the future with the growing adoption of the hybrid electric vehicle (HEV). Currently theUnited States is the largest market for such HEVs, but the global market for such vehicles
is expected to grow rapidly going forward as more models are launched.
Most of the batteries that power the current lineup of HEVs are of the nickel metal
hydride variety. However, attention is also focusing on development of lithium-ion batteries for automotive applications owing to the potential benefits in terms of higher performance, reduced weight and lower replacement cost. The competition between various
manufacturers to develop rechargeable secondary batteries for automotive use has intensified amid rising oil prices and mounting environmental concerns. Expectations have risenthat this will lead to the emergence of new materials and technologies.

12

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

(Millions of U.S. dollars)

30,000External Environment and Business Strategy

25,000(Millions of U.S. dollars)

30,000
Semiconductormonthly shipment value (actual)
20,00025,00030,00015,000Notebook PCs

LCD TVs

20,00025,00010,000EuropeJapan

Asia-Pacific(Millions of U.S. dollars)

China

Korea

Americas

LCD Monitors

Japan

EuropeUSA

15,00020,0005,000
10,00015,0000
5,000
10,0000
5,000

2002/1

2003/1

2004/1

2005/1

2006/1

2007/1

2008/1

Source: WSTS (World semiconductor trade statistics)

2002/1

2003/1

2004/1

2005/1

2006/1

2007/1

2008/1

Source: WSTS (World semiconductor trade statistics)

0(m )20,0002

2002/1

2003/1

2004/1

2005/1

2006/1

2007/1

2008/1Asia-PacificSource: WSTS (World semiconductor trade statistics)
EuropeAmericas
Japan

(m2)
15,00020,000LCD TVs

Notebook PCs(m2)
20,00010,00015,000Korea

Large-area TFT-LCD panel demand (estimation)

China

Japan

LCD Monitors

EuropeUSA

15,0005,000
10,00010,000
0
5,000

2007
3Q

2007
4Q

1Q

2008
2Q

2008

2008

3Q

4Q

2009
1Q

2009
2Q

Source: Large Area TFT-LCD Panel Supply & Demand Analysis — 15th Edition May 2008 (Displaybank)

5,000
0

2008

2007
3Q

2007
4Q

2008
1Q

2008
2Q

Asia-Pacific

2008
3Q

Japan

2008
4Q

EuropeAmericas

1Q

2Q

2009

2009

Source: Large Area TFT-LCD PanelLCD
SupplyAnalysisPCs— 15th Edition
May 2008 (Displaybank)
Notebook
LCD Monitors
TVs& Demand

0

2007
2008
2007
Hybrid car production(forecast)
3Q
4Q
1Q

2008
2Q

2008
3Q

2008
4Q

2009
1Q

2009
2Q

ChinaAnalysis Japan
EuropeUSA
Source: Large Area TFT-LCD PanelKorea
Supply & Demand— 15th Edition
May 2008 (Displaybank)(Thousands)

5,000

4,000
(Thousands)
5,000(Thousands)
3,000

5,000
4,000
2,000
4,000
3,000
1,000
3,000
2,000
0
2,000
1,000

1,000
0

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

2013
2014
2015 (CY)
Source: HEV Market Report 2008 (HIEDGE INSTITUTE Ltd.)SUMITOMO METAL MINING CO., LTD. Annual Report 2008

2013

2014

2015 (CY)

Source: HEV Market Report 2008 (HIEDGE INSTITUTE Ltd.)13

External Environment and Business Strategy

Overview of longer-termbusiness strategy and FY2007–9
Medium-term Business Plan
~Strategic objectives: become a major player in the non-ferrous
metal industry (Mineral Resources and Metals); secure leading
global market shares for our key products (Semiconductor andAdvanced Materials)
The FY2007–9 Medium-term Business Plan marks the second stage of our longerterm business strategy. Fiscal 2008 is the second year of this plan.
The longer-term business strategy is to focus on our two core businesses in themineral resources and metals and semiconductor and advanced materials sectors.
The basic strategic objectives for the SMM Group are to become a major within the
non-ferrous metals industry in the mineral resources and metals sector, and to secure leading global market shares for our products in the semiconductor and advanced materials sector.
To develop and grow these core businesses, in the mineral resources and metals
sector we are focusing on raising production output by boosting the scale of production at the mines around the world in which the SMM Group owns equity interests, while at the same time expanding smelting capacity. In the semiconductor andadvanced materials sector, we are focusing our efforts on developing new products
and on expanding our sales beyond the domestic market in Taiwan and China.
Other areas of focus include reinforcing the management infrastructure bystrengthening occupational health and safety, environmental preservation and compliance programs so that we can uphold the SMM Group Corporate Philosophy;
expanding and upgrading programs to retain and develop human resources; making
further progress with the SMM Group’s financial strategy; and improving corporate
governance and CSR activities.
Through such initiatives aimed at further strengthening our management capabilities and general business vitality — and by trying to raise the bar in each of theseareas -- we aim to build enterprise value.

14

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Join ranks of non-ferrous majors

06 3-year Plan (FY2007–2009)
Building on growth strategy from 03 3-Year Plan
Key points

Toyo Smelter & Refinery: Establish 450ktpa set-up for copper
Copper: Secure supply of smelting ores (proprietary ore ratio of 40%)
Nickel: Create building blocks for 100ktpa set-up

Core business
Semiconductor materials
business
Advanced materials
business

Leading global
market sharesin key products

2003

Achieve by
FY2013Gain leading global market shares

Toward a“resources +refining” business
model

Mineral resourcesbusiness
Metals business

Proprietary ore
ratio*2 to 2/3

Pogo Gold Mine: Ongoing production ramp-up to 12tpa

Semiconductor and Advanced Materials:
Targeting synergy creation throughoptimization of Group operations

2006

2009

2012 (FY)

Toyo Smelter & Refinery: Establish 450ktpa set-up for copper

Copper: Secure supply of smelting ores (proprietary ore ratio of 40%)

We are on track to build a 450ktpa set-up for electrolytic copper at the
Toyo Smelter & Refinery by fiscal 2009. With a capacity of 450ktpa, theelectrolytic copper production line is one of the single largest such facilities in the world.

We have sought to secure supplies of copper smelting ores while at thesame time expanding our smelting capacity. As part of this strategy, weinvested in an equity stake in a sulfide ore development project at the
Cerro Verde Copper Mine. The commencement of operations at this project in November 2006 has helped to boost our proprietary ore ratio forcopper to 40%.
•	Off-take rights for half of the copper concentrates produced at Cerro
Verde (equivalent to 90ktpa of copper) for an initial ten-year period•	Active investment in exploration activities to boost the ratio to twothirds• Production output:
FY2004: 268kt
FY2006: 366kt

FY2005: 327kt
FY2007: 407kt

Nickel: Create building blocks for 100ktpa set-up
This is the major theme of the FY2007–9 Plan. We are putting in place thebuilding blocks needed to achieve a 100ktpa level of output for nickel by
fiscal 2013. By further honing advanced refining technologies such as
HPAL*3 and MCLE,*4 which have drawn critical approval worldwide, we aim
to expand production by securing a stable supply of raw materials.

Pogo Gold Mine: Ongoing production ramp-up to 12tpa
Located in Alaska in the US, Pogo is a gold mine in which the SMM Group
has a majority interest. It was developed following a successful in-houseprospecting project. Production began in February 2006, around 11 years
after the initial discovery of gold seams.
•	Ongoing ramp-up in operating capacity toward 12tpa target for 2009

• CBNC: second-phase plant operational by April 2009 (22ktpa)•	Expansion of electrolytic nickel production capacity in Japan by FY2012(from 30ktpa to 65ktpa)• Goro Nickel Project: operational by end of 2008 (60ktpa)• Taganito Nickel Project: provisionally operational by FY2012 (30ktpa)

Semiconductor and Advanced Materials: Targeting synergy creation through optimization of Group operations
In this sector, our aim is to secure leading global market shares for our
major products. To this end, in October 2008 we initiated a reorganization to focus efforts on those technical areas where we are strong, toaccelerate product development, and to maximize synergy benefits.
Reinforcement of existing operations•	Maintain and build on leading global market shares for major productgroups such as copper-clad polyimide film (CCPF), bonding wire,*8 nickel paste and lead frames*7•	In tape bonding materials,*7 commence production of COF*6 in Taiwan
based on a new manufacturing process

Accelerate product development
Establish four core development themes (including development of moreadvanced materials)•	Battery materials (such as LNO*12)•	Single-crystal materials (such as sapphire substrates)•	Thin-film materials*9 (such as materials for sputtering targets*9)•	Thin-film chip packaging materials (including CCPF and IC substrates)

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

15

016

017

Progress Status of Major Projects

chased in-houseNi

exploration activities with the aim ofestablishing a 100ktpa production setup

CopperTotal electrolytic Cu output(Thousands of tonnes)

(%)

600

60

500

50

400

40

300

30

200

20

100

10

0

0

However, our plans assumed a stable quality of ore
to ensure efficient production. Reflecting a decline
in the grade of copper concentrates, during fiscal
2008 we plan to improve smelting processes tocope with the lower-quality ore and thus regain
operational stability toward realizing a 450ktpa setup.

NickelOthersTaganito
Goro
Coral Bay
P.T.INCOAt Philippines-based CBNC, where the first-phase
plant is already operating, production at a secondphase plant is due to commence around April
2009. This will enable use to secure 22ktpa of raw
materials. As a follow-on project, we are also pushing forward with the Taganito Project to supply
raw materials using HPAL*3 technology. Alongsidethese two projects, we are also upgrading nickel
refining capacity at our facilities in Japan with the

山下

Under the FY2007–9 Plan, we are focused on securing smelting ores and bolstering the earnings
base through the stable operation of overseas
mines such as Cerro Verde in Peru. We are also
undertaking an aggressive exploration programwith the aim of developing copper mines in which
the SMM Group has a controlling stake. Our aim is
to raise the proprietary ore ratio*2 for copper from
40% at present to around two-thirds in the future.
Production output from the Toyo facility has
increased steadily in line with internal projections.

Nickel Refinery

Hyuga

Develop 100ktpa capacity for Ni(Thousands of tonnes)

100

80

60

40

20

ultimate aim of expanding electrolytic nickel output
to 65ktpa by 2013. Moreover, in New Caledonia,
we are jointly developing the Goro Nickel Mine inpartnership with VALE Inco. Production is due tocommence in late 2008.
By 2013, we thus intend to raise overall nickel
production capacity to 100ktpa, from the current
level of 56ktpa.
Another key exploration project to secure nickel resources to increase output beyond the 100ktpa
mark is currently progressing in the Solomon Islands.

Au

ing new product development. An organizational
restructuring to achieve these aims has been underway since October 2008.
We have also upgraded our production capacity both in Japan and overseas in response to rising
global demand for LCD panel materials. Taiwanbased producers in particular have been grabbing
market share for LCD driver ICs*5, and now havearound 40% of the world market for these products.
With a view to capitalizing on this trend, in 2008 wecommenced production of COF*6 substrates used in
LCD driver applications at a new plant in Taiwan. In
lead frames,*7 we are aiming to maintain and build
on our leading share of the global market by increasing operating capacity at our production facility
in Suzhou (Jiangsu Province, China).

Close to full operating capacity at ma-

Gold

Overseas
03

04

05

06

07

08 (FY)

Toyo
Proprietary ore ratio for Toyo

Semiconductor &Advanced Materials
Semiconductor andAdvanced Materials

Cerro Verde

16

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

0

06

07

08

09

10

11

12

13 (FY)

Cultivating inherent strengths andpromoting new product development
through organizational restructuring
In this sector, we have established four core development themes (including the development of
more advanced materials).
Core development themes include battery
materials (such as LNO*12), single-crystal materials(such as sapphire substrates), thin-film materials*9(such as materials for sputtering targets*9) and thinfilm chip packaging materials (such as CCPF andIC substrates). Based on these various themes, weare aiming to re-cultivate the strengths of the SMM
Group in materials technologies while also reinforc-

jority-interest Pogo Gold MineThe Pogo Gold Mine is important in that it is the
SMM Group’s first overseas mine in which we own
a majority interest. Located in Alaska, USA, thePogo mine began production in 2006. After some
initial teething troubles, output reached 80% of
full design capacity in fiscal 2007. During fiscal
2008, our priority is to increase production up to
the 11tpa level ahead of a further rise to 12tpa (fullcapacity) in fiscal 2009.

SUMITOMO METAL MINING CO., LTD. Annual Report 200817

天地 297- 左右 395

Cu

steadily raising the ratio of ores pur-Expansion of operating capacity and

仕上がりRealizing 450ktpa production set-up by

2008 年 09 月 18 日 10 時 00 分

08116-1387 住友金属鉱山 2008AR 英文 下版 F9000 Comp_M45_175 線

External Environment and Business Strategy

President’s Message

My mission is to carry out
the FY2007–9 Medium-term
Business Plan.
The core theme of the FY2007–9 Medium-term Business Plan that we began last year
is to achieve the two growth strategy objectives originally set out by Chairman Fukushima in the FY2004–6 Medium-term Business Plan. These are to become a major
within the non-ferrous metals industry in our mineral resources and metals business,and to secure leading global market shares for our products in the semiconductor andadvanced materials sector.
	Becoming a major within the non-ferrous metals industry does not mean that weneed to attain a similar scale of operations to the world’s top mining firms, which havetransformed through mergers to attain so-called “super-major” status. It is not realistic
for us to target the top-ranked positions in the global industry in terms of scale. What
we are aiming to do is to develop a “mineral resources + refining” business model inwhich we do our own exploration and mine development. In other words, we aim to
be a firm with sufficient scale to develop mineral resources completely in-house. Thishas been a consistent theme of our medium-term business plans ending in FY2003,
FY2006 and FY2009. I believe that this is a realistic goal for us.
Our core focus for the FY2004–6 Plan was on the development of our copper business. With the FY2007–9 Plan, we are concentrating our efforts primarily on our
nickel operations with the aim of putting in place the blocks required to build up ournickel production capacity to 100ktpa.
In the semiconductor and advanced materials business, we are now investing moreheavily to upgrade our technical expertise so that we can generate new streams ofearnings to supplement our existing mainstay products. New areas offering potential
earnings growth include chip-on-film (COF*6) substrates, sapphire substrates and battery materials.
	By carrying out the FY2007–9 Plan, we aim to build a more robust business baseso that we can target future growth.

18

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

SUMITOMO METAL MINING CO., LTD. Annual Report 200819

Making management more
responsive by tackling two
issues

I have spent a good part of my first year as president visiting company sites and introducing myself to a variety of people so that SMM Group employees are aware of thetransition at the top.
Outside the company, I have also made a point of meeting the prefectural governors and other local dignitaries in the parts of Japan where we have operations, aswell as many of our key suppliers. Taking advantage of varied opportunities, I havealso shaken hands with our overseas partners to assure them that we remain committed to our joint business ventures. In addition, I have visited many mining and smelting companies in the industry to deepen our relations, particularly with those sector
peers that are developing business globally and with whom we have good relations.
In my travels over the past year I have visited each of the 40 domestic SMM
Group sites. This has given me the chance to observe our frontline operations at firsthand and to have a direct dialogue with employees.
What struck me particularly is that we need to make the management of ourbusiness faster and more responsive. I believe that this involves tackling two issues.
First, we need to make our corporate culture more goal-oriented by implementing
short PDCA (Plan, Do, Check, Act) cycles with clearly defined responsibilities, methods
and limits. The second issue is to upgrade human resource development. In line withour business strategy, we are expanding the presence of the SMM Group into a
broader range of business domains. This means that we need to invest more in thepeople in frontline operations, both in Japan and overseas. I believe that investing
more to cultivate human capital in order to develop our future business remains a key
issue for us.

Reinforcing the businessbase for the next generation of growth by steadily
upgrading the production
set-upBy the end of fiscal 2006, we had completed the major capital investment projects to(Mineral Resources and Metals Division)

With nickel, Philippines-based Coral Bay Nickel Corporation (CBNC) reached fullcreate a 450ktpa production set-up for copper at the Toyo Smelter & Refinery. Sub­sequently, we have ramped up production gradually, with annual output rising from366kt in fiscal 2006 to 410kt in fiscal 2007. While we expect output to dip to 400kt
in fiscal 2008 owing to the effect of lower-grade copper concentrates, we remain oncourse to achieve a full-capacity output target of 450kt in fiscal 2009.
operating capacity in 2007 and is currently producing a little over 10ktpa of nickel
intermediates for refining (slightly above design capacity). Construction work on asecond-phase plant to double production capacity is progressing steadily, with operations due to commence in April 2009.
Production output of gold at the Pogo mine in Alaska in the United States was
3.2t in 2006, the first year of production. Annual output rose to 8.1t in 2007. We aretargeting a figure of 11t for the year to March 2009. Our medium-term goal is annual gold output of 12t.

20

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

President’s Message

We have been expanding the scale of our exploration and prospecting budget
over the years. In fiscal 2008 we plan to spend ¥4.7 billion on such activities, which
represents a significant increase on previous years. While exploration projects requiretime to generate results, we are aggressively increasing our investment in such activities so that we can build a stronger business base to support the growth of the company over the next couple of decades. Through these initiatives, we aim to increase
our proprietary ore ratio*2 for copper from around 40% at present to about twothirds over the longer term.

Mineral resources and metals strategy: Progress overview
Copper: Thousands of tonnes (Toyo, Cerro Verde)(Coral Bay) Nickel: Thousands of tonnes

500

25

400

20

300

15

200

10

100

5

0

2004

2005

2006

Electrolytic Cu (Toyo)

2007

2008

2009

Sulfide ore (Cerro Verde)

2010

(FY)

0

Mixed sulfides (Coral Bay)Achieving the FY2009 goalfor operating income bycreating optimized, rapidresponse operations

Effective October 2008, we renamed the Electronics and Advanced Materials Division(Semiconductor and Advanced Materials
Division)planned operating income target of ¥20 billion in fiscal 2009, we intend to build on

as the Semiconductor and Advanced Materials Division as part of a re-organizational
move.
Operating income in this business segment reached ¥13.6 billion in fiscal 2006,
but then declined significantly in fiscal 2007 to a little over ¥8.0 billion. To achieve thethe recent reorganization with reforms in various areas to strengthen these
operations.
In doing so we have two aims. The first is to strengthen the existing business insuch a way that we can optimize operations by creating synergies with the rest of the
SMM Group. This is a markedly different approach for the division, which until now

500
has operated on a purely stand-alone basis. Second, weare aiming to speed up deci-sion-making and product development. We plan to do this by saving time through400 the center and divisional
more coordinated internal decision-making, both between
300
200

SUMITOMO METAL MINING CO., LTD. Annual Report 200821

operating sites and within each site. We are putting people into the necessary positions to facilitate a doubling in speed. We are also adjusting the set-up within our
technical departments to enable faster decision-making and communication of information relating to product development or operational improvements.
Our principal challenge in this business segment is to achieve ¥20 billion in operating income in fiscal 2009. To achieve this objective, we are working to translate thisfinancial goal into specific actions that each individual employee must accomplish.

Cultivating a “culture ofsafety” through upgradedsafety initiatives

Occupational health and safety is a fundamental aspect of our business and represents
an important emotional issue for all employees.
In 2000, we formulated a plan to revitalize SMM from a safety perspective. Our
initial goal was to halve the number of safety-related incidents. In 2003, we formulated
a policy to cultivate an internal culture of safety by taking up the challenge of hazard
minimization based on better safety management at the production line level. After a
lot of hard work across all operating sites to develop safety programs, we achieved
the goal in 2004, recording a total of 30 safety-related incidents involving employees
for that year.
We are now working to try to eliminate such incidents completely. Led by the site
general managers, each SMM Group site is implementing effective safety activities
tailored to the needs of each workplace.

SMM group “culture of safety”(Number of safety-related incidents)
120

100

80

60

40

20

0

22

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006 2007(CY)

President’s Message

CSR evolution andpromotion of corporate
governance based on the
Sumitomo Business Spirit

SMM can trace its history directly back to the origins of the Sumitomo Group. Our
business rationale is derived from the Sumitomo Business Spirit, whose first tenetemphasizes the importance of integrity. In line with this principle, we have formulated
the SMM Group Corporate Philosophy “in order to win ever greater trust” along with
the SMM Group Management Vision, which commits us to working to maximize
enterprise value. These statements form a true and honest basis for our CSR andcorporate governance activities.
Increasing the value of a company is not merely a matter of earning profits. BothCSR and corporate governance have an important part to play as well. Our belief isthat pursuing both of these concurrently and realizing related objectives will help us
to maximize enterprise value.
The core concept at the heart of our approach to CSR is one of “sustainable coexistence with the global environment and society.” This draws on the central idea in
the SMM Group Corporate Philosophy of seeking to contribute to society and to fulfill
the company’s responsibilities to stakeholders through sound corporate activities.
From October 2008, we are taking our actions to the next level with the institution ofa CSR Policy for the SMM Group, along with the establishment of the CSR
Committee.
Corporate governance is not simply about the observance of rules. Rather, it isabout setting your own rules governing what you believe it is right to do as a company,
creating a framework, and then instituting the necessary internal procedures to checkthat corporate actions are in line with this code. We also regard proper internal
controls relating to standardization and documentation of business processes as a
critical element in boosting the effectiveness of corporate governance.

Targeting further growthin enterprise value throughsteady stream of boldinvestments

Given that the resources sector is a growth industry, we are determined to expand
and reinforce our business by pursuing a growth strategy so that we do not miss any
valuable opportunities. The three-year period to March 2010 (FY2007–9) covered byour current medium-term business plan is one in which we plan to invest aggressively
for growth. Total planned investments over this period amount to ¥140 billion.
Our priority during this period will be to reinvest profits back into the business.
We aim to maintain an equity ratio in excess of 50%. We also plan to raise thedividend payout ratio to more than 20% in fiscal 2009.
Taking into account our current situation, our overall aim is to target further
growth in enterprise value through a steady stream of bold investments.
We hope that you will continue to support SMM’s development.
August 2008

Nobumasa Kemori
President and Representative Director
SUMITOMO METAL MINING CO., LTD. Annual Report 200823

Review of Operations: SMM at a Glance
Mineral ResourcesGold and silver ores
Copper concentrates and electrolytic copper
Geological research

Metals
CopperNickelZinc
Lead
Precious metals such as gold, silver and platinum
Sulfuric acid
Copper and brass

Tasked with the dual mission of boosting the earnings of the mineral resource business and securing raw materials for the refining
business, this segment is engaged in the exploration for and development, production, and sales of non-ferrous metal resources. It isalso engaged in geological consulting utilizing mineral resource development techniques.

This segment refines non-ferrous raw materials procured fromoverseas mining companies and the mineral resources segment
into metals such as gold, copper, nickel and zinc, which it then sells.
Having achieved the world’s first commercially viable method ofrecovering nickel from low-grade ore, which had been considereddifficult with conventional technology, we possess world-class refining technology and are the industry leader.

Semiconductor and Advanced Materials

In the semiconductor materials business, we apply the materials

Semiconductor materials(Bonding wire*8, lead frames*7, CCPF, COF*6)
Advanced materials(Thick-film pastes*10, battery materials, single-crystal
materials, etc.)

spectrum non-ferrous metals producer to supply high-quality

and fabrication technologies that we have developed as a fullmaterials that are critical to the manufacture of semiconductors
and electronic equipment.
In the advanced materials business, we apply metals-related
technologies to create a range of high-value-added materials withspecific functions. These include thick-film pastes, battery materials,
single-crystal materials, thin-film materials*9 and rare metals.

Others(energy/catalysts/construction materials)
Auto exhaust and petroleum refining catalysts
Recovery and sale of valuable metals from used
catalysts
Construction materials (ALC)
Environmental surveys (air/water quality)
Environment-related engineering services

This segment includes operations to leverage various technologies
that we have developed in non-ferrous metals refining. Besides
conducting environmental surveys of air and water quality andmaking environmental protection equipment, SMM Group firms
also manufacture and sell chemical catalysts and recycle valuable
metals from used catalysts. In the housing and construction
materials sector, subsidiary Sumitomo Metal Mining Siporex Co.,
Ltd. manufactures and sells ALC (Autoclaved Lightweight aerated
Concrete).

Note: In line with an organizational change, the Electronics and Advanced Materials Division was renamed the Semiconductor and Advanced Materials Division in October 2008.

24

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

24.0
24.0

%

%

Segment (Percentage of Group operating income)

24.0

%

24.0

%

68.5

%

68.5
68.5
68.5
5.2
5.2
5.2

%

%

2.3

%

0

10
20
17.1

2004 0 27.710
2007
12.6
2003
2006
20

2004
2007
2003
2006

20

30
108.8

2004
2007
2003
(FY)
2006

80

20

100 120

82.2
40
43.7

60

80

40 60
49.7

80

100 120

100

27.7

2003
2005

12.6

2004 0
2007
2003
2006

20

0

3

80

100 120

11.2

2004
2007
2003
2006

80

6

9
12
11.2

100 120
13.6
15

5.6
3

9
12
11.2

(FY)

15

5.6
3

2004 0
3
2007
0.4
2003
2006
0

2004
2006

6.4

(FY)

(FY)

0

12

6
6.4

200

758.8
400
453.7

8

758.8
400
453.7

600

184.1
400154.9
600

100

50

100

142.7
50

100

142.7

0

10

100

20

223.6
250

255.0
223.6
250

47.7
46.1

15038.9200
40.7

25.6

250

255.0

150 200
184.1
40.7

154.9

50

223.6

150 200
184.1

154.9

0

800 1,000
255.0

150 200
184.1

142.7
0

800 1,000
255.0
223.6

154.9

2004 0
2007
2003
2006
2005

800 1,000

910.6

142.7

2003
2005

15

600

333.2

50

2005
2007

800 1,000

910.6

273.4

0

2005

600

333.2

200

6.2

4

200

2004 0
2007
2003
2006

7.3

9

15

6.2
2

0

2004
2007
2003
(FY)
2006

13.6

3.6
6
3.7

758.8
400
453.7

273.4

273.4

2005

80
100
910.6

333.2

2003
2005

9
12
11.2

5.6

(FY)

2005
2007

6
3.7

2004
2006

200

(FY)

7.3
8.2

0

0

80
100
910.6

60

273.4

2004
2007
2003
2006

13.6
6

2004
2007
2003
(FY)
2006

333.2
20
40

60

758.8

(FY)

7.3
8.2

0

2004 0
2007
2003
2006

(FY)

40 7.360
8.2
5.6

40
43.7

25.3 453.7

2004
2006

13.6

(FY)

20

2003
2005

2004
2007
2003
(FY)
2006

109.6
40 60
49.7 8.2

2004
2006

0

100

82.2

33.1

2005

80

91.4

2004
2006

2005

60

25.3

(FY)

108.8

20

2005
2007

40
43.7

33.1

2004
2007
2003
2006

109.6

12.6

(FY)

40

108.8

20

20

(FY)

27.7

0

40

109.6

12.6
0

0

(FY)

27.7

(FY)

2005

30
108.8

40 60
49.7

(FY)

2005

2004
2007
2003
(FY)
2006

109.6

2003
2005

%

2005

0

(FY)

33.5

4.5 49.7

0

40

38.1

2005
2003

2005
2007

30

4.5

(FY)

2005

%

40

91.4

Review of Operations

25.3

(FY)

10.0

10.0

2005

%

30

10
20
17.1

2006
2004

2005
2007
%

0

2004
2007
2003
(FY)
2006

2005

5.2

2.3

2005
(FY)

2005

%

33.5

10
20
17.1

33.1

Income (Billions of yen) 2004Net Sales
2004Operating
33.1 (Billions of yen)
10.0
2007
2007
91.4
38.1
2003
2003
25.3
4.5
2006
2006
82.2
33.5

2007
2005

%

2004
2007
2003
2006

38.1

4.5
0

43.7

(FY)

10.0

2004
2007
2003
2006

82.2

2005

17.1

2005
(FY)

2005
(FY)

2006

33.5

2006

250

47.7
30

(FY)

40
50
46.1

Notes:
2004
2004
3.6
38.9
1. Operating income and net sales figures include inter-segment
2007 transactions. 3.7
2007
40.7
2. Operating income ratio by segment is calculated based on operating income including inter-segment transactions for fiscal 2007, the year ended March 31, 2008.

0.4

2003
2006
2005

(FY)

0

2

4

2003

25.6

6.2

2006
47.72008
SUMITOMOMETAL MINING CO., LTD. Annual Report

6
6.4

8

2005

(FY)

0

10

20

30

40
50
46.1

25

SMM’s Mines and Refineries

Pogo (51.0%)

Morenci (12.0%)
Jinglong Copper Co., Ltd. (27.1%)[copper 270,000 tonnes]
Coral Bay (54.0%)[nickel/cobalt mixed sulfide nickel
10,000 tonnes, cobalt 700 tonnes]
Sorowako (20.1%)
Figesbal (25.5%)
Goro (11.0%)

Batu Hijau (5.0%)

Cerro Verde (16.8%)
Ojos del Salado (16.0%)
Candelaria (16.0%)

Northparkes (13.3%)

Mine (SMM’s interest)
Gold
NickelCopperRefinery (SMM’s interest) [Annual production capacity]

Harima Smelter[zinc 90,000 tonnes, lead 30,000 tonnes]
Toyo Smelter & Refinery[copper 450,000 tonnes, gold 60 tonnes,
silver 360 tonnes]
Niihama Nickel Refinery[nickel 36,000 tonnes]

SMM’s Metal Shares andEstimated Values
By MineHyuga Smelting Co., Ltd. (60%)[ferro-nickel 22,000 tonnes](Thousands of tonnes)

0500

Morenci

1,000

2,558

1,500

Hishikari Mine

945

7,088

Candelaria

341

61
457

Northparkes
Cerro Verde

1,313

9,848

13
Ojos del Salado 97

Notes:

1. Only the Company’s own mines are covered.
2. SMM’s metal share = Ore reserves (tonnes) x Metal grade x SMM’s interest in mine (%)
3. Estimated value = SMM’s metal share (tonne) x Standard metal price
4. Standard metal price = Copper: $7,500/tonne, Gold: $850/Toz, Nickel: $12/lb

208
1,560

Batu Hijau

Hishikari 0.150

4,099

Pogo 0.066
1,804
576

Sorowako

By Metal

15,238Figesbal

386

Goro

362

0

(Thousands of tonnes)

0

197
5,212

Coral Bay

1,000

Copper10,212

Gold

9,577

Nickel

10,00020,000

SMM’s Metal Share (top) ■Copper■Nickel■Gold

Estimated Value (bottom) ■26

Shisaka Plant[zinc oxide 120,000 tonnes*processing capacity]

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

30,000(Millions of U.S. dollars)

2,000

2,881

21,608
0.216

5,903
1,521

0

3,000

20,000■■■SMM’s Metal Share (top)■Estimated Value (bottom)

40,23940,00060,000(Millions of U.S. dollars)

Review of Operations

SMM’s Production Facilities for Semiconductor and Advanced Materials

❶

❷

❸

❼
❹❻
❺

❶ ■

Kunitomi District Division❷ ■SMM Precision Co., Ltd.

❸ ■Shinko Co., Ltd.

❹ ■Sagami Plant❺ ■Nittosha Co., Ltd.

❻ ■Sumiko Tec Co., Ltd.

❼ ■Ome District Division❽ ■■ Isoura Plant

❾❽
❿
⓫

❾ ■

Niihama Electronics Co., Ltd.

❿ ■Ajimu Electronics Co., Ltd.

⓫ ■■ Ohkuchi Electronics Co., Ltd.

■ Semiconductor materials

❶
❹❷
❸

❺

❽

❾

❻
❼

■ Advanced materials❶ ■SMM KOREA Co., Ltd.

❷ ■Shanghai Sumiko Electronic Paste Co., Ltd.

❸ ■Sumitomo Metal Mining Electronics Materials (Shanghai) Co., Ltd.

❹ ■Sumiko Electronics Suzhou Co., Ltd.

❺ ■Sumiko Leadframe Chengdu Co., Ltd.

❻ ■Sumiko Electronics Taiwan Co., Ltd.

❼ ■Taiwan Sumiko Materials Co., Ltd.

❽ ■Dongguan Sumiko Electronic Paste Co., Ltd.

❾ ■Sumiko Leadframe（Thailand）Co., Ltd.

❿ ■M-SMM Electronics SDN. BHD.

⓫ ■■ Malaysian Electronics Materials SDN. BHD.
❿
⓫

⓬
⓭

⓬ ■

Sumitomo Metal Mining Asia Pacific Pte. Ltd.

⓭ ■P.T.SUMIKO LEADFRAME BINTANSUMITOMO METAL MINING CO., LTD. Annual Report 200827

Mineral Resources

Fiscal 2007 Review

Reflecting higher prices for copper and gold, divisional net sales increased by ¥9,112 million (11%) compared with the previous year to ¥91,360 million. Operating income increased by ¥4,595 million (14%) to ¥38,127 million.
Copper mining operations
n Cerro Verde (Peru)
The operating capacity of the sulfide ore development project at the Cerro Verde Copper
Mine has been increased largely in line with plan. Full-capacity processing of sulfide ores
was achieved in August 2007. Going forward, Cerro Verde promises to play a major role
as a driver of SMM Group earnings and as a stable supply of raw materials for copper
smelting operations.
Note: This mine is operated as a joint venture with U.S.-based Freeport-McMoRan Copper & Gold Inc.

n Morenci (Arizona, USA)The mine’s output in fiscal 2007 was virtually in line with plan. Production of concentraterestarted at an ore-dressing facility that had been idle, enabling a leaching facility that
produces electrolytic copper from the ore concentrate to recommence operations. The
facility is currently ramping up to full production.
Note: This mine is operated as a joint venture with U.S.-based Freeport-McMoRan Copper & Gold Inc.

n Candelaria (Chile)
The mine operated largely in line with plan during fiscal 2007.
Note: This mine is operated as a joint venture with U.S.-based Freeport-McMoRan Copper & Gold Inc.

Gold mining operationsn Hishikari (Japan)
Operations at the Hishikari Mine proceeded steadily. Output of gold and silver ores
reached 133,955t (containing 7.9t of gold) and the corresponding sales volume was127,605t (containing 7.5t of gold).
Note: Wholly owned by SMM, this is the largest gold mine in Japan.

n Pogo (Alaska, USA)
Construction of a new ore-processing facility was completed in March 2007. It begancommercial production the following month. The operational capacity of the mine hasrisen steadily due to the additional ore-processing capacity.
Note: This mine is operated as a joint venture with Teck Cominco of Canada.
Hishikari Mine

Status of major projects
Project name28

Objective

FY2007 status

Cerro Verde Copper
Mine(Cerro Verde)

Secure resources toboost proprietaryore ratio*2• Copper concentrate output: 177kt (Cu equivalents)• Electrolytic copper output: 92kt
• Start-up of Cu concentrate production boosted
proprietary ore ratio for Toyo smelter to 37% (from
16% in FY2006)

Pogo Gold Mine
(Pogo)

Expand gold mining operations• Gold output: 8.1t
• Operating capacity rose to commercial levels (80%of maximum) in April 2007

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Review of Operations

Financial highlights, by segment

Exploration activities(Millions of yen)

FY2007

FY2006

FY2005Net sales

91,36082,24843,719Operating income

38,12733,532

17,107

Operating margin (%)

41.73

40.77

39.13

Depreciation expense

5,537

4,539

3,250

Capital expenditures

9,427

9,288

14,014

SMM’s non-ferrous metals growth strategy involves securing further resources for the longterm. Reflecting the need to transport ores to Japan, SMM is undertaking exploration andacquiring related zoning rights in more than 20 locations, principally in sites across the
Asia-Pacific Rim. Copper exploration projects are concentrated mainly in South Americaand Australia. In nickel, to secure resources to follow the Taganito Nickel Project, SMM is
engaged in exploration in the Solomon Islands. Reflecting its estimated high potential, thelatter project is set to absorb a third of the exploration budget in fiscal 2008 so that thescale of prospecting can be expanded.
	Besides developing in-house projects, as a matter of policy SMM also actively seeks toparticipate in blue-chip exploration projects through joint ventures with other companies.

Exploration costs (Billions of yen)

Exploration in the Solomon Islands

FY2008 (Budget)

FY2007 (Actual)

FY2006 (Actual)

FY2005 (Actual)

4.7

2.4

1.9

1.4

SUMITOMO METAL MINING CO., LTD. Annual Report 200829

Metals

Fiscal 2007 Review

Reflecting higher prices and sales volumes for copper, nickel and gold, net sales recordedby the division increased by ¥151,738 million (20%) compared with the previous year to¥910,574 million. Although refining margins widened due to a spike in nickel prices in thefirst quarter of the year, the movements in non-ferrous metals prices also led to an inventory valuation loss. Operating income declined by ¥722 million (1%) to ¥108,842 million.
n CopperSupported by global economic growth, demand for copper was robust during the year.
In Japan, although sales to electric wire manufacturers posted good growth related todemand for copper wire in automotive applications, this was offset by reduced demandin the construction sector due to a drop in housing starts and sluggish sales tomanufacturers of rolled copper products. There was also evidence that higher copper
prices constrained purchasing in some quarters. Overall, domestic sales of copper wereon a par with fiscal 2006.
Construction work on a capacity expansion at the Toyo Smelter & Refinery wasGoldcompleted as part of efforts to develop a 450ktpa production set-up for electrolytic
copper. Going forward, SMM plans to increase operating capacity in line with changes
in copper supply and demand. Output during fiscal 2007 did not reach targeted levels
due to changes in the composition of the copper concentrate used as raw materials forthe smelting process, which created a number of operational challenges.
Exports of copper were up in year-on-year terms due to increased shipment volumes
to Asia.
n Nickel
Although stainless steel-related demand was initially firm during fiscal 2007, production
slowed from around the middle of the year due to a spike in prices, which prompted
corrective moves by some producers to switch from nickel steel to chrome steel. However,this was more than offset by the demand for nickel in specialty steels for energy-related
applications, reflecting the high price of oil. Demand for nickel for use in alloys withapplications related to power generation and aerospace was also firm. Overall sales ofnickel were higher than in the previous year.
In the Philippines, Coral Bay Nickel Corporation reached the initially planned processing
capacity of 10ktpa for low-grade nickel oxide ores based on the utilization of highpressure acid leaching (HPAL*3) technology.
n GoldSales increased due to higher sales volumes coupled with higher prices.
n Rolled copper and other fabricated products
Sales of rolled copper, steel castings, precision castings and other fabricated products
generated higher revenues as the result of generally firm demand from manufacturers in
the automotive and electronics sectors. However, high raw material prices exerted anegative impact on profitability.

Status of major projects

30

Project nameObjective

FY2007 status

Toyo Smelter &Refinery

Build 450ktpa set-up
for electrolytic Cu

Annual output up 41kt in year-on-year terms to
407kt

Coral Bay Nickel
Project

Raise production
capacity as part ofbuilding 100ktpa setup for Ni•O utput of mixed sulfide ores (Ni intermediate)surpassed 10ktpa• P reparations made for production start-up at
a second line in April 2009 (to boost capacityfrom 10ktpa to 22ktpa)

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Review of Operations

Financial highlights, by segment(Millions of yen)

FY2007

FY2006

FY2005Net sales

910,574

758,836

453,680

Operating income

108,842

109,564

49,683Operating margin (%)

11.95

14.44

10.95

Depreciation expense

10,071

8,433

7,478

Capital expenditures

42,08918,833

16,195Net sales, by product (Non-Consolidated)(Billions of yen)

350
300
250
200
150
100
50
0
2002
Mineral ResourcesGold and silver ores

Capital investment plans

2003
Metals

2004

Nickel2005
Copper

Gold

(FY)

2007

2006
Zinc

The aim of the SMM Group in mineral resources and metals operations is to move toward
a “mineral resources + refining” business model. Fiscal 2008 plans call for aggressive
capital investment in projects to expand operations, focusing on the nickel business. Major
planned capital expenditures comprise ¥6.4 billion on construction of a second production
line at the Coral Bay Nickel Project, where operations are scheduled to start in April 2009,and ¥5.1 billion to build additional production capacity for electrolytic nickel.

Capital expenditures
FY2008(Plan)

FY2007(Actual)

FY2006(Actual)

FY2005(Actual)

FY2004(Actual)Mineral Resources

7.1

9.4

9.3

14.0

7.0

Metals

26.5

42.1

18.8

15.6

15.2

Overseas Develop­mental
Investments

12.4

5.2

10.9

37.3

—

Total

46.0

56.7

39.0

66.9

22.2

(Billions of yen)Hyuga Smelting

SUMITOMO METAL MINING CO., LTD. Annual Report 200831

Semiconductor and Advanced Material

Fiscal 2007 Review

Reflecting higher metals prices, divisional net sales grew by ¥31,422 million (14%) compared with the previous year to ¥255,002 million. Operating income declined by ¥5,369
million (40%) to ¥8,215 million, mainly due to the effects of intensifying price competitionand higher raw materials prices.
Sales within the electronic equipment market were underpinned by increased uptake ofdigital appliances such as flat-screen televisions and mobile phones and other portable
digital equipment. Another major contributory factor was the growth in sales of PCs, particularly notebook models.
Products recording strong sales performances in fiscal 2007 included bonding wire*8
for semiconductors used in PC applications; nickel paste for applications in multi-layer ceramic capacitors used in electronic equipment such as PCs, mobile phones and flat-screen
televisions; and lithium niobate and lithium tantalate*13 substrates for applications in SAW(surface acoustic wave) filters used in mobile phones.
Sales of copper-clad polyimide film (CCPF) declined in year-on-year terms, reflecting a

Ohkuchi Electronics

dip in demand due to yield improvements by customers combined with the effects of sales
price erosion as the result of intense competition (CCPF is a substrate material used in chipon-film (COF*6) substrates, a type of build-up packaging for the integrated circuits used in
LCD screen drivers).
In battery materials, sales of nickel hydrides for use in HEV batteries posted strong growth.
Demand also increased for lithium nickel oxide as a material used in secondary lithium-ion
batteries*11. Elsewhere, the SMM Group recorded a steady increase in sales volumes for
IR-shielding inks, which are used to protect objects from the effects of infrared radiation.

Financial highlights, by segment

32(Millions of yen)

FY2007

FY2006

FY2005Net sales

255,002223,580

184,075

Operating income

8,215

13,584

11,176

Operating margin (%)

3.22

6.08

6.07

Depreciation expense

11,70910,073

9,647

Capital expenditures

11,862

22,563

18,783

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Review of Operations

Main Products

Sapphire single-crystal materials

Capital investment plans

Paste*10

Copper-clad polyimide film (CCPF)

Planned capital expenditures in this segment in fiscal 2008 of ¥13.8 billion are primarily
targeted at the commercialization of new products and production capacity expansions
aimed at gaining market share. Specific projects include a total investment of ¥3.6 billion
to build a production line for COF substrates at Sumiko Electronics Taiwan Co., Ltd. basedon a new manufacturing method.

Capital expenditures(Billions of yen)

Semiconductor andAdvanced Materials

FY2008(Plan)

FY2007(Actual)

FY2006(Actual)

FY2005(Actual)

FY2004(Actual)

13.8

11.8

22.6

18.8

12.6

Sumiko Electronics Taiwan

SUMITOMO METAL MINING CO., LTD. Annual Report 200833

Sustainable Growth Through Sound Business—CSR and Corporate Governance
At SMM we believe that in undertaking business activities we have a duty to contribute to society and tofulfill our corporate responsibilities to stakeholders (comprising shareholders, customers, business partners, local communities, civil groups, creditors, government bodies and employees). The SMM Group
Corporate Philosophy and SMM Group Management Vision defines our mission in terms of striving to earn
greater trust as a company and to maximize enterprise value. In this spirit we aim to fulfill our corporatesocial responsibility (CSR) and implement sound corporate governance practices.
From the perspective of sustainable co-existence with the global environment and society, in October
2008 we are instituting a CSR Policy to provide a new platform to develop full-fledged CSR-related activities across the SMM Group.
Corporate governance provides a framework for maximizing the corporate value of the SMM Groupand ensuring sound management practices. We are seeking to reinforce such structures while at the sametime focusing efforts on improving internal controls and disclosure based on greater transparency.
Ultimately, CSR activities and good corporate governance rely on raising the awareness of individual
employees. With this in mind, we have formulated the SMM Group Code of Conduct to help educate ourworkforce on an ongoing basis about corporate behavioral and attitudinal standards as based on the
Sumitomo Business Spirit.

The Sumitomo Business Spirit: Building Trust and Integrity
Article 1:
Sumitomo shall achieve strength and prosperity by placing prime importance on integrity and sound management in the conduct of its business.
“Business Principles” forming the Rules Governing the House of Sumitomo (version formulated in 1928)

A New Platform for Development of CSR Activities—Contributing to society while fulfilling responsibilities
to stakeholders
To date, we have undertaken various initiatives to cultivate a culture of safety and to strengthen internal
systems governing environmental management (to the ISO14001 standard), risk management and compliance. Going forward, our aim is to take these initiatives to the next level by systematizing our efforts
from a CSR standpoint.
In 2007, we initiated full-fledged development of CSR activities by organizing workshops for the senior managers of central departments and by creating project teams of section leaders from within eachdepartment to discuss related issues. On October 1, 2008, we set up the CSR Committee. Chaired by thepresident, this committee is a pivotal body reporting directly to senior management that will oversee thedevelopment of CSR activities across the SMM Group.

34

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Sustainable Growth Through Sound Business

CSR Promotion Framework
Board of Directors
President

Compliance Working Group(Reports to: Legal & General Affairs Dept.)

CSR Committee Chair: President
Deputy chair: Executive in charge of CSR
Members (all divisional heads):
Mineral resources
Non-ferrous metals
Semiconductor materials
Advanced materials
Energy/catalysts/construction materials
Technology
Engineering
Central divisions
Administrative manager: Head, Safety &Environmental Control Dept.
Administrative aides designated by executive
in charge of CSR

Risk Management Working Group
Secretariat(Safety &Environmental
Control Dept.)

Internal Controls Committee Chair: President
Branch offices

Business divisions

Central divisions(Reports to: Safety & Environmental Control Dept.)

Efficient Resource Utilization Subcommittee(Reports to: Technology Div.)

Environmental Protection Subcommittee(Reports to: Safety & Environmental Control Dept.)

Corporate Citizenship Subcommittee(Reports to: Legal & General Affairs Dept.)

Human Rights and Human Resources Development Subcommittee(Reports to: Personnel Dept.)

Occupational Health & Safety Subcommittee(Reports to: Safety & Environmental Control Dept.)

Communications Subcommittee(Reports to: Public Relations & IR Dept.)

CSR Policy
1. SMM shall work to combat global warming by promoting recycling and effective resource utilization
while also targeting technological innovation and continuous improvements in energy efficiency.
2. SMM shall promote sustainable co-existence with society by respecting the needs of local communities
in which we operate around the world.
3. SMM shall respect human rights and safeguard diversity in the workplace.
4. According safety the highest priority, SMM shall provide safe, comfortable working environments andseek to eliminate safety-related incidents.
5. SMM shall strengthen communications with all stakeholders to build healthy, trust-based relationships.

Sustainable co-existence with society and the global­environment
Our planet currently faces grave environmental problems such as global warming and pollution of air andwater, as well as other critical issues such as ongoing depletion of limited resources. To ensure the future
growth of SMM, it is vital that we realize a growth strategy that is directionally compatible with a policy ofsustainable co-existence with society and the global environment. To this end we must integrate our CSR
activities and business operations, based on the concept of “aligning our path with that of society.”
For example, we are undertaking a variety of environmental activities at the mines and refineries that
we are developing and operating inside and outside Japan, as well as at our other operating sites. We havealso installed teams at mining sites in Japan whose operations have been suspended temporarily or closed
down so that proper post-operational environmental measures are implemented.

SUMITOMO METAL MINING CO., LTD. Annual Report 200835

In line with the SMM Group Corporate Philosophy, we also undertake a range of corporate citizenshipactivities to make a positive contribution to society. These include providing assistance with disaster relief,sponsoring overseas scholarships, organizing educational activities for local communities and other programs aimed at the development of social infrastructure.
	Based on this thinking and activities, we have defined six key CSR areas to take into account present
and future needs. For each of these areas we have formulated a vision statement describing where wewant to be in 2020.
For more details of our CSR activities, please refer to the CSR Report 2008 (in previous years we havepublished an Environmental Report).

Six Key CSR Areas

Effective use of resources
Contribution to society
and local communities

Environmental preservation

SMM’s
SMM’s CSR
CSR
Occupational healthand safety

Respect for people
and human rights
Stakeholder communications

CSR Vision for 2020
Six Key Areas

36

CSR Vision for 2020

Effective use of resources

A company that generates resources using innovative technology• Business development based on low-grade and hard-to-process ores and use ofprocessing technologies to recycle materials from urban sources

Environmental preservation
Reduced CO2 emis­sions (Energy
savings)
Biodiversity

A company that meets international anti-global warming standards by using
advanced technologies• Zero waste emissions• 50% of new products with low environmental impact (e.g. fuel cells, solar cells)

Contribution to society andlocal communities

A company respected for its social contribution

Respect for people and humanrights

A company offering equal-opportunity employment free of any discrimination
based on nationality, gender, disability or religious belief
Respect for diversity (Active recruitment of disabled/seniors, expanded job
opportunities for women)

Occupational health and safety

A company that prioritizes the safety and total health of all employees andin all workplaces
No work-related accidents throughout the SMM Group (including venture partners)
Zero incidence of occupational disease
Create workplaces where protective equipment (mufflers/masks) is unnecessary
A vibrant company whose workforce is physically and mentally healthy

Stakeholder communications

A company in communication with stakeholder groups worldwide

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Sustainable Growth Through Sound Business

Improving management transparency(corporate governance)
1) SMM views corporate governance as providing a disciplinary framework both for maximizing theenterprise value of the SMM Group and for ensuring sound management practices.
2) SMM has adopted executive officer and corporate auditor systems to ensure effective monitoringand oversight functions within management. First introduced in June 2001, the executive officer
system delegates significant authority to executive officers and reinforces executive functions via aclear delineation of authority and responsibilities. It also helps to bolster oversight functions bypromoting greater debate within the Board of Directors and by promoting faster decision-making.
3) The Sumitomo Business Spirit emphasizes the importance of integrity in corporate actions. Merecompliance with laws is insufficient – managers must also strive to do what is right. The basic stanceis that adhering to this rule in every part of the organization will enable the enterprise to earn thetrust of suppliers, shareholders and the rest of society.
n Directors and Board of Directors
SMM’s articles of association limit the maximum number of directors to ten as a way of promoting
lively debate at meetings of the Board of Directors. With eight members as of July 2008 (including
one outside director), the Board meets regularly each month and on special occasions as required toensure flexible decision-making. Information is shared between the Board of Directors and the Management Committee, which receives reports on all matters decided at Board meetings. Terms of­directors are for one year and the membership of the Board is subject to an annual vote of confidence by shareholders. The system of remuneration for directors is based on corporate financial
performance.
n Management Committee
The Management Committee is composed of the president, senior managing executive officers andother executive officers. Corporate auditors also attend its meetings. The purpose of the Management Committee is to provide a forum for broad-ranging discussion of serious issues that are either
matters for the Board agenda or fall under the direct authority of the president. The Management
Committee provides functional support to the president and approves which matters are placed on
the Board agenda.
n Executive officer system
This system reinforces executive functions by establishing a clear delineation of authority and responsibilities and by delegating significant authority to each executive officer. The executive officers occupy senior management positions with specifically assigned operational responsibilities for divisions, central departments and other key parts of the organization. All executive officers report on amonthly basis to the Executive Committee, which oversees the status of operations. SMM has introduced a performance-based remuneration system for executive officers similar to that for directors.
nCorporate auditors
As of July 2008, SMM had four corporate auditors, including two outside auditors. The full-time
internal auditors base their independent opinions on internally conducted audits, while outside auditors state opinions based on their knowledge from specialist fields. Corporate auditors attend meetings of the Board of Directors and of the Management Committee. The Board of Corporate Auditors
meets once a month in coordination with Board meetings, and also convenes in extraordinary session if required.
SUMITOMO METAL MINING CO., LTD. Annual Report 200837

Internal controls and disclosure
Building a system of internal controls to ensure proper and efficient oversight of operational execution helps to improve legal and regulatory compliance and also increases management efficiency
and transparency. We regard such a system as a critical tool in ensuring the sustained growth of the
SMM Group.
Internal controls based on Japan’s Company Law
With the aim of realizing sound business management, we have established compliance structures
to ensure proper operational execution. SMM’s Board of Directors approved measures in May 2006
to construct a system of internal controls based on Japan’s Company Law and the regulations pertaining to its enforcement. We have since taken a number of steps to bolster compliance and risk
management, to strengthen disclosure of corporate information in the interests of transparency andcredibility, and to ensure that the appropriate controls are applied to operational execution.
The system of internal controls was applied fully from July 2006. From April 2008, the president
assumed chairmanship of the Internal Controls Committee, which had been working on related issues for many months. This committee will oversee the reinforcement of efforts in this area going
forward.
Internal controls based on the Financial Instruments and Exchange Law (FIEL)
For investors it is essential that firms provide full and proper disclosure of corporate information. As
part of our broader efforts to strengthen corporate governance, we have focused on developing
systems to ensure the accuracy and appropriateness of our financial reporting.
In line with the FIEL that was enacted in June 2006 (often referred to as the “J-SOX” legislation),
SMM’s senior management is required to evaluate the internal controls relating to financial reportingand ensure that this system is audited by a certified public accountant (CPA).
From fiscal 2008, we plan to publish documentation on our internal controls system and related
internal control audit reports together with the securities reports that we are required to file with the
Financial Services Agency.
Investor relations (IR) activities
The SMM Group Corporate Philosophy emphasizes the responsibilities of the company to stakeholders. In line with this rationale, we disclose information to shareholders and potential buyers of SMM
stock and undertake IR activities to deepen the understanding of shareholders and investors withrespect to the SMM Group. Besides publishing information on our web site, as well as via shareholder communications and annual reports, we also organize around two IR presentations a year fordomestic and overseas institutional investors where the president talks directly about business strategy and results.
Other IR activities include regular meetings convened with specific domestic and overseas institutional investors; factory tours, which are organized on request; presentations on the nickel business and related products; and investment conferences that are widely attended by overseas institutional investors. These activities aim to deepen two-way communications between the company andinvestors based in Japan and overseas so that investor feedback can be reflected in the way that wemanage the SMM Group.

38

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Sustainable Growth Through Sound Business

Development of risk management system
With the formulation of a set of internal regulations, risk management has been systematized acrossthe SMM Group’s entire organization. A dedicated working group established under the CSR Committee oversees the promotion of risk management at each organizational level on a companywide
basis.
SMM has also created internal regulations covering specific business-related risks, which are
handled using the established risk management system.

Outside directors and auditors
Outside directors and auditors
Title

Name

CV/specialist skills

Outside director

Tsutomu Ushijima

Registered lawyer and tax accountant
Provides specialist advice as a tax accountant and expert in legal affairs

Outside auditor

Katsumi Maeda

CPA
Provides specialist advice as a CPA, along with auditing capabilities

Takayuki Kurata

Export-Import Bank of Japan/Japan Bank for International Cooperation
Advisor, Marubeni Power Development Corporation
Provides specialist advice based on extensive experience in managementof financial institutions and related knowledge

Outside auditor

Total financial remuneration of directors and auditors
Title

Persons* Figures for outside directors/auditors
Persons
Total executive bonuses

Total executive bonuses

Director

8

401 Millions of yen

1

11 Millions of yen

Auditor4

85 Millions of yen

2

20 Millions of yen

Total

12

486 Millions of yenn Purpose of takeover defenses
SMM’s Board of Directors approved the adoption of takeover defenses at a meeting held on February 19, 2007. These measures received the necessary approval of at least two-thirds of shareholders
at the 82nd Ordinary General Meeting of Shareholders held in June 2007. These takeover defenses
will remain in effect until the Ordinary General Meeting of Shareholders due to be convened in June
2010.
In the interests of both the company and its shareholders, these takeover defenses aim to prevent any moves that would be detrimental to the creation of enterprise value.

SUMITOMO METAL MINING CO., LTD. Annual Report 200839

Feature

The Inherent Strengths Supporting Our Business Strategy
The Sumitomo tradition: excellence in human resources and technology

SMM can trace its roots back to Soga Riemon, who at the tender age of 19 beganlearning the techniques involved in smelting and working with copper. He set up
shop in Kyoto in 1590. Bold and naturally inquisitive, he used the information that
he had gleaned from foreign merchants in Sakai to develop “Nanban-buki,” a new
smelting technique for extracting gold and silver from unrefined copper. At the time,
metallurgical techniques were undeveloped in Japan. The innovative smelting method was an epoch-making development in Japan’s industrial history because it
stemmed the flow overseas of copper containing gold and silver impurities. This firststep in the 400-year history of Sumitomo was a good example of the recurring
theme of excellence in human resources and technology.
Eventually the Tokugawa shoguns lost power and Japan underwent major change
following the Meiji Restoration. The Besshi copper mine that formed the core of theSumitomo business was now in poor shape, and the situation deteriorated to thepoint where its continued existence was threatened. The general manager at thetime, Saihei Hirose, displayed leadership in insisting that Sumitomo modernize its
management and introduce Western technology to save the business. This enterprising attitude ensured that the company overcame its difficulties. It subsequently
produced a series of outstanding top managers. Human resources and technology
remained the key to the growth and development of the business. The company
became the foundation stone for the construction of today’s corporate grouping
under the Sumitomo name.
Without the value placed on excellence in human resources and technology, ourcorporate history might have turned out quite differently. In this section, we look atsome of the inherited strengths of the business.

40

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

The Inherent Strengths Supporting Our Business Strategy

Developing People for the Global Stage
Training of mining engineers as leaders in developing the “mineral resources + refining”
business model

The Hishikari Gold Mine: SMM’s

Ten years of training to produce a

Reinforcing our base of inherited“school of mining”

professional mining engineer

knowledge and technical expertise

Today, most of the mines in Japan have closed.

The job of engineers working in the mining in-

Our long-term strategic objective is to become

This is a significant problem from the point of

dustry involves different aspects such as discov-a major within the non-ferrous metals industry.

view of training the next generation of mining

ering, analyzing and evaluating new deposits

To this end, we are pursuing the development

engineers and passing on related skills. Located(exploration) and then mining the actual oreof a “mineral resources + refining” businessin Kagoshima Prefecture, SMM’s Hishikari Mine

(extraction). At Hishikari, our mining engineersmodel that combines mining operations to yieldis Japan’s only remaining operational gold mine.

spend about three years learning these basic

stable supplies of raw materials with metal

We use it as a “mining school” where new re-skills. They also acquire other expertise criticalsmelting and refining operations. Amid intensi-

cruits are initially assigned. This enables us toto the field such as safety management, process

fying competition to secure resources, owning

develop the people who will support the future

management, operational supervision and bud-an interest in a highly productive mine is gain-of our mineral resources business.

geting. We then post the engineers to a mine

ing in importance in terms of providing businesslocated overseas to acquire further technicalstability and generating sustained growth. Our

and other expertise. Overall, our development

mining engineer development program has

program takes about ten years to turn out ademonstrated its value by underpinning suc-fully trained professional mining engineer.

cessful exploration projects outside Japan andhelping us improve the operational management of our mines.
Going forward, we plan to upgrade efforts
to train and develop a corps of mining engineers for the SMM Group. This promises to help
reinforce our base of inherited knowledge andtechnical expertise.

SUMITOMO METAL MINING CO., LTD. Annual Report 200841

Training process engineers and NPD engineers as value creators focused on generating
outstanding results

Intensive training for new

Building the platform to generate

employees emphasizes market

valuable results

awareness and technical skills

One of the main objectives of this training is to

In the semiconductor and advanced materials

Stage 1: The program builds skills and aware-

enable trainees to meet and interact with asector, one of the main keys to success is toness using on-the-job training, focusing on key

wide range of frontline personnel in order tocultivate technical personnel capable of assimi-

themes. These include: the basics of manufac-

gain a detailed understanding of the distinctive

lating market needs and rapidly developing theturing; the relationship between production,

features and capabilities of our facilities. At therequired technology. We use a three-stage

technology and sales; and the importance ofsame time, the training experience helps people

training program to turn our new employees

R&D in the semiconductor and advanced mate-to build the networks that will foster creative

into engineers with the necessary combination

rials business.

collaboration in the future.

Stage 2: Training continues at our research fa-

and analytical technologies. A high level of ex-

cilities in Ichikawa and Niihama. Trainees learn

pertise in these areas helps to support our pre-basic approaches to solving technical problems

eminent position in materials technologies. Ex-

and related methods in order to cultivate theo-posure to these critical technologies as part ofretical problem-solving capabilities.

early career training helps to build the platformof market awareness and technical expertise.

Another key aim is to understand testingfor the growth and development of engineers
Stage 3: The final stage takes place at our test-

who will lead our future R&D activities.

ing and technical evaluation center. Trainees

In addition, the training also stresses thelearn evaluation technologies, gain an apprecia-

importance of realizing that the R&D function,

tion for what analytical evaluation can teach us,

like any other part of an enterprise, must be or-and acquire data-handling techniques.

ganized to produce output. The training program aims to cultivate people with the skills
needed to manage this function in a way that
fosters early creation of valuable results.

42

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

The Inherent Strengths Supporting Our Business Strategy

Training production engineers to support our manufacturing capabilities

Our strengths in productionengineering

Developing mission-specific

Advancing to the next level in thetargeted skill setsthird, sixth and ninth years*3

Production engineers are responsible for work-

Within the first three years at the company, ourand MCLE*4 technology that we employ to pro-ing out how the manufacturing processes that

production engineers learn all the fundamentals

duce nickel have received critical approval fromwe have developed are incorporated into pro-of our in-house production technology. A dis-

all around the world. Production engineers are

duction facilities. We are reinforcing our train-

tinctive feature of this initial training period is

the people who set up our manufacturing sys-

ing programs to ensure that they turn out peo-that two years are spent learning about howtems and keep facilities running at high capac-

ple with the requisite skills in each field. In thewe maintain the world-class technology in op-

ity. We have also developed unrivaled manufac-

engineering field, this means the acquisition oferation at the Toyo Smelter & Refinery and ourturing capabilities in semiconductor materials

the skills needed to manage whole projects andnickel refining facilities. Our rationale is thatsuch as CCPF, which is used as a substrate ma-

operations from plant design to equipment in-those with a poor knowledge of our production

terial for LCD driver ICs*5. Our ability to design,

stallation. In the field of plant maintenance, thefacilities and the people who operate them willbuild and operate production facilities on an in-required skill set encompasses the management

be unable to design such facilities well. Throughdependent basis counts as one of our strengths.

of smelting facilities and related skills. In themaintenance operations, we teach production

field of production technology development re-engineers about plant design and help them tolating to semiconductors and advanced mate­acquire the basic technical knowledge and re-rials, we aim to cultivate the skills needed tolated engineering skills.

The manufacturing processes based on HPAL

design plants for particular requirements based

The objective of the training program ison the introduction of new technology and thethat, by the end of the ninth year after joining

vertical integration of production equipment

the company, the engineer is capable of assum-

made in-house, all with the goal of accelerating

ing a leadership role to manage the construc-the pace of overall production.

tion of a plant, manage and maintain the operations of a large-scale facility and the related
production technology, or else contribute to
new product development (NPD) by developing
production technology.

SUMITOMO METAL MINING CO., LTD. Annual Report 200843

Training management accountants as “on-site CFOs” to lead pivotal accounting
operations

The rising importance of the

HR development emphasis on

For instance, at our operating sites in Japan, theaccounting function

integrated skills

accounting function uses figures relating to

From the compilation and management of bud-In furthering the career development of eachgets to production of financial figures on aemployee, our HR development programs em-

monthly, quarterly and annual basis, companies

phasize building integrated skill sets. The devel-need accounting functions that can handle

opment plan for the accounting stream has anthese tasks quickly and accurately and also pro-initial phase in which trainees learn about thevide more advanced processing capabilities. The

company’s systems and gain basic financial ac-

fundamental role of management accountants

counting knowledge. Trainees advance over

at SMM is to contribute to the management oftime to higher levels within the training pro-the business by using accounting knowledge togram, in the process broadening and deepening

collect and analyze management information.

their knowledge and gaining greater awarenessBesides handling corporate accounting in cen-of their role.

business performance to interface between thesite and head office and to liaise between theon-site departments.
We see management accountants as
numbers professionals whose job it is to identify
issues relevant to the management of the business, or to provide a financial overview of how
the business or certain functions are performing. Effectively, they function as “on-site CFOs.”
We are working to upgrade our training anddevelopment program so that we can cultivate
people with the outlook and skills to perform

tral divisions, these personnel are also assigned
to mines and production bases worldwide toProviding enhanced management

such a role, thus enhancing the management

support the management of these operations

support capabilities as “on-site

support capabilities for the SMM Group as abased on their knowledge and perspectives as

CFOs”

whole.

accounting professionals.

Management accountants play a key role insupporting the management of the business.

44

1

Introductory training(First 7 months)

Basic knowledge of company systems and accounting

2

Basic training(Through year 3–5)

Basic investigative knowledge relating to business performance measurement and related accuracy

3

Applied training(Through year 8–10)

General accounting knowledge and skills to provide independent operational support

4

Accounting leadership development(After completion of applied training)

Operational knowledge for managerial function; line management experience

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

The Inherent Strengths Supporting Our Business Strategy

Developing the next generation of capable and motivated leaders

Four new training programs to set
SMM Group personnel standards
We believe that the quality of operations depends on the quality of the people. We are up-

Upgrading SMM Group HR

Short overseas training course

development systems

system for new recruits: basic

From developing and operating mines acrosstraining to develop people forthe world to refining metals and fabricating

overseas positions

materials, the SMM Group has developed a

Pursuing a growth strategy requires global op-

way, our aim is to establish high standards forvertically integrated business spanning both

erations. As part of our training for overseas

the SMM Group.

upstream and downstream sectors. In our view,roles, we send the entire class of graduate re-As of the end of March 2008, the parent

the source of greatest enterprise value lies incruits to a university outside Japan for two

company employed 2,184 people and the SMM

the possession of the technologies required inmonths of language training in the autumn ofGroup as a whole had 9,786 employees on theeach of these fields along with the human re-their first year at the company. This boosts

payroll. More than 4,000 employees work insources to operate globally at the highest level.

awareness of the need to learn languages andoperations outside Japan. In 2008, we are initi-

In line with the Sumitomo Business Spirit, wecreates opportunities to improve communica-

ating a program to bring those working at

aim to cultivate capable and motivated peopletion skills for the future. We began this program

managerial levels in overseas operations to

to take on fresh challenges.

in 2006 to reinforce our commitment as a com-

Japan for a course that covers topics such aspany to HR development and to enhance thethe history and traditions of the company, themessage to new recruits that we hope the SMM

Sumitomo Business Spirit and the SMM Group

Group can satisfy their lifelong career needs.

Code of Conduct. The program also includes

grading HR development programs for four key
sets of employees with the aim of raising thequality level of personnel in terms of functional
and technical skills, style and intellect. In thissite tours of Besshi and Hishikari.

CourseTargeting

Aim

Middle management training

Section leaders

Develop abilities to realize business philosophy and contributeto strategic management

Executive management training

Department heads, presidents of affiliated companies

Develop strategic management capabilities

Overseas management training

Persons expected to assume overseas
managerial posts

Improve abilities in flexible, cross-cultural management andoverseas crisis management

Training for executives of overseas
bases

Locally hired managers of overseas
bases

Increase loyalty and motivation by sharing Sumitomo BusinessSpirit and corporate history
SUMITOMO METAL MINING CO., LTD. Annual Report 200845

Original World-Class Technologies
SMM has developed first-class materials and fabrication technologies to maximize thepotential of non-ferrous metals. Efforts are focused on developing and supplying enhanced value by trying to create technical breakthroughs in five designated core fieldsof technology.

State-of-the-art hydrometallurgicalprocess low-grade nickel oxide ores. In 2005,

technologies

SMM subsidiary Coral Bay Nickel Corporation

Refining methods based on hydrometallurgical
technologies employ solvents rather than heatto recover ore-based metals. Because of theirlower energy costs, such refining methods arebeing adopted increasingly throughout the industry. Our development of a proprietary hydrometallurgical refining method positions SMM asa technological leader within the industry.

Producing high-purity nickel fromlow-grade ores (MCLE*4/HPAL*3)
SMM is the only producer of electrolytic nickel inJapan. In the mid-1990s, we developed and­successfully commercialized MCLE (Matte Chlorine Leach Electrowinning), an energy-efficientmethod for high-purity nickel recovery based onhydrometallurgical technologies.
HPAL (High-Pressure Acid Leach) is a me­
thod for recovering nickel from difficult-to-

46(CBNC) in the Philippines began employing the
HPAL method to commercially produce intermediate materials used in nickel refining. Basedon our HPAL expertise, SMM is a frontrunner inthe processing of lower-grade ores.
SMM was recognized at the 2007 Nikkei
Manufacturing Awards for successfully incorporating the HPAL method at CBNC.

Recovering precious metals (PMEX)

Pyrometallurgical technologies
We are also making innovations to more traditional refining methods based on pyrometallurgical technologies. For example, our proprietary
Sumitomo method burner was designed to increase the volume of copper concentrate melted
inside the flash furnace. With relatively minimal
investment, therefore, we are currently working
to expand the production capacity for electrolytic
copper at the Toyo Smelter & Refinery to
450ktpa, the largest capacity in the world for asingle production line.

The PMEX (Precious Metals Solvent Extraction &Ion Exchange) method employs hydrometallurgical technologies to recover precious metals.
With the PMEX method, we have achieved continuous, automated operations for refining precious metals. This not only significantly reduces
the time needed to recover gold and silver but
also yields metals of higher purity than that previously achieved with traditional methods.

1

Separation, refinement andcrystallization technologies

Technologies that are the source of the SMM Group’s high competitiveness in smelting and other­operations

2

Nano-powder technologies

Technologies based on the science of nano-powders

3

Surface treatment technologies

Technologies for treating the surfaces of materials such as chrome to satisfy advanced performance­requirements

4

Organic resin technologies

Technologies for developing materials with new properties and functions

5

Evaluation/analysis technologies

Technologies for quickly and accurately evaluating and verifying development results for materials andfor developing and commercializing products

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

The Inherent Strengths Supporting Our Business Strategy

World-leading semiconductor and advanced materials products

Copper-clad polyimide film (CCPF)

Chip-on-Film (COF*6) boards

Battery materials

CCPF is a material that is used to connect LCD

COF substrates are components incorporating

We supply materials such as nickel hydroxide

screens to driver ICs. In the past these parts

CCPF that connect LCD screens to driver ICs.

and lithium nickel oxide (LNO) for the electrodes

were composed of three layers, with metal andSupplementing the subtractive method that weof secondary batteries. Besides mobile phones

copper foil sandwiched together by an adhesive

have used for some time, in 2008 we led theand laptop PCs, these battery materials arelayer. Using our surface treatment technologies,

industry in Taiwan in the mass-production of

being widely used in hybrid electric vehicles due

we were able to attach copper directly to a

COF substrates using the semi-additive method.

to high charging capacity and good reliability.

polyimide film to form a bilayer. This allowed

This method uses laser etching of the circuitry

The market for secondary batteries is expected

for further miniaturization and a greater degree

rather than the previous electroplating process,to expand in the future due to the growth inof precision in fabrication. LCD panel manufac-

which enables thinner lines and greater posi-

the number of hybrid vehicles on the road. In

turers began widely adopting CCPF in 2000.

tional precision. We have successfully used thisanticipation we are focusing efforts on the de-Today, we still command a dominant share of

method to create COF substrates with a line

velopment of new battery materials.

the market for packaging substrates for LCD

resolution of 20 microns.

driver ICs.*5

Sapphire substrates
Sapphire substrates are the materials used as
the substrate for white LEDs, which are used in
car headlights as well as backlighting in mobile
phones and laptop PCs. Due to their superiorenergy efficiency, demand for white LEDs is also
expected to rise as they replace the incandescent light bulbs still widely used for lighting in
the home. We were the first company in Japanto succeed in making sapphire substrates using
the epitaxial method. Production output continues to grow steadily.

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

47

CORPORATE OFFICERS

From left: Yoshiaki Nakazato (Director), Naoki Tajiri (Director), Koichi Fukushima (Representative Director), Ichiro Abe (Director), Masashi Koike(Representative Director), Nobumasa Kemori (Representative Director), Kouzou Baba (Director), Tsutomu Ushijima (Director)

Directors and Corporate Auditors

Executive Officers

Representative Directors:

President:

Directors:

Senior Managing Executive Officers:

Ichiro Abe
Naoki Tajiri
Kouzou Baba
Yoshiaki Nakazato
Tsutomu Ushijima*Managing Executive Officers:

Standing Senior Corporate Auditor:

Motoki Kitamura
Standing Corporate Auditor:

Toshikazu Yakushiji
Corporate Auditors:

Katsumi Maeda**
Takayuki Kurata*** Outside Director under the Commercial Code** Outside Corporate Auditor under the Commercial Code48

Nobumasa Kemori*

Koichi Fukushima (Chairman)
Nobumasa Kemori (President)
Masashi Koike (Director)

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Executive Officers:

Masashi Koike*
Ichiro Abe*
Naoki Tajiri*

Yoshiaki Hashinaka
Etsu Senda
Kouzou Baba*
Kotaro Tomino
Yoshiaki Nakazato**Double role as Director and Executive Officer

Yukio Kawaguchi
Tohru Yamasaki
Takahito Kusada
Takashi Itou
Takeshi Kubota
Yasushi Hashimoto
Naoyuki Tsuchida
Ryoichi Manabe
Mikinobu Ogata

Financial Section
Eleven-Year Financial Summary

50

Financial Analysis

52

Consolidated Balance Sheets

58

Consolidated Statements of Income

60

Consolidated Statements of Changes in Net Assets

61

Consolidated Statements of Cash Flows

63

Notes to Consolidated Financial Statements

64

Independent Auditors’ Report85

SUMITOMO METAL MINING CO., LTD. Annual Report 200849

Eleven-Year Financial Summary

SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

2008

2007

2006

2005

Net sales¥1,132,372¥966,764¥625,579¥484,585

Gross profit

198,147

203,180

120,137

82,878Operating income

155,394

162,632

82,75647,893

Other income (expenses)

61,11042,985

10,218

6,024

Income (loss) before income taxes
and minority interests

216,504

205,617

92,97453,917

Net income (loss)

137,808

126,054

62,80037,017

Equity in earnings of affiliated companies

73,956

46,70821,915

13,513

Capital expenditures

65,14551,56750,56836,488Depreciation

30,50525,693

22,951

20,578Net interest expenses(2,209)(2,606)(1,281)(893)

Years ended March 31

Results for the year:

Net cash flows from operating activities

157,383

95,98570,77240,150Net cash flows from investing activities(126,413)(77,429)(102,384)(31,725)

Net cash flows from financing activities

55,727(10,073)

28,723

6,097

Free cash flows

30,97018,556(31,612)8,425

1,091,716

929,208

772,562

573,925

640,345528,921394,899—

Financial position at Year-end:
Total assets
Net assets

—

—

—

283,897

Long-term debt due after one year

169,394

93,800114,405

109,777

Interest-bearing debt

258,054

189,910

190,891

160,533

Working capital

266,250

103,791

72,22886,382238.13220.49109.96

64.77

Shareholders’ equity*1

Amounts per share (Yen):
Net income (loss)— Basic— Diluted
Shareholders’ equity
Cash dividends

231.50213.67108.87—

1,017.96

859.82654.15497.57

30.0

27.0

14.0

8.0

13.64

14.81

9.33

6.78

25.39

28.99

19.10

13.79

54.0

53.4

48.4

49.5

Key ratios:
ROA (%)ROE (%)*1

Equity ratio (%)*1*1

Interest-bearing debt to total asset ratio (%)

23.6

20.4

24.7

28.0

Debt-to-equity ratio (times)*1
Current ratio (times)

0.44
2.04

0.38
1.39

0.51
1.33

0.57
1.61

Shareholders’ equity are defined as following equation.
Shareholders’ equity = Total shareholders’ equity + total valuation and translation adjustment

50

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Millions of yen (Except per share amounts and key ratios)

2004

2003

2002

2001

2000

1999

1998

¥402,131¥355,242¥330,194¥375,352¥360,299¥350,288¥431,950

53,714

51,764

38,152

63,37245,061

41,19062,641

22,778

16,593

1,147

26,9308,990

858

24,622

8,416(24,098)(13,735)(11,359)(4,342)(12,932)(3,605)31,194(7,505)(12,588)

15,571

4,648(12,074)

16,876

19,882(1,172)(6,611)

15,103

4,740(12,495)

10,157

7,112

3,400

1,535

4,078

2,406

326

(2,599)46,54018,92725,37928,07820,49032,49927,96817,824

18,283

17,822

16,774

16,611

23,095

21,638(1,098)(1,459)(1,775)(2,129)(2,492)(1,907)(2,447)32,324

26,10533,37023,339(800)

22,912

43,056(17,448)(21,246)(16,246)(4,248)4,143(23,287)—(9,293)(14,163)(14,267)(26,089)(9,086)

4,047—

14,876

4,859

17,12419,091

3,343

(375)

—

517,930

470,774

518,756

530,080

544,121544,519566,088

—

—

—

—

—

—

—

253,071

223,341

236,313

237,470

235,231226,795

243,436

86,43776,47073,972

83,839107,266

124,535

82,356

148,351

154,799

167,077

176,998

197,624

207,821201,515

52,79535,94523,371

33,25938,91050,51826,52934.76(2.05)(11.56)

26.41

8.29

(21.85)

17.77

—

—

—

—

—

—

—

443.29391.14413.28415.25411.34396.59425.68

6.0

5.0

4.0

6.0

5.0

3.0

6.0

4.02

—

—

2.81

0.87

—

1.76

8.35

—

—

6.39

2.05

—

4.22

48.9

47.4

45.6

44.8

43.2

41.7

43.0

28.6

32.9

32.2

33.4

36.3

38.2

35.6

0.59
1.38

0.69
1.26

0.71
1.14

0.75
1.20

0.84
1.23

0.92
1.31

0.83
1.13

SUMITOMO METAL MINING CO., LTD. Annual Report 200851

Financial Analysis

SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Overview of Consolidated Operations
The SMM Group comprised the parent company (Sumitomo
Metal Mining Co., Ltd.), 59 subsidiaries and 17 affiliated companies as of March 31, 2008. The SMM Group operates three main

U.S. Dollar–Yen Exchange Rate (Ave.)(¥/US$)

130
125

businesses, which are outlined below.
(1) Mineral resources: mining of ores to extract gold, copper andother metals(2) Metals: smelting and refining of non-ferrous metals such as
gold, copper, nickel and zinc; manufacture of fabricated metal

120
117.03114.29115113.32113.06110products such as copper strip products(3) Electronics and advanced materials: manufacture of electronics materials such as IC packaging materials, single-crystal
materials and PCB substrates (electronics materials business);manufacture of advanced materials such as copper-clad poly-

107.54105
100
Years ended
March 31

2004

2005

2006

2007

2008

（円・ドル為替ルート）

imide film, powdered materials such as nickel powder, battery
materials and magnetic materials (advanced materials

Net Salesbusiness)

Although there was some evidence that elevated prices con-

Other consolidated operations include production of housing

strained buying and encouraged a shift toward alternatives,and construction materials such as Siporex (Autoclaved Light-

demand in the non-ferrous metals industry remained firm in fiscal

weight aerated Concrete), nuclear power-related engineering ser-2007, supported by the ongoing economic expansion of emerg-

vices and environment-related operations.

ing nations and a global economic recovery. Strong demand

The results presented in this Annual Report comprise the con-helped non-ferrous metals prices to remain at high levels gener-

solidated performance of the parent company, 50 domestic andally, although nickel prices spiked and fell back in the first quarter

overseas subsidiaries, and 12 equity-method affiliates.

of fiscal 2007. The yen appreciated in currency markets during theyear.
In the electronics sector, demand for mobile phones, flat-

Operating Performance (Consolidated)screen televisions, PCs, other electronic equipment and electronic

Impact of Foreign Exchange Fluctuations(Reference Note)components was firm overall, but weakened in some areas. Sales

Exchange rates are closely linked to the non-ferrous metals busi-

the effects especially marked in LCD-related products.

price erosion had a negative impact on sector profitability, withness, from the purchase of ore to sales of final products. Although

Mainly reflecting sharply higher prices for both copper anda stronger yen pushes down the price of purchased ore for refin-

nickel as well as higher sales volumes for copper, consolidated net

ing, it also lowers the sales prices for manufactured products. A

sales totaled ¥1,132,372 million in fiscal 2007, an increase ofstronger yen tends to exert a negative overall impact on earnings¥165,608 million (17.1%) compared with the previous year.

because U.S. dollar-denominated smelting margins are worth lesswhen translated into yen. The yen appreciated slightly during fiscal 2007 (the year ended March 31, 2008). The average exchange
rate against the U.S. dollar was ¥114.29, compared with ¥117.03
in the previous fiscal year (April 1, 2006 – March 31, 2007). Thisappreciation of ¥2.74 in the yen’s value against the U.S. dollar
depressed consolidated profits by around ¥1.0 billion (a movement in the yen-dollar exchange rate of ±¥1 over the course of ayear translates into a shift in annual earnings of approximately¥1.0 billion).

52

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Net Sales

Operating Income(Billions of yen)

Profits increased in the mineral resources business due to higher

1,500

prices for copper and gold, but were lower in the electronics and

1,250
30.0
17.7

1,000

40.7

advanced materials sector. Consolidated operating income

255.0

declined by ¥7,238 million (4.5%) in year-on-year terms to¥155,394 million..

223.6

750

10.2
15.4
142.7

250

Years ended
March 31910.6

Other income (expenses) recorded a net profit of ¥61,110 million,

758.8

154.9

a gain of ¥18,125 million (42.2%) compared with fiscal 2006. The

453.7

major contributory factor was equity in earnings of affiliated

333.2

273.4

0

Other Income (Expenses)

28.8
17.3
184.1

23.1
15.8

500

25.3

82.2

43.7

33.1

companies, which increased by ¥27,248 million (58.3%) to

91.4

2008

¥73,956 million due to higher earnings recorded by equity-

Mineral Resources
MetalsElectronics and Advanced Materials
Housing and Construction Materials
OthersNote: Net sales of business segments include inter-segment transactions.

method affiliates such as SMMA Candelaria Inc., SMM Cerro

2004

2005

2006

2007

Verde Netherlands B.V. and P.T. International Nickel Indonesia.
Offsetting negative factors included a foreign exchange loss of（売上高）

Cost of Sales and SG&A Expenses¥2,142 million (representing a year-on-year decline of ¥3,349

Reflecting higher raw material costs associated with the sharp

million compared with the previous year’s gain) and a loss fromincreases in non-ferrous metals prices, the cost of sales increased

valuation of derivative instruments of ¥2,449 million (representingby ¥170,641 million (22.3%) in year-on-year terms to ¥934,225

a year-on-year fall of ¥2,829 million compared with the previous

million. However, the gross margin slipped from 21.0% to 17.5%,

year’s valuation gain).

due mainly to the effect of reduced inventory valuations in themetal refining business and sharp increases in the costs of energy

Net Income

and materials.

Consolidated net income rose by ¥11,754 million (9.3%) in year-

Selling, general and administrative (SG&A) expenses rose byon-year terms to ¥137,808 million. Net income per share¥2,205 million (5.4%) to ¥42,753 million. The main factors push-amounted to ¥238.13, compared with ¥220.49 in the previous

ing up SG&A expenses were selling, transportation and miscella-

year.

neous expenses (up by ¥1,858 million, or 20.9%), salary bonuses
and benefits (up by ¥1,058 million or 11.7%), and R&D expenses(up by ¥719 million or 13.3%). These factors were partially offset

Net Income(Billions of yen)

150

by a fall in other expenses of ¥1,631 million.

137.8

120

Gross Profit and Gross Margin(Billions of yen)

126.1

(%)

250

25

90

20

60

15

30

10

0

21.0

200
203.2

62.8

198.1

19.2

150

100

17.5

17.1

37.0
19.9

13.4

120.1

Years ended
March 31

2004

2005

2006

2007

2008

82.9

50

5
53.7

（当期純利益（損失））0Years ended
March 31

0
2004

2005

2006

2007

2008

Gross Margin (RH scale)（売上総利益・売上総利益率）
SUMITOMO METAL MINING CO., LTD. Annual Report 200853

Capital Expenditures and Depreciation

Depreciation

Total capital expenditures during fiscal 2007 amounted to ¥65,145(Billions of yen)million, an increase of ¥13,578 million (26.3%) over the previous
year. Of this figure, the mineral resources and metals segments

30

1.1
2.1

25

0.6

accounted for ¥51,516 million (79.1% of the total) and the electronics and advanced materials segment accounted for ¥11,862
million (18.2% of the total).

20

0.6

15

0.8
0.5
0.7

10

8.3

1.4
0.7

0.6
1.3
0.7

1.3
0.7

11.7

10.1
9.6

8.9

In the mineral resources segment, the major capital spending programs for the year focused on exploration and development activi-

5

4.7

production facilities at the Morenci Copper Mine in the United0

2.9

States. In the metals segment, besides undertaking capital invest-

Years ended
March 31

ties, primarily at the Hishikari Mine, and on copper extraction andments to expand, upgrade and rationalize capacity at smelting
and refining facilities for copper, nickel, lead and zinc, completion

10.1
8.4

2004

Mineral Resources

7.5

6.4

2005
Metals

Housing and Construction Materials

2006

5.5

4.5

3.3

2.8

2007

2008

Electronics and Advanced Materials
OthersElimination or corporate（減価償却費）

of the facility’s second phase doubled the hydrometallurgicalrefining capacity for low-grade nickel oxide ores at Coral Bay

Research and Development (R&D) Expenses

Nickel Corporation; renovation of the ferronickel production facili-

Total R&D expenses in fiscal 2007 amounted to ¥6,111 million, anties at Hyuga Smelting Co., Ltd. also continued.

increase of ¥719 million (13.3%) over the previous year. An over-In the electronics and advanced materials segment, the major
items of capital expenditure in fiscal 2007 included various invest-

view of the spending breakdown by business segment is provided
below.

ments to expand production capacity and upgrade manufacturing

R&D expenses in the mineral resources segment totaled ¥104

facilities. In China and Taiwan, spending was targeted at increas-

million. Major projects focused on ore-dressing processes for non-ing production of lead frames and upgrading facilities for COF

ferrous metal ores; the development of different types of leaching(Chip on Film) products.

technologies for metal refining; and development of mine water

Depreciation increased by ¥4,812 million (18.7%) comparedwith the previous year to ¥30,505 million.

discharge processing technologies. R&D expenses in the metals
segment totaled ¥2,873 million. Major project themes included
the development of non-ferrous metal refining, electrolytic tech-

Capital Expenditures

nologies and new metal-refining processes; the optimization of(Billions of yen)

0.0
1.8

60

11.8

50
2.1
1.2
0.2

40

0.2
1.2
0.3

12.2

30

1.7
0.2

1.3
0.2

18.8

22.6

related casting technologies; the development of surface-treatment technologies; and the development of manufacturing tech-

12.6

18.8

15.2

27.9

3.0

lion. Major project themes included the development of technologies, processes and related equipment for creating high-perfor-

14.0

0

9.4

9.3

7.0

-0.7

-0.4

mance and related value-added electronic materials, along withthe development of novel and more advanced high-performance-10
Years ended
March 31

2004

Mineral Resources

2005
Metals

Housing and Construction Materials

2006

2007

2008

Electronics and Advanced Materials
OthersElimination or corporate（設備投資額）54

nologies for rolled copper foil products. R&D expenses in theelectronics and advanced materials segment totaled ¥2,961 mil-

16.2

10

gies; the active separating, refining and purifying of trace amountsof other metals contained in ores; the development of alloys and

42.1

20

original in-house hydrometallurgical copper-smelting technolo-

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

materials. Other R&D spending totaling ¥173 million was directed
at development of housing and construction materials, environment-related R&D and related facility development.

Financial Position and Liquidity
Assets
As of the fiscal 2007 year-end (March 31, 2008), total assets
amounted to ¥1,091,716 million, an increase of ¥162,508 mil-Composition of Interest-Bearing Debt
(Millions of yen)

2008

March 31

Short-term debt

(8.1%)

lion, or 17.5%, compared with a year earlier.
Long-term debt

Current assets increased by ¥154,011 million (41.8%) to ¥522,699
million. This was mainly the result of increases in notes andaccounts receivable and inventories due to higher metals prices,along with an increase in negotiable certificates of deposit following the implementation of a capital procurement program basedon loans with stock acquisition rights. Although a drop in share

2007

2006

2005

¥    88,660 ¥ 96,110 ¥ 76,486 ¥ 50,756

Shareholders’ equity*(10.3%)(9.9%)(8.8%)

169,394

93,800114,405

109,777(15.5%)(10.1%)(14.8%)(19.1%)

589,640

495,844373,752

283,897(54.0%)(53.4%)(48.4%)(49.5%)¥1,091,716 ¥929,208 ¥772,562 ¥573,925

Total assets(100.0%) (100.0%) (100.0%) (100.0%)

Figures in parentheses refer to proportions of total assets.
*including total valuation and translation adjustments

prices caused the value of investment securities to fall, property,
plant and equipment increased as the result of strategic investments in the core mineral resources and metals businesses. Total
fixed assets increased by ¥8,497 million compared with the previ-

Long-Term Debt and Debt-to-Equity Ratio(Billions of yen)(Times)200

1.0

ous year-end.
160

169.4

0.8

Liabilities
Total liabilities amounted to ¥451,371 million as of the fiscal 2007

120

0.6

year-end, an increase of ¥51,084 million (12.8%) compared witha year earlier.

0.59

80

114.4
109.8 0.57

0.51

0.44

86.4

0.38

Current liabilities decreased by ¥8,448 million (3.2%) to¥256,449 million, due mainly to a drop in accrued income taxes.

0.4

93.8

40

0.2

The current ratio rose to 2.04 times from 1.39 times at the previous fiscal year-end. Reflecting growth in long-term debt due to0capital procurement using loans with stock acquisition rights,

March 31 2004

Net Assets

2006year earlier. This was the result of net income recorded for fiscal
2007 of ¥137,808 million, among other factors. Subtracting
minority interests, shareholders’ equity amounted to ¥589,640（長期借入債務・D/Eレシオ）(Billions of yen)

(%)

600

60
53.4

500

48.9

from 53.4% to 54.0%.

49.5

48.4

589.6
54.0

50

495.8

400

40
373.8

300

million as of March 31, 2008, which represented a year-on-yearincrease of ¥93,796 million, or 18.9%. The equity ratio increased

2008

Shareholders’ Equity and Equity Ratio

As of the fiscal 2007 year-end, net assets amounted to ¥640,345
million, an increase of ¥111,424 million (21.1%) compared with a2007

Debt-to-Equity Ratio (RH scale)total long-term liabilities rose by ¥59,532 million (44.0%) to¥194,922 million.

0
2005

30

283.9
253.1

200

20

100

10

0

0

March 31

2004

2005

2006

2007

2008

Equity Ratio (RH scale)（株主持分、自己資本比率）

SUMITOMO METAL MINING CO., LTD. Annual Report 200855

Cash Flows

Risk Information

Net cash provided by operating activities totaled ¥157,383 mil-

The following section provides an overview of the risk factors that

lion, an increase of ¥61,398 million compared with the previous

could exert a significant effect on the business performance andyear. This primarily reflected higher income before income taxes

financial position of the SMM Group. All forward-looking state-

and minority interests and an increase in interest and dividend

ments in the text refer to management decisions based on theincome.

best information available at the end of fiscal 2007.

Net cash used in investing activities in fiscal 2007 equaled
outflow of ¥48,984 million. This result reflected the financing ofFluctuations in non-ferrous metals prices andexchange rates

major ongoing facility investments as well as other factors such asn Sustained downturn in non-ferrous metals prices

increased acquisitions of securities.

Prices of copper, nickel, gold and other non-ferrous metals are¥126,413 million, which marked a year-on-year increase in cash

Net cash provided by financing activities amounted to ¥55,727

influenced by a number of factors, including international supply

million in fiscal 2007. Compared with the prior year, this marked

and demand, political and economic circumstances, speculative

an increase in cash inflow of ¥65,800 million and was mainly due

trading and competition from alternative materials. A sharp andto substantial growth in long-term debt as the result of capitalsustained downturn in non-ferrous metals prices could have aprocurement using loans with stock acquisition rights.

significant negative impact on the Group’s business performance

Factoring in the effects of exchange rate fluctuations, theand financial position.

year-end balance of cash and cash equivalents amounted ton Appreciation of the yen¥132,475 million at March 31, 2008, an increase of ¥88,142 mil-

The refining margins earned by SMM are effectively denominatedlion compared with the previous year-end.

in U.S. dollars. Returns on investments in overseas mining developments, income earned from investments in the electronics
materials business and revenues from exports of products in the

Cash Flowselectronics materials and other segments are also denominated in(Billions of yen)
157.4

150
100

these currencies over a sustained period could exert a significant

96.0

negative impact on the Group’s business performance and finan-

70.8

40.2

55.7

50
32.3

cial position.

28.7

0
-50

foreign currencies. A substantial appreciation of the yen against

6.1
-17.4

-9.3

To mitigate these external risks, the SMM Group continues to-10.1

make progress in implementing a variety of measures aimed at-31.7

boosting competitiveness, both in materials procurement and
-77.4

-100

manufacturing.

-102.4-126.4-125
Years ended
March 31

2004

2005

Net cash flows from operating activities
Net cash flows from financing activities

2006

2007

2008

Net cash flows from investing activities（キャッシュ・フロー）

Deterioration in terms of non-ferrous metal orepurchasing contracts and supply disruptions
Currently the SMM Group procures the majority of copper ores,
nickel matte and other raw materials for non-ferrous metal refining operations based on long-term ore-purchasing contracts withthird-party producers. This exposes the Group to the risk thatshifts in supply and demand or various other factors affecting
markets could prevent the purchase of required volumes of ore at
reasonable prices. Supplies of ore are also subject to unpredictabledisruptive events such as natural disasters and operational stoppages due to accidents or industrial disputes. Such factors could
impose various constraints on Group production volumes, which
as a result could exert a negative impact on the Group’s businessperformance and financial position.

56

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

To mitigate such risks, the Group continues to seek to invest

may not materialize due to obsolescence caused by technologicalin high-grade overseas mines to secure reliable (in-house) supplies

progress, delays caused by responding to customer requests orof ore.

the launch of competitor products, among other factors. Customer demand for products may also decline in the future. All

Uncertainty inherent in mining investments

these various factors could have a negative impact on the Group’s

As described above, the raw materials procurement policy of thebusiness performance and financial position.

SMM Group is to develop in-house mining resources to boost the

The SMM Group recognizes the importance and value of

proprietary ore ratio. Amounts of extractable ore and extraction

acquiring intellectual property rights and managing such rights

costs can only be estimated based on the results of exploratory

properly in accordance with related laws and regulations. Althoughsurveys prior to mine development. In addition, the development

the Group strives to observe such laws, it remains exposed to risks

costs of a mining project can rise as the result of a variety of situa-

such as failure to acquire certain rights or damage done to thetions such as compliance with environmental or regulatory actions.

results of the Group’s R&D activities due to illegal actions by third

Any additional investment or increase in the burden of extraction

parties.

costs arising from the inherent uncertainty associated with mining

To mitigate such risks, the Group strives to minimize related

developments could have a negative impact on the Group’s busi-

problems by structuring R&D activities to realize commercial

ness performance and financial position.

opportunities as quickly as possible. The Group has also created

To mitigate such risks, the SMM Group employs a selective

dedicated in-house teams to manage issues related to intellectual

investment policy and undertakes strict assessments of the poten-

property rights to ensure that such rights are acquired and pro-tial profitability of individual mining developments based on

tected properly.

extensive experience in mining extraction and mine valuation
accumulated over many years.

Overseas investments
Overseas operations are subject to political and economic risks

Environmental protection and regulatory compliancerisks

that vary by country. The emergence of various developments

SMM Group businesses, notably the mining and non-ferrous

seas investments. Such risks include the development of mineral

metal smelting and refining operations, are subject to a broad

resource projects by organizations funded by national or regional

range of laws and regulations in areas such as occupational safety

governments against the backdrop of high non-ferrous­ metals

and health, environmental protection, pollution prevention, indus-

prices, or the levying of higher taxes on such operations. Increased

trial waste disposal and management of potentially toxic sub-environmental demands from various quarters constitute a further

stances. Ongoing regulatory compliance costs are substantial andrisk.

could prevent the Group from earning a suitable return on over-subject to unexpected increases as the result of the sudden emer-

To mitigate such risks, the SMM Group makes overseas invest-

gence of previously unknown risks. The costs of ensuring regula-ment decisions based on careful consideration of all relevant

tory compliance could therefore exert a negative impact on the

country risks.

Group’s business performance and financial position.
To mitigate such risks, the Group seeks to ensure that opera-

Disaster-related risks

tions are in full compliance with environmental protection and

The SMM Group locates manufacturing operations based on con-other laws and regulations through the operation of environmen-

siderations such as customer relationships, raw material procure-tal and risk management systems based on strict standards. The

ment, the links to other Group operations and effective use ofGroup also endeavors to manage operations so that related com-management resources. Unexpected large-scale natural disasters

pliance costs are kept within reasonable limits.

such as earthquakes or typhoons that affect the regions wheresuch facilities are located could result in major financial losses

Risks associated with market shifts, new productdevelopment and intellectual property rights

arising from factors such as on-site damage and loss of
production.

Demand changes rapidly in markets targeted by the SMM Group’s

To mitigate such risks, the Group insures such facilities where

electronics and advanced materials operations, even as productthis is possible at reasonable cost and has made plans containing

development programs in these areas require the investment ofsuitable countermeasures to minimize any secondary effects due

increasingly large amounts of time and resources. Expected returns

to such disasters.

on investment from related new product development programs

SUMITOMO METAL MINING CO., LTD. Annual Report 200857

Consolidated Balance Sheets

SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIESASSETS

Thousands of U.S. dollars(Note 1)Millions of yen

2008

As of March 31, 2008 and 2007

Current assets:
Cash and cash equivalents
Time deposits
Negotiable certificates of deposits

2008

2007
2008

¥

132,475¥ 44,333$ 1,322,238

295

314

2,944

43,000—429,185

113,023

101,660

1,128,087

5,886

6,972

58,748

Receivables:
Notes and accounts receivable:
Trade
Non-consolidated subsidiaries and affiliated companies
Loans and others:
Non-consolidated subsidiaries and affiliated companies

3,150

4,808

31,440Other

16,698

6,899

166,663

(329)

(304)

(3,284)

169,556

169,333

1,692,345

3,112

4,499

31,061

Allowance for doubtful accounts
Inventories (Note 5)
Deferred tax assets (Note 8)

35,83330,174

357,651522,699368,688

5,217,078

Non-consolidated subsidiaries and affiliated companies

199,504

188,943

1,991,257

Other73,816

108,507736,760

(16)

(16)

(160)

Non-consolidated subsidiaries and affiliated companies

2,340

—

23,356

Other

1,300

1,142

12,975

5,374

5,080

53,638Other current assets
Total current assets

Investments and long-term receivables:
Investment securities (Notes 3 and 7):

Allowance for loss on investments
Loans:

Other long-term receivables

(273)

(383)

(2,725)

282,045

303,273

2,815,101

Land

29,19429,188291,386

Buildings and structures

157,488

155,034

1,571,893

Machinery and equipment

357,764

341,289

3,570,855

Allowance for doubtful accounts
Total investments and othr assets

Property, plant and equipment (Notes 6 and 7):

Construction in progress

Accumulated depreciation
Net property, plant and equipment

Deferred tax assets (Note 8)
Other assets
Total assets
The accompanying notes are an integral part of these financial statements.

58

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

33,4639,000

333,995

577,909534,511

5,768,129(299,760)(283,811)(2,991,914)

278,149

250,700

2,776,215

1,880

1,843

18,764

6,943

4,704

69,299¥ 1,091,716¥ 929,208$ 10,896,457

LIABILITIES AND NET ASSETS

Thousands of U.S. dollars(Note 1)Millions of yen

2008

As of March 31, 2008 and 2007

2008

2007

Current liabilities:

2008
67,806¥ 67,163

20,85528,947208,155

Trade

53,133

51,131

530,322

Non-consolidated subsidiaries and affiliated companies

14,611

6,132

145,833

Other

16,763

17,435

167,312

Accrued income taxes (Note 8)

18,79544,742

187,594

Accrued expenses

5,932

4,772

59,208Advances received

1,104

1,433

11,019

360

479

3,593

7

86

70

100

115

998

Deferred tax liabilities (Note 8)
Other current liabilities

2,580
54,40345
42,41725,751
542,997

Total current liabilities

256,449

264,8972,559,626

Long-term debt (Note 7)

169,394

93,8001,690,728

Deferred tax liabilities (Note 8)

11,672

26,682

116,499

Accrued retirement benefits (Note 9)

8,157

9,510

81,415

Accrued environmental measures

643

632

6,418

Accrued restructuring charges
Accrued indemnification loss on damages caused by a consolidated subsidiary

27
225

75
552

269
2,246

2,568
2,236

2,265
1,874

25,631
22,318

194,922

135,390

1,945,524

930,652

Bank loans (Note 7)Long-term debt due within one year (Note 7)¥$

676,774

Notes and accounts payable:

Accrued restructuring charges
Accrued repair construction of lots for saleAccrued bonus to directors and corporate auditors

Long-term liabilities:

Other accruals
Other long-term liabilities
Total long-term liabilities
Contingent liabilities (Note 13)

Net assets:
Shareholders’ equity (Note 12):
Common stock
Authorized — 1,000,000,000 shares
93,242

91,821

Capital surplus

86,104

84,668859,407

Retained earnings (Note 11)
Treasury stock, at cost

403,459(2,529)283,568(1,777)

4,026,939(25,242)580,276458,280

5,791,756

12,02734,558120,043

790(3,453)

1,170
1,836

7,885
(34,465)

Issued — 581,628,031 shares

Total shareholders’ equity
Valuation and translation adjustments:
Net unrealized holding gain on securities
Deferred gains on hedges

Foreign currency translation adjustment
Total valuation and translation adjustments:
Minority interests
Total net assets
Total liabilities and net assets

9,364

37,564

93,46350,70533,077506,088

640,345¥ 1,091,716

528,921¥ 929,208

6,391,307$ 10,896,457

SUMITOMO METAL MINING CO., LTD. Annual Report 200859

Consolidated Statements of Income
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Thousands of
U.S. dollars(Note 1)Millions of yen

2008

2007

2006

2008

¥ 1,132,372¥ 966,764¥ 625,579$ 11,302,246

934,225
42,753976,978
155,394

763,584
40,548804,132
162,632

505,442
37,381
542,823
82,756

9,324,533
426,719
9,751,252
1,550,993

4,088(6,297)
81
(458)
—
—
23
(941)
—
—
54
—
—
—
(2,351)(2,142)
(274)
—
—
(41)
(2,449)—73,956(36)(2,103)
61,110216,504

2,829(5,435)
76
(6)
400
(302)
(1,026)
—
939
63
355
(16)
(73)
(57)
(1,803)
1,207
—
37
(605)
(103)
380
10
46,708(593)
42,985
205,617

1,673(2,954)
356
(60)
—
—
(3,407)(1,825)
—
418
54
—
(191)
(573)
(1,055)845(1,092)
—
(816)
(409)
(2,029)33
21,915—(665)
10,21892,97440,802(62,851)808(4,571)——
230(9,392)
—
—
539
—
—
—
(23,465)(21,379)(2,735)——(409)(24,444)—738,158(359)(20,991)
609,941
2,160,934

57,9383,812
61,750154,754(16,946)
137,808

68,1491,203
69,352
136,265(10,211)¥ 126,054

31,932(3,557)28,37564,599(1,799)¥ 62,800

578,281
38,048616,329
1,544,605(169,139)$ 1,375,466

For the years ended March 31, 2008, 2007 and 2006

Net sales (Note 14)
Costs and expenses (Note 14):
Cost of sales
Selling, general and administrative expenses (Note 10)

Operating income (Note 14)
Other income (expenses):
Interest and dividend income
Interest expense
Gain on sale of investment securities
Write-down of investment securities
Gain on sales of securities of subsidiaries and affiliated companies
Write-down of securities of subsidiaries and affiliated companies
Gain (Loss) on sale and disposal of property, plant and equipment
Loss on impairment of fixed assets (Note 6)
Reversal of loss on impairment of fixed assets
Gain on liquidation of subsidiaries
Reversal of doubtful accounts
Provision for loss on investments
Provision for repair construction of lots for sale
Provision for environmental measures
Loss from valuation of gold loans
Exchange gain (loss)
Provision for restructuring charges
Reversal of restructuring charges
Maintenance cost for ceased projects
Casualty loss
Gain (Loss) from valuation of derivative instruments
Amortization of negative goodwill
Equity in earnings of affiliated companies
Loss from renunciation of receivable
Other, net

Income before income taxes and minority interests
Income taxes (Note 8):
Current
Deferred

Minority interests in net income of consolidated subsidiaries
Net income¥—

U.S. dollars(Note 1)

Yen

2008

For the years ended March 31, 2008, 2007 and 2006

2007

2006

¥ 220.49
213.6727.00¥ 109.96
108.8714.00

2008

Amounts per share of common stock:
Net income (Note 16)—Basic—Diluted
Cash dividends applicable to the year
The accompanying notes are an integral part of these financial statements.

60

SUMITOMO METAL MINING CO., LTD. Annual Report 2008¥

238.13231.50
30.00

$

2.38
2.31
0.30

Consolidated Statements of Changes in Net Assets
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Shareholders’ Equity
For the years ended March 31, 2008, 2007 and 2006

Numberof shares
issuedCommonstock

CapitalsurplusRetainedearnings¥88,355¥81,191 ¥113,762
62,800551(thousands)

Balance at March 31, 2005
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Treasury stock
Gain on sale of treasury stock
Executive bonuses
Cash dividends paid
Balance at March 31, 2006
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Decrease due to change in consolidation of subsidiaries
Treasury stock
Gain on sale of treasury stock
Deferred gains or losses on hedges
Executive bonuses
Minority interests
Cash dividends paid
Balance at March 31, 2007
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Treasury stock
Gain on sale of treasury stock
Deferred gains or losses on hedges
Minority interests
Cash dividends paid
Balance at March 31, 2008

571,873

TreasurystockMillions of yen

551¥ (779)¥282,529
62,800
1,102

(348)

(348)
8
(52)
(4,564)¥341,475
126,0545,825

8

572,972

Total
shareholders’equity¥88,906
2,915(52)(4,564)¥81,750 ¥171,946
126,0542,910¥(1,127)

(75)
(657)
7

8

(75)
(657)
15

(73)

578,791¥91,8211,421(14,284)¥84,668 ¥283,568
137,808
1,419

(73)

¥(1,777)

(770)
18

(770)
35

(17,917)¥86,104 ¥403,459 ¥(2,529)(17,917)¥580,27617

581,628¥93,242(14,284)¥458,280
137,808
2,840

Shareholders’ Equity
For the year ended March 31, 2008

Commonstock

CapitalsurplusRetainedearnings$916,469$845,074 $2,830,302
1,375,467
14,163

Treasury
stock

Total
shareholders’equityThousands of U.S. dollars (Note 1)

Balance at March 31, 2007
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Treasury stock
Gain on sale of treasury stock
Deferred gains or losses on hedges
Minority interests
Cash dividends paid
Balance at March 31, 2008

14,183170$930,652$(17,737) $4,574,108
1,375,467
28,346(7,685)
180(7,685)350(178,830)(178,830)$859,407 $4,026,939 $(25,242) $5,791,756

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

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

61

Consolidated Statements of Changes in Net Assets(continued)

SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Valuation, translation adjustments and others
For the years ended March 31, 2008, 2007 and 2006

Net
unrealized
holding gain
on securities

Deferred
gains onhedgesForeignTotal
currency
valuation andtranslationtranslation
adjustment adjustments¥ 15,280—¥ (13,912) ¥ 1,368

Minority
interests

Total
net assets

Millions of yen

Balance at March 31, 2005
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Treasury stock
Gain on sale of treasury stock
Executive bonuses
Cash dividends paid
Balance at March 31, 2006
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Decrease due to change in consolidation of subsidiaries
Treasury stock
Gain on sale of treasury stock
Deferred gains or losses on hedges
Executive bonuses
Minority interests
Cash dividends paid
Balance at March 31, 2007
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Treasury stock
Gain on sale of treasury stock
Deferred gains or losses on hedges
Minority interests
Cash dividends paid
Balance at March 31, 2008

11,292
19,617¥ 34,897—

11,292
19,617¥ (2,620) ¥ 32,277

4,456
(339)

1,170

¥ 21,147

4,456
(339)

1,170
11,930¥ 34,558¥ 1,170¥ 1,836¥ 37,564(5,289)(5,289)(22,531)(22,531)(380)¥33,077(380)
17,628¥ 12,027¥ 790¥ (3,453) ¥ 9,364¥50,705¥ 283,897
62,8001,102
11,292
19,617(348)
8(52)(4,564)¥ 394,899
126,054
5,825
4,456
(339)
(75)
(657)
15
1,170
(73)
11,930(14,284)¥ 528,921
137,808
2,840(5,289)(22,531)
(770)
35
(380)
17,628(17,917)¥ 640,345

Valuation, translation adjustments and others

For the year ended March 31, 2008

Net
unrealized
holding gain
(loss) on
available-forsale
securities

Foreigncurrencytranslation
adjustment

Deferred
gains onhedgesTotalvaluation,translation
adjustments
and others

Minority
interestsincosolidated
subsidiaries

Total
net assets

Thousands of U.S. dollars (Note 1)

Balance at March 31, 2007
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Treasury stock
Gain on sale of treasury stock
Deferred gains or losses on hedges
Minority interests
Cash dividends paid
Balance at March 31, 2008
The accompanying notes are an integral part of these financial statements.

62

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

$ 344,925$11,678(224,882)$ 120,043$ 18,325$ 374,928(52,790)(52,790)(224,882)(3,793)(3,793)$ 7,885$(34,465) $ 93,463$330,143 $5,279,179
1,375,467
28,346(52,790)(224,882)(7,685)350(3,793)
175,945
175,945(178,830)$506,088 $6,391,307

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

Thousands of
U.S. dollars(Note 1)Millions of yen

For the years ended March 31, 2008, 2007 and 2006

2008

2007

¥ 216,504¥ 205,617¥ 92,974$ 2,160,934

30,505
941
—
(23)
(81)
458
—
—
2,449
(83)
(2,267)—(4,088)
6,297(73,956)69
41
666(20,026)(1,148)
13,971
4,719
174,948
72,231(6,330)(666)(41)(82,759)
157,383

25,693
—
(939)
1,026
(76)
6
16
(400)
(380)
(154)
(350)
(1,030)(2,829)5,435(46,708)—103605(24,454)(40,413)
3,017
4,020
127,805
23,904(5,087)(605)(103)(49,929)
95,985

22,951
1,825
—
3,407
(356)
60
—
—
2,029
(122)
(1,613)(418)(1,673)
2,954(21,915)
441
409
816
(18,971)(24,964)
8,804
8,298
74,936
14,350(2,811)(816)(409)(14,478)
70,772

304,472
9,392
—
(230)
(808)
4,571
—
—
24,444(828)(22,627)—(40,802)62,851(738,158)
689
409
6,647
(199,880)(11,458)
139,445
47,101
1,746,164
720,940(63,180)(6,647)(409)(826,021)
1,570,847(64,883)
1,852(43,000)(3,216)(13,804)
106—(7,955)
4,992(505)(126,413)(48,314)
4,033—(14,118)(21,564)263
1,195(2,500)2,015
1,561(77,429)(48,728)
3,103—(1,204)(51,969)510
5(1,621)956(3,436)(102,384)(647,600)
18,485(429,185)(32,099)(137,778)
1,058—(79,399)
49,825(5,040)(1,261,733)

98,888(18,990)
3,180(10,000)
—
6,502
(735)
(17,917)(5,201)
55,727
1,445
88,14244,333——¥ 132,475

5,671(20,759)
18,880(10,000)
9,944
5,731
(642)
(14,284)(4,614)(10,073)
1,602
10,08534,2509(11)¥ 44,333

31,867(4,337)
7,682(10,000)
—
9,288
(338)
(4,564)(875)
28,723
2,354(535)
34,785——¥ 34,250

987,005(189,540)
31,740(99,810)—64,897(7,336)(178,830)(51,911)556,215
14,423879,752
442,489——$ 1,322,238

2006

2008

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority
interests to net cash provided by operating activities:
Depreciation
Loss on impairment of fixed assets
Reversal of loss on impairment of fixed assets
Loss (Gain) on sale and disposal of property, plant and equipment
Gain on sale of investment securities
Write-down of investment securities
Increase in allowance for loss on investments
Gain on sales of securities of subsidiaries and affiliated companies
Loss (Gain) from valuation of derivative instruments
Reversal of doubtful accounts
Decrease in retirement benefits
Gain on liquidation of subsidiaries
Interest and dividend income
Interest expense
Equity in earnings of affiliated companies
Restructuring charges
Casualty loss
Maintenance cost for ceased projects
Increase in trade receivables
Increase in inventories
Increase in trade payables
Others
Sub totalInterest and dividend received
Interest paid
Payments for maintenance costs for ceased project
Payments for recovery costs
Payments for income taxes
Net cash provided by operating activities

Cash flows from investing activities:
Payments for acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for purchases of securities
Payments for purchases of investment securities
Payments for purchase of securities of subsidiaries and affiliated companies
Proceeds from sale of investment securities
Proceeds from sales of securities of subsidiaries and affiliated companies
Payments for loans receivableCollection of loans receivable
Other
Net cash used in investing activities

Cash flows from financing activities:
Proceeds from long-term debt
Repayments of long-term debt
Net increase in bank loans
Payments for redemption of bonds
Proceeds from issuance of bonds
Contribution from minority in consolidated subsidiaries
Increase in treasury stocks
Cash dividends paid
Cash dividends paid to minority in consolidated subsidiaries
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 fiscal year
Increase in cash due to newly consolidated subsidiaries
Other decrease in cash and cash equivalents due to exclusion from consolidation
Cash and cash equivalents at end of fiscal year
The accompanying notes are an integral part of these financial statements.

SUMITOMO METAL MINING CO., LTD. Annual Report 200863

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

1.

of the investees, are accounted for by the equity method (12 affili-

Basis of presenting consolidated financial ­statements

ated companies in 2008, 13 in 2007 and 2006). Investments in

The accompanying consolidated financial statements have been

the re­maining unconsolidated subsidiaries and affiliates are ­carried

prepared in accordance with the provisions set forth in the Japa-

at cost because of their immaterial effect on the consolidated

nese Financial Instruments and Exchange Act, which took effectfinancial statements.

on September 30, 2007 replacing the Japanese Securities andIn the elimination of investments in subsidiaries, the assets

Exchange Law and its related accounting regulations, and in con-and liabilities of the subsidiaries, including the portion attributable

formity with accounting principles generally accepted in Japanto minority shareholders, are recorded based on the fair value at(“Japanese GAAP”), which are different in certain respects as tothe time the Company acquired control of the respective

application and disclosure requirements of International Financial

subsidiaries.

Reporting Standards (“IFRSs”).

The goodwill (consolidation difference between the invest­

The accounts of consolidated overseas subsidiaries are based

ment cost and the underlying equity in its net assets at the date ofon their accounting records maintained in conformity with gener-

acquisition) is amortized within five years on a straight-line basis.

ally accepted accounting principles prevailing in the respective

Regarding subsidiaries in the United States of America, goodwill iscountries of domicile. The accompanying consolidated financial

not amortized, but instead is tested for impairment at least annu-

statements have been restructured and translated into English

ally in accordance with Financial Accounting Standards (“FAS”)

with some expanded descriptions from the consolidated financial

142.

statements of Sumitomo Metal Mining Co., Ltd. (the “Company”)
prepared in accordance with Japanese GAAP and filed with theCash and cash equivalents and cash flow statements — Cashappropriate Local Finance Bureau of the Ministry of Finance ason hand, readily-available bank deposits, negotiable certificates ofrequired by the Japanese Financial Instruments and Exchange Act.

deposits and short-term highly liquid investments with maturities

Some supplementary in­formation included in the statutory Japa-of not exceeding three months at the time of purchase are consid-

nese language consolidated financial statements, but not required

ered to be cash and cash equivalents. Negotiable certificates offor fair presentation, is not presented in the accompanying con-deposits with maturities of exceeding three months is presented

solidated financial statements.

as negotiable certificates of deposits.

As discussed in Note 2 “Accounting Standard for Statementof Changes in Net Assets”, the consolidated statement of changes

Allowance for doubtful accounts — The allowance for doubt-

in net assets for 2006 has been prepared for the purpose of inclu-

ful receivables is provided at an amount determined based on thesion in the consolidated financial statements although such state-historical experience of bad debt with respect to ordinary receiv-

ment was not required to be filed with Local Finance Bureau priorables, plus an estimate of uncollectible amount determined by

to 2007.

reference to specific doubtful receivables from customers who are

The translations of the Japanese yen amounts into U.S. dollars

experiencing financial difficulties.

are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2008, which was

Investment securities — Securities are classified into two catego-¥100.19 to U.S. $1.00. The convenience translations should notries based on the intent of holding; available-for-sale securities

be construed as representations that the Japanese yen amounts

and securities issued by non-consolidated subsidiaries and affili-

have been, could have been, or could in the future be, converted

ated companies.

into U.S. dollars at this or any other rate of exchange.

Available-for-sale securities with available fair values (marketable securities) are stated at the fair value. Unrealized gains and2.

losses on these securities are reported, net of applicable income

Summary of significant accounting policies

taxes, presented as separate component of net assets. Other

Consolidation — The consolidated financial statements include

available-for-sale securities with no available fair values (non-mar-the accounts of the Company and its majority-owned subsidiaries

ketable securities) are stated at moving-average method. Securi-(50 subsidiaries in 2008, 48 in 2007 and 49 in 2006). All signifi-

ties issued by non-consolidated subsidiaries and affiliated compa-

cant inter-company balance and transaction have been eliminated.

nies are carried at cost. The cost of securities sold is determined by

Investments in affiliates over which the Company has the ability to

the moving-average method.

exercise significant influence over operating and financial policies

64

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Derivatives and hedge accounting — Derivative instru­ments

Balance sheets of consolidated overseas subsidiaries are trans-

are stated at fair value. Changes in the fair values are recognized

lated into Japanese yen at the year-end rates except for accountas gains and losses unless derivative transactions are used forcomponents of net assets, which are translated at the historical

hedging purposes.

rates. Income statements of consolidated overseas subsidiaries are

If derivative transactions are used as hedges and meet certain
hedging criteria, the Company and its domestic consolidated sub-translated at average rates except for transactions with the Company, which are translated at the rates used by the Company.

sidiaries defer recognition of gains or losses resulting from changes
in fair value of derivative transactions until the related losses orInventories —gains on the hedged items are recognized.

(1)	Merchandise, finished products, semi-finished products, work

However, in cases where forward foreign exchange contracts

in process and raw materials – Merchandise, finished prod-

are used as hedges and meet certain hedging criteria, forward

ucts, semi-finished products, work in process and raw materi-foreign exchange contracts and hedged items are accounted forals are stated at cost based on the first-in first-out (FIFO)

in the following manner:

method.

(1)	If a forward foreign exchange contract is executed to hedge
an existing foreign currency receivable or payable,(2)	Supplies – Supplies are stated at cost based on the moving
average method.

(a) the difference, if any, between the Japanese yen amountof the hedged foreign currency receivable or payable trans-

Property, plant and equipment — Property, plant and equip-

lated using the spot rate at the inception date of the con-ment are stated at cost.

tract and the book value of the receivable or payable isDepreciation of property, plant and equipment is computed

recognized in the income statement in the period whichby the straight-line method, based on the estimated useful lives ofincludes the inception date, andrespective assets. The depreciation period generally ranges from 3(b) the discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract

years to 50 years for buildings and structures and 5 years to 17
years for machinery and equipment.

translated using the contracted forward rate and that

The Company and consolidated domestic subsidiaries havetranslated using the spot rate at the inception date of the

adopted an accounting standard for impairment of fixed assets

contract) is recognized over the term of the contract.

from April, 2004. This standard requires that tangible and intangible fixed assets be carried at costs less depreciation, and be(2)	If a forward foreign exchange contract is executed to hedge areviewed for impairment whenever events or changes in circum-

future transaction denominated in a foreign currency, thestance indicate that the carrying amount of an asset may not be

future transaction will be recorded using the contracted for-recoverable.

ward rate, and no gains or losses on the forward foreignexchange contract are recognized.

In addition, the Company and consolidated domestic subsidiaries are required to recognize an impairment loss in their consolidated statements of income if certain indicators of asset impair-Also, if interest rate swap contracts are used as hedge and meet

ment exist and if the book value of an asset exceeds thecertain hedging criteria, the net amount to be paid or received

undiscounted sum of its future cash flows. This standard states

under the interest rate swap contract is added to or deductedthat impairment losses should be measured as the excess of thefrom the interest on the assets or liabilities for which the swap

book value over the higher of (i) the fair market value of the asset,

contract was executed.

net of disposition costs, and (ii) the present value of future cash

The Company evaluates hedge effectiveness monthly by com-flows arising from the ongoing utilization of the asset and its dis-paring the cumulative changes in cash flows from or the changes

position after use. This standard covers land, factories, buildings,

in fair value of hedged items and the corresponding changes inand other forms of property, plant and equipment as well as

the hedging derivative instruments.

intangible assets. Fixed assets are to be grouped at the lowest
levels for which there are identifiable cash flows which are inde-

Foreign currency translation — Receivables and payables

pendent from the cash flows from other groups of assets.

denominated in foreign currencies are translated into Japanese
yen at the year-end rates.

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

65

(Change for the accounting policy)

Accrued retirement benefits in the consolidated balance

In accordance with the revised Japanese Corporate Tax Law andsheets also include estimated liabilities for the unfunded lump-

its regulation, the Company and its domestic subsidiaries havesum benefit plan covering directors and corporate ­auditors.

changed the depreciation method for tangible fixed assets
acquired on or after April 1, 2007.

(Revision to accounting policy for employees’ retirement benefits)

The effect of adoption of the new depreciation method on

In line with public announcement of “Partial Revision of Account-income before income taxes and minority interests is not

ing Standard for Retirement Benefit (Statement No.3 issued by thematerial.

Accounting Standards Board of Japan on March 16, 2005)” aswell as “Implementation Guidance for Partial Revision of Account-(Additional Information)

ing Standard for Retirement Benefit (the Financial Accounting

In accordance with the revised Japanese Corporate Tax Law andStandard Implementation Guidance No.7 issued by the Account-its regulation, the Company and its domestic subsidiaries haveing Standards Board of Japan on March 16, 2005)”, both issued

adopted a new depreciation method for tangible fixed assets

by the Accounting Standards Board of Japan on March 16, 2005,

acquired on or before March 31, 2007 from the current consoli-

the Company elected to apply these standards to its consolidated

dated fiscal year. By the new method, the residual book value offinancial statements for the year ended March 31, 2006.

those assets which had been fully depreciated to the limit pre-As the result of the revision of the accounting policy, in the

scribed in the previous corporate tax code is depreciated in equal

year ended March 31, 2006, both operating income and income

amount over five-year period.

before income taxes and minority interests increased by ¥454 mil-As a result,depreciation increases by ¥1,024 million ($10,221

lion. Also refer to the section of business segment information

thousand) and operating income and income before income taxes

and geographic segment information for the impact of the change

and minority interests decreased by ¥942 million ($9,402 thou-

to the Company’s segment information.

sand), respectively.
The effects on Segment information are described in the relevant notes.

Accrued restructuring charges — Accrued restructuring charges
are provided by the Company and its consolidated subsidiaries tocover the costs of business reconstruction.

Retirement benefits — Under the terms of the Company’s
retirement plan, substantially all employees are entitled to a lump-Accrued repair construction of lots for sale — Accrued repair

sum payment at the time of retirement. The amount of retirement

construction of lots for sale is provided to cover the costs of repair

benefits is, in general, determined by reference to their current

construction and compensation that an ex-consolidated subsidiarybasic rate of pay, the length of service, and the cause thereof.

built and sold.

The Company and certain consolidated domestic subsidiaries

Accrued indemnification loss on damages caused by a con-also have a non-contributory funded pension plan, which covers

solidated subsidiary — Accrued indemnification loss on dam-

substantially all employees.

ages caused by a consolidated subsidiary is provided to cover the

The Company may make payments for additional retirement

indemnification loss of the accident incurred by the ­subsidiary.

benefits for employees which payments have not been included in
the actuarial calculation of the projected benefit obligation.

Accrued environmental measures — The provision for environ-

The Company and its consolidated domestic subsidiaries pro-mental measures is estimated and recorded to provide for future

vided allowance for employees’ severance and retirement benefits

potential costs, such as costs related to disposal of polychlorinatedbased on the estimated amounts of projected benefit obligation

biphenyl (PCB).

and the fair value of the plan assets at those dates.
Actuarial gains and losses are recognized in expenses using

Accrued bonuses to directors and corporate auditors — Pro-the straight-line method over the average of the estimatedvision for directors’ bonuses are provided by the Company and its

remaining service lives of ten years commencing with the follow-

consolidated domestic subsidiaries to be accounted for as aning period. Prior service costs are recognized in expenses using theexpense of accounting period in which such bonuses werestraight-line method over the average of the estimated remaining

incurred.

service lives of ten years.

66

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

(Adopting the new accounting standard for bonuses to directors

The Company prepared the accompanying consolidated state-

and corporate auditors)

ments of changes in net assets for the years ended March 31,

The Company and its consolidated domestic subsidiaries adopted

2008 and 2007 in accordance with the Additional New Account-from April 1, 2006, the new accounting standard for directors’

ing Standards. The accompanying consolidated statement ofbonus (the Financial Accounting Standard for Directors’ Bonus

shareholders’ equity for the year ended March 31, 2006, whichissued by the Accounting Standards Board of Japan on November

was voluntarily prepared for inclusion in the consolidated financial

29, 2005).

statements, has not been adapted to the new presentation rules

As the result of adopting the accounting policy, in the yearof 2007.

ended March 31, 2007, both operating income and income
before income taxes and minority interests decreased by ¥115

Research and development — Research and development costs

million.

are charged to income as incurred.

Accounting standard for presentation of net assets in theBond issue expense — Bond issue expense is charged to income

balance sheet — Effective from the year ended March 31,2007,

as incurred.

the Company and its consolidated subsidiaries adopted the new
accounting standard, “Accounting Standard for Presenting of Net

Accounting for certain lease transactions — Finance leases

Assets in the Balance Sheet” (Statement No.5 issued by thewhich do not transfer ownership to lessees are accounted for in

Accounting Standards Board of Japan on December 9, 2005), andthe same manner as operating leases.

the implementation guidance for the accounting standard forpresentation of net assets in the balance sheet (the Financial

Income taxes — Deferred tax assets and liabilities are determin­ed

Accounting Standard Implementa­tion Guidance No.8 issued bybased on the differences between financial reporting and the tax

the Accounting Standards Board of Japan on December 9, 2005)

bases of assets and liabilities, and measured using the statutory

Under the New Accounting Standards, the balance sheet

tax rates which will be in effect when the differences are expectedcomprises the assets, liabilities and net assets sections. Previous­ly,

to be realized.

the balance sheet comprised the assets, liabilities, minority interests and shareholders’ equity sections. The net assets section

Sales — Sales of merchandise and finished products are recog-

includes deferred gain and loss on hedges and minority interests,

nized when the products are shipped to customers.

which were not included in the previous share­h olders’ equity
section.
The adoption of the New Accounting Standards had no
impacts on the consolidated statement of income for the year

Amounts per share of common stock — Basic net income pershare is computed based on the weighted-average number ofshares of common stock in issue during each fiscal year.

ended March 31, 2007. Also, if the New Accounting Standards

Diluted net income per share assumes that outstanding con-

had not been adopted at March 31, 2007, the shareholders’vertible bonds were converted into common stock at the begin-equity amounting to ¥494,674 million would have beenning of the period at the current conversion price.

presented.

Cash dividends per share represent the actual amount applicable to the respective fiscal year.

Accounting standard for statement of changes in net assets— Effective from the year ended March 31, 2007, the Company

Reclassifications — Certain reclassifications have been made in

and its consolidated subsidiaries adopted the new accounting

the 2007 and 2006 financial statements to conform to the pre-standard, “Accounting Standard for Statement of Changes in Net

sentation of 2008.

Assets” (Statement No. 6 issued by the Accounting Standards
Board of Japan on December 27, 2005) and the implementation
guidance for the accounting standard for statement of changes in
net assets (the Financial Accounting Standard Implementation
Guidance No. 9 issued by the Accounting Standards Board ofJapan on December 27, 2005), (collectively, “the Additional New
Accounting Standards”).

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

67

3.

Securities(1) The following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available fair values
as of March 31, 2008 and 2007:
Securities with book values exceeding acquisition costs
Millions of yen

2008
Equity securities
Total

2007

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥36,069¥58,439¥22,370¥44,877¥102,113¥57,236¥36,069¥58,439¥22,370¥44,877¥102,113¥57,236

Thousands of U.S. dollars

2008
Equity securities
Total

Acquisition cost

Book value

Difference$360,006$583,282$223,276$360,006$583,282$223,276

Securities with book values not exceeding acquisition costs
Millions of yen

2008
Equity securities
Total

2007

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥13,007¥10,165¥(2,842)¥1,261¥1,179¥(82)¥13,007¥10,165¥(2,842)¥1,261¥1,179¥(82)

Thousands of U.S. dollars

2008
Equity securities
Total

Acquisition cost

Book value

Difference$129,823$101,457$(28,366)$129,823$101,457$(28,366)(2) The following tables summarize book values of the securities with no available fair values as of March 31, 2008 and 2007:
Available-for-sale securities
Millions of yen

2008
Unlisted equity securities
Total

Thousands of U.S. dollars

2007

2008

¥4,229¥4,299$42,210¥4,229¥4,299$42,210(3) As of March 31, 2008 and 2007, there was no available-for-sale security with maturities.
(4) Total sales of available-for-sale securities sold amounted toMarch 31, 2008, 2007 and 2006, respectively. Losses amounted¥106 million ($1,058 thousand), ¥263 million and ¥510 mil-to ¥2 million ($20 thousand) were recognized in the year

lion, and the related gains amounted to ¥83 million ($828

ended March 31, 2008 and no losses were recognized in thethousand), ¥76 million and ¥356 million in the years ended

years ended March 31, 2007 and 2006.

68

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

4.

Derivative transactions

Status of derivative transactions — The Company and its con-Each department of the Company and its consolidated sub­solidated subsidiaries utilize derivative transactions in order tosidiaries involving derivative transactions have their own rules forhedge various risks, such as fluctuation of metal prices, exchange

derivative transactions which stipulate purposes and scope ofrates and interest rates, in the normal course of business; such as

using derivatives, standards for choosing transaction counterpar-

futures contracts for hedging fluctuation of international price ofties, and procedures of reporting and administration.

metals, forward foreign exchange contracts and currency swaps

The derivative transactions are subject to approval by thefor hedging fluctuation of exchange rates, and interest swaps for

General Manager of the department in charge after consulting

hedging fluctuation of interests of floating-rate bonds and termwith related departments. Based on these rules, the person inloans payable.

charge sets up the position. Then, the results are reported to the

Derivative transactions of the Company and its consolidated

Directors monthly.

subsidiaries cause market risk and credit risk. Market risk is the

The derivative positions are confirmed semi-annually with thepotential loss the Company and its consolidated subsidiaries may

transaction counterparties. Also, the internal audit department of

incur as a result of changes in the market value. The Company’s

the Company regularly examines derivative transactions.

and its consolidated subsidiaries’ exposure to market risk are

The Company and its consolidated subsidiaries are notdetermined by a number of factors, including fluctuation of mar-

exposed to market risk arising from commodity derivative transac-

ket prices, exchange rates and interest rates. Credit risk is thetions, because the risk of fluctuation of market prices, that is

potential loss the Company and its consolidated subsidiaries could

caused by time lag between purchase and sale of materials andincur if the counterparties made default on their obligation. The

products, is hedged by the corresponding future contracts. The

derivative transactions are solely made with highly rated financial

Company and its consolidated subsidiaries also utilize currency

institutions, their subsidiaries or LME (London Metal Exchange)

derivative transactions to hedge market risk of exchange rates or

brokers guaranteed by banks, so that the Company and its con-interest rates. Taking receivables and payables denominated insolidated subsidiaries might reduce the risk of default on an

foreign currencies into account, the Company and its consolidated

obligation.

subsidiaries are not exposed to market risk.

The following tables summarize market value information as of March 31, 2008 and 2007 of derivative transactions for which hedge
accounting has not been applied:
Millions of yen

2008

2007

Contracted amountContracted amount

Total

Over oneyear

Marketvalue¥11,307¥—¥11,192

Buy position—Euro——

Buy position—A.U. dollars

65—¥11,372¥—¥¥14,416—

Recognized
gains (losses)

Total

Over oneyear

Marketvalue

Recognized
gains (losses)¥(115)¥11,680¥—¥11,741

—

—

2,290

—

2,466

176

80

15

845

68

932

87

—

¥(100)¥14,815

¥—

—

¥ 324

¥13,787

629

—

—

—

—

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

¥

¥

61

Commodity:
Forward contracts:
Sell position—Metal
Buy position—Metal

5,071

—

¥19,487

¥—

¥

5,071

—

14,754—

17,053

2,299

—

¥ 629

¥14,754¥—¥¥2,299—SUMITOMO METAL MINING CO., LTD. Annual Report 200869

Thousands of U.S. dollars

2008
Contracted amount
Total

Over oneyear

Marketvalue

Recognized
gains (losses)$112,856$—$111,708$(1,148)

Buy position—Euro

—

—

—

—

Buy position—A.U. dollars

649

—

798

149

$113,505$—$—$ (999)$143,887$—$137,609$6,278Currency:
Forward contracts:
Buy position—U.S. dollars

Commodity:
Forward contracts:
Sell position—Metal

50,614—$194,501$—

Buy position—Metal

5.

50,614——$6,278$Inventories

Inventories at March 31, 2008 and 2007 consists of the following:
Millions of yen

Merchandise

Thousands of U.S. dollars

2008

2007

¥ 1,378

¥

2008
$

1,970

13,754

Finished products

34,70945,317

346,432

Semi-finished products and work in process

87,32076,728871,544

46,14945,318

460,615¥169,556¥169,333$1,692,345

Raw materials and supplies

6.

Loss on impairment of fixed assets

Loss on impairment of fixed assets for the year ended March 31, 2008 consisted of the following:
Millions of yen
Location

Major use

Asset category

Thousands of
U.S. dollars

LossNiihama City, Ehime Prefecture, Japan

Manufacturing facilities for copper-clad polyimide film Buildings and Structures¥218$2,176Niihama City, Ehime Prefecture, Japan

Manufacturing facilities for copper-clad polyimide film Machinery and equipment

489

4,881

Ichihara City, Chiba Prefecture, Japan

Manufacturing facilities for decontamination for soil

Buildings and Structures

22

220

Ichihara City, Chiba Prefecture, Japan

Manufacturing facilities for decontamination for soil

Machinery and equipment

181

1,807

Okuchi City, Kagoshima Prefecture, Japan

Manufacturing facilities for packaging materials

Machinery and equipment

29

289

Nasu District, Tochigi Prefecture, Japan

Idle Land

Land

2

20

¥941

$9,393Total

70

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

The Company categorized operating assets by business unit such(3)	The book value of manufacturing facilities for packaging

as a plant and manufacturing process, based on the division ofmaterials in Kagoshima Prefecture was reduced to the recov-

managerial accounting.

erable amount because its products were not profitable andthe Company has decided not to continue its operation.

The breakdown of major use is as follows.
(1)	The book value of existing manufacturing facilities for copperclad polyimide film in Ehime Prefecture was reduced to the

As for the idle land which was acquired for future factory

recoverable amount because the facilities were completely

sites, the book value of the assets was reduced to the recover­able

idle due to the installation of the latest manufacturing facili-amount due to a decline in the market price. Net sales prices ofties which were suitable for the current market size.

the assets are used as their recoverable amounts for the measure-(2)	The book value of facilities for decontamination of soil inment of the impairment loss. The market price information was

Chiba Prefecture was reduced to the recoverable amount due

obtained on the basis of values provided by real estate appraisers

to withdrawal from its business.

and other specialists.

Loss on impairment of fixed assets is not recorded for the year ended March 31, 2007.
Loss on impairment of fixed assets for the year ended March 31,2006 consisted of the following:
Millions of yen
Location

Major use

Asset category

Loss

Hyuga City, Miyazaki Prefecture, Japan Idle Land

Land

Singapore

Manufacturing facilities for electronic parts

Machinery and equipment

118

Ocean Side, California, USA

Manufacturing facilities for electronic parts

Machinery and equipment

172

Iwanai-gun, Hokkaido, Japan

Manufacturing facilities for electronic crystal materials Machinery and equipment

512

New South Wales, Australia

Mining and concentrating facilities for copper ore

Machinery, equipment, andmining rights

Total

¥

9

1,014
¥1,825The Company categorized operating assets by business unit such

The Company principally used the value in use for calculating

as a plant and manufacturing process, based on the division of

the recoverable amount. The discounted rates used for computing

managerial accounting.

the value in use of “Manufacturing facilities for crystal materials”

The breakdown of major use is as follows.

and “Mining and concentrating facilities for copper ore,” were(1) The book value of manufacturing facilities for crystal materials

7.9% and 9.4% respectively. The book value of manufacturing

was reduced to the recoverable amount because it is difficult

facilities for electronic parts was reduced to ¥1 as memorandum

to achieve the planned sales volume due to a delay of demand

price because no net cash inflows were expected.

recovery.

As for the idle land which was acquired for future factory(2) The book value of mining and concentrating facilities for a partsites, the book value of the assets was reduced to the recoverableof copper deposits will be less than discounted cash flow

amount due to a decline in the market price. Net sales prices ofincluding restitution costs due to the increase of investment

the assets are used as their recoverable amounts for the measure-amount, and it was reduced to the recoverable amount.

ment of the impairment loss. The market price information was(3) The book value of manufacturing facilities for electronic parts

obtained on the basis of values provided by real estate appraisers

in U.S.A. and Singapore was reduced due to withdrawal fromand other specialists.

a TV frame business.

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

71

7.

Bank loans and long-term debt

Bank loans are generally represented by short-term notes (most of

On January 31, 2008, the Company has passed a resolution towhich are unsecured) and bank overdrafts, and bore interest atissue stock acquisition rights by way of third-party allotment andannual rates of 1.04% to 5.87% and 0.85% to 6.00% at March

to execute a loan agreement for the purpose of procuring funds

31, 2008 and 2007, respectively.

through a loan with stock acquisition rights. By executing this

The Zero-coupon convertible bonds due in 2009 are currently
convertible at ¥1,001 ($9.99) per share until June 15, 2009.

loan agreement, the Company procures ¥100 billion ($998 milliion) from February 15, 2008 to February 13, 2015. The exercise

As of March 31, 2008, 10,225 thousand additional shares of

price of the stock acquisition rights will be revised in accordancecommon stock in aggregate could be issued upon full conversion

with market price. The stock acquisition rights have a structure

at the current conversion price.

that prevents dilution of the share price to a price lower than
¥1,749 ($17).

Long-term debt at March 31, 2008 and 2007 consists of the following:
Millions of yen

2008

Thousands of U.S. dollars

2008

2007

Long-term loans from:
Banks, insurance companies and other financial institutions,maturing through 2015 at interest rates of 0.82% to 7.36%
Secured

¥

10

¥

—

$

100

122,999

37,105

1,227,658

Secured

10,61911,826

105,989

Unsecured

26,38630,741

263,360

1.08% domestic bonds due in 2007*—

10,000—0.51% domestic bonds due in 2008

10,00010,00099,810

1.42% domestic bonds due in 2012

10,00010,00099,810Unsecured
Government owned banks and government agencies, maturing
through 2020 at interest rates of 0.95% to 4.65%:

Zero coupon convertible bonds due in 2009
Amount due within one year
: The 1.08% domestic bonds were redeemed during the year ended March 31, 2008.

*

72

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

10,235

13,075102,156

190,249

122,747

1,898,883(20,855)(28,947)(208,155)¥169,394¥ 93,800$1,690,728

The aggregate annual maturities of long-term debt at March 31, 2008 are as follows:
Years ending March 31,

Millions of yen

Thousands of U.S. dollars

2009¥ 20,855$ 208,155

2010

19,975

199,371

2011

9,019

90,0192012

23,147231,031

2013

5,337

53,269111,916

1,117,038

Thereafter

Assets pledged as collateral for bank loans and long-term debt at March 31, 2008 and 2007 are as follows:
Millions of yen

2008

Thousands of U.S. dollars

2008

2007

Investment securities¥

Subsidiaries
Other
Property, plant and equipment, at net book value

8.

131

¥

131

$

1,308

10,186

16,422

101,667

58,70457,330585,927¥69,021¥73,883$688,902

Income taxes

Income taxes in the accompanying consolidated statements ofenterprise taxes. Consolidated overseas subsidiaries are subject toincome comprise corporation taxes, inhabitants taxes andincome 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 consolidated subsidiaries’ effective tax rate for financial statement purposes for the years ended March 31, 2008, 2007 and 2006:
2008

2007

2006

Statutory tax rate

40.7%

40.7%

40.7%

Equity in earnings of unconsolidated subsidiaries and affiliated companies

(9.1)

(5.6)

(7.2)

Effect of elimination of intercompany dividends received

12.1

8.4

4.0

Difference in tax rates among the Company and its consolidated subsidiaries

(4.3)

(2.3)

0.3

Permanently nondeductible expenses

0.4

0.1

0.3

Permanently nontaxable dividends received

(5.6)

(5.0)

(3.5)

Per capita inhabitant tax

—

—

0.1

Refunded corporation tax

—

—

(2.5)

1.2
(6.9)
28.5%

0.7
(3.3)
33.7%

(0.8)
(0.9)
30.5%

Increase (decrease) in valuation allowance
Others
Effective tax rate

SUMITOMO METAL MINING CO., LTD. Annual Report 200873

Significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities as of March 31, 2008 and2007 are as follows:
Millions of yen

Thousands of U.S. dollars

2008

2007

2008

Deferred tax assets:¥ 5,511¥ 6,499$ 55,005

Net operating loss carry forwards

4,885

3,463

48,757

Accrued enterprise taxes

1,614

3,292

16,109Allowance for bonus payable

1,707

1,540

17,038Loss from valuation of gold loans

1,602

1,918

15,990Loss on impairment or fixed assets

863

596

8,614

Unrealized profits

736

834

7,346

Exploration expenses (oversea subsidiaries)

487

707

4,861

Depreciation
Allowance for reparing furnace
Others

—
632
6,717

318
365
6,211

—
6,308
67,043Gross deferred tax assets

24,75425,743247,071(7,787)
16,967(7,749)17,994(77,723)
169,348

Net unrealized holding gain on available-for-sale securities(7,532)(22,529)(75,177)

Depreciation(2,509)(3,518)(25,042)Retirement benefits

Less valuation allowance
Deferred tax assets-less valuation allowance
Deferred tax liabilities:

Deferred gains on properties for tax purpose(3,364)(3,399)(33,576)

Reserve for losses on overseas investment(2,837)(2,018)(28,316)

Accumulated earnings of overseas subsidiaries(7,253)(3,949)(72,392)

(924)
(594)

(787)
(594)

(9,222)(5,929)(77)(1,137)(175)(1,410)(769)(11,348)

Deferred tax liabilities(26,227)(38,379)(261,771)

Net deferred tax liabilities¥ (9,260)¥(20,385)$ (92,422)

Reserve for explorations
Gain on securities contributed to employee retirement benefits trust
Accrual for special depreciation of fixed assets
Others9.

Retirement benefits and pension costs

The liabilities for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31,
2008 and 2007 consists of the following:
Millions of yen

Thousands of U.S. dollars

2008

2007

2008

Projected benefit obligation
Fair value of pension assets¥(51,546)
44,476¥(51,289)
54,846$(514,482)
443,917

Excess of projected benefit obligation over pension assets
Unrecognized actuarial differences
Unrecognized prior services costs¥ (7,070)
2,509(1,491)¥ 3,557(9,949)(1,894)$ (70,565)
25,042(14,882)

Net retirement benefits
Prepaid pension costs
Retirement benefits¥ (6,052)(1,890)¥ (7,942)¥ (8,286)(928)¥ (9,214)$ (60,405)(18,864)$ (79,269)

74

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

The Company contributed securities to employee retirement ben-unfunded lump-sum benefit plan covering directors and corporate

efit trust, which are included in the pension assets.

auditors of ¥184 million ($1,837 thousand) and ¥272 million,

Retirement benefits in the consolidated balance sheets as ofrespectively.

March 31, 2008 and 2007 also include estimated liabilities for the
Included in the consolidated statements of income for the years ended March 31, 2008, 2007 and 2006 are severance and retirement
benefit expense comprised of the following:Thousands of
U.S. dollars

Millions of yen

2008
Service cost-benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial differences
Amortization of prior services costs¥2,323
856
(574)
(836)
(271)
¥1,498

2007

2006

2008

¥ 2,003884(1,161)
(557)
(214)
¥ 955

¥1,837
798
(639)
632
(461)
¥2,167$23,186
8,544(5,729)(8,344)(2,705)$14,952

The discount rates used by the Company are primarily 2.0% forusing the estimated number of total service years. Actuarial gains

the years ended March 31, 2008, 2007 and 2006.

and losses are recognized in income statement using the straight-

The rates of expected return on plan assets used by the Com-line method in ten years commencing with the following period.

pany are primarily 3.5%, respectively for the years ended March

Prior service costs are recognized in expenses using the straight-

31, 2008, 2007 and 2006.

line method over the average of the estimated remaining service

The estimated amount of all retirement benefits to be paid atlives of ten years.

the future retirement date is allocated equally to each service year

10.

Research and development expense

Research and development expense included in selling, general and administrative expenses for the years ended March 31, 2008, 2007
and 2006 are ¥6,111 million ($60,994 thousand), ¥5,392 million and ¥5,297 million, respectively.

11.

Special reserves

For the purpose of obtaining tax benefits, the Company and some

Such reserves, which are included in retained earnings, areconsolidated subsidiaries have set up special reserves mainly for¥91,978 million ($1,431,820 thousand) and ¥143,454 million atlosses on overseas investments and explorations in accordance

March 31, 2008 and 2007, respectively.

with the Special Taxation Measures Law of Japan.

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

75

12.

Net assets

As described in Note 2, net assets comprises three subsections,

Under the Code, legal earnings reserve and additional paid-in

which are shareholders’ equity, accumulated gain (losses) from

capital could be used to eliminate or reduce a deficit by a resolu-

valuation and translation adjustments, and minority interests.

tion of the shareholders’ meeting or could be capitalized by a res-

The Japanese Corporate Law (“the Law”) became effective on

olution of the Board of Directors. Under the Law, both of these

May 1, 2006, replacing the Japanese Commercial Code (“theappropriations generally require a resolution of the shareholders’Code”). The Law is generally applicable to events and transactions

meeting.
Additional paid-in capital and legal earnings reserve may notoccurring after April 30, 2006 and for fiscal years ending after

be distributed as dividends. Under the Code, however, on condi-

that date.
Under the Japanese laws and regulations, the entire amounttion that the total amount of legal earnings reserve and additional

paid for new shares is required to be designated as common

paid-in capital remained equal to or exceeded 25% of common

stock. However, a company may, by resolution of the Board ofstock, they were available for distribution by resolution of share-

Directors, designate an amount not exceeding one-half of theholders’ meeting. Under the Law, all additional paid-in-capital andprice of the new shares as additional paid-in capital, which is

all legal earning reserve may be transferred to other capital sur-included in capital surplus.

plus and retained earnings, respectively, which are potentially

Under the Law, in cases where a dividend distribution of sur-available for dividends.

plus is made, the smaller of an amount equal to 10% of dividend

The maximum amount that the Company can distribute as

or excess, if any, of 25% of common stock over the total of addi-

dividends is calculated based on the non-consolidated financial

tional paid-in capital and legal earnings reserve must be set asidestatements of the Company in accordance with Japanese laws

as additional paid-in-capital or legal earnings reserve. Legal earn-

and regulations.
At the annual shareholders’ meeting held on June 26, 2008,

ings reserve is included in retained earnings in the accompanying
consolidated balance sheets.

the shareholders approved cash dividends amounting to ¥8,689

Under the Code, companies were required to set aside an

million ($86,725 thousand). Such appropriations have not beenamount equal to at least 10% of the aggregate amount of cash

accrued in the consolidated financial statements as of March 31,

dividends and other cash appropriations as legal earnings reserve2008. Such appropriations are recognized in the period in which

until the total of legal earnings reserve and additional paid-in capi-

they are approved by the shareholders.

tal equaled 25% of common stock.

13.

Contingent liabilities

Contingent liabilities at March 31, 2008 are as follows:

Notes and accounts receivable sold to factoring companies with recourse

Millions of yen

Thousands of U.S. dollars¥ 9,729$ 97,105

1,675

16,718As guarantor for loans of:Non-consolidated subsidiaries and affiliated companies
Other

145

1,447

¥11,549$115,270

Besides the above, as to providing electric power to Pogo gold mine, there are ¥1,081 million ($10,789 thousand) to guarantee construction costs of electric facilities.

76

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

14.

Segment information

Business segment information
The primary business segments of the Company and its consoli-

and advanced materials and others. Also refer to the section of

dated subsidiaries include mineral resources, metals, electronics“Review of Operations” for the details of each business.

Business segment information for the years ended March 31, 2008, 2007 and 2006 are as follows:
2008

Millions of yen
Mineralresources

MetalsElectronics& advanced
materials¥ 67,825¥797,914¥237,703¥28,930¥—¥1,132,372

23,535

112,660

17,299

11,778(165,272)—

91,360910,574

255,00240,708(165,272)

1,132,372

53,233

801,732

246,787

37,046(161,820)

976,978

OthersEliminations
or corporate

Consolidated

Net sales:
Outside customers
Inter segment
Total
Costs and expenses
Operating income (loss)¥ 38,127¥108,842¥

8,215¥ 3,662¥(3,452)¥ 155,394

Identifiable assets¥176,234¥521,362¥154,075¥62,133¥ 177,912¥1,091,716

5,537

10,071

11,709

2,132

1,056

30,505

—

—

736

205

—

941

9,427

42,08911,862

1,779

(12)

65,145

Depreciation
Loss on impairment of fixed assets
Capital expenditures
2007

Millions of yen
Mineralresources

MetalsElectronics& advanced
materials¥ 55,482¥671,471¥209,515

Construction
materials

OthersEliminations
or corporate

Consolidated¥17,029¥13,267¥¥966,764

Net sales:
Outside customers
Inter segment
Total
Costs and expenses—

26,76687,365

14,065632

16,687(145,515)—

82,248758,836

223,580

17,661

29,954(145,515)

966,764

48,716649,272

209,996

15,50825,917(145,277)

804,132

Operating income (loss)¥ 33,532¥109,564¥ 13,584¥ 2,153¥ 4,037¥(238)¥162,632

Identifiable assets¥142,652¥456,056¥151,451¥14,370¥50,086¥ 114,593¥929,208

Depreciation

4,539

8,433

10,073

659

1,373

616

25,693

Reversal of loss on impairmentof fixed assets

(939)

—

—

—

—

—

(939)

Capital expenditures

9,288

18,83322,563

240

1,314

(671)

51,567

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

77

2006

Millions of yen
Mineralresources

MetalsElectronics& advanced
materials

Construction
materials

OthersEliminations
or corporate

Consolidated¥ 29,617¥390,369¥174,989¥17,001¥13,603¥—¥625,579

14,102

63,311

9,086

317

15,181(101,997)—

43,719453,680

184,075

17,31828,784(101,997)

625,579

Net sales:
Outside customers
Inter segment
Total

26,612403,997

172,899

15,17824,520(100,383)

542,823

Operating income (loss)

Costs and expenses¥ 17,107¥ 49,683¥ 11,176¥ 2,140¥ 4,264¥(1,614)¥ 82,756

Identifiable assets¥125,562¥350,695¥132,227¥15,428¥49,225¥ 99,425¥772,562
22,951

Depreciation expense

3,250

7,478

9,647

656

1,329

591

Loss on impairment of fixed assets

1,014

9

802

—

—

—

1,825

Capital expenditures

14,014

16,19518,783

241

1,735

(400)

50,568Eliminations
or corporate

Consolidated

2008

Thousands of U.S. dollars
Mineralresources

Electronics& advanced
materials

MetalsOthers

Net sales:
Outside customers
Inter segment
Total
Costs and expenses$ 676,964 $7,964,009 $2,372,522
1,124,463

172,662

117,557 (1,649,586)—

911,868

9,088,472

2,545,184

406,308 (1,649,586)

11,302,246

531,320

8,002,116

2,463,190

369,757 (1,615,131)

9,751,252$ 380,548 $1,086,355 $Identifiable assets$1,758,998 $5,203,733 $1,537,828

Loss on impairment of fixed assets
Capital expenditures— $11,302,246

234,904

Operating income (loss)
Depreciation expense$288,751 $

55,265100,519

81,994
116,868$ 36,551 $(34,455) $ 1,550,993$620,152 $1,775,746 $10,896,457
21,280

10,540304,472

—

—

7,346

2,046

—

9,392

94,091420,092

118,395

17,756(120)

650,214(The effects of changes in accounting policies on segment

million in Electronics & advanced materials and ¥26 million in

information)

Others.

Revision to accounting policy for employees’ retirement benefits
In line with public announcement of “Partial Revision of(The effects of changes in segregation on segment information)

Accounting Standard for Retirement Benefit (Statement No.3

The Company has embarked the Mid-Term Business Plan byissued by the Accounting Standards Board of Japan on March 16,

expanding and strengthening its core business. Clarifying this2005)” as well as “Implementation Guidance for Partial Revisionidea, the business segment of “Construction materials” is includedof Accounting Standard for Retirement Benefit (the Financial

in the business segment of “Others”. Compared with the previ-

Accounting Standard Implementation Guidance No.7 issued byous segregation, ¥14,748 million ($147,200 thousand) in sales,

the Accounting Standards Board of Japan on March 16, 2005)”¥690 million ($6,877 thousand) in operating income, ¥13,206

both issued by the Accounting Standards Board of Japan on

million ($131,810 thousand) in identifiable assets, ¥676 million

March 16, 2005, the Company elected to apply these standards($6,747 thousand) in depreciation, ¥2 million ($20 thousand) in

to its consolidated financial statements for the year ended Marchloss on impairment of fixed assets and ¥380 million ($3,793 thou-

31, 2006. As the result of the change of the accounting policy, insand) in capital expenditure are included in the business segment

the year ended March 31, 2006, operating income increases byof Others as a result of business of former “Construction¥115 million in Mineral resources, ¥219 million in Metal, ¥94

materials”.

78

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

(The effects of changes in depreciation method)of depreciation method, in the year ended March 31, 2008,

In accordance with the revised Japanese Corporate Tax Law, fordepreciation increases by ¥42 millon ($419 thousand) in Mineraltangible fixed assets acquired on or before March 31,2007, theresources, ¥669 million ($6,677 thousand) in Metal, ¥287 million

Company and its domestic consolidated subsidiaries have started($2,865 thousand) in Electronics & advanced materials and ¥26

to depreciate the remaining balance of assets over a five year

million ($260 thousand) in Others. And operating income

period using straight-line method from the following fiscal year

decreases by ¥39 million ($389 thousand) in Mineral resources,

after the book value of the assets decreases to 5% of the acquisi-¥591 million ($5,899 thousand) in Metal, ¥286 million ($2,855

tion costs under the method of depreciation based on the Corpo-

thousand) in Electronics & advanced materials and ¥26 million

rate Tax Law before revision. As a result of the change($260 thousand) in Others.

Geographic segment information
Geographic segment information for the years ended March 31, 2008, 2007 and 2006 are summarized as follows:
2008

Millions of yen
Domestic

North
AmericaSoutheast
Asia

Others¥ 986,469¥57,649¥53,405¥ 34,849—¥1,132,372

53,986

123

34,462

6,447(95,018)—

1,040,455

57,772

87,867

41,296(95,018)

1,132,372

Eliminations
or corporate

Consolidated

Net sales:
Outside customers
Inter segment
Total

929,789

35,687

66,909Operating income (loss)¥ 110,666¥22,085¥20,958¥

Identifiable assets¥ 647,305¥95,265¥81,667

Costs and expenses

2007

¥

37,874(93,281)

976,978

3,422¥ (1,737)¥ 155,394¥169,290¥ 98,189¥1,091,716

Eliminations
or corporate

Consolidated

Millions of yen
Domestic

North
AmericaSoutheast
Asia

Others¥846,581¥46,682¥47,349¥ 26,152—¥966,764

42,159—20,61812,319(75,096)—888,740

46,682

67,96738,471(75,096)966,764

Costs and expenses

758,171

29,13355,052

33,672(71,896)804,132

Operating income (loss)¥130,569¥17,549¥12,915¥4,799¥ (3,200)¥162,632

Identifiable assets¥608,940¥75,629¥66,275¥119,053¥ 59,311¥929,208

Net sales:
Outside customers
Inter segment
Total

¥

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

79

2006

Millions of yen
Domestic

North
AmericaSoutheast
Asia

Others¥547,665¥25,358¥37,790¥14,766

Eliminations
or corporate

Consolidated

Net sales:
Outside customers
Inter segment¥—¥625,579

31,015

—

4,653

4,678

(40,346)—

578,680

25,35842,443

19,444(40,346)625,579

Costs and expenses

505,648

16,11442,045

18,590(39,574)

542,823

Operating income (loss)¥ 73,032¥ 9,244¥¥¥

Identifiable assets¥514,881¥74,365¥47,575

Total

2008

398

854

(772)

¥ 82,756¥ 58,197¥772,562

OthersEliminations
or corporate

Consolidated

347,829$$11,302,246¥77,544

Thousaands of U.S. dollars
Domestic

North
AmericaSoutheastAsia$ 9,845,983$575,397$533,037

538,836—

343,966

64,348(948,378)—

10,384,819

575,397

877,003412,177(948,378)

11,302,246

Net sales:
Outside customers
Inter segment
Total

$

9,280,258

356,193

667,821

Operating income (loss)$ 1,104,561$219,204$209,182$

Identifiable assets$ 6,460,775$950,843$815,121

Costs and expenses—

378,022(931,041)

9,751,253

34,155$ (17,337)$ 1,550,993$1,689,690$ 980,028$10,896,457(The effects of changes in accounting policies on segment(The effects of changes in depreciation method)

information)

In accordance with the revised Japanese Corporate Tax Law, for

Revision to accounting policy for employees’ retirement benefits

tangible fixed assets acquired on or before March 31,2007, theIn line with public announcement of “Partial Revision ofCompany and its domestic consolidated subsidiaries have started

Accounting Standard for Retirement Benefit (Statement No.3

to depreciate the remaining balance of assets over a five year

issued by the Accounting Standards Board of Japan on March 16,

period using straight-line method from the following fiscal year2005)” as well as “Implementation Guidance for Partial Revision

after the book value of the assets decreases to 5% of the acquisi-

of Accounting Standard for Retirement Benefit (the Financial

tion costs under the a method of depreciation based on the Cor-

Accounting Standard Implementation Guidance No.7 issued byporate Tax Law before revision. As a result of the change of depre-

the Accounting Standards Board of Japan on March 16, 2005),”

ciation method, in the year ended March 31, 2008, operating

both issued by the Accounting Standards Board of Japan on

income decreases by ¥942 million ($9,402 thousand) in Japan.

March 16, 2005, the Company elected to apply these standards
to its consolidated financial statements for the year ended March
31, 2006. As the result of the change of the accounting policy, inthe year ended March 31, 2006, operating income in Domestic
section increases by ¥454 million.

80

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Information for overseas sales
2008

Overseas net sales
Consolidated net sales
Share of overseas net sales

Millions of yen
North
AmericaSoutheast
Asia

East
Asia

¥58,265¥85,721

—

—

5.1%

7.6%

North
AmericaSoutheast
Asia

East
Asia

OthersTotal¥46,792¥74,731¥184,556¥11,795¥317,874

2007

Overseas net sales
Consolidated net sales
Share of overseas net sales

Consolidated net sales
Share of overseas net sales

Consolidated net sales
Share of overseas net sales¥242,835¥7,908¥ 394,729——¥1,132,372

21.4%

0.7%

34.9%

—

—

—

—

¥966,764

4.8%

7.7%

19.1%

1.2%

32.9%

Millions of yen
North
AmericaSoutheast
Asia

East
Asia

OthersTotal¥30,082¥45,216¥128,921¥7,844¥212,063

—

—

—

—

¥625,579

4.8%

7.2%

20.6%

1.3%

33.9%

2008

Overseas net sales

Total

Millions of yen

2006

Overseas net sales

OthersThousands of U.S. dollars
North
AmericaSoutheast
Asia

East
Asia

$581,545$855,584

—

—

5.1%

7.6%

OthersTotal$2,423,745$78,930$ 3,939,804——$11,302,246

21.4%

0.7%

34.9%

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

81

15.

Information for certain leases

As a lessee
A summary of assumed amounts inclusive of interest of acquisition cost, accumulated depreciation and net book value of finance leases
accounted for in the same manner as operating leases at March 31, 2008 and 2007 are as follows:
Millions of yen

2008
Acquisition
cost

Accumulated
depreciation

2007
Net bookvalue

Acquisition
cost

Accumulated
depreciation

Net book
value

¥225

¥143

¥82

¥440

¥295

¥145

Others

—

—

—

418

416

2

Total

¥225

¥143

¥82

¥858

¥711

¥147

Machinery and equipment

Thousands of U.S. dollars

2008
Acquisition
cost

Accumulated
depreciation

Net bookvalue$2,246$1,427$819

Others

—

—

—

Total

$2,246$1,427$819

Machinery and equipment

Future lease payment, inclusive of interest at March 31, 2008 and 2007 under such leases are as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of U.S. dollars

2008

2007

2008

¥38

¥ 78

$379

44

69

440

¥82

¥147

$819

Total lease expenses and assumed depreciation charges for the years ended March 31, 2008, 2007 and 2006 are as follows:
Millions of yen

Thousands of U.S. dollars

2008

2007

2006

2008

Total lease expenses

¥83

¥160

¥319

$828

Assumed depreciation charge

83

160

319

828

82

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

As a lessor
A summary of acquisition cost, accumulated depreciation and net book value at March 31, 2008 and 2007 were as follows:
Millions of yen

2008

2007

Acquisition
cost

Accumulated
depreciation

Net bookvalue

Acquisition
cost

Accumulated
depreciation

Net book
value

Machinery and equipment

¥—

¥—

¥—

¥124

¥111

¥13

Others

—

—

—

1

1

—

Total

¥—

¥—

¥—

¥125

¥112

¥13

Thousands of U.S. dollars

2008
Acquisition
cost

Accumulated
depreciation

Net book
value

Machinery and equipment

$—

$—

$—

Others

—

—

—

Total

$—

$—

$—

Future lease receipt, inclusive of interest, at March 31, 2008 and 2007 under such lease were as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of U.S. dollars

2008

2007

2008

¥—

¥15

¥—

—

—

—

¥—

¥15

¥—

Total revenue and depreciation charges for the years ended March 31, 2008, 2007 and 2006 were as follows:
Millions of yen

Total revenues
Depreciation charge

Thousands of U.S. dollars

2008

2007

2006

2008

¥15

¥20

¥31

$150

7

19

29

70

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

83

16.

Earnings per share

Reconciliation of the difference between basic and diluted net income per share (“EPS”) for the years ended March 31, 2008, 2007 and2006 were as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2007

2006

2008

¥137,808¥126,054¥ 62,800$1,375,467(bonuses to directors from retained earnings)

—

—

73

—

Net income available to common shareholders

137,808

126,054

62,727

1,375,467

Basic net income per share calculation
Numerator:
Net income
Amounts not belonging to common stock

Denominator (thousands of shares) :Weighted average number of shares
Basic EPS (yen and U.S. dollars)

578,707

571,708

570,477¥ 238.13¥ 220.49¥ 109.96$—¥137,808¥126,054¥ 62,800$1,375,467

2.38

Diluted net income per share calculation
Numerator:
Net income
Amounts not belonging to common stock(bonuses to directors from retained earnings)

—

—

73

—

Net income available to common shareholders

137,808

126,054

62,727

1,375,467

Adjusted net income

137,917

126,054

62,727

1,376,555

Weighted average number of shares

578,707

571,708

570,477—

Assumed conversion of convertible bonds

17,053

18,2495,680—

Denominator (thousands of shares):

Adjusted weighted average number of shares
Diluted EPS (yen and U.S. dollars)

595,760

589,957

576,157¥ 231.50¥ 213.67¥ 108.87

—
$

2.31

The diluted net income per share for the years ended March 31, 2008, 2007 and 2006 were ¥231.50, ¥213.67 and ¥108.87, respectively
because there were securities with dilutive effect.

84

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Independent Auditors’ Report

SUMITOMO METAL MINING CO., LTD. Annual Report 200885

Glossary
1) [Five major projects] Featuring on page 5

method to produce nickel-cobalt mixed sulfides, the interme-

SMM established five major projects for the FY2004–6

diate raw material used in nickel refining.

­Medium-term Business Plan. All are strategic projects in the
Mineral Resources and Metals sector.

4) [MCLE] Featuring on pages 15, 43, 46

1Capacity expansion to 450ktpa for copper at the Toyo

MCLE (Matte Chlorine Leach Electrowinning) is a refining

Smelter & Refinery (Ehime Prefecture, Japan)

method employed in the manufacturing process at our nickel

2 Cerro Verde Copper Mine Project (Peru)

refinery to produce high-quality electrolytic nickel at low cost.

3 Coral Bay Nickel Project (Philippines)

By combining the HPAL and MCLE methods, SMM developed

4 Goro Nickel Project (New Caledonia)

and successfully commercialized a state-of-the-art method for5 Pogo Gold Mine Project (Alaska, United States)

recovering high-purity nickel from low-grade nickel oxide
ores.

Pogo

5) [LCD driver ICs] Featuring on pages 12, 17, 43, 47
Liquid crystals are substances that combine the properties ofliquids and crystals. The application of an electric voltage

Toyo Smelter & Refinery

across a liquid crystal alters these properties. Liquid crystal displays (LCDs) change in line with the precise way in which elec-

Coral Bay

tricity is passed through the crystals.
Cerro VerdeGoro

LCD driver ICs are integrated circuits that are used to control the passage of electricity through the LCD panel to change(or “drive”) the screen display.

6) [COF] Featuring on pages 15, 17, 18, 24, 32, 47
2) [Proprietary ore ratio] Featuring on pages 15, 16, 21, 28

Chip-on-film (COF) tape bonding materials are a type of semi-This ratio, which we use mainly for copper, equals the propor-

conductor packaging material used with LCD driver ICs. Theytion by volume of ore procured from overseas mining interests

are substrates that are used to connect driver ICs to LCD

relative to the overall volume of smelting ores used as raw ma-

panels.

terials. SMM has 50% off-take rights at the Cerro Verde Copper Mine for the first ten years after production commenced
in 2006. These ores are also included in the numerator of theformula.
(Calculation formula:)
Copper equivalent to SMM interests by volume

7) [Lead frames and tape bonding materials]
Featuring on pages 15, 17, 24

These are build-up packaging materials used in semiconductor
assembly processes to provide electrical connections between
semiconductor chips and printed circuit boards. Lead frames
comprise metals to provide a flat, board-like substrate, while+ Cerro Verde off-take rights in Cu-equivalents

tape bonding materials consist of plastic tape attached to cop-

Volume of copper used to produce electrolytic Cu
at Toyo facility

per foil.

3) [HPAL] Featuring on pages 15, 17, 30, 43, 46
HPAL (High-Pressure Acid Leach, pronounced “H-PAL”) is agroundbreaking refining method that facilitates the recoveryof nickel and cobalt from difficult-to-process low-grade nickel
oxide ores. In this method, low-grade nickel oxide ores are
subjected to high temperature and pressure in an autoclave.

8) [Bonding wire] Featuring on pages 15, 24, 32
Bonding wire is used to create an electrical connection between the electrode on the semiconductor chip and the electrode on the lead frame or other build-up packaging material.

9) [Sputtering targets and thin-film materials]
Featuring on pages 15, 16, 24

Sulfuric acid is then fed into the autoclave to selectively extract

Fabricated in flat or disk-like shapes using metals and trans-

nickel and cobalt. SMM subsidiary CBNC employs the HPAL

parent conductors such as indium tin oxide (ITO), sputtering

86

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

targets are used in the formation of electrode films and otherturn now being superseded by high-capacity lithium-ion re-thin-films for manufacturing products such as LCD panels andchargeable batteries, which have been developed for wide-

photovoltaic panels.

spread use in products such as mobile phones and PCs.

10) [Paste] Featuring on pages 24, 33

12) [LNO] Featuring on pages 15, 16

Thick-film paste is ink-like substances produced by mixing

Battery materials manufactured by the SMM Group include

powdered metals and glass in various solvents. They are usednickel hydroxide and lithium nickel oxide (LNO). Used in thein the manufacture of electronic components such as capaci-

positive electrodes in NIMH and lithium-ion batteries, these ma-

tors based on a type of printing process. Resin pastes, which

terials produce electricity as the result of a chemical reaction.

consist of powdered metals mixed with organic resins, are also
used in the manufacture of electronic components.

13) [Lithium niobate and lithium tantalate]
Featuring on page 3211) [Secondary batteries] Featuring on pages 12, 32
Secondary batteries are rechargeable and reusable. Nickel
metal hydride (NiMH) batteries were commercialized in the
1990s as a replacement for the nickel-cadmium (NiCad) bat-

Lithium niobate (LN) and lithium tantalate (LT) are materials
used in the SAW filters of mobile phones. SAW (­surface acoustic wave) filters are functional components that reduce background noise during mobile phone conversations.

teries that had been common until then. NiMH batteries are in

Other terminology
LME

Copper concentrates(London Metal Exchange)

Copper smelting based on the melting of ores (dry-process

Established in 1877, the London Metal Exchange provides

smelting) uses copper concentrates as its raw material.

trading in spot contracts and commodity futures for non-These are ores that have been “dressed” (the extracted

ferrous metals such as copper, nickel, aluminum, lead andore is separated from non-metallic impurities), a process

zinc. Producers can monetize surplus inventory of refinedthat raises the copper content to around 30% by weight.

ores by holding these stocks in LME-designated ware-

Copper concentrates typically contain around 30% eachhouses. The exchange also enables users to purchaseof copper, iron and sulfur, with the remaining 10% con-quantities of metal when needed.

sisting of gold and platinum group metals.

London fixing

Electrolytic nickel/ferronickel

In contrast to copper, nickel and other base metals, gold is

Nickel is graded as Class 1 or Class 2. Electrolytic nickel is a

not traded on the LME. The price of gold is still determined

typical Class 1 grade of high-purity nickel, which is tradedlargely by telephone or electronic communication methods

on the LME. Ferronickel is the name given to Class 2 grades

between market participants for each transaction. The fi-

of nickel, which are alloys typically containing about 20%

nancial institutions that are the so-called “fixing members”

nickel and 70% iron. Ferronickel is mainly used in theof the London Bullion Market Association (LBMA) agree on

manufacture of stainless steel. Electrolytic nickel is used ina standard price for gold based on the results of all thesea broad range of applications, including specialty steels,

individual transactions and publish it at 10:30 a.m. andelectronics materials and electroplating.

3:00 p.m. London time on each trading day. Buy and sellorders for gold bullion are then collated and processed atthese times at the published prices. The London fixing
price is thus the benchmark for global trading in gold.

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

87

SMM GroupAs of March 31, 2008

Voting Shares
Name
Operations
		(%)■Mineral Resources
Sumiko Consultants Co., Ltd.
100
Geological survey of resources and civil engineering; Test boring
Sumitomo Metal Mining America Inc.
100
Prospecting; Management of mining subsidiaries in U.S.A.
Sumitomo Metal Mining Arizona Inc.
80
Mining and related operations
Subsidiary engaged in investment in local corporation located in Chile operating Candelaria Mine
SMMA Candelaria Inc.
100
Sumitomo Metal Mining Canada Ltd.
100
Prospecting; Consulting
Sumitomo Metal Mining Oceania Pty. Ltd.
100
Resource surveys, mine development and related operations in Oceania
SMM Pogo LLC
100
Investment in Pogo Mine project
SMM Cerro Verde Netherlands B.V.
80
Investments in local Peruvian companies engaged in the Cerro Verde Mine operation
SMM Solomon LIMITED
100
Prospecting in the Solomons Islands
Sumitomo Metal Mining Peru S.A.
100
Prospecting in South America
Sumitomo Metal Mining Chile LTDA
100
Prospecting in South America■Metals
Hyuga Smelting Co., Ltd.
60
Ferro-nickel smelting
Manufacture and sale of copper and brass products and processed copper and brass products
Sumitomo Metal Mining Brass & Copper Co., Ltd. 100
Sumiko Logistics Co., Ltd.
100
Maritime trading; Harbor transportation and services; Land transportation
MS Zinc Co., Ltd.
50
Manufacture and sale of zinc and related operations
Acids Co., Ltd.
50
Manufacture and distribution of sulfuric acid and related products
P.T. International Nickel Indonesia
20
Nickel ore mining; Nickel smelting
FIGESBAL
26
Nickel ore mining; Harbor transportation
Jinlong Copper Co., Ltd.
27
Manufacture and sale of electrolytic copper and sulfuric acid
Coral Bay Nickel Corporation
54
Intermediate products manufacture of nickel and cobalt
Sumic Nickel Netherlands b.v.
52
Investments in nickel and cobalt development businesses; Distribution of nickel and cobalt
Taihei Metal Industry Co., Ltd.
97
Manufacture of heat-, corrosion- and friction-resistant steel castings and precision castings■Semiconductor and Advanced Materials
Ohkuchi Electronics Co., Ltd.
100
Semiconductor packaging materials production; Recovery of precious materials;
Manufacture of functional inks
Ajimu Electronics Co., Ltd.
100
IC package plating
Shinko Co., Ltd.
94
Design, manufacture and distribution of printed circuit boards
SMM Precision Co., Ltd.
100
Production of optical communications components
GRANOPT Ltd.
50
Manufacture and distribution of rare earth iron garnet (RIG)
Niihama Electronics Co., Ltd.
100
Lead frame production; Copper-clad polyimide film production
Malaysian Electronics Materials SDN. BHD.
100
Manufacture and sale of bonding wire and thick-film paste
Taiwan Sumiko Materials Co., Ltd.
100
Manufacture and distribution of bonding wire
Sumitomo Metal Mining Electronic Materials
100
Manufacture and distribution of bonding wire
(Shanghai) Co., Ltd.
Shanghai Sumiko Electronic Paste Co., Ltd.
51
Manufacture and distribution of thick-film paste
Dongguan Sumiko Electronic Paste Co., Ltd.
76
Manufacture and distribution of thick-film paste
Sumitomo Metal Mining Asia Pacific Pte. Ltd.
100
Regional headquarters (RHQ) for overseas lead frame businesses
Sumiko Leadframe Chengdu Co., Ltd.
85
Lead frame production
M-SMM Electronics SDN. BHD.
100
Manufacture and sale of lead frames
Sumiko Electronics Taiwan Co., Ltd.
70
Lead frame and tape materials production
Sumiko Leadframe (Thailand) Co., Ltd.
100
Lead frame production
P.T. SUMIKO LEADFRAME BINTAN
100
Lead frame production
Sumiko Electronics Suzhou Co., Ltd.
100
Lead frame production
SMM KOREA Co., Ltd.
100
Marketing support for semiconductor materials and related operations
Nittosha Co., Ltd.
100
Metal product plating, surface treatment and sales
Sumiko Tec Co., Ltd.
100
Manufacture of electronic device terminals, connectors and sales■Energy, Catalysts and Construction Materials
Nippon Catalyst Cycle Co., Ltd.
100
Valuable-metals recovery businessJapan Irradiation Service Co., Ltd.
100
Radiation processing for sterilization and modification of industrial materials
JCO Co., Ltd.
100
Management of facilities dealing with uranium and related waste
Nippon Ketjen Co., Ltd.
50
Manufacture and sale of desulfurization catalyst for petroleum processing
Sumitomo Metal Mining Siporex Co., Ltd.
100
Manufacture and distribution of ALC (Autoclaved Lightweight aerated Concrete) and otherconstruction materials
Igeta Heim Co., Ltd.
100
Sub-contractor of ALC and ferro-concrete housings
N. E. Chemcat Corporation
42
Manufacture of precious metal catalyst and surface treatment chemicals; Recovery andrefining of precious metals
Sumiko Lubricant Co., Ltd.
100
Manufacture and distribution of various fabricants■Others
Sumiko Techno-Research Co., Ltd.
100
Environmental measurement verification operations related to water quality, air, soil,
noise and vibration, etc.
Sumiko Technical Service Co., Ltd.
100
Trustee, personnel services for non-ferrous metals refining businesses
Sumitomo Metal Mining Engineering Co., Ltd.
100
Non-ferrous metal smelting; Chemicals business; Environment sector machinery andequipment; Plant surveys, design, manufacturing, and repair and maintenance
Sumiko Plantech Co., Ltd.
100
Manufacture of machinery and equipment and repair work for non-ferrous metal smelting
and chemical plants; Installation of machinery and equipment and piping work; Steelstructure work

88

SUMITOMO METAL MINING CO., LTD. Annual Report 2008

Corporate Data and Investor Information
Corporate Data
(Contact Information)
Public Relations & Investor Relations Department:
11-3, Shimbashi 5-chome
Minato-ku, Tokyo 105-8716, Japan
Phone: 81-3-3436-7705
Facsimile: 81-3-3434-2215
Homepage: http://www.smm.co.jp/E/

Founded:
1590
Incorporated:
1950
Paid-In Capital:¥93.2 billion *As of March 31, 2008
Number of Employees: 2,184 *As of March 31, 2008
Head Office:	11-3, Shimbashi 5-chome, Minato-ku,
Tokyo 105-8716, Japan

Investor Information (As of March 31, 2008)
Closing Date:
The Company’s books are closed on March 31 each year.
Regular General Meeting:	The regular general meeting of shareholders is held in
June each year.
Common Stock:
Number of authorized shares: 1,000,000,000 shares
Number of issued and outstanding shares:
581,628,031 shares
Number of shareholders: 59,912
Listing of Shares: Tokyo, Osaka
Stock Transaction Unit: 1,000 shares

As of October 1, 2008

Registrar of Shareholders:
The Sumitomo Trust and Banking Company, Limited(Head office) 5-33, Kitahama 4-chome, Chuo-ku, Osaka
Stock Transfer Agency Department:
3-1, Yaesu 2-chome, Chuo-ku, Tokyo
Method of Public Notice:	Electronic notification (However, if electronic notification is notpossible due to an accident or other unavoidable circumstances,notice will be published in the Nihon Keizai Shimbun newspaper.)The Company’s website: http://www.smm.co.jp/E/
Independent Public Accountant:
KPMG AZSA & Co.
1-2, Tsukudo-cho, Shinjuku-ku, Tokyo

Major Shareholders (As of March 31, 2008)

The Master Trust Bank of Japan, Ltd. (Trust accounts)
Japan Trustee Services Bank, Ltd. (Trust accounts)
Sumitomo Metal Industries, Ltd.
Trust & Custody Services Bank, Ltd. (Trust accounts Y)
BNP PARIBAS Securities (Japan) Limited
Sumitomo Mitsui Banking Corporation
Sumitomo Life Insurance Company
Sumitomo Corporation
The Nomura Trust and Banking Co., Ltd. (Investment accounts)
Trust & Custody Services Bank, Ltd.
(Securities investment trust accounts)

Number ofshares held
(thousands)

Shareholding
ratio
(%)

58,02755,569
8,715
8,594
7,715
7,650
7,474
7,000
6,619

10.0
9.6
1.5
1.5
1.3
1.3
1.3
1.2
1.1

5,776

1.0

Individuals
and Other
20.45%
118,981

Financial
Institutions
42.04%
244,466

Breakdownof
Shareholders(Thousands ofshares)ForeignInvestors
25.55%
148,615

Other
Corporations
7.89%
45,867

Securities
Companies
4.07%
23,699Note: Shareholdings of less than 1,000 shares havebeen omitted.

Note: Shareholding ratio is calculated excluding treasury stock.

Stock Price and Trading Volume
SMM stock price (Yen)
TOPIX (Point)(Millions of shares)

3,500

60

3,000

50

2,500

40

2,000

30

1,500

20

1,000

10

500
06/4

06/6

06/8

SMM (left)

06/10

06/12

TOPIX (left)

07/2

07/4

07/6

07/8

07/10

07/12

08/2

08/4

08/6

08/8

0

Trading volume (right)

Note: TOPIX began on 4 January 1968 with a base level of 100.
SUMITOMO METAL MINING CO., LTD. Annual Report 200889

SUMITOMO METAL MINING CO., LTD.
SUMITOMO METAL MINING CO., LTD.

Annual Report 2008
Annual Report 2008

11-3,
11-3,
Shimbashi
Shimbashi
5-chome,5-chome,Minato-ku,
Minato-ku,
Tokyo
Tokyo
105-8716,
105-8716,
Japan
Japan
http://www.smm.co.jp
http://www.smm.co.jp

PrintedPrintedon recycled
on recycled
paper
paper
in Japanin Japan