SUMITOMO METAL MINING CO., LTD.
11-3, Shimbashi 5-chome, Minato-ku,
Tokyo 105-8716, Japan
http://www.smm.co.jp

Annual report 2011
SUMITOMO METAL MINING CO., LTD.

Printed in Japan

Contents
2 Consolidated Financial Highlights
3 Introduction
Our story
11 Message to our stakeholders
19 Feature
New growth
29 Year in review
30 Review of Operations
36 Working to Realize a Sustainable Society
39 Corporate Governance
43 Financial Section
90 Glossary
92 Corporate Data and Investor Information– For explanations of specialized industry terms, please see the Glossary on pages 90 to 91.
–	Note Regarding Forward-Looking Statements: The forward-looking statements in this annual
report, including business results forecasts, are based on information available to the Company
and on certain assumptions deemed to be reasonable as of the date of release of this report.
Actual business results may differ substantially due to a number of factors. Unless specificallystated otherwise, information in this annual report is as of July 1, 2011.

The Sumitomo Business Spirit
Article 1
Sumitomo shall achieve strength and prosperity by placing prime importanceon integrity and sound management in the conduct of its business.
Article 2
Sumitomo shall manage its activities with foresight and flexibility in order tocope effectively with the changing times. Under no circumstances, however,shall it pursue easy gains or act imprudently.
“Business principles” forming the Rules Governing the House of Sumitomo(version formulated in 1928)

SMM Group Corporate Philosophy– Sumitomo Metal Mining Co., Ltd. (SMM), in accordance with the Sumitomo
Business Sprit, shall, through the performance of sound corporate activities
and the promotion of sustainable coexistence with the global environment,seek to make positive contributions to society and to fulfill its
responsibilities to its stakeholders, in order to win ever greater trust.
– SMM shall, based on respect for all individuals and recognizing each person’s
dignity and value, seek to be a forward-minded and vibrant company.

Sumitomo Metal Mining

Consolidated Financial Highlights
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Years ended March 31

2011

2010

2009

Results for the year (Millions of yen):
Net sales¥864,077¥725,827¥793,797

Operating income

96,03866,265

10,534

Recurring profit

123,701

87,791

32,572

Net income

83,962

53,952

21,974Equity in earnings of affiliated companies

34,832

26,09031,536

Capital expenditures

53,105

26,41447,723

Total assets

1,052,353

981,458

880,001

Net assets

684,103629,684

547,251

Long-term debt due after one year

135,128

132,311

141,716

Interest-bearing debt

210,969

200,939

218,534

149.38

96.26

38.87

1,121.19

1,043.50

913.92

32

20

13

ROA (%)

8.26

5.80

2.23

ROE (%)*

13.80

9.89

4.02

Equity ratio (%)*

59.9

59.8

57.3

Interest-bearing debt to total assets ratio (%)

20.0

20.5

24.8

Debt-to-equity ratio (times) *

0.33

0.34

0.43

Financial position at year-end (Millions of yen):Amounts per share (Yen):
Net income
Shareholders’ equity
Cash dividends
Key ratios:* Shareholders’ equity are defined as following equation.
Shareholders’ equity = Total shareholders’ equity + Accumulated other comprehensive inocme

Recurring Profit

Net Income¥ billions¥ billions

200

100

1,200

100

100

50

600

50

2009

2

2010

2011

2009

Total Assets / Equity Ratio
Total assets (¥ billions) (left scale)
Equity ratio (%) (right scale)

2010

2011

2009

2010

2011

Our

story

OriginCopper smelting and mining operations were the starting point of Sumitomo Metal Mining. From generation to generation, we
have carefully passed down the technologies and know-how that we have cultivated. Our resource and refining operations—such as our copper, nickel, and gold operations—have supported our growth, as well as the growth of the Japanese economy.

4

Tounaru Area, Besshi Copper Mine

5

ShiftOver our extensive history, we have responded to a vast number of changes in our operating environment by updating ouroperating structure. Today’s operating environment is marked by expanding global demand for non-ferrous metals and theresulting trend toward an oligopoly in mineral resources. Accordingly, under our current three-year business plan, we haveshifted from our previous structure of two core businesses to a new structure of three core businesses and are implementing
strategies to further increase our enterprise value.

6

Cerro Verde Copper Mine in Peru : Mineral Resources Segment (left)
Coral Bay Nickel Corporation in the Philippines : Smelting & Refining Segment (above right)
Battery materials operations at Isoura Plant : Materials Segment (below right)

7

GrowthLooking beyond the period covered by our current three-year business plan, our goal is to enter the ranks of the non-ferrous
majors. Leveraging the technical capabilities that we have cultivated in the mineral resources business and smelting & refining
operations, as well as the capital that we have accumulated, our long-term vision calls for increasing our total production
interest in copper to 300 ktpa and in gold to 30 tpa, as well as expanding our nickel operations to achieve a 150 ktpa production set-up.

8

Sierra Gorda Project in Chile

9

Sumitomo Metal Mining

Aiming to bea World-Class Player
Throughout our history, we have grown by implementing a broad array of initiatives in
response to the changes that have occurred around the world. These include nickel refining,
the electronic and advanced materials business, operation of the Hishikari Mine, nickel refining
in the Philippines, and the sole operatorship of overseas mines.
The rapid growth of emerging countries has fostered further changes in our global operating
environment. Through the steady implementation of the strategies that were outlined in the
FY2010–12 three-year business plan, SMM is targeting new growth. Going forward, we willcontinue to focus on further gains in enterprise value by making full use of our many strengths.

Long-term vision
beyond FY2013

In Top 5
non-ferrous
majors

FY2010–FY2012
09 3-Yr Business Plan
New long-term vision-oriented
growth strategy
FY2004–FY2009
03 & 06
3-Yr Business
Plans

Globallycompetitive(base)

GloballycompetitiveNon-ferrous
major

Enter
non-ferrous
major ranks

Mineral Resources Segment
This segment is tasked with the mission of securing earnings in the mineral resource
business and securing raw materials for the refining business. In Japan and overseas,
the segment is engaged in the exploration for and the development, production, andsales of non-ferrous metal resources.
Smelting & Refining Segment
This segment smelts and refines raw materials procured from the mineral resources
segment and overseas mining companies into metals such as copper, nickel, gold andzinc. We possess world-class refining technologies, such as highly competitive copper
smelting and refining technologies and process technologies for recovering nickel fromlow-grade ore, and are the industry leader.
Materials Segment
In the semiconductor materials business, we supply high-quality materials that are
essential for semiconductors and electronic equipment. In the advanced materials
business, we create a range of high-value-added materials, including thick-film materials,
battery materials, crystal materials, thin-film materials, and other materials

10Messageto our stakeholders

Sumitomo Metal Mining

President and Representative Director

Nobumasa Kemori12Annual Report 2011

Message to our stakeholders
Business Environment
In fiscal 2010, ended March 31, 2011, one notable aspect of our markets was the high levelof non-ferrous metals prices. These high prices, which resulted from both demand- andsupply-related factors, are expected to continue over the long term. On the demand side,
forecasts call for higher consumption of non-ferrous metals due to continued economic
growth in emerging countries, including China and ASEAN member countries. On the supply
side, existing mines are yielding lower grade ores, and many of the potential mines that areunder consideration for development present challenging mining conditions, such as a lackof infrastructure and high-altitude locations. Accordingly, we expect the supply of nonferrous metals to remain tight, and do not anticipate any significant change in the
demand–supply balance, even over the medium to long term.
Despite these trends, however, my frank opinion is that conditions in the markets for
non-ferrous metals were remarkably strong in fiscal 2010. In the first half of the fiscal year,
China and other emerging countries led the global economy, while business conditions in
the United States, the largest market for the emerging countries, remained sluggish. In
this setting, I had concerns about a double-dip recovery. In the end, as a result of thequantitative easing implemented by the United States following the global financial crisis,
substantial quantities of funds entered the commodities markets, and non-ferrous metals
prices increased. Looking at the situation from a different angle, the fact that non-ferrous
metals prices have risen due to an excess of money also means that there is cause for concern that those prices could plummet if the outlook for the global economy worsens due tothe materialization of any of a number of risks. For example, these risks include the sovereign crises in Europe as well as an economic slowdown caused by monetary tightening in
China. Steep price drops would lead directly to a substantial decline in results for theCompany, and accordingly we are concerned about the high non-ferrous metals prices.
In addition to conditions in non-ferrous metals markets, other areas of concern in theexternal environment include the ongoing concentration of power in the hands of a few
resource majors and the resource policies of the Chinese government. When prices stabilize,
the resource majors could further increase their price negotiatWe expect the supply of non-ferrous
ing power versus the smelters and refineries by stepping up
metals to remain tight, and do not
the concentration of power through mergers and acquisitions(M&As). In addition, Chinese companies will leverage theiranticipate any significant change
substantial financial resources and the backing of the Chinese
in the demand–supply balance,
government to aggressively extend their reach and procure reeven over the medium to long term.
sources that cannot be obtained domestically. In contrast, SMM
cannot directly compete with these companies financially. As aresult, I believe it is fair to say that China is our biggest concern
in terms of progress in resource procurement.
Also, as prosperous minerals dwindle in the years ahead, the conditions for participating in projects could become increasingly harsh due to the policies of the resource-richcountries. For SMM, determining the best way to handle this situation is one of the mostimportant issues that we face.

13

Sumitomo Metal Mining

Results in Fiscal 2010
In fiscal 2010, we recorded recurring profit of ¥123.7 billion and net income of ¥84.0 billion.
These results not only exceed the targets for the first year of the three-year business plan,
they also surpass the targets for the final year of the plan, fiscal 2012, for which the plancalls for recurring profit of ¥110.0 billion and net income of ¥70.0 billion.
Nonetheless, it is a fact that these results were due in large part to the rise in prices of
non-ferrous metals. Copper, nickel, and gold prices surged, and the increase above the forecasted level contributed about ¥56.0 billion to our results. Excluding that factor, we would
have needed another ¥40 billion to reach the fiscal 2012 recurring profit target.
The factors behind this outcome include issues that are beyond SMM’s control, such as
the running costs of overseas mines, which are influenced by the policies of partner companies, and the influence of foreign exchange rate fluctuations. However, despite the fact that
we did not reach the fiscal 2012 targets, we have substantial
room for steady improvement toward those targets in areas that
In fiscal 2010, the first year of theare under our control. These areas include the level of profits inthree-year business plan, the plan got
materials operations, the start of operations at the Goro Project,
off to a strong start, and we achieved
and costs in smelting & refining operations. In other words,
the plan’s first-year targets.
we have the potential to further increase our profits. We havealready formulated countermeasures for Philippines-based Coral
Bay Nickel Corporation, where production had to be reduced because of a drought, and arealso working to resolve other issues. In these ways, we are taking steps to secure profits.
Progress in the Three-Year Business Plan by Segment
Mineral Resources
In the mineral resources segment, our basic policy is to focus our efforts on increasing the
supply of our own raw materials for our smelting & refining operations while expanding ourearnings from the mining business.
In this context, our participation in the Sierra Gorda copper-molybdenum mining project
represents strong progress in the acquisition of copper rights. This project is scheduled tostart production in 2014. Over 20 years of mine life, average annual production is expected
to be 220,000 tons of refined copper equivalent, of which we have rights to 31.5%. We also
anticipate increased production at the Cerro Verde Copper Mine and the Morenci Copper
Mine. Accordingly, we believe that it is increasingly likely that we will achieve the goal incorporated in our long-term vision of a copper proprietary ore ratio of two-thirds. In addition,
we have 50% off-take rights in the copper from the Sierra Gorda Project, which is a significant step in terms of our ability to supply raw materials to the Toyo Smelter & Refinery.
Accordingly, in June 2011 we established the Sierra Gorda Project Division. In this way,
we will participate as essentially equal partners with the operator, Quadra FNX Mining Ltd.,and do our utmost to ensure the project starts production as planned in 2014. Also, we will
work to achieve yields that exceed our initial plans by focusing on R&D and working to further enhance our mineral processing technologies.

14

Annual Report 2011

In comparison with the operations of the resource majors, the scale of our operations
is small, so it is clear that we cannot directly compete in terms of fund-raising capacity or
number of projects in operation. However, we are proud of the fact that we can compete byleveraging our technical strengths to ensure that individual projects are successful. In fact,
we can do more than just compete. We can win. The key to success in mineral resources operations and in the implementation of our growth strategies lies in our technical strengths.
On the other hand, a key issue at this point is our relative lack of experience in overseas
projects. For example, there is a need to consider issues that are not frequently encounteredin Japan even in corporate social responsibility (CSR) contexts, such as determining how tobest maintain harmonious relationships with local residents who have different culturalvalues and customs and preventing child labor. In this environment, we need to actively
foster enhanced understanding among local governments and populations regarding theenvironmental initiatives that we have implemented, such as
our achievements in restoring the Besshi Copper Mine, which
We will focus on exploration, discovery,
had been damaged by development, to a green mountain. To
and development. I believe that if we canthat end, we must enhance the capabilities of employees disdo that, we can become a truly global
patched overseas, including their communication skills. At thecompany for the first time in our history.
same time, it is important to select optimal local partners.
To aggressively acquire this experience, we will place a
special focus on conducting exploration activities on our own and increasing the number ofprojects in which we take the lead role. In fiscal 2011, we will increase exploration expenses
to ¥7.0 billion, from ¥4.0 billion in the year under review. We have already had success inentering new development projects and in increasing production from existing mines, but
the fact that we cannot take the initiative is an ongoing challenge. Also, if non-ferrous metals prices remain high, competition surrounding project participation will intensify, which
will likely have an adverse effect on profitability. Accordingly, we will focus on exploration,
discovery, and development. I believe that if we can do that, we can become a truly global
company for the first time in our history.

Progress of SMM Exploration

Alaska, USA

Yukon Territory, Canada

Philippines
BrazilSolomon Islands
CopperNickelGold
OthersPeru

Australia
Chile

15

Sumitomo Metal Mining

Smelting & Refining
In smelting & refining, our basic policy will be to expand and reinforce our nickel refining
business to bolster our top-ranked position, and we are making steady progress with thoseendeavors. The Taganito Project, which will produce intermediates, is proceeding according
to plan, with the start of operations scheduled for 2013. At the same time, progress isbeing made with work to expand the new Niihama Nickel Refinery, which produces end
products. In fiscal 2011, we are planning investment of ¥43.1 billion in the Taganito Projectand ¥2.8 billion in the Niihama Nickel Refinery. We are making steady progress toward theestablishment of a system that produces 100,000 tons a year.
In addition, copper smelting and refining was the original business of the Sumitomo
Group and has supported SMM’s growth up until the present day. Moving forward, we willcontinue working to secure profits in copper smelting, which will remain a key part of ouractivities in Japan. One key point in fiscal 2011 will be the initiaWe are proud of our number one position
tives at the Toyo Smelter & Refinery. Specifically, the operationin the technologies that are used to turnof the furnace will be halted for its first overhaul since it wasplaced into operation 40 years ago. At the same time, we willore into metal as effectively as possible
introduce new smelting technology with the objective of enyet without placing a burden on the
hancing operational stability and efficiency. The supply ofenvironment.
copper is highly important for domestic industry, and it is essential that the furnace repair is completed according to plan.
For the near future, we believe that it will be difficult to secure profits from copper
smelting operations. However, I have no intention of implementing a withdrawal from copper refining operations and generating profits from mineral resources operations alone. We
have smelted and refined copper for more than 400 years, and our entry into mineral resources operations followed our start in copper smelting and refining. Our copper smelting
and refining operations today incorporate centuries of innovation and effort, including
measures to prevent pollution. That is why we are proud of our number one position in
the technologies that are used to turn ore into metal as effectively as possible yet without
placing a burden on the environment. I believe that it is by continuing to include smelting in
Outline of Current Medium-Term Business Plan
The non-ferrous metal majors

16

Mineral Resources

Smelting & Refining

Materials

Long-Term
VisionCu: Interests
180 ktpa 300 ktpa
Ni: Solomons operational
Au: Interests 20 tpa 30 tpa

Cu: Application of R&D
Ni: 150 ktpa set-up– Earnings boosted
via radical reforms

Key Point

Cu/Au:
Secure mine interests
Ni:
Solomons project B-FS

Cu:
More cost competitive
Ni:
Progress at Taganito– Expand into E&E– Exit loss-making
ops

Annual Report 2011

our operational portfolio that we can make the largest possible contribution around theworld. In the future, if smelters and refineries in Japan and China can secure the majorityof their ores in-house, the resource majors will have no choice but to raise processing fees.
In this way, profits will not be skewed toward resource companies, and an appropriate
allocation of profits will be possible for the industry as a whole.
Materials
Finally, in the materials segment, semiconductor and advanced materials operations havebeen designated as our core businesses. In these fields, we are implementing growth strategies for battery materials and sapphire substrates in the energy and environmental (E&E)
fields. For semiconductor materials and thick-film materials, meanwhile, our basic policy is
to strengthen our operational foundation. Our target for the segment’s operating income
over the period covered by the current three-year business plan
We are implementing growth strategiesis ¥7.0 billion in fiscal 2010, ¥10.0 billion in fiscal 2011, andfor battery materials and sapphire¥15.0 billion in fiscal 2012. Because the plan calls for a substantial jump up in fiscal 2012, it is essential that we meet our
substrates. For semiconductor materials
objectives for fiscal 2011. Accordingly, we need to fundamenand thick-film materials, our basic policy istally rebuild our growth strategies for both semiconductor andto strengthen our operational foundation.
advanced materials.
In semiconductor materials, at this point we do not have plans to launch new products,
so for products with limited growth potential we need to pursue tie-ups with other companies or, in some cases, consider withdrawal. Pressing issues include simultaneously raisingquality and cost-competitiveness and bolstering the foundation for raising profitability.
In advanced materials, we need to push our battery materials operations beyond thepoint at which our sales are significantly influenced by the condition of major customers, as
was the case in fiscal 2010. Moreover, our sales could plummet if our customers implementa model change and decide not to use our products in the new models. Accordingly, at theBattery Research Laboratories, we will continually implement R&D focused three to four
years into the future, in alignment with the model change cycle. In sapphire substrates, wewill strive to commence mass production in fiscal 2011 and to start generating profits infiscal 2012. Under the subsequent business plan, we will focus efforts on our materials operations and take steps to nurture them.
Initiatives Targeting Sustained Growth
To properly prepare and oversee large-scale projects, in fiscal 2010 we established theEnterprise Value Committee. Each business group works to achieve its quantitative objectives, and we do our utmost to complete the projects in which we are participating.
However, if we focus only on these shorter-term issues, then we can end up neglecting
preparations for longer-term initiatives. As a countermeasure, the Committee implements
Companywide oversight of long-term, large-scale projects to ensure that the projects ineach segment are receiving the ongoing attention that they need. Specifically, projects are17

Sumitomo Metal Mining

divided into four stages―sowing, transplanting, nurturing, and harvesting―and progress
is confirmed every six months at meetings of the Committee. We expect this framework
to make a major contribution to the achievement of higher profits under each successive
three-year business plan as well as to increased enterprise value.
Also, we believe that personnel are themselves management resources, and are aggressively implementing human resources development activities in accordance with that
belief. Moving forward, we will work to further increase the utilization of female employees.
The Company’s workforce, at this point, is composed primarily of men, due in part to thenature of the work. In the future, as we step up overseas business development, we will
expand employment of people from other countries, and will promote diversity byincreasing the percentage of female employees. In these ways, we will build a foundation
as a global company. As one facet of those initiatives, from fiscal 2011 we will increase thenumber of women that we hire. We will also take steps to expand the range of jobs thatare filled by women, such as jobs at production sites.
Shareholder Return Policy and Message to Shareholders
The Company believes that increasing enterprise value is the best method of providing
a return of profits to shareholders. To increase enterprise value, we need to make steadyprogress in projects and to implement long-term strategies in each area of business. These
endeavors require large-scale capital investment, such as in mine development and refinery
construction. Furthermore, given the current state of the global economy, we cannot
neglect preparations for risks that could put pressure on our
SMM is a straightforward company that
equity, such as a sudden drop in non-ferrous metals prices or aemphasizes “trust” over all else. We have
rapid rise in interest rates. Consequently, we need to accumulate internal reserves in order to reinforce our financial position
never been a flamboyant company;so that we do not miss immediate opportunities due to arather, we have steadily worked to achieve
shortage of funds. This is essential for raising our enterprise
the goals that we have announced.
value. Accordingly, over the course of the 09 Three-YearBusiness Plan, our policy will be to maintain our dividend payout ratio at 20% or more while
increasing profits.
SMM is a straightforward company that emphasizes “trust” over all else. We have neverbeen a flamboyant company; rather, we have steadily worked to achieve the goals that wehave announced. Moving forward, I pledge that we will do our utmost to raise enterprisevalue so that we can maintain the trust and meet the expectations of all of our shareholders
and investors.
August 2011
Nobumasa Kemori
President and Representative Director

18

Business Environment
in the Non-Ferrous
Metals Industry

Cerro Verde Copper Mine

It has been about two years since the 2009 economic crisis
that was triggered by the global financial crisis. Non-ferrous
metals prices, which plunged in 2009, have returned tohigh levels. Today, the Company’s business environment
presents promising growth opportunities, but it also holds
significant threats. These threats include the growing
concentration of power in the hands of the resource majors
and the expanding presence of China in the competition tosecure resources.

challenging conditions, such as extremely high altitudes andlocations with little to no infrastructure. Furthermore, we also
expect the influx of speculative funds to help sustain nonferrous metals prices at high levels.

Rising Prices for Non-Ferrous Metals
The rise of non-ferrous metals prices in recent years has
been mainly due to an increase in demand fueled byeconomic growth in China and other emerging countries.
Going forward, emerging countries are expected to record
ongoing population growth and industrial development.
Consequently, these countries are likely to continue to play acentral role in driving demand for non-ferrous metals, evenover the medium to long term.
On the supply side, the grade of remaining resources
is declining while mining conditions are simultaneously
worsening. As a result, it is becoming increasingly difficult
to increase the supply of non-ferrous metals. In particular,
new copper mine development projects are constrained by

Intensifying Competition to Secure Resources
The resource majors have registered substantial profits asa result of the increases in metals prices. In the period of
economic globalization that has followed the end of the Cold
War, the resource majors have leveraged their operational
scale. In the 1990s, they commenced a series of large-scale
M&A transactions. Consequently, the resource industry has
moved toward an oligopoly, and the mine developers haveenjoyed growing power in their negotiations with the refiners.
Moreover, China, which continues to generate strong
economic growth, is also a factor in the intensifying competition. China’s domestic resources are not sufficient to meet thegrowth in its domestic demand. As a result, China has now
become a net importer of copper and nickel. In recent years,
China’s national policy has focused on securing overseas
resources, and China is using its abundant financial resources
to expand its resource interests in regions around the world. In
addition, resource-rich countries are stepping up efforts to“enclose” their resources. This rise in resource nationalism is

Global Copper Consumption

Global Nickel Consumption

Thousand tonnes

Thousand tonnes

20,000

1,500

1,000
10,0005002000 01

Source: ICSG

20

02

03

04

05

06

07

08

09 20102000 01

Source: INSG

02

03

04

05

06

07

08

09 2010

Annual Report 2011

becoming another major adverse influence on efforts tosecure non-ferrous metal resources.
In this way, the growing demand for non-ferrous metals has
supported growth in the resource business, but the purchasing
conditions for metal resources have worsened dramatically,
and it has become difficult to secure profits with a pure
custom smelting business model.
Market Trends by Metal
Copper
The distinctive features of copper include high conductivityof electricity and heat and superior workability. Consumptionof copper, which is principally used in electric cables and inrolled copper products, increases during periods of infrastructure development. Consequently, global demand forcopper is currently rising due to the economic growth inemerging countries. The growth in consumption is especiallystriking in China, which now accounts for nearly 40% of global
copper consumption. We expect continued economic growthin emerging countries and increasing demand for copper overthe medium to long term.
On the other hand, the supply of copper has not expanded
as much as the demand. At major mines around the world, theminable reserves are declining, and the grade of the ore isdecreasing. This trend is one factor behind the sluggish growthin supply. Global copper ore reserves are generally thought tobe sufficient, but many large-scale new mine development
projects present difficult conditions, such as mines at highaltitudes. Because these projects entail tasks that require
substantial amounts of time and money, such as securing
electric power, water, and personnel, many of these projects
are currently stalled.
Against this background, the price of copper has reachedrecord high levels in 2011, and it is expected to remain high inthe future.
NickelNickel is used in stainless steel and other specialty steels andalloys. It is also used as a raw material for secondary batteries.
Because of its superior corrosion resistance, nickel is also usedin oil and gas exploration equipment in harsh environments.
In the future, rising energy demand is expected to further
increase nickel consumption. In addition, in China, which

6th to 10th

Cu

11th to 15thGold
In addition to decorative and industrial applications, gold isoften purchased for investment purposes. In recent years,
demand has increased as China and India have expanded theirholdings. In addition, gold is known as a “stateless currency,”with a universal value that extends across time periods andgeographical regions. Accordingly, purchases of gold tend toincrease in environments marked by concern about shaky
government finances and spreading economic crises. In recent
years, gold has accounted for a growing percentage of foreign
reserves, particularly in emerging countries.
On the supply side, production volume in China is increasing,but production volume in South Africa, which was once theworld’s largest gold producer, is declining. In addition, newmine development has become more challenging. Consequently,
global production volume is not increasing.
At this point, the price of gold has reached a record highlevel. This rise is attributable to a number of factors, such asa loss of confidence in the U.S. dollar, an increase in the supplyof funds due to economic stimulus measures in industriallydeveloped countries, inflation countermeasures implemented
against a background of rising crude oil prices and other
trends, and the spread of financial products. These factors
have led to structural problems, and moving forward theprice of gold is expected to remain at a high level.

Commodity Price Indices

Share of Ore Production in 2009
1st to 5th

accounts for one-third of global nickel consumption, growth indemand for stainless steel for use in construction has becomea factor in higher demand for nickel.
On the supply side, a number of new development projects
have been planned in recent years. However, most of theseprojects have been delayed, and the actual increase in supply
has not matched expectations.
Nickel prices have not returned to the peak that was set
in 2007, but prices have nonetheless followed an increasing
trend after the global financial crisis. Future price trends will beheavily affected by the state of progress in new development
projects. The scale of the nickel market is relatively small, andconsequently it has high volatility due to demand–supply
trends and the influx of speculative funds.

OthersNi

Daily spot price index (1 January 2000=100)
Cu (LME)Ni (LME)
Au (London Fixing)
700

350

100

Source: JOGMEC* Companies grouped by size

Source: JOGMEC

2000

2004

2008

2011

21

Priority Strategy 1
Overseas Resources
Strategy
In May 2011, SMM decided to participate in the Sierra Gorda
Copper Mine development project in Chile. We acquired
copper resource rights—about 70 ktpa of refined copper
equivalent—and the right to off take 50% of produced
copper concentrate. With the price of copper increasing andcompetition with resource majors and others to securerights intensifying, how was SMM able to participate in thispromising new large-scale development project on favorable
terms? The answer lies in the technologies and know-howthat SMM has cultivated over many years of operations.
Technologies and Know-How Cultivated Over More than
300 Years
SMM has participated in the resource development businessfor more than 300 years, and over that period we havecultivated a range of advanced technologies. The exploration,mining, and mineral processing technologies that we haveaccumulated, and the mine operation know-how that we haveacquired, have enabled us to achieve stable operation of theHishikari Mine in Kagoshima Prefecture and the Pogo Gold
Mine in Alaska.
To ensure that we reliably pass on these technologies andknow-how, and to further improve them, we have established

22

Sierra Gorda Projecta system for the training of mining engineers. We havepositioned the Hishikari Mine, which is the only operational
gold mine in Japan, as a “mining school” for our engineers.
After joining the Company, mining engineers first spend about
three years at this mine, where they study basic technologies
and safety management for mine operations. Subsequently,
they are assigned to overseas mines, such as the Pogo Gold
Mine, where they spend about three years to learn additional
technologies and know-how. They then spend about four tofive years in Japan, where they study to acquire further
knowledge necessary for mine management. In this way,
they start with the basics of mine operations; acquire
the capability to plan, evaluate, and manage projects throughpractical experience; and develop the ability to operate
overseas mines. This is SMM’s basic model for mining
engineer training.
Through this system, we continue to pass down thetechnical skills that we have built up over our long history.
In fact, the technologies that we have acquired were the key
reasons why we were selected to partner with Quadra FNXMining, which is the operator of the Sierra Gorda Project.

Annual Report 2011

Sierra Gorda Project
Quadra FNX Mining, of Canada, is taking the lead in
advancing the Sierra Gorda Project. Quadra FNX has
a 55% interest in the project, SMM 31.5%, and Sumitomo
Corporation 13.5%. With construction commencing in
2011, the start of production is scheduled for 2014.
Minable reserves are approximately 1.3 billion tonnes,
and copper reserves are approximately 5,000 kilo tonnes.
Over the expected mine life of 20 years, average annual
production is expected to be 220,000 tonnes of refinedcopper equivalent, of which SMM has the right to offtake about 70,000 tonnes.
The elevation of Sierra Gorda, at 1,700 meters, isrelatively low for Chile’s mining sites. The site is adjacent
to a highway and a railroad and close to a port. This solid
infrastructure is a key feature of the Sierra Gorda Project.
As there are large mines in operation nearby, development
can proceed with comparatively low risk.

Copper Production Plan

In addition, SMM has acquired the right to off take 50%
of produced copper concentrate, so the project will playa significant role in our ability to supply large quantities
of raw materials to the Toyo Smelter & Refinery, in Ehime
Prefecture. From the viewpoint of Quadra FNX Mining,
SMM can offer stable uptake of copper concentrate, and it
is possible to put together a large-scale project financepackage for the initial development investment of about
2.9 billion dollars. These were some of the advantages
that SMM could offer.
For SMM, this project offers more than expansion of ourinterests. It also has advantages in terms of profitability,
and we have high expectations for Sierra Gorda fromthe perspective of profits as well. Accordingly, we havedispatched personnel, principally mining engineers, and are
doing our utmost to ensure the smooth implementation of
the project.

Sierra Gorda

Thousand tonnes

SMM’s Share of Annual Production(refined copper equivalent)

250

70,000 t

125

SMM’s Annual Copper Concentrate Off-take Rights(refined copper equivalent)

2014

2015

2016

2017

2018

110,000 t

23

Sumitomo Metal Mining

Methods of Increasing Interests
With copper, nickel, and gold as the principal targets, SMM will
utilize the following three methods to expand its interests.
1. Conducting independent exploration
2. Participating in mine development projects
3. Increasing output at existing mines
We will carefully consider the various advantages anddisadvantages of each of these methods and in each caseselect the method that will enable us to generate substantial
revenues from a medium-to-long-term viewpoint.
1. Conducting independent exploration
A considerable amount of exploration time is needed to
discover undeveloped ore body. Moreover, even if undevelopedore body is discovered, long lead times will be required until
operations are started. Nonetheless, if we are able to discoverore body on our own, we can acquire majority rights andconduct development and operation ourselves. Consequently,
independent exploration enables us to target profits and theaccumulation of know-how that would not be available withother methods.
Accordingly, we will place a special focus on independent
exploration from a medium-to-long-term viewpoint. To
support these initiatives, we will increase exploration
expenses from ¥4.0 billion in fiscal 2010 to ¥7.0 billion in fiscal
2011, and will move ahead with exploration activities,
centered on North America, South America, and Oceania.

Exploration Costs
2011

2010

¥

4 bn

¥

7bn

By Stage
New deposit exploration

Exploration around existing mines

2010

2011

Ni

Au

2010

2011

By Area
North America

2010

24

South America

Asia

2011

Background1991: Four companies, including SMM, started joint exploration
1995: Following the acquisition of all rights by SMM and
Sumitomo Corporation, a gold deposit was discovered in the
Liese Zone
Ratio of interests
SMM 95% / Sumitomo Corporation 5%
Target minerals
Gold, silver, antimony

Border Project
Under this project, we are conducting exploration
activities in Australia in cooperation with Minotaur
Exploration, a local exploration company. Copper and gold
are the main target minerals of the Border Project, which
is located in a region on the border between South
Australia and New South Wales. In 2010, exploration wascommenced in the Mutooroo region, which is locatedwithin the project area. In March 2011, magnetite ore
body was confirmed through drill testing. Moving
forward, we will need to examine and consider the
potential of further exploration.
Background2005: JOGMEC and Minotaur commenced joint exploration
2007: SMM acquired JOGMEC’s rights through a tendercompetition
Ratio of interests
SMM 59.1% / Minotaur 40.9%
Target minerals
Copper, zinc, magnetite ore

By Metal
Cu

Stone Boy Project
We are advancing the Stone Boy exploration project in
Alaska in cooperation with Sumitomo Corporation. In June
2011, we confirmed the presence of a gold, silver, andantimony mineralization zone in the Naosi prospect of theMonte Cristo area. Previously, this project discovered thePogo Mine, which has produced gold since 2006. In the
future, we will continue exploration in the Naosi prospectand move ahead with efforts to find ore body in otherprospects as well.

Oceania

Stone Boy Project

2. Participating in mine development projects
With this method, we take equity stakes in and jointly develop
projects that an overseas company has discovered and taken
to the development plan stage. As a consequence, the period
until the start of operations is shorter than in projects where
we start from the exploration stage. We entered the Sierra
Gorda Project at the stage when Quadra FNX Mining had
formulated the development plan.
However, due to current strong conditions in the resource
business, there has been an increase in the number ofcompeting companies looking to join projects, and competition
to secure rights has intensified. SMM has advanced technicalcapabilities that are indispensable in mine development, andwe will leverage these strengths to support our efforts to join
projects on favorable terms.
3. Increasing output at existing mines
With this method, we take steps to increase output at minesthat are already in operation. Because operations havealready commenced and the presence of ore body has been
confirmed, we are able to increase output with some degreeof certainty. The project is centered on the company that isleading the mine operation, but SMM provides technicalcooperation and works in cooperation with the lead company
to increase output. In this way, we work to increase our shareof production. In mines in which we have interests in North
America and Peru, we are currently formulating plans toincrease output.
Morenci / Cerro VerdeAt the Morenci Copper Mine, which is in operation in the
U.S. state of Arizona, plans call for increasing annual
copper production by 100 kilo tons of refined copper
equivalent through increases in mining output andconcentration capacity over the next two to three years.
At the Cerro Verde Copper Mine, which is in Peru, planscall for tripling the current volume of the concentration
process from 120 kilo tons per day to 360 kilo tons per day.
Ratio of interests
Morenci
SMM 12% / Freeport-McMoRan Copper & Gold Inc. 85% /Sumitomo Corporation 3%
Cerro Verde
SMM 16.8% / Freeport-McMoRan Copper & Gold Inc. 53.6% /Sumitomo Corporation 4.2% / Others 25.4%

25

Priority Strategy 2
Nickel Growth Strategy
SMM has an undisputed strength in nickel operations. Thatis our success in being the first company in the world toeffectively use High Pressure Acid Leach (HPAL) technology
on a commercial basis. With this technology, it is possible
to recover nickel from low-grade ore. Consequently, even in
an environment marked by declines in nickel resources, theCompany will be able to steadily secure raw materials at low
cost and expand its nickel operations.
Background to Commercialization of HPAL Technology
SMM commenced nickel refining in 1939. Subsequently, in the
1980s we introduced the Matte Chlorine Leach Electrowinning(MCLE) method at our nickel refinery in Ehime Prefecture. Thismethod has cost advantages but requires advanced operational
technologies. Through the successful use of MCLE, SMM took
the global lead in hydrometallurgical nickel refining technology.
On the other hand, securing nickel resources has long
been a major issue for SMM. In this context, we focused on
the low-grade nickel oxide ores held by Rio Tuba Nickel Mining,of the Philippines. Nickel ore is classified as nickel sulfide ore
and nickel oxide ore, with nickel oxide ore said to account for
about 70% of global reserves. In addition, oxide ores include
limonite which is found close to the surface. Limonite is26

Coral Bay Nickel Corporation

low-grade nickel ore and was not previously suitable forprocessing. However, this low-grade oxide ore accounts forabout 70% of all oxide ore. Accordingly, the development oftechnology that can process this ore was a global priority.
Recovering nickel from this low-grade oxide ore requires
the use of HPAL, a hydrometallurgical refining technology.
The use of HPAL in large-scale production requires advanced
technologies in facilities engineering and operations, butthese technologies were not established until around 2000.
However, SMM had high-level hydrometal lurgical technologies,
including our track record in the successful use of MCLE
technology. Consequently, we took on the challenge of largescale nickel production using HPAL, commencing the Coral Bay
Project using ore from the Rio Tuba Mine.
Use of HPAL Technology at Coral Bay
In April 2005, SMM began commercial production of nickel
intermediates at Coral Bay, and in 2007 we achieved the initialdesign output for the first processing facility at Coral Bay—
10 ktpa (nickel metal equivalent, same below). Subsequently,
we put a second processing line into operation, and currently
the Coral Bay Nickel Corporation (CBNC) has an output of 24
ktpa. Contributions to this success were made not only by theAnnual Report 2011

Production of Electrolytic Nickel from Low-Grade
Nickel Oxide Ores

Taganito Project

Low-Grade
Nickel Oxide Ores
HPAL
(Coral Bay)

Nickel-Cobalt Mixed Sulfide

MCLE(Niihama Nickel Refinery)

Electrolytic Nickel

Electrolytic Cobalt

Annual Nickel Production Capacity(expected operating period of 30 years)

30,000 t
Establishing a

100 ktpa
refining technologies that we have accumulated over many
years but also by our detailed analysis and research ofprevious HPAL projects that had been undertaken by othercompanies. In addition, another important factor in our success
was the fact that we were able to choose the ideal partner,
Nickel Asia Corporation, which is one of the largest nickel
mining companies in the Philippines.
Due to the success of the Coral Bay Project, we became thefirst nickel producer in the world to successfully mass produce
nickel from low-grade nickel oxide ore. This ability has becomea strong growth driver in a market characterized by continued
high prices for nickel.

Production Set-Up

To accommodate with this project, in 2011 we began
construction to expand the electrolytic nickel production
capacity at our domestic nickel refinery from the current 41
ktpa to 65 ktpa. Total investment in this endeavor is expected
to be ¥14.0 billion over the three years to 2013. As a result of
this capacity increase, our 100 ktpa nickel production set-up
will be completed in 2013.

Building a 100 kpta Nickel Production Set-Up in
Conjunction with the Start-Up of the Taganito Project
To make full use of this HPAL technology, in 2009 wecommenced the Taganito Project. We built a large-scale HPALprocess plant in the Taganito district of Mindanao, an islandin the Philippines. We decided to invest $1.3 billion in thisproject, which will produce 30 ktpa of nickel intermediates.
The project is making steady progress. Civil engineering work
has already been completed and plant construction has
begun. Plans call for operation to start in 2013.
Nickel Refinery27

Guided by Our
Long-Term Vision

Solomons Project

Based on the growth strategies in our current three-yearbusiness plan, we will steadily implement strategies
targeting the realization of our long-term vision. SMM
has a solid foundation that is unique—technologies andknow-how cultivated over many years of operation inmining and in smelting & refining. By making full use of
these strengths, we will steadily advance our strategies tostrive to enter the ranks of the non-ferrous majors andbecome a truly global company.
CopperIn copper, in addition to our participation in the Sierra Gorda
Project, plans call for extension of the Cerro Verde Copper Mineand increased output at the Morenci Copper Mine from 2014.
As a result, we will be close to achieving total production
interest of 300 ktpa of copper equivalent, which would give
us a two-thirds proprietary ore ratio. For now, we will focus ourefforts on the Sierra Gorda Project and move forward withpreparations for the start of operations in 2014. At the sametime, targeting the acquisition of further rights, we willcontinue to aggressively implement mining activities.

Our Long-Term Vision Targets

Cu: 300 ktpa interest
Ni: 150 ktpa set-up
Au:
28

30 tpa interest

Nickel
Our long-term vision for nickel calls for advancing theSolomons Project to build a 150 ktpa production set-up.
Going forward, we will advance exploration initiatives, withthe support of Japan Oil, Gas and Metals National Corporation(JOGMEC). Our short-term objective is to commence a
feasibility study in 2011. Moving forward, we will establish a
150 ktpa capacity, leverage our advantage in HPAL, and workto establish a position as one of the world’s top nickel
producers.
Gold
Our long-term vision for gold targets a production interestof 30 tpa. The reasons for working to expand gold interests
include the benefits of having a portfolio that is balanced
among metals. While maintaining the production volumeof the Hishikari Mine and the Pogo Mine, we will target therealization of our long-term vision by advancing independent
exploration in such areas as Alaska and the Philippines.

Sumitomo Metal Mining

Review of Operations: Mineral Resources Segment

Segmental Income

Main ProductsGold and silver ores, Copper concentrates,
Copper, Gold

56.2%

Fiscal 2010 Review
In fiscal 2010, higher gold prices drove up profit of directly
controlled domestic operations at the Hishikari Mine
(Kagoshima Prefecture) and the Pogo Gold Mine (UnitedStates); the acquisition of additional production interestsin the Pogo Gold Mine increased its sales volumes; andhigher copper prices boosted profit at SMM’s overseas
copper mining operations. As a result, income was up at
all of these mining operations.
In regard to mining operation, outputs at the Hishikari
Mine remained strong. Total ore production in fiscal 2010
increased 2,000t, to 136,000t, and the total volume of goldore sold over the fiscal year was 7.5t, the same as in theprevious fiscal year. At the Pogo Gold Mine, while we wereforced to temporarily suspend operations due to a forest fire,
we worked to increase output after resuming operations andwere able to produce 12t of gold ore over the year, in line with
our production plans. Also, production of copper concentrates
and electrolytic copper at the principal overseas copper

mining operations in which SMM is a management
participant through an operating subsidiary—namely
Morenci (United States), Candelaria (Chile), and Cerro Verde(Peru)—remained strong.
Exploration Activities
In fiscal 2010, continuing to target the expansion of its
overseas mineral production interests, SMM conducted
exploration activities around the world in search of copper,
gold, and nickel. In fiscal 2011, we intend to aggressively
expand the scope of our exploration activities, targetingseveral new sites in regions across the world. To this end,
we will increase exploration costs from ¥4.0 billion in fiscal
2010 to ¥7.0 billion in fiscal 2011. In the Solomon Islands,
SMM is conducting exploration activities for nickel deposits
with the aim of establishing development plans for themining area acquired by SMM. Additionally, SMM is actively
conducting exploration activities for gold mines in Alaska,
the United States.

Net Sales

Segmental Income

Gold Production Volume¥ billions¥ billions

Tonnes

100

100

20

50

50

10

2009

2010(FY)2009

2010(FY)2008

Hishikari

30

Pogo

2009

2010 (FY)Annual Report 2011

Hishikari Mine

SMM’s Mines and Metal Shares
CopperGold

Gold
NickelCopperOther

United States
Pogo (85.0%)
Morenci (12.0%)

Japan
Hishikari (100.0%)

Indonesia
Batu Hijau (3.5%)

Peru
Cerro Verde (16.8%)
Chile
Ojos del Salado (16.0%)
Candelaria (16.0%)
Sierra Gorda (31.5%)

Australia
Northparkes (13.3%)

SMM’s Metal Shares by Mine
As of December 31, 2010
Copper (Thousand tonnes)
Approx. Total

Nickel (Thousand tonnes)

7,100 kt

Gold (Tonnes)

Approx. Total

1,800 kt

Approx. Total

Morenci

Sorowako

Hishikari
Pogo

Candelaria

Figesbal

Ojos del Salado

Goro

Cerro Verde

Nickel Asia

100
500

Northparkes
Batu Hijau
Sierra Gorda*

1,500

3,000

250 t

200

1,000

* Decided to participate in Sierra Gorda in May 2011
– Based on SMM equity interests– SMM share of reserves = Reserves x SMM equity
interest in mine (%)

31

Sumitomo Metal Mining

Review of Operations: Smelting & Refining Segment

Segmental Income

Main Products
Copper, Gold, Silver, Nickel, Ferro nickel,
Zinc, Chemical products, Copper and brass

39.5%

Fiscal 2010 Review
In fiscal 2010, sales of copper for the electric wires and rolled
copper products industry were strong, a result of the recovery
in demand, but we were forced to increase our focus on the
profitability of operations in response to the worsening ofpurchasing conditions for raw materials. Also, in fiscal 2010
the percent of total net sales of copper accounted for byexports decreased, and the percent accounted for bydomestic sales increased subsequently. Meanwhile, thedemand for nickel used in specialty steels and alloys forenergy plant-related applications progressively recovered.
Demand for nickel used in the production of stainlesssteel remained strong. Accordingly, sales of nickel showeda year-on-year increase.
In this segment, production volumes of copper were up
8,000t year on year, to 404,000t, production volumes of gold
increased 2.4t, to 39.3t, and production volumes of nickel(including ferro nickel) rose 5,000t, to 60,000t.
At Coral Bay Nickel Corporation, an affiliate located on
the island of Palawan in the Philippines which uses HPALNet Sales

Segmental Income¥ billions¥ billions

1,000

50

500

25

2009

32

2010(FY)2009

2010(FY)

technology to facilitate the efficient processing of low-grade
nickel oxide ores, production volumes fell below the plannedlevels due to the effects of the water shortages experienced
during the summer months. However, this company was able
to achieve a year-on-year increase in production due to theemployment of a two-production line system. Also, theconstruction of plants at the Taganito Project on the islandof Mindanao in the Philippines, which began in fiscal 2009, is
progressing smoothly. This project will serve as SMM’s second
project using HPAL technology and is scheduled to begin
production in fiscal 2013.
Capital Investment Plans
Major items of capital investments planned for fiscal 2011
include investments in the Taganito Project, the developmentof systems to achieve an annual electrolytic nickel production
capacity of 65kt, and the overhaul of the furnace at Toyo
Smelter & Refinery. These investments are forecasted to total¥57.3 billion, ¥16.3 billion higher than investments in theprevious fiscal year.

Annual Report 2011

Nickel Refinery

SMM’s Refineries and Annual Production Capacity (SMM’s Interest)
CopperNickel

Gold

Other

China
Jinlong Copper Co., Ltd. (27.1%)
copper: 400,000 tonnes
Philippines
Coral Bay (54.0%)
nickel/cobalt mixed sulfide
nickel: 24,000 tonnes
cobalt: 1,500 tonnes
Taganito (62.5%)

Japan
Toyo Smelter & Refinery
copper: 450,000 tonnes
gold: 60 tonnes
silver: 360 tonnes
Niihama Nickel Refinery
nickel: 41,000 tonnes
Harima Smelter
zinc: 90,000 tonnes
Shisaka Smelting Co., Ltd.
zinc oxide: 120,000 tonnes
processing capacity
Hyuga Smelting Co., Ltd. (60%)
ferro nickel: 22,000 tonnes

Indonesia
Sorowako (20.1%)

New Caledonia
Figesbal (25.5%)
Goro (11.0%)

Production Volume
Electrolytic Copper(Toyo Smelter & Refinery)

Electrolytic Nickel & Ferro Nickel

Nickel-Cobalt Mixed Sulfide*

Thousands tonnes

Thousands tonnes

500

100

20

250

50

10

Thousands tonnes

2008

2009

2010(FY)

2008

2009

2010(FY)

2008

2009

2010(FY)* Refined nickel equivalent

33
100

Sumitomo Metal Mining

Review of Operations: Materials Segment

Main Products
Semiconductor materials, Thick-film materials, Thin-film
materials, Battery materials, Single-crystal materials,
Magnetic materials

Fiscal 2010 Review
In fiscal 2010, orders of lead frames recovered following strong
demand from emerging countries. However, orders tapered
off during the second half of the fiscal year due to customers’
inventory adjustments. Orders for copper-clad polyimide
films and chip-on-film (COF) substrates (electronic packaging
materials used to make liquid-crystal display (LCD) panel
integrated circuits) were sluggish during the second half offiscal 2010. In thick-film pastes, which include nickel pastes for
multi-layer ceramic capacitor (MLCC) applications, a recovery
in demand began slowly midway through the fiscal year. Salesof battery materials were stagnant following the end of the“eco point” system, government grants for the purchase ofenvironment-friendly vehicles, and other government
measures meant to encourage the purchasing of productswith low environmental impact. Accordingly, income in thematerials segment was up on a year-on-year basis due to therecovery in demand seen in the first half of fiscal 2010 coupledwith the effects of measures aimed at reducing the cost ofoperations. However, sluggish demand during the second halfof the fiscal year and the rising raw materials prices resulted ina decline in the profitability of the segment.

Net Sales

Segmental Income¥ billions¥ billions

300

10

150

5

2009

34

2010(FY)2009

2010(FY)

Segmental Income

4.3%

Capital Investment Plans
Major items of capital investments planned for fiscal 2011
include investments in boosting production of materials forenergy and environmental (E&E) applications as well as raising
the production of COF substrates at a subsidiary in Taiwan.
These investments are forecasted to total ¥11.5 billion, ¥5.7
billion higher than investments in the previous fiscal year.
Japan
Ome District Division
Isoura Plant
Sagami Plant
Sumiko Kunitomi Denshi Co., Ltd.
SMM Precision Co., Ltd.
Shinko Co., Ltd.
Sumiko Tec Co., Ltd.
Nittosha Co., Ltd.
Niihama Electronics Co., Ltd.
Ohkuchi Electronics Co., Ltd.

Voting Shares (%)

—
—
—
100
100
94
100
100
100
100

Korea
SMM KOREA Co., Ltd.

100

China
Sumitomo Metal Mining Electronics Materials(Shanghai) Co., Ltd.
Shanghai Sumiko Electronic Paste Co., Ltd.
Sumiko Electronics Suzhou Co., Ltd.
Sumiko Leadframe Chengdu Co., Ltd.
Sumiko Precision Chengdu Co., Ltd.
Dongguan Sumiko Electronic Paste Co., Ltd.

100
69
100
70
70
85

TaiwanSumiko Electronics Taiwan Co., Ltd.
Taiwan Sumiko Materials Co., Ltd.

70
100

ThailandSumiko Leadframe (Thailand) Co., Ltd.

100

Malaysia
M-SMM Electronics SDN. BHD.
Malaysian Electronics Materials SDN. BHD.

100
100

Singapore
Sumitomo Metal Mining Asia Pacific Pte. Ltd.

100

Annual Report 2011

Review of Operations: Other Businesses

Main Products
Chemical, Oil refining, and Automotive-use catalysts

Fiscal 2010 Review
In fiscal 2010, net sales of other businesses increased ¥0.8
billion year on year, to ¥30.4 billion, and segment income rose
¥0.8 billion, to ¥2.5 billion. (Net sales does not include sales of
equity-method affiliates.)
Operational Overview of Major SMM Group Affiliates(Two Catalyst Manufacturing Equity-Method Affiliates)
N.E. Chemcat Corporation is one of Japan’s largest manufacturersof precious metal catalysts. This company is a joint-venture
between SMM and BASF SE of Germany—one of the world’s
leading chemical companies. Principal activities of thisaffiliate encompass the development and manufacture ofcatalysts used to purify hazardous substances contained in
automobile exhaust gases and chemical catalysts used for
petrochemicals and for other purposes. Going forward, thiscompany will continue to utilize its wealth of expertise incatalyst technology to push ahead with the development of
new catalysts.

Two Catalyst Manufacturing Affiliates

Japan
N.E. Chemcat Corporation
Nippon Ketjen Co., Ltd.,

Nippon Ketjen Co., Ltd., manufactures catalysts used foroil refining in Japan. This company is a joint-venture between
SMM and Albemarle Corporation, of the United States, aleading company in the development and manufacturing ofoil refining catalysts and sophisticated chemical processing
products. Nippon Ketjen provides hydroprocessing catalysts;
offers services for off-site catalyst regeneration; provides
other technical services; and conducts related process
licensing. Nippon Ketjen aims to help protect the global
environment by developing businesses that deliver more
technically advanced and economic solutions in oil refining.
The two catalyst manufacturers generate profits as shownin the chart below. SMM works together with BASF SE andAlbemarle Corporation to develop growth strategies foreach company.

Net Sales

Recurring Profit¥ billions¥ billions

80

10

40

5

Voting Shares (%)

50
50

2009

2010(FY)2009

2010(FY)35

Sumitomo Metal Mining

Working to Realize a Sustainable Society
The Sumitomo Group has been developing its business for around 400 years throughcontinuous adherence to the Sumitomo Business Spirit. Acknowledging the importanceof the values and ethics our forerunners built into the Sumitomo Business Spirit, we will
make every effort to strengthen SMM Group business and consolidate society’s trust in us.

CSR Objectives

Sustainable Co-Existence with Society and the Global Environment
SMM Philosophy
The SMM Group upholds the Sumitomo Business Spirit in its Corporate Philosophy andManagement Vision. The very activities we pursue to substantiate the visions expressed inthose lines constitute SMM’s CSR activity and their implementation will take us closer
toward our goal of “sustainable co-existence with society and the global environment.”

The Sumitomo
Business Spirit

Corporate Philosophy
Management Vision

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 needsof 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 and seek to eliminate occupational accidents.
5 SMM shall strengthen communications with all stakeholders to build healthy, trustbased relationships.

36

CSR Policy

Annual Report 2011

A company that generates resources
using innovative technology

A company that is open tocommunication with stakeholder
groups worldwide

Effective useof resources

Stakeholder
communication

A company that meets internationalanti-global warming standards byusing advanced technologies
Environmental
preservation
Reduced CO2 emissions(energy savings)
and conservationof biodiversity

CSR Vision for 2020
Occupational healthand safety
A company that accords safety
the highest priority and provides
comfortable working
environments

Contribution tosociety andlocal communities
Respect forpeople andhuman rights

A company respected forits social contribution

A company offering equal-opportunity
employment free of any
discrimination based on nationality,
gender, disability or religious belief
A company that respects diversity(expanded job opportunities fordisabled persons, seniors and women)

Six Key CSR Areas and CSR Vision for 2020
In 2008, SMM determined six key areas of CSR activity for theGroup and a CSR Vision for 2020 based on the impact of thoseareas on the Group and the extent of related social needs.
We will actively pursue initiatives in those areas in line with
the CSR Policy, toward our goal of “sustainable co-existencewith society and the global environment.”
Risk Management
The Corporate Reform Plan was formulated by SMM in April
2000 based on reflections from a criticality accident at anuclear fuel processing facility belonging to an SMM Group
company, JCO Co., Ltd. (JCO) in 1999. The plan acknowledged

the importance of risk management improvements forstrengthening the Company’s condition. In 2001, regulations
pertaining to risk management systems were formulated anda Groupwide risk management system was established.
Currently, the Risk Management Working Group of the
CSR Committee handles issues related to risk management
for the Group as a whole. Risk management systems havebeen introduced for each business unit at business divisions
throughout the Group, including overseas companies. At least
once a year, or when the need arises, divisions identify andassess the various types of unlawful behavior and other risks
and take action to control those risks, registering or reviewing
them as required and implementing countermeasures.

37

Sumitomo Metal Mining

Compliance
The SMM Group views compliance as the fulfillment of socialand moral duties as a member of society through soundcorporate activities. The Compliance Working Group of the CSR
Committee plays a central role in compliance improvements
and takes steps to strengthen and advance the following
main measures.
(1) Draft revisions to the SMM Group Code of Conduct(2) Establish and revise compliance-related regulations(3) Implement compliance education(4) Convene the Compliance Working GroupIn situations where there are problems or doubts that are
not resolved by referral to the SMM Group Code of Conduct, wework to ensure that information can be provided directly to
consultation channels. The source of the information is always
kept secret and if, for any reason, the informant is unfairly
treated, the person responsible will be accordingly punished.
CSR Activity Topics
Human Resources Development Initiatives
As implied in the expression, “A business depends on its
people,” human resources development is indispensable forthe growth of a corporation. The SMM Group is aggressively
implementing initiatives targeting the development of humanresources who can contribute in global markets while meetingthe expectations of society. As one facet of those activities,
in 2009 and 2010 we opened three human resources
development facilities. The first two are the HR Development
Center’s Oji-kan and Hoshigoe-kan facilities. To strengthen
manufacturing capabilities, the Oji-kan facility is used forhazard simulation and equipment skills training, while the
Hoshigoe-kan facility is a general training facility that
conducts a wide range of training activities.
The third facility is an SMM Strategy Planning Center thatwas opened in October 2010. This facility is a base for thedevelopment of the human resources that will formulate andimplement the Group’s future strategies. In particular, it isutilized for studying and formulating management strategies
in the training of directors and senior staff.
Safety Initiatives
In September 1999, a criticality accident occurred at a nuclear
fuel processing facility belonging to JCO, in Tokai Village,
Ibaraki Prefecture. A subsequent Groupwide review ofcompliance and safety matters was conducted, and the Group
has strengthened its safety-related activities. As a result, theannual number of occupational accidents, which was 64 in
2000, was reduced to 19 in 2010.

38

At the HR Development Center’s Oji-kan facility, which
was introduced above, a variety of accident simulations
can be experienced. These include a fall from a high place,entanglement in rotation systems of a belt conveyor or othermachinery, or a collision caused by a moving suspended load.
Through training at this facility, employees gain knowledge
about situations where accidents tend to occur and theconsequences, improving their sensitivity to danger. In
this way, we expect this training to reduce accidents.
Acknowledging that safety and production are the two
fundamentals of business activities, the entire Group will work
together to eliminate occupational accidents by 2020.
Resource Recycling Initiatives
The Group’s CSR Policy states that SMM shall promote
recycling and effective resource utilization shall generateresources through the use of original technology. The Groupsupplies battery manufacturers with cathode materials forthe nickel metal hydride batteries used in hybrid vehicles.
Moreover, in addition to supplying materials, we are also
active in recycling the nickel contained in nickel metal
hydride batteries. With demand for batteries expected toincrease, progress in the reuse of nickel could also reduce theenvironmental impact of nickel ore extraction. In the future,
we will strive to contribute to environmental preservation by
applying our advanced technologies in the field of recycling.
Using Technology to Process Low-Grade Ores
The SMM Group’s HPAL technology makes it possible toaccomplish the technically challenging task of recovering
nickel from low-grade nickel oxide ores. With HPAL, the oxide
ores are subjected to high temperature and pressure andreacted under stable conditions with sulfuric acid. This enables
the stable production of a mixed nickel-cobalt sulfide
intermediate used as a raw material in electrolytic nickel
production.
Demand for nickel is steadily increasing. Through the useof HPAL technology at the Coral Bay Nickel Project, the Group
has succeeded in effectively using low-grade oxide ores as araw material. These low-grade oxide ores had previously not
been processed. In addition, the Group also plans to use HPAL
technology in the Taganito Project, which is currently underconstruction. Moving forward, the Group will strive to use thetechnologies that is has cultivated over many years to foster
further technological innovation, so that limited resources
can be used effectively without waste.

Annual Report 2011

Corporate GovernanceTo gain the trust and satisfy the expectations of shareholders and other stakeholders,
SMM is committed to building and maintaining an optimized framework for business
management based on high levels of transparency and efficiency.
Basic Policy Stance– SMM views corporate governance as a disciplinary
framework both for maximizing the enterprise value of the
SMM Group and for ensuring sound management practices.
As such, it is an important management issue.
– SMM has instituted the SMM Group Corporate Philosophy
based on the Sumitomo Business Spirit, and has also
formulated the SMM Group Code of Conduct as a set of
behavioral standards to guide executives and employees inrealizing SMM’s business philosophy.
– SMM is committed to striving to achieve the goals containedin the business philosophy; to conducting efficient and soundbusiness activities; to making a valuable social contribution;and to fulfilling responsibilities to stakeholders.
– SMM has adopted executive officer and corporate auditor
systems to ensure that the execution, monitoring andoversight of business management each function effectively
within governance systems.

Corporate Governance Framework
General Meeting of Shareholders

Auditing

Decision-Making and Supervision

Board ofCorporate Auditors

Board of Directors

Independent
Public Accountant

Business Execution

President
SocialResponsibility

Executionof Business

Execution of Business

Auditing Department(Headquarters)

CSR Committee

Internal Control Committee

Compliance WG

Six CSR Subcommittees

Management Committee

Risk Management WG

Executive Officers

Efficient Resource Utilization
Environmental Protection
Corporate Citizenship
Human Rights and Human
Resources Development
Occupational Health & Safety
Communications

39

Sumitomo Metal Mining

Operational Execution
Under the system, significant operational authority isdelegated to executive officers to establish a clear delineationof authority and responsibilities with respect to executionfunctions, while directors focus mainly on decision-making
and supervision.
• Reporting to the president, the executive officers assume
responsibility for business execution, both in terms ofdivisional operating activities and the fulfillment of social
responsibilities (CSR activities and internal controls).
• The Management Committee deliberates on the following
important business matters:– Matters requiring Board approval that also need priordeliberation– Matters deemed to require discussion but not items for
the Board agenda
Through such deliberations, the Management Committee
facilitates rational business discussion and decision-making
while helping to promote efficient management based on
appropriate internal controls.

Directors and Corporate Auditors
Operation of the Board of Directors
SMM’s articles of incorporation set the maximum number of
directors to ten. This number is considered to be appropriate
because it secures flexibility of the Board of Directors andpromotes lively debate at Board meetings. Directors serve forterms of one year. The Board of Directors convenes regularly
once a month and in extraordinary sessions as required toensure flexible decision-making. Board minutes are circulated
to all executive officers to share information.
Operation of the Board of Corporate Auditors
SMM’s articles of incorporation set the maximum number ofcorporate auditors to five. The in-house corporate auditors
work in a full-time capacity and state opinions at meetings ofthe Board of Directors and other senior executive meetingsfrom an independent standpoint, based on audit results. The
outside auditors also attend these meetings, basing opinions
on expertise in specialized fields. The Board of Corporate
Auditors meets each month on the same day as regular Board

Outside Director and Outside Corporate Auditors

40

Outside Director

Tsutomu Ushijima (Lawyer and Licensed Tax Accountant)

Relationship with SMM

He has signed a limited liability agreement with SMM and has no relationship with SMM Group companies.

Reason for Appointment

Based on his specialist knowledge and wealth of experience as a lawyer and a licensed tax accountant, he wasappointed an outside director to provide advice to SMM on business matters, particularly from a compliance
perspective. In addition, he is unlikely to have a conflict of interest with general shareholders, and he has been
designated as an independent director.

Attendance at Meetings

In the year ended March 31, 2011, the Board of Directors convened 23 times (12 regular meetings and 11
extraordinary sessions). He attended 22 of these meetings (12 regular and 10 extraordinary).

Outside Corporate Auditor

Takayuki Kurata (previously with Japan Bank for International Cooperation, etc.)

Relationship with SMM

He has signed a limited liability agreement with SMM and has no relationship with SMM Group companies.

Reason for Appointment

He was appointed due to his vast experience of financial institutions and his knowledge of company management.
In addition, he is unlikely to have a conflict of interest with general shareholders, and he has been designatedas an independent corporate auditor.

Attendance at Meetings

In the year ended March 31, 2011, the Board of Directors convened 23 times (12 regular meetings and 11
extraordinary sessions). He attended 22 of these meetings (12 regular and 10 extraordinary). In addition, he
attended all 17 meetings of the Board of Corporate Auditors.

Outside Corporate Auditor

Hikoyuki Miwa (Certified Public Accountant)

Relationship with SMM

He has signed a limited liability agreement with SMM and has no relationship with SMM Group companies.

Reason for Appointment

He was appointed due to his wealth of auditing experience accumulated over many years at audit firms as well
as extensive knowledge in accounting. In addition, he is unlikely to have a conflict of interest with generalshareholders, and he has been designated as an independent corporate auditor.

Attendance at Meetings

He was newly appointed at the Ordinary General Meeting of Shareholders held in June 2011.

Annual Report 2011

meetings, but at an earlier time. Extraordinary sessions canalso be convened as necessary.
Both the full-time corporate auditors and the outside
corporate auditors visit SMM Group operating sites andfactories as required to conduct site audits. The full-time
corporate auditors compile audit reports relating to any auditsof operating sites, subsidiaries or affiliates; these reports arealso submitted to the outside corporate auditors. In addition,
the full-time corporate auditors are required to report to theBoard of Corporate Auditors what happened at any meetings
not attended by the outside corporate auditors.
Remuneration System for Directors
and Corporate Auditors
Paid to directors(outside directors)¥358 million(¥13 million)

Paid to corporate
auditors (outside
corporate auditors)¥84 million(¥22 million)

Remuneration system The system of retirement and severance

benefits for directors and corporate auditors
was abolished with effect from the end of the80th Ordinary General Meeting of Shareholders
held on June 29, 2005. Remuneration for
directors (with the exception of outside
directors) is based on corporate financial
performance and varies from year to year.

Other Governance-Related Mattersa. Quorum for director appointments
Resolutions to appoint directors require approval by majority
shareholder vote at an Ordinary General Meeting of
Shareholders where the voting rights of at least one third of
all shareholders are represented.
b. Acquisition of treasury stock
The articles of incorporation permit acquisitions of treasury
stock by means of open-market purchases by resolution of theBoard of Directors, in line with the provisions of Article 165
Section 2 of the Company Law. (No treasury stock purchases
were made in the year ended March 31, 2011).
c. Interim and final dividends
The articles of incorporation permit the distribution of aninterim dividend each year to those shareholders registered on
the record date of September 30 by resolution of the Board of
Directors, in line with the provisions of Article 454 Section 5 of
the Company Law. Payment of a final dividend based on the
distribution of retained earnings requires the approval ofshareholders, in line with the provisions of the Company Law.
The record date for the final dividend is March 31.

Takeover Defense Measures
With the approval of the Ordinary General Meeting of
Shareholders held in 2007, the Company introduced takeover
defense measures. At the Ordinary General Meeting of
Shareholders held in 2010, this approval was renewed, withcertain exceptions. The effective period will expire at theconclusion of the Ordinary General Meeting of Shareholders tobe held in June 2013. 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 ofenterprise value.

41

Sumitomo Metal Mining

Directors and Corporate Auditors
As of June 27, 2011

Kouzou Baba

Yoshiaki Nakazato

Takeshi Kubota

Takashi Itou

Tsutomu Ushijima

Director

Director

Director

Director

Outside Director

Ichiro Abe

Masashi Koike

President,
Representative Director

Executive Vice President,
Representative Director

Representative Director

Standing Senior Corporate Auditor

Outside Corporate Auditors

Naoki Tajiri

Takayuki Kurata
Hikoyuki Miwa

Standing Corporate Auditor

Toshikazu Yakushiji

42

Nobumasa Kemori

Financial Section
44 Eleven-Year Financial Summary
46 Management’s Discussion & Analysis of Financial
Position and Business Results
50 Consolidated Balance Sheets
52 Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
53 Consolidated Statements of Changes in Net Assets
55 Consolidated Statements of Cash Flows
56 Notes to Consolidated Financial Statements
89 Independent Auditors’ ReportSumitomo Metal Mining

Eleven-Year Financial Summary
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

2011

2010

2009

2008

Net sales¥ 864,077¥725,827¥793,797¥1,132,372

Gross profit

138,810

105,956

56,887

198,147

Operating income

96,03866,265

10,534

155,394

Other income (expenses)

27,356

16,511

12,408

61,110

Income (loss) before income taxes and minority interests

123,394

82,776

22,942

216,504

Net income (loss)

83,962

53,952

21,974

137,808

Equity in earnings of affiliated companies

34,832

26,09031,53673,956

Capital expenditures

53,105

26,41447,72365,145

Depreciation

34,62534,74634,26830,505

Years ended March 31

Results for the year:

257

(654)

(271)

(2,209)Net cash flows from operating activities

102,458

44,153

128,000

157,383

Net cash flows from investing activities(75,735)(75,443)(28,386)(126,413)

Net cash flows from financing activities

7,379(19,322)(74,086)

55,727

Free cash flows

26,723(31,290)

99,61430,970Total assets

1,052,353

981,458

880,001

1,091,716

Net assets

684,103629,684

547,251

640,345

—

—

—

—

Long-term debt due after one year

135,128

132,311

141,716

169,394

Interest-bearing debt

210,969

200,939

218,534

258,054

Working capital

267,072

229,259

206,123

266,250—Basic149.38

96.26

38.87

238.13—Diluted

136.98

88.75

36.18

231.501,121.19

1,043.50

913.92

1,017.96

32.0

20.0

13.0

30.0

ROA (%)

8.26

5.80

2.23

13.64

ROE (%)*

13.80

9.89

4.02

25.39

Equity ratio (%)*

59.9

59.8

57.3

54.0

Interest-bearing debt to total assets ratio (%)

20.0

20.5

24.8

23.6

Debt-to-equity ratio (times)*

0.33

0.34

0.43

0.44

Current ratio (times)

2.30

2.19

2.17

2.04

Net interest expenses

Financial position at year-end:

Shareholders’ equity*

Amounts per share (yen):
Net income (loss)

Shareholders’ equity
Cash dividends
Key ratios:* Shareholders’ equity are defined as following equation.
Shareholders’ equity = Total shareholders’ equity + Accumulated other comprehensive income

44Annual Report 2011

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

2007

2006

2005

2004

2003

2002

2001

¥966,764¥625,579¥484,585¥402,131¥355,242¥330,194¥375,352

203,180

120,137

82,87853,714

51,764

38,152

63,372

162,632

82,75647,893

22,778

16,593

1,147

26,93042,985

10,218

6,024

8,416

(24,098)(13,735)(11,359)

205,617

92,97453,91731,194(7,505)(12,588)

15,571126,054

62,80037,017

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

15,10346,70821,915

13,513

7,112

3,400

1,535

4,078

51,56750,56836,48846,54018,92725,37928,07825,693

22,951

20,57817,824

18,283

17,822

16,774(2,606)(1,281)(893)(1,098)(1,459)(1,775)(2,129)95,98570,77240,15032,324

26,10533,37023,339(77,429)(102,384)(31,725)(17,448)(21,246)(16,246)(4,248)(10,073)

28,723

6,097(9,293)(14,163)(14,267)(26,089)

18,556(31,612)8,425

14,876

4,859

17,12419,091

929,208

772,562

573,925

517,930

470,774

518,756

530,080

528,921394,899

—

—

—

—

—

—

—

283,897

253,071

223,341

236,313

237,470

93,800114,405

109,777

86,43776,47073,972

83,839189,910

190,891

160,533

148,351

154,799

167,077

176,998

103,791

72,22886,382

52,79535,94523,371

33,259220.49109.96

64.77

34.76

(2.05)(11.56)26.41

213.67108.87

—

—

—

—

—

859.82654.15497.57443.29391.14413.28415.25

27.0

14.0

8.0

6.0

5.0

4.0

6.0

14.81

9.33

6.78

4.02

—

—

2.81

28.99

19.10

13.79

8.35

—

—

6.39

53.4

48.4

49.5

48.9

47.4

45.6

44.8

20.4

24.7

28.0

28.6

32.9

32.2

33.4

0.38

0.51

0.57

0.59

0.69

0.71

0.75

1.39

1.33

1.61

1.38

1.26

1.14

1.20

45

Sumitomo Metal Mining

Management’s Discussion & Analysis of Financial Position and Business Results

Medium- to Long-Term Business Strategy and Financial Policies
The short-term performance of SMM’s three core businesses—mineral resources, smelting & refining, and materials—issignificantly affected by fluctuations in non-ferrous metals prices, the conditions in markets for electronic materials andforeign exchange rate fluctuations. At the same time, the development of metal resources is an area in which it takes a longtime before investments start to generate returns.
Due to the operating characteristics of its businesses, SMM believes that it is important to maintain healthy corporate
finances to ensure that its business strategies can be implemented properly. Accordingly, SMM has maintained a consolidated
equity ratio in excess of 50% since fiscal 2006. SMM’s medium-term business plan, which was formulated in fiscal 2009,
covers the period from April 2010 to March 2013. Under this plan, SMM plans to pursue a growth strategy for the medium tolong term. To that end, the Company will leverage its solid financial base to focus its management resources on its core businesses and to conduct aggressive investment, such as acquiring rights in overseas mines and advancing the Taganito Project.
SMM also intends to ensure that it maintains a strong financial position, based on financial policies of maintaining a consolidated equity ratio of at least 50% and a low level of gearing as measured by the debt-to-equity (D/E) ratio.

As of March 31, 2011, the SMM Group comprised the parent
company (Sumitomo Metal Mining Co., Ltd.), 63 subsidiaries,
and 19 affiliated companies. The SMM Group’s operations areorganized into the Mineral Resources segment, the Smelting& Refining segment, the Materials segment, and Others. The
figures in this annual report refer to the results of the parent
company, 60 consolidated subsidiaries, and 14 equity-method
affiliates (both domestic and overseas). This section provides
an overview of SMM’s financial position and business results
for fiscal 2010.
Business Results
Industry Environment
In the non-ferrous metals industry, domestic demand recovered gradually, due primarily to an economic rebound inJapan and overseas. Near the end of the fiscal year underreview, non-ferrous metals prices increased and surpassed
the levels prevailing prior to the Lehman Shock in 2008, due
in part to the influx of funds in the commodities market. In
foreign exchange markets, the yen appreciated against many
currencies due to the uncertainty surrounding economic
prospects in Europe and the United States. In the electronics
sector, demand recovered, due primarily to economic growthin emerging nations. However, in the second half of the fiscal
year the pace of the recovery in demand slowed due toinventory adjustments.
Net Sales
Consolidated net sales in fiscal 2010 increased ¥138,250
million from fiscal 2009, to ¥864,077 million, mainly due tothe rise in non-ferrous metals prices, which offset the appreciation of the yen.

46

Operating Income
Non-ferrous metals prices rose, and electronics-sector
demand recovered in the first half of the fiscal year. As aresult, consolidated operating income increased ¥29,773
million from fiscal 2009, to ¥96,038 million.
Other Income
A write-down of investment securities was recorded, but loss
on impairment of fixed assets declined. In addition, werecorded higher equity in earnings of affiliated companies,
including Candelaria Mine, Cerro Verde Copper Mine, and P.T.
International Nickel Indonesia. As a result, other income infiscal 2010 was up ¥10,845 million from fiscal 2009, to¥27,356 million.
Income before Income Taxes and Minority Interests /Net Income
Consequently, income before income taxes and minority
interests increased ¥40,618 million from fiscal 2009, to¥123,394 million.
Net income rose ¥30,010 million from fiscal 2009, to¥83,962 million.
Capital Expenditures
Total capital expenditures in fiscal 2010 were ¥53,105 million.
By segment, capital expenditures were ¥3,816 million in the
Mineral Resources segment; ¥41,373 million in the Smelting &Refining segment, principally for the Taganito Project; and¥5,829 million in the Materials segment.
Research and Development (R&D) Expenses
Total R&D expenses in fiscal 2010 amounted to ¥5,271 million.
By segment, R&D expenses were ¥111 million in the Mineral
Resources segment, ¥312 million in the Smelting & Refining

Annual Report 2011

segment, ¥1,689 million in the Materials segment, and ¥116
million in Others.
In the Mineral Resources segment, R&D investment was
focused on ore-dressing processes to improve ore grades,development of various types of leaching technologies, anddevelopment of technologies to process wastewater emissions from mines. In the Smelting & Refining segment, themajor R&D themes included the development of refining
technologies that will foster the ability to handle a wide
range of raw materials and ore grades and improved costcompetitiveness, as well as the development of new
metal-refining processes. In addition, the segment moved
ahead with the development of a recycling process to recover
nickel from used hybrid-vehicle secondary batteries. In the
Materials segment, R&D initiatives were focused on functional materials related to secondary batteries, solar cells,
and energy-saving products, which are currently drawing
attention in the field of energy and the environment.
Cash Flows
Factors that decreased cash and cash equivalents included anincrease in inventories—stemming from an increase in stockin preparation for furnace repair work as well as the rise innon-ferrous metals prices—and payments for acquisition ofproperty, plant and equipment. However, income before
income taxes and minority interests was ¥123,394 million,
substantially higher than in fiscal 2009. Consequently, thebalance of cash and cash equivalents at the end of fiscal
2010 was ¥128,311 million, an increase of ¥27,859 million
from the end of fiscal 2009.
Financial Position
Assets
As of the fiscal 2010 year-end, total assets amounted to¥1,052,353 million, a rise of ¥70,895 million from a year earlier.

In current assets, cash and deposits increased ¥50,437
million, primarily due to improvement in net cash provided byoperating activities and to a rise in inventories resulting froman increase in stock in preparation for furnace repair workand from higher non-ferrous metals prices. Total fixed assets
were up ¥20,458 million from the end of fiscal 2009, as aresult of the purchase of investment securities and the implementation of aggressive investment in such projects as theTaganito Project.
Liabilities
Total liabilities amounted to ¥368,250 million as of the end of
fiscal 2010, an increase of ¥16,476 million compared with ayear earlier.
Current liabilities increased by ¥12,624 million due to suchfactors as the transfer of bonds, which became due within one
year, from long-term liabilities. In long-term liabilities, bonds
became due within one year, but long-term debt was increased
to accommodate capital investment. As a result, total longterm liabilities increased ¥3,852 million from a year earlier.
Net Assets
In net assets, net income was ¥83,962 million, and in accumulated other comprehensive income, foreign currencytranslation adjustments declined due to the appreciation of
the yen. Consequently, as of the end of fiscal 2010 total net
assets amounted to ¥684,103 million, an increase of ¥54,419
million from fiscal 2009.
Financial Indicators
The equity ratio rose to 59.9% at March 31, 2011, from
59.8% at the previous fiscal year-end, while the D/E ratio
declined from 0.34 times to 0.33 times.

Shareholders’ Equity and Equity Ratio

Debt-to-Equity Ratio and Interest-Bearing Debt

Shareholders’ Equity (¥ billions)
As of March 31

Interest-Bearing Debt (¥ billions)
As of March 31

Equity Ratio (%)

Debt-to-Equity Ratio (Times)

800

80

400

0.50

400

40

200

0.25

2007

2008

2009

2010

2011

2007

2008

2009

2010

2011

47

Sumitomo Metal Mining

Risk Information
The following section provides an overview of the risk
factors that could exert a significant effect on the businessperformance and financial position of the SMM Group. All
forward-looking statements in the text refer to management
decisions based on the best information available at the endof fiscal 2010.
(1) Fluctuations in non-ferrous metals prices
and exchange rates
1. Sustained downturn in non-ferrous metals prices
The prices of copper, nickel, gold and other non-ferrous metals
are essentially determined by the London Metal Exchange(LME) and other international markets (hereinafter referred
to as “LME and other market prices”). LME and other market
prices are influenced by a number of factors, including international supply and demand, political and economic
circumstances, speculative trading and competition fromalternative materials. A sharp and sustained downturn in nonferrous metals prices could have a significant negative impact
on the Group’s business performance and financial position.
2. Appreciation of the yen
Not only imported raw materials including copper concentrates
and nickel matte, but also the domestic prices of non-ferrous
metals are determined under U.S. dollar-denominated LME
and other market standards. Accordingly, the refining margins
earned by SMM from its refining business are effectively
denominated in U.S. dollars. In addition, returns on investments in overseas mining developments, income earned frominvestments in the semiconductor as well as advanced materials businesses and revenues from exports of products ineach of the aforementioned businesses are also denominatedin foreign currencies. A substantial appreciation of the yen
against these currencies over a sustained period could exert
a significant negative impact on the Group’s business performance and financial position.
To mitigate these external risks, the SMM Group continues
to make progress in implementing a variety of measures
aimed at boosting competitiveness, both in materials
procurement and manufacturing.
(2) 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 that are not backed by investment.
Each year, the raw materials purchasing terms and conditions of long-term ore-purchasing contracts are subject tonegotiation. In each case, there are instances in which
required volumes cannot be purchased at an appropriate
48

price due to a variety of market factors. Furthermore, as
product prices are generally determined by such factors as
supply and demand—particularly factors relating specificallyto non-ferrous metals—there are instances where the transfer of any deterioration in the purchasing terms andconditions of raw materials to product prices is difficult.
Supplies of ore can also be delayed or suspended due tounpredictable disruptive events beyond the control of theCompany, such as extreme weather conditions, large-scale
earthquakes, supplier operational accidents and industrial
disputes. Such factors could impose various constraints on
Group production volumes, which as a result could exert anegative impact on the Group’s business performance andfinancial position.
To mitigate such risks, the Group continues to seek todevelop overseas mines and invest in high-grade overseas
mines to secure reliable (in-house) supplies of ore.
(3) Uncertainty inherent in mining investments
As described above, the raw materials procurement policy of
the SMM Group is to develop in-house mining resources toboost the proprietary ore ratio. Amounts of extractable ore
and extraction costs can only be estimated based on the
results of exploratory surveys. With respect to mining development, the development costs of a mining project can riseas the result of a variety of situations, such as compliancewith environmental or regulatory actions. Any additional
investment or increase in the burden of extraction costs
arising from the inherent uncertainty associated with mining
developments could have a negative impact on the Group’sbusiness performance and financial position.
To mitigate such risks, the SMM Group employs a selective
investment policy and undertakes strict assessments of thepotential profitability of individual mining developments
based on extensive experience in mining extraction and mine
valuation accumulated over many years.
(4) Environmental protection andregulatory compliance risks
SMM Group businesses, notably the mining and non-ferrous
metal smelting and refining operations, are subject to abroad range of laws and regulations in such areas as occupational safety and health, environmental protection, pollution
prevention, industrial waste disposal and management ofpotentially toxic substances.
In accordance with these statutory and regulatory requirements, operators may be charged with compensation for loss
or damages, irrespective of the existence of negligence orotherwise, or demands for the maintenance and management of abandoned mines. Moreover, operators may incur

Annual Report 2011

the burden of additional expenses due to requirements
imposed under new environmental standards and regulations. At the same time, both the mining and non-ferrous
metals refining industries incur the risks and associatedresponsibilities for environmental pollution as well as thedisposal of mining and industrial waste. Ongoing regulatorycompliance costs are substantial and subject to unexpected
increases as the result of the sudden emergence of previously
unknown risks. The costs of ensuring regulatory compliancecould therefore exert a negative impact on the Group’sbusiness performance and financial position.
To mitigate such risks, the Group seeks to ensure that
operations are in full compliance with environmental protection and other laws and regulations through the operationof environmental and risk management systems based onstrict standards. The Group also endeavors to manage
operations so that related compliance costs are kept withinreasonable limits.
(5) Risks associated with market shifts, new productdevelopment and intellectual property rights
In those markets related to the Company’s materials
operations, increasingly longer periods are required for thedevelopment of new products due largely to rapid changes
in applied technologies, customer requirements and productlife. This is even as product development programs in theseareas require the investment of increasingly large amountsof time and resources.
Expected returns on investment from related new productdevelopment programs may not materialize due to obsolescence caused by technological progress, delays caused byresponding to customer requests or the launch of competitor
products, among other factors. Customer demand for products may also decline in the future. All these various factors
could have a negative impact on the Group’s business performance and financial position.
In addition, sales volumes of the Company’s mainstay
materials operations products are dependent upon customer
production levels of such items as mobile terminals, personal
computers (PCs) and electrical household appliances.
Accordingly, performance is subject to a variety of factors
including cyclical demand for the products manufactured bycustomers, advances in technological innovation and general
economic trends.
As a result of such factors, the development of new
products and sales of existing products in the Company’s
materials operations may not progress in accordance withplans. This in turn could exert a negative impact on theGroup’s business performance and financial position.
The SMM Group recognizes the importance and value ofacquiring intellectual property rights and managing suchrights properly in accordance with related laws and regulations. Although the Group strives to observe such laws, itremains exposed to such risks as failure to acquire certain
rights or damage done to the results of the Group’s R&D
activities due to illegal actions by third parties. To mitigate
such risks, the Group strives to minimize related problems bystructuring R&D activities to realize commercial opportunities
as quickly as possible. The Group has also created dedicatedin-house teams to manage issues related to intellectual
property rights to ensure that such rights are acquired andprotected properly.
(6) Overseas investments
The Company strives to develop its business overseas both interms of the location of manufacturing bases as well as thesale of its products. In the conduct of its business overseas,
however, SMM is subject to a wide range of political andeconomic risks that vary by country. These include but are notlimited to political instability; changes in statutory and regulatory requirements with respect to the environment, labor,taxes, currency management and controls as well as trade;
limited protection under the law or inadequate enforceability
in connection with intellectual and other property rights;
fluctuations in foreign currency exchange rates; and theconfiscation or nationalization of assets. The emergence ofvarious developments could prevent the Group from earninga suitable return on overseas investments. Such risks include
the development of mineral resource projects by organizations funded by national or regional governments against the
backdrop of high non-ferrous metals prices, or the levying of
higher taxes on such operations. Increased environmental
demands from various quarters constitute a further risk.
To mitigate such risks, the SMM Group makes overseas
investment decisions based on careful consideration of all
relevant country risks.
(7) Disaster-related risks
The SMM Group locates manufacturing operations based on
considerations such as customer relationships, raw material
procurement, the links to other Group operations and effective use of management resources. Unexpected large-scale
natural disasters such as earthquakes or typhoons that
affect the regions where such facilities are located could
result in major financial losses arising from such factors as
on-site damage and loss of production.
To mitigate such risks, the Group insures such facilities
where this is possible at reasonable cost and has made plans
containing suitable countermeasures to minimize any
secondary effects due to such disasters.
49

Sumitomo Metal Mining

Consolidated Balance Sheets
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Millions of yen

Thousands of
U.S. dollars(Note 1)

2011

2010

2011

¥ 128,311
213¥ 100,452
34$ 1,543,127
2,562

100,195
4,129(242)
170,246
2,658
67,048472,558

97,701
3,302(262)
149,575
2,889
68,430422,121

1,204,991
49,657(2,910)2,047,456
31,966806,350
5,683,199

201,740
86,682(6)
11,704(222)
299,898

197,917
71,034(64)
16,203(245)
284,8452,426,218
1,042,477(72)
140,758(2,670)3,606,711

28,129168,634
374,554
44,942616,259(351,170)
265,089

28,383
165,971389,630
15,060599,044(341,040)
258,004

338,292
2,028,070
4,504,558
540,493
7,411,413(4,223,331)
3,188,082

2,528
12,280¥1,052,353

1,380
15,108¥ 981,458

30,403
147,684$12,656,079

ASSETSAs of March 31, 2011 and 2010

Current assets:
Cash and cash equivalents
Time deposits
Notes and accounts receivable:
Trade
Unconsolidated subsidiaries and affiliated companies
Allowance for doubtful accounts
Inventories (Note 6)
Deferred tax assets (Note 9)
Other current assets
Total current assets

Investments and long-term receivables:
Investment securities (Notes 4 and 8):
Unconsolidated subsidiaries and affiliated companies
Other
Allowance for loss on investments
Other long-term receivables
Allowance for doubtful accounts
Total investments and other assets

Property, plant and equipment (Notes 7 and 8):
Land
Buildings and structures
Machinery and equipment
Construction in progress
Accumulated depreciation
Net property, plant and equipment

Deferred tax assets (Note 9)
Other assets
Total assets
The accompanying notes are an integral part of these financial statements.

50

Annual Report 2011

Millions of yen

Thousands of
U.S. dollars(Note 1)

2011

2010

2011

55,42820,413¥ 63,104
5,524

33,660
8,933
16,024
15,520
4,224
930
189
106
765
49,294205,486

38,322
6,541
15,94013,919
3,790
2,244
106
506
119
42,747
192,862

404,811
107,432
192,712
186,651
50,80011,185
2,273
1,275
9,200
592,8312,471,269

135,128
4,200
7,216
26
1,032
204
4,268
10,690162,764

132,311
7,334
8,050
164
1,781
193
3,009
6,070
158,912

1,625,111
50,51186,783313
12,411
2,453
51,329128,563
1,957,474

93,242
86,063524,978(21,788)682,495

93,242
86,062454,896(21,633)
612,567

1,121,371
1,035,033
6,313,626(262,032)
8,207,998

17,738(4,636)(65,481)(52,379)
53,987684,103¥1,052,353

16,043(2,439)(39,595)(25,991)
43,108629,684¥981,458

213,326(55,755)(787,505)(629,934)
649,272
8,227,336$12,656,079

LIABILITIES AND NET ASSETS
As of March 31, 2011 and 2010

Current liabilities:
Bank loans (Note 8)Long-term debt due within one year (Note 8)
Notes and accounts payable:
Trade
Unconsolidated subsidiaries and affiliated companies
Other
Accrued income taxes (Note 9)
Accrued expenses
Advances received
Accrued restructuring charges
Accrued environmental measures
Deferred tax liabilities (Note 9)
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Note 8)
Deferred tax liabilities (Note 9)
Accrued retirement benefits (Note 10)
Accrued environmental measures
Accrued restructuring charges
Other accruals
Asset retirement obligations
Other long-term liabilities
Total long-term liabilities¥$

666,603245,496

Contingent liabilities (Note 14)
Net assets:
Shareholders’ equity (Note 13):
Common stock
Authorized—1,000,000,000 shares
Issued—581,628,031 shares
Capital surplus
Retained earnings (Note 12)
Treasury stock, at cost
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized holding gains (losses) on securities
Deferred gains (losses) on hedges
Foreign currency translation adjustments
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets

51

Sumitomo Metal Mining

Consolidated Statements of Income
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2011, 2010 and 2009

Net sales (Note 15)
Costs and expenses:
Cost of sales
Selling, general and administrative expenses (Note 11)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Write-down of investment securities
Loss on sale and disposal of property,
plant and equipment
Loss on impairment of fixed assets (Note 7)
Loss from valuation of gold loans
Exchange loss
Provision for restructuring charges
Maintenance cost for ceased projects
Equity in earnings of affiliated companies
Loss (Gain) from valuation of derivative instruments
Amortization of goodwill
Other, net
Income before taxes and minority interests
Income taxes (Note 9):
Current
DeferredIncome before minority interests
Minority interests in net income of consolidated subsidiaries
Net income

Amounts per share of common stock:
Net income (Note 20)—Basic—Diluted
Cash dividends applicable to the year

Millions of yen

Thousands of
U.S. dollars(Note 1)

2011
¥864,0772010¥725,8272009¥793,797

2011$10,391,786

725,267
42,772
768,039
96,038619,871
39,691
659,562
66,265736,910
46,353
783,263
10,534

8,722,393
514,396
9,236,789
1,154,997

2,741(2,484)(1,500)2,334(2,988)—

4,052(4,323)(4,607)32,965(29,874)(18,040)

(378)
(63)
(1,049)(4,863)(61)(519)
34,832
(862)
2
1,560
27,356
123,394(557)(2,087)(1,384)(2,004)(2,303)(476)
26,090(1,286)992
180
16,511
82,776(624)(3,514)(68)(9,489)(697)(701)
31,536
1,568—
843
12,40822,942(4,546)(758)(12,616)(58,485)(734)(6,242)418,906(10,367)
24
18,763328,996
1,483,993

29,671987
30,65892,736(8,774)¥ 83,962

17,0406,127
23,16759,609(5,657)¥ 53,952

4,052(8,818)(4,766)
27,708(5,734)¥ 21,974

356,837
11,870368,707
1,115,286(105,520)$ 1,009,766

Yen

U.S. dollars(Note 1)

2011

2010

2009

2011

¥149.38
136.9832.00¥96.2688.75
20.00¥38.87
36.18
13.00

$1.80
1.65
0.38

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

Consolidated Statements of Comprehensive Income
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2011 and 2010

Income before minority interests
Other comprehensive income
Net unrealized holding gains (losses) on securities
Deferred gains (losses) on hedges
Foreign currency translation adjustments
Share of other comprehensive incomeof affiliated companies accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attribute to:
Owners of the parent
Minority interests
The accompanying notes are an integral part of these financial statements.

52

Millions of yen

Thousands of
U.S. dollars(Note 1)2011
¥ 92,7362010¥59,609

2009
¥—

2011
$1,115,286

1,676(2,244)(10,884)

16,836
12
4,376

—
—
—

20,156(26,987)(130,896)(20,418)(31,870)
60,866

1,880
23,10482,713———(245,556)(383,283)
732,00257,574
3,292

75,966
6,747——

692,41139,591

Annual Report 2011

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

Shareholders’ Equity

For the years ended March 31, 2011, 2010 and 2009

Balance at March 31, 2008
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Decrease resulting from unificationof accounting policy of overseas subsidiaries
Minority interest
Cash dividends paid
Balance at March 31, 2009
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Decrease resulting from change
in consolidation of subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Minority interest
Cash dividends paid
Balance at March 31, 2010
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Increase resulting from change in consolidationof subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Increase resulting from unificationof accounting policy of affiliated companies
Minority interest
Cash dividends paid
Balance at March 31, 2011

Total
shareholders’equityMillions of yen

Number ofshares issued
Thousands

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

581,628¥93,242¥86,104¥403,459
21,974¥ (2,529)¥580,276
21,974(30,238)89(30,238)76(13)(3,459)581,628¥93,242¥86,091(16,028)¥405,946
53,952(3,459)¥(32,678)(18)

581,628¥93,242(29)(1,049)¥86,062(3,935)¥454,896
83,962(175)
11,220¥(21,633)

67
(160)
5

1
106

581,628¥93,242¥86,063(14,053)¥524,978(16,028)¥552,601
53,952(18)(175)
10,142(3,935)¥612,567
83,962

67
(160)
6
106

¥(21,788)(14,053)¥682,495

Shareholders’ Equity
Commonstock

Capitalsurplus$1,121,371$1,035,021

For the year ended March 31, 2011

Balance at March 31, 2010
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Increase resulting from change in consolidationof subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Increase resulting from unificationof accounting policy of affiliated companies
Minority interest
Cash dividends paid
Balance at March 31, 2011

Total
Retained
Treasury shareholders’earnings
stock
equityThousands of U.S. dollars (Note 1)$5,470,788
1,009,765$(260,168)

806(1,924)
60

12
1,275

$1,121,371$1,035,033(169,008)$6,313,626$7,367,012
1,009,76500806(1,924)
72
0

1,275
0
(169,008)$(262,032) $8,207,998

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

53

Sumitomo Metal Mining

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

Accumulated other comprehensive income
Net unrealized
holding gains Deferred gains(losses) on(losses) on
securities
hedgesForeigncurrencytranslation
adjustments

Total accumulated othercomprehensive income

Minority
interests

Total net
assetsMillions of yen¥ (3,453)¥ 9,364¥50,705(41,368)(41,368)(12,779)¥640,345
21,974(41,368)(12,779)(30,238)76(3,222)For the years ended March 31, 2011, 2010 and 2009

Balance at March 31, 2008
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Decrease resulting from unificationof accounting policy of overseas subsidiaries
Minority interest
Cash dividends paid
Balance at March 31, 2009
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Decrease resulting from change in consolidationof subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Minority interest
Cash dividends paid
Balance at March 31, 2010
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Increase resulting from change in consolidationof subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Increase resulting from unificationof accounting policy of affiliated companies
Minority interest
Cash dividends paid
Balance at March 31, 2011

¥ 12,027¥790(12,779)(3,222)(3,222)(8,050)¥(752)¥(2,432)¥(44,821)¥(48,005)

5,226

5,226
16,795

16,795¥42,655¥(39,595)¥(25,991)(25,886)(25,886)
1,695

(18)
(175)
10,142(7)453(3,935)¥629,684
83,962(25,886)
1,695(2,197)67(160)
6(2,197)

(7)

(7)
453

¥ 16,043¥(2,439)

1,695(2,197)¥43,108

10,879¥ 17,738¥(4,636)(3,459)(8,050)(16,028)¥547,251
53,952
5,226
16,795¥(65,481)¥(52,379)¥53,987

106
10,879(14,053)¥684,103

Accumulated other comprehensive income
Net unrealized
holding gains Deferred gains(losses) on(losses) on
securities
hedgesForeigncurrencytranslation
adjustments

For the year ended March 31, 2011

Balance at March 31, 2010
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Increase resulting from change in consolidationof subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Increase resulting from unificationof accounting policy of affiliated companies
Minority interest
Cash dividends paid
Balance at March 31, 2011

$192,940$(476,188)$(312,581)(311,317)(311,317)
20,385$7,572,868
1,009,765(311,317)
20,385(26,422)806(1,924)72(26,422)

20,385(26,422)$518,437

130,836$213,325

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

54$(29,333)

Total accumulated othercomprehenMinority
Total net
sive income
interests
assetsThousands of U.S. dollars (Note 1)$(55,755)$(787,505)$(629,935)$649,273

1,275
130,836(169,008)$8,227,336

Annual Report 2011

Consolidated Statements of Cash Flows
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2011, 2010 and 2009

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
Loss on sale and disposal of property, plant and equipment
Write-down of investment securities
Loss (Gain) from valuation of derivative instruments
Interest and dividend income
Interest expense
Equity in earnings of affiliated companies
Restructuring charges
Casualty loss
Decrease (Increase) in trade receivables
Decrease (Increase) in inventories
Increase (Decrease) in trade payables
Others
Sub totalInterest and dividend received
Interest paid
Payments for maintenance costs for ceased project
Payments for recovery costs
Payments for (Refund of) income taxes
Net cash provided by operating activities
Cash flows from investing activities:
Payments for acquisition of property, plant and equipment
Payments for acquisition of intangible assets
Proceeds from sale of property, plant and equipment
Payments for purchases of negotiable certificates of deposits
Proceeds from sales of negotiable certificates of deposits
Payments for purchases of investment securities
Payments for purchase of securities of subsidiaries
and affiliated companies
Proceeds from sales of securities of subsidiaries
and affiliated companies
Payments for loans lended
Collection of loans repaid
Other
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Repayments of long-term debt
Net increase (decrease) in bank loans
Payments for redemption 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
Cash and cash equivalents at end of fiscal year

Millions of yen

Thousands of
U.S. dollars(Note 1)

2011

2010

2009

2011

¥123,394¥ 82,776¥ 22,942$1,483,993

34,625
63
378
1,500
862
(2,741)
2,484(34,832)151
456(8,967)(25,892)
2,336
2,580
96,39736,724(2,538)(519)(66)(27,540)
102,458

34,746
2,087
557
—
1,286
(2,334)
2,988(26,090)519
67(54,706)(43,113)
6,899
9,157
14,83921,569(3,038)(476)(67)
11,32644,15334,268
3,514
624
4,607
(1,568)(4,052)
4,323(31,536)304
21
73,93060,698(31,622)(10,224)
126,273
42,988(4,515)(701)(21)(36,024)
128,000

416,416758
4,546
18,04010,367(32,965)
29,874(418,906)
1,816
5,484
(107,841)(311,389)
28,09431,027
1,159,314
441,660(30,523)(6,242)(794)(331,209)
1,232,206(53,966)
(614)
550
—
—
(11,480)(40,416)(12,071)
1,182——(5,886)(46,898)(4,415)2,238(25,000)
68,000(640)(649,020)(7,384)
6,615——(138,064)(9,361)(18,285)(19,936)(112,580)—(2,887)2,206(183)(75,735)308(5,476)
5,064
137(75,443)—(5,834)
4,032
25(28,386)—(34,720)
26,530(2,201)(910,824)

23,140(5,422)(3,773)—
14,196(154)(14,053)(6,555)
7,379(3,183)30,919100,452(3,060)¥128,311

3,916(16,836)
4,100
(105)
120
(163)
(3,935)(6,419)(19,322)746(49,866)
150,287
31¥100,452

2,021(15,504)(2,125)(10,000)
262(30,162)(16,028)(2,550)(74,086)(7,716)
17,812
132,475—¥150,287

278,292(65,207)(45,376)—
170,728(1,852)(169,008)(78,833)
88,744(38,280)
371,846
1,208,082(36,801)$1,543,127

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

55

Sumitomo Metal Mining

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

1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Act, and in
conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain
respects as to the application and disclosure requirements ofInternational Financial Reporting Standards (“IFRSs”).
The accounts of consolidated overseas subsidiaries are
based on their accounting records maintained in conformity
with generally accepted accounting principles prevailing in therespective countries of domicile. However, as described in Note2, necessary adjustments such as the influence of applying
Practical Issues Task Force (PITF) No.18 are made upon consolidation. The accompanying consolidated financial statements
have been restructured and translated into English with some
expanded descriptions from the consolidated financial statements of Sumitomo Metal Mining Co., Ltd. (“the Company”)
prepared in accordance with Japanese GAAP and filed with theappropriate Local Finance Bureau of the Ministry of Finance as
required by the Japanese Financial Instruments and ExchangeAct. Some supplementary information included in the statutory Japanese language consolidated financial statements,
but not required for fair presentation, is not presented in theaccompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S.
dollars are included solely for the convenience of readers
outside Japan, using the prevailing exchange rate at March
31, 2011, which was ¥83.15 to US$1.00. The conveniencetranslations should not be construed as representations that
the Japanese yen amounts have been, could have been, or
could in the future be, converted into U.S. dollars at this or
any other rate of exchange.
2. Summary of significant accounting policies
Consolidation—The consolidated financial statements
include the accounts of the Company and its significant
subsidiaries (60 subsidiaries in 2011, 54 in 2010 and 50 in2009). All significant inter-company balances and transactions have been eliminated. Investments in affiliatedcompanies of which the Company has the ability to exercise
significant influence over financial and operating policies, areaccounted for by the equity method (14 affiliated companies
in 2011, 13 in 2010 and 12 in 2009). Investments in theremaining unconsolidated subsidiaries and affiliated companies are carried at cost because of their immaterial effect on
the consolidated financial statements.

56

In the elimination of investments in subsidiaries, theassets and liabilities of the subsidiaries, including the portion
attributable to minority shareholders, are recorded based on
the fair value at the time the Company acquired control of
the respective subsidiaries.
Goodwill (consolidation difference between the investment cost and the underlying equity in its net assets at thedate of acquisition) is amortized over five years on astraight-line basis. With respect to subsidiaries in the UnitedStates, goodwill is amortized over twenty years on astraight-line basis in accordance with PITF No.18.
(Change for unification of accounting policies applied to overseas subsidiaries for consolidated financial statements)
Effective from the fiscal year ended March 31, 2009, theCompany adopted “Practical solution on unification of
accounting policies applied to overseas subsidiaries forconsolidated financial statements” PITF No.18, issued by the
Accounting Standard Board of Japan (ASBJ) on May 17, 2006.
PITF No.18 prescribes that: (i) the accounting policies andprocedures applied to a parent company and its subsidiaries
for similar transactions and events under similar circumstances should in principle be unified for the preparation of
consolidated financial statements; (ii) financial statements
prepared by overseas subsidiaries in accordance with either
International Financial Reporting Standards (IFRSs) or thegenerally accepted accounting principles in the U.S. (U.S.GAAP) tentatively may be used for the consolidation process;(iii) however, the following items should be adjusted in the
consolidation process so that net income is accounted for inaccordance with Japanese GAAP unless they are not material;(1) Amortization of goodwill(2) Actuarial gain and loss of defined benefit plans recognized outside profits and loss
(3) Capitalization of intangible assets arising from development phases(4) Fair value measurement of investment properties, and therevaluation model for property, plant and equipment, andintangible assets(5) Retrospective application when accounting policies arechanged(6) Accounting for net income attributable to minority interest
As a result of this change, operating income decreased by¥86 million and income before income taxes and minority
interests decreased by ¥689 million for the fiscal year ended
March 31, 2009.

Annual Report 2011

(Change for unification of accounting policies applied to affiliated companies accounted for using the equity method)
Effective from the fiscal year ended March 31 2011, theCompany adopted the “Accounting Standard for Equity
Method of Accounting for Investment” (ASBJ Statement
No.16 issued on March 10, 2008) and the “Practical Solution
on Unification of Accounting Policies Applied to Associates
Accounted for Using the Equity Method” (ASBJ PITF No.24 ofMarch 10, 2008) and made necessary adjustment in consolidation process.
As a result of this change, income before income taxes andminority interests decreased by ¥161 million($1,936 thousand) for the fiscal year ended March 31, 2011.
Cash and cash equivalents and cash flow statements—
Cash on hand, readily available bank deposits, negotiablecertificates of deposits and short-term highly liquid investments with maturities not exceeding three months at thetime of purchase are considered to be cash and cash
equivalents.
Allowance for doubtful accounts—The allowance for doubtful accounts is provided at an amount determined based on
the historical experience of bad debt with respect to ordinaryaccounts, plus an estimate of uncollectible amount determined by reference to specific doubtful accounts from
customers who are experiencing financial difficulties.
Investment securities—Securities are classified into two
categories based on the intent of holding: available-for-salesecurities; and securities issued by unconsolidated subsidiaries and affiliated companies.
Available-for-sale securities with available fair values(marketable securities) are stated at the fair value. Unrealized
gains and losses on these securities are reported, net of
applicable income taxes, presented as a separate component of
net assets. The cost of securities sold is determined by themoving-average method. Other available-for-sale securities
with no available fair values (non-marketable securities) arestated at moving-average method. Securities issued byunconsolidated subsidiaries and affiliated companies arecarried at cost.
Derivatives and hedge accounting—Derivative instruments
are stated at fair value. Changes in the fair values are recognized as gains and losses unless derivative transactions areused for hedging purposes.
If derivative transactions are used as hedges and meetcertain hedging criteria, the Company and its consolidated

domestic subsidiaries defer recognition of gains or losses
resulting from changes in fair value of derivative transactions
until the related losses or gains on the hedged items arerecognized.
However, in cases where forward foreign exchange
contracts are used as hedges and meet certain hedging criteria, forward foreign exchange contracts and hedged items
are accounted for in the following manner:(1) If a forward foreign exchange contract is executed tohedge an existing foreign currency receivable or payable,(a) the difference, if any, between the Japanese yen amountof the hedged foreign currency receivable or payable translated using the spot rate at the inception date of the contract
and the book value of the receivable or payable is recognizedin the income statement in the period which includes the
inception date, and(b) the discount or premium on the contract (that is, thedifference between the Japanese yen amount of the contract
translated using the contracted forward rate and that translated using the spot rate at the inception date of thecontract) is recognized over the term of the contract.
(2) If a forward foreign exchange contract is executed tohedge a future transaction denominated in a foreign
currency, the future transaction will be recorded using thecontracted forward rate, and no gains or losses on theforward foreign exchange contract are recognized.
Also, if interest rate swap contracts are used as hedges andmeet certain hedging criteria, the net amount to be paid or
received under the interest rate swap contract is added to or
deducted from the interest on the assets or liabilities forwhich the swap contract was executed.
The Company evaluates hedge effectiveness monthly bycomparing the cumulative changes in cash flows from or thechanges in fair value of hedged items and the corresponding
changes in the hedging derivative instruments.
Foreign currency translation—Receivables and payables
denominated in foreign currencies are translated into
Japanese yen at the fiscal year-end rates.
Balance sheets of consolidated overseas subsidiaries aretranslated into Japanese yen at the fiscal year-end rates
except for account components of net assets, which aretranslated at historical rates. Income statements of consolidated overseas subsidiaries are translated at average rates
except for transactions with the Company, which are translated at the rates used by the Company.

57

Sumitomo Metal Mining

Inventories—(1) Merchandise, finished products, semi-finished products,
work in process and raw materials–Merchandise, finishedproducts, semi-finished products, work in process and raw
materials are stated at the lower of cost determined by the
first-in first-out (FIFO) method or net selling value of inventories regarded as the decreased profitability of assets, whose
write-downs are included in cost of sales.
(2) Supplies—Supplies are stated at the lower of cost basedon the moving-average method or net selling value of inventories regarded as the decreased profitability of assets,
whose write-downs are included in cost of sales.
(Change in the accounting policy for the measurement of
inventories)
Previously, inventories held for sale in the ordinary course ofbusiness have been stated at cost primarily determined by
the first-in, first-out (FIFO) method. Effective from the fiscal
year ended March 31, 2009, the Company and its consolidated domestic subsidiaries adopted the “AccountingStandard for Measurement of Inventories” (ASBJ Statement
No.9 released on July 5, 2006) and stated inventory values atthe lower of cost, which is primarily determined by the FIFO
method or net selling value, which is defined as selling priceless additional estimated manufacturing costs and estimateddirect selling expenses. The replacement cost may be used inplace of net selling value, if appropriate. As a result of thischange, operating income decreased by ¥7,477 million for the
fiscal year ended March 31, 2009.
The effect on segment information are described in therelevant notes.
(Change in accounting policy)
Effective from the fiscal year ended March 31, 2011, theCompany and its consolidated domestic subsidiaries adopted
the “Accounting Standard for Measurement of Inventories”(ASBJ Statement No.9 issued on September 26, 2008), andthe method of accounting for the inventories of certain
consolidated subsidiaries was changed from the last-in, firstout method(LIFO) to the first-in, first-out method (FIFO).
As a result of this change, operating income and income
before taxes and minority interests increased by ¥444
million ($5,340 thousand) for the fiscal year ended March
31, 2011.
Property, plant and equipment—Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is computed

58

by the straight-line method, based on the estimated useful
lives of respective assets. The depreciation period generally
ranges from 3 years to 50 years for buildings and structuresand 5 years to 17 years for machinery and equipment.
The Company and consolidated domestic subsidiaries haveadopted an accounting standard for the impairment of fixed
assets. This standard requires that tangible and intangible
fixed assets be carried at cost less depreciation, and bereviewed for impairment whenever events or changes incircumstance indicate that the carrying amount of an asset
may not be recoverable.
In addition, the Company and consolidated domestic
subsidiaries are required to recognize an impairment loss intheir consolidated statements of income if certain indicatorsof asset impairment exist and if the book value of an asset
exceeds the undiscounted sum of its future cash flows. This
standard states that impairment losses should be measured
as the excess of the book value over the higher of (i) the fairmarket value of the asset, net of disposition costs; and (ii)the present value of future cash flows arising from theongoing utilization of the asset and its disposition after use.
This standard covers land, factories, buildings, and otherforms of property, plant and equipment as well as intangible
assets. Fixed assets are to be grouped at the lowest levels forwhich there are identifiable cash flows which are independent from the cash flows of other groups of assets.
(Additional information)
In accordance with the revised Japanese Corporate Tax Law
and its regulation, the Company and its domestic subsidiaries
adopted a new useful life for tangible fixed assets from thefiscal year ended March 31, 2009.
The effect of adopting this new useful life on both operating income and income before income taxes and minority
interests was ¥2,959 million for the fiscal year ended March
31, 2009.
Accrued retirement benefits—Under the terms of theCompany’s retirement plan, substantially all employees areentitled to a lump-sum payment at the time of retirement.
The amount of retirement benefits is, in general, determinedby reference to their current basic rate of pay, the length ofservice and the cause thereof.
The Company and certain consolidated domestic subsidiaries
also have a non-contributory funded pension plan, which
covers substantially all employees.
The Company and its consolidated domestic subsidiaries
provided accrued retirement benefits based on the estimatedAnnual Report 2011

amounts of projected benefit obligation and the fair value ofthe plan assets at those dates.
Actuarial gains and losses are recognized in expenses
using the straight-line method over the average of the estimated remaining service lives of ten years commencing withthe following period. Prior service costs are recognized in
expenses using the straight-line method over the average ofthe estimated remaining service lives of ten years.
Accrued retirement benefits in the consolidated balance
sheets also include estimated liabilities for the unfundedlumpsum benefit plan covering directors and corporate
auditors.
(Change in accounting policy)
Effective from the fiscal year ended March 2010, theCompany and consolidated domestic subsidiaries adopted
Partial Amendments to Accounting Standard for Retirement
Benefits (Part 3) (ASBJ Statement No.19 issued on July
31, 2008).
There was no effect on income before income taxes andminority interests as a result of adopting the new standard.
Accrued restructuring charges—Accrued restructuring
charges are provided by the Company and its consolidated
subsidiaries to cover the costs of business reconstruction.
Accrued environmental measures—The provision for environmental measures is estimated and recorded to provide for
future potential costs, such as costs related to the disposal ofpolychlorinated biphenyl (PCB).
Research and development—Research and development
costs are charged to income as incurred.
Bond issue expense—Bond issue expense is charged toincome as incurred.
Accounting for certain lease transactions—Finance leases,
except for certain immaterial leases, are capitalized anddepreciated over their estimated useful lives or lease term,
as applicable. Finance leases commencing prior to April 1,
2008, which do not transfer ownership of the leased property to lessees are accounted for in the same manner as
operating leases.
(Change in accounting policy)
The Company and its domestic subsidiaries adopted ASBJ
Statement No.13 “Accounting Standard for Lease
Transaction” and ASBJ Guideline No.16 “Guidance on
Accounting Standard for Lease Transaction,” originally issued

by the Business Accounting Deliberation Counsel on June 17,1993 and by the Japanese Institute of Certified Public
Accountants on January 18, 1994, respectively, and bothrevised by the ASBJ on March 30, 2007.
In the consolidated fiscal year ended March 31, 2009,
finance leases are recognized on the balance sheet.
Depreciation or amortization expense is recognized on astraight-line basis over the lease period.
There was no effect on income before income taxes andminority interests as a result of adopting the new standard.
Income taxes—Deferred tax assets and liabilities are determined based on the differences between financial reporting
and the tax bases of assets and liabilities, and measured
using the statutory tax rates which will be in effect when the
differences are expected to be realized.
Sales—Sales of merchandise and finished products arerecognized when the products are shipped to customers.
Accounting standard for recognizing revenues and costs ofconstruction contracts(Change in accounting policy)
Previously, revenues and costs of construction work had beenrecognized under the percentage-of-completion method forcontract amounts of ¥5,000 million or more with construction periods of more than two years. For other construction
work, the completed-contract method was applied. Effectivefrom the fiscal year ended March 31, 2010, the Company andits consolidated domestic subsidiaries have applied the“Accounting Standard for Construction Contracts” (ASBJ
Statement No.15, released on December 27, 2007) and the“Guidance on Accounting Standard for Construction Contracts”(ASBJ Guidance No.18, released on December 27, 2007).
Accordingly, with respect to construction contracts underwhich construction work commenced during the fiscal year
ended March 31, 2010, when the outcome of individual
contract can be estimated reliably, the percentage-ofcompletion method (the percentage of completion at the endof the fiscal year is measured based on the percentage of thecost incurred to the estimated total cost) has been applied
for that portion in progress through to the end of the fiscal
year ended March 31, 2010. For other construction work, thecompleted-contract method has been applied. As a result of
this change, net sales increased by ¥678 million ($7,286 thousand) operating income and income before income
taxes and minority interests increased by ¥154 million($1,655 thousand), respectively, for the fiscal year ended
March 31, 2010.

59

Sumitomo Metal Mining

Asset retirement obligations —(Change in accounting policy)
Effective from the year ended March 31, 2011, the Company
adopted “Accounting Standard for Asset Retirement
Obligations” (ASBJ Statement No.18 issued on March 31,2008) and “Guidance on Accounting Standard for Asset
Retirement Obligations” (ASBJ Guidance No.21 issued on
March 31, 2008).
As a result of adopting these standards, operating income
decreased by ¥20 million, and income before income taxes
and minority interests decreased by ¥344 million ($4,137
thousand) for the fiscal year ended March 31, 2011.
(Additional information)
Previously, asset retirement obligations for overseas mines,
etc., were presented in “other accruals” under “long-term
liabilities.” However, accompanying the adoption from theyear ended March 31, 2011 of “Accounting Standard for
Asset Retirement Obligations” (ASBJ Statement No.18 issued
on March 31, 2008) and “Guidance on Accounting Standard
for Asset Retirement Obligations” (ASBJ Guidance No.21
issued on March 31, 2008), they were reclassified to “asset
retirement obligations.”
Business combinations and others—(Change in accounting policies)
Effective from the year ended March 31, 2011, the Company
has adopted “Accounting Standard for Business
Combinations” (ASBJ Statement No.21 of December 26,2008), “Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No.22 of December 26, 2008),“Partial Amendments to Accounting Standard for Researchand Development Costs” (ASBJ Statement No.23 of December
26, 2008), “Revised Accounting Standard for Business
Divestitures” (ASBJ Statement No.7 of December 26, 2008),
Revised Accounting Standard for Equity Method of
Accounting for Investments (ASBJ Statement No.16 ofDecember 26, 2008), and “Revised Guidance on AccountingStandard for Business Combinations and AccountingStandard for Business Divestitures” (ASBJ Guidance No.10 ofDecember 26, 2008).
Comprehensive income —(Additional information)
Effective March 31, 2011, the Company adopted “AccountingStandard for Presentation of Comprehensive Income” (ASBJ
Statement No.25 issued on June 30, 2010) and “Revised
Accounting Standard for Consolidated Financial Statements”(ASBJ Statement No.22, revised on June 20, 2010).

60

As a result of the adoption of these standards, theCompany has presented the consolidated statement ofcomprehensive income in the consolidated financial statements for the fiscal year ended March 31, 2011.
In addition, the Company has presented the consolidated
statement of comprehensive income for the fiscal year ended
March 31, 2010 as well as that for the fiscal year ended
March 31, 2011.
Amount per share of common stock—Basic net income pershare is computed based on the weighted-average number ofshares of common stock issued during each fiscal year.
Diluted net income per share assumes that outstanding
convertible bonds were converted into common stock at the
beginning of the period at the current conversion price.
Cash dividends per share represent the actual amountapplicable to the respective fiscal year.
Reclassifications—Certain reclassifications have been madein the 2010 and 2009 financial statements to conform to thepresentation of 2011.
3. Notes to financial instruments
1. Status of financial instruments(1) Policies on the handling of financial instruments
The Sumitomo Metal Mining Group (“the Group”)
procures the funds necessary for its capital expenditure, investment and loan plans mainly through bankloans and the issuance of bonds. Short-term operating
funds are funded through bank loans as required. In
the event of a need for new funds, the Group, in principle, looks to the issuance of short-term bonds(commercial paper). This is supplemented by bankloans and the use of liquidation schemes applicable tonotes and accounts receivable. The Group takes greatcare to monitor the status of its funding needs andfinancial position. This is to ensure that the Group does
not overly rely on specific procurement methods andfinancial instruments. Accordingly, steps are taken to
ensure a balanced funding portfolio from both theshort and long term as well as direct and indirect
financing perspectives. Temporary surplus funds are
utilized only for highly safe financial assets for which
there is a low probability of a loss of principal.
Derivative transactions are only used to avoid the risks
attributable to fluctuations in the prices of non-ferrous
metals as well as foreign currency exchange and interest rates. The Group does not engage in derivativetranslations for speculative purposes.

Annual Report 2011

(2) Details of and risks associated with financial
instruments
Notes and accounts receivable, which are trade receivables, are exposed to the credit risk of customers. In
addition, foreign currency-denominated trade receivables, which are generated by global business
operations, are also exposed to fluctuations in foreign
currency exchange rates. Turning to the metals business, trade receivables are also exposed to the risk of
movements in the prices of non-ferrous metals.
Investment securities, which largely represent sharesof companies with whom the Group trades or hasformed an equity alliance, are exposed to the risk ofchanges in their market prices.
Notes and accounts payable, which are trade obligations, generally have maturity dates of one year or less.
In similar fashion to trade receivables, trade obligationsin the metals business are subject to the risk of movements in the prices of non-ferrous metals. A certain
portion of trade obligations are related to the importof raw and other materials and as such are denominated in foreign currencies. On this basis, they too are
open to the risk of fluctuations in the foreign currency
exchange rates. Within loans and bonds payable, bankloans payable primarily represent funding applicable tooperating transactions while long-term debt (with amaximum maturity up to March 21, 2025) and bonds
mainly concern funding relating to capital expenditures. A certain portion of loans and bonds payable isprovided on a floating rate of interest basis.
Accordingly, this portion is exposed to the risk of fluctuation in interest rates.
Derivative transactions employed in an effort tooffset the aforementioned risks include forward
foreign currency exchange rate contracts; forward andoption transaction agreement; and interest rate swap
transaction agreements, which seek to provide hedges
for the risks of fluctuations in the foreign currency
exchange rates of trade receivables and trade obligations; the prices of non-ferrous metals applicable tonon-ferrous metal trade receivables and trade obligations; and interest rates applicable to loans and bonds
payable, respectively. For hedging instruments andhedged items, hedging policy, the method of assessing
the effectiveness of hedges and other details inconnection with hedge accounting, refer to the“Derivative and hedge accounting” described in thenote 2 Summary of significant accounting policies.

(3) Risk management systems relating to financial
instruments(i) Management of credit risk (risk relating to nonperformance of a contract obligation by acounterparty, etc.)
With respect to trade receivables, each operating
department and division within the Sumitomo Metal
Mining Group is guided by its own set of management
rules and regulations. Sales and marketing departments and divisions regularly monitor the status ofcustomers, managing due dates and balances on an
individual customer basis. In this manner, every effort
is made to ensure early detection and the mitigation ofconcerns regarding collection due to deterioration in
financial standing or other factors. With respect to theuse of derivative transactions, steps are taken to
engage in transactions with highly rated financial institutions only. These steps are taken with the aim of
mitigating counterparty risk.
The maximum amount of the credit risk is shown inthe value of financial assets on the balance sheet
which are subject to credit risk.
(ii) Management of market risks (risks associated withfluctuations in the price of non-ferrous metals, foreign
currency exchange as well as interest rates, etc.)
The Group employs commodity forward transaction
and commodity option transaction agreements, whichseek to provide hedges for the risks of fluctuationsin the prices of imported raw materials with respect
to non-ferrous metals as well as the sales prices ofcommodity metals and copper concentrate on international commodities markets. At the same time, theGroup utilizes forward foreign currency exchange rate
contracts in an effort to offset the risks of movements
in foreign currency exchange rates in connection withtrade receivables and obligations denominated inforeign currencies, and interest rate swap transaction
agreements aimed at converting floating rates ofinterest applicable to loans and bonds payable to fixed
rates of interest.
With respect to investment securities, the Groupregularly monitors fair values as well as the financial
status of issuers (counterparties), and reviews it holdings on a continuous basis taking into consideration its
relationships with counterparties.
As for derivative transactions, in accordance with
derivative transaction management rules and regulations that outline the purpose and objectives ofderivative transactions while providing authority and61

Sumitomo Metal Mining

setting limits and scope, individual departments anddivisions are responsible for formulating operating
rules with respect to the implementation of derivativetransactions, executing and booking transactions andreconciling balances with counterparties on a regularbasis. Consolidated subsidiaries also adhere to theCompany’s derivative transaction management rules
and regulations while working to build the aforementioned management structure under which derivativetransactions are managed.
(iii) Management of liquidity risks associated with theprocurement of funds (the risk of being unable to
make payments on due dates)
The Sumitomo Metal Mining Group manages liquidity
risk by preparing and updating a cash management
plan six months in advance based on reports from eachdepartment and division. Certain domestic consolidated subsidiaries have adopted a cash management
system and are efficiently maintaining appropriate
levels of liquidity and cash on hand.
(4) Supplementary explanation for Fair values, etc. offinancial instruments
Fair values of financial instruments are determined bymarket prices. If no market price is available, the fairvalue is based on the value that is calculated in areasonable manner. The determination of such values
contains variable factors and as such the adoption ofwide ranging and differing assumptions may cause
values to change. In addition, with respect to contract
and other amounts applicable to derivative transactions outlined as follows in “2. Fair values, etc. offinancial instruments” such amounts themselves do
not indicate the size of market risks associated with
derivative transactions.

2. Fair values, etc. of financial instruments
Amounts on the consolidated balance sheet, fair values
and the differences between the two as of March 31, 2011
and 2010 are shown as follows. Certain financial instruments were excluded from the following table as the fairvalues were not available (Refer to the note 2 below).
Millions of yen

2011
Cash and cash equivalents
Time deposit
Notes and accounts
receivable (trade &unconsolidated)
Investment securities
Total assets
Notes and accounts
payable (trade &unconsolidated)
Bank loans
Long-term debt due after
one year
Total liabilities
Derivative transactions

Fair values

Difference¥128,311
213¥128,311
213¥

104,324
119,785¥352,633

104,324
366,757¥599,605—
246,972¥246,972¥ 42,593
65,841¥ 42,593
65,841¥

145,128
253,562

145,257
253,691¥ (7,462)* ¥ (7,778)*

—
—

—
—
129
129

¥

(316)

Millions of yen

2010
Cash and cash equivalents
Time deposit
Notes and accounts
receivable (trade &unconsolidated)
Investment securities
Total assets
Notes and accounts
payable (trade &unconsolidated)
Bank loans
Long-term debt due after
one year
Total liabilities
Derivative transactions

62

Book values of
consolidatedbalance sheets

Book values of
consolidatedbalance sheets

Fair values

Difference¥100,452
34¥100,452
34¥ ——101,003
260,136¥461,625

101,003
260,136¥461,625——¥ —¥ 44,863
68,628¥ 44,863
68,628¥ ——132,311245,802132,504
245,995

193
193¥ (2,040)*¥ (2,087)*¥ (47)

Annual Report 2011

Thousands of U.S. dollars
Book values of
consolidatedbalance sheets

Fair values
Difference
2011
Cash and cash equivalents $1,543,127 $1,543,127 $—Time deposit
2,562
2,562
—
Notes and accounts
receivable (trade &unconsolidated)
1,254,648
1,254,648—
Investment securities
1,440,589
4,410,788
2,970,199
Total assets$4,240,926 $7,211,125 $2,970,199

Notes and accounts
payable (trade &unconsolidated)
Bank loans
Long-term debt due after
one year
Total liabilities
Derivative transactions$ 512,243 $ 512,243
791,834
791,834
1,745,376
3,049,453$

1,746,927
3,051,004$ (89,741)* $ (93,542)* $

—
—
1,551
1,551
(3,801)* Net receivables and obligations arising from derivativetransactions are shown as a net amount and items forwhich aggregated results lead to net obligations are shownin asterisk.
*1
Fair values of financial instruments, and matters pertaining
to securities and derivative transactions

2. Notes and accounts receivable
The book values approximate to the fair values due toshort-term maturities of these instruments.
3. Marketable securities
Marketable securities are limited to negotiable certification of deposit. The book values approximate to the fairvalues due to their high liquidity.
4. Investment securities
The fair values of investment securities are based on themarket prices of securities exchanges on which shares arelisted.
For details regarding marketable securities on an individual holding purpose basis refer to the Note 4. Securities.
Liabilities
1. Notes and accounts payable, 2. Bank loans
The book values approximate to the fair values due toshort-term settlement of these instruments.
3. Bonds
The fair values are based on market prices.
4. Long-term debt
The discounted cash flow method was used to estimate
the fair values, based on marginal borrowing rates as
discount rate.
Derivative transactions
Refer to the Note 5. Derivative transactions.

Assets
1. Cash and cash equivalents
The book values approximate to the fair values due totheir high liquidity.

*2
The financial instruments excluded from the above table as of March 31, 2011 and 2010 were as follows:
Millions of Yen

Non marketable securities

Thousands of U.S. dollars

2011

2010

2011

Book values of
consolidated balance sheets

Book values of
consolidated balance sheets

Book values of
consolidated balance sheets¥162,532¥8,815$1,954,684

These instruments were not included in “Investment securities” (refer to above table) as the fair values were not available.

63

Sumitomo Metal Mining*3
The aggregate maturities subsequent to March 31, 2011 and 2010 for financial assets were as follows:
Millions of yen

2011

Cash and cash equivalents
Notes and accounts
receivable
Total

Due within
one year

Due after
one year andwithin 5 year

Due after
5 year andwithin 10 year

¥128,524¥—

104,324

Thousands of U.S. dollars
Due within
one year

Due after
one year andwithin 5 year

Due after
5 year andwithin 10 year

Due over10 year¥—¥— $1,545,689

$—

$—

$—

—

—

—

1,254,648———¥232,848¥—¥—¥— $2,800,337

$—

$—

$—

Due within
one year

Due after
one year andwithin 5 year

Due after
5 year andwithin 10 year

Due over10 year¥100,486

¥—

¥—

¥—

101,003———¥201,489

¥—

¥—

¥—

Due over10 yearMillions of yen

2010

Cash and cash equivalents
Notes and accounts
receivable
Total

*4
The amount scheduled to be repaid after the consolidated account settlement date of bonds, long-term debt, lease obligations
and other interest-bearing liabilities
Refer to the note 8 Bank loans and long-term debt.
(Additional information)
Effective from the fiscal year ended March 31, 2010, the “Accounting Standard for Financial Instruments” (ASBJ Statement
No.10 revised on March 10, 2008) and the “Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance
No.19 revised on March 10, 2008) have been adopted.
4. Securities(1) The following tables summarize acquisition costs and book values (available fair values) as of March 31, 2011 and 2010:
Available-for-sale securities
Securities with book values (available fair values) exceeding acquisition costs
Millions of yen

2011

Equity securities

2010

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥27,330¥56,163¥28,833¥24,334¥49,097¥24,763

Thousands of U.S. dollars

2011

Equity securities

Acquisition cost

Book value

Difference$328,683$675,442$346,759

Securities with book values (available fair values) not exceeding acquisition costs
Millions of yen

2011

Equity securities

64

2010

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥29,937¥21,544¥(8,393)¥23,599¥18,961¥(4,638)

Annual Report 2011

Thousands of U.S. dollars

2011

Equity securities

Acquisition cost

Book value

Difference$360,036$259,098$(100,938)(2) The following table summarizes book values of the securities with no available fair values as of March 31, 2011 and 2010:
Available-for-sale securities
Millions of yen

Unlisted equity securities

Thousands of U.S. dollars

2011

2010

2011

¥8,786¥8,815$105,664(3) As of March 31, 2011 and 2010, there were no available-for-sale securities with maturities.
(4) Total sales of available-for-sale securities sold during the
fiscal year ended March 31, 2011 amounted to ¥215
million (US$2,586 thousand) and the related losses
amounted to ¥96 million (US$1,155 thousand) andthe related gains amounted to ¥96 million (US$1,155
thousand).
Total sales of available-for-sale securities sold during
the fiscal year ended March 31, 2010 amounted to ¥27
million (US$290 thousand) and the related losses
amounted to ¥2 million (US$21 thousand). No gains onsales of available-for-sale securities were recognized forthe period.
Total sales of available-for-sale securities sold during
the fiscal year ended March 31, 2009 amounted to ¥42
million. No gains and losses on sales of available-for-salesecurities were recognized for the period.
5. Derivative transactions
Status of derivative transactions—The Company and its
consolidated subsidiaries utilize derivative transactions inorder to hedge various risks, such as fluctuations in the priceof metals, exchange rates and interest rates, in the normal
course of business. Derivative instruments include futurescontracts for hedging against fluctuations in the international price of metals, forward foreign exchange contracts
and currency swaps for hedging against fluctuations in
exchange rates and interest swaps for hedging against fluctuations in the interest rates of floating-rate bonds and termloans payable.
Derivative transactions of the Company and its consolidated subsidiaries are subject to market and credit risks.
Market risk is the potential loss the Company and its consolidated subsidiaries may incur as a result of changes in market
values. The Company’s and its consolidated subsidiaries’
exposure to market risk are determined by a number offactors, including fluctuations in market prices, exchange
rates and interest rates. Credit risk is the potential loss theCompany and its consolidated subsidiaries could incur if
counterparties default on their obligations. Derivative transactions are entered into solely with highly rated financial
institutions, their subsidiaries or London Metal Exchange(LME) brokers guaranteed by banks, so that the Company
and its consolidated subsidiaries might reduce the risk ofdefault on an obligation.
Each department of the Company and its consolidated
subsidiaries involving derivative transactions have their own
rules for derivative transactions which stipulate the purposesand scope of using derivatives, standards for choosing transaction counterparties and procedures with respect toreporting and administration.
Derivative transactions are subject to approval by theGeneral Manager of the department in charge after consulting with related departments. Based on these rules, theperson in charge sets up a position. Then, the results arereported to directors monthly.
Derivative positions are confirmed semi-annually with thetransaction counterparties. Also, the internal audit department of the Company regularly examines derivativetransactions.
The Company and its consolidated subsidiaries are notexposed to market risks arising from commodity derivativetransactions, because the risk of a fluctuation in market
prices that is caused by the time lag between the purchaseand sale of materials and products is hedged by corresponding future contracts. The Company and its consolidated
subsidiaries also utilize currency derivative transactions tohedge against the market risk of exchange rate or interest
rate fluctuation. Taking receivables and payables denominated in foreign currencies into account, the Company and its
consolidated subsidiaries are not exposed to market risk.

65

Sumitomo Metal Mining

The following tables summarize the market value information as of March 31, 2011 and 2010 of derivative transactions forwhich hedge accounting has not been applied:
Millions of yen

2011

2010

Contracted amountCurrency:
Forward contracts:
Buy position—U.S. dollars
Buy position—A.U. dollars

Commodity:
Forward contracts:
Sell position—Metal
Buy position—Metal
Option contracts:
Put option—Metal

Contracted amount

Total

Over oneyear

Marketvalue

Recognized
gains (losses)

Total

Over oneyear

Marketvalue

Recognized
gains (losses)¥11,760—¥11,760

¥—
—
¥—

¥ 202
—
¥ 202

¥ 202
—
¥ 202

¥10,517—¥10,517

¥—
—
¥—

¥276
—
¥276

¥276
—
¥276

¥ 3,199
8,976

¥—
—

¥ 383
—

¥ 383
—

¥

717
176

¥—
—

¥149
—

¥149
—

¥ 590
¥12,765¥—¥—¥(395)¥ (12)¥(395) ¥¥ (12) ¥

—
893

¥—
¥—

¥ —
¥149

¥ —
¥149

Thousands of U.S. dollars

2011
Contracted amountCurrency:
Forward contracts:
Buy position—U.S. dollars
Buy position—A.U. dollars

Commodity:
Forward contracts:
Sell position—Metal
Buy position—Metal
Option contracts:
Put option—Metal

66

Total

Over oneyear

Marketvalue

Recognized
gains (losses)$141,431—$141,431$——$—$ 2,429—$ 2,429$ 2,429—$ 2,429$ 38,473
107,949$——$ 4,606—$ 4,606—$ 7,096$153,518$—$—$(4,750)$ (144)$(4,750)$ (144)

Annual Report 2011

Derivative transactions for which hedge accounting has been applied for the fiscal year, ended March 31, 2011 and 2010
consisted of the following:
Millions of yen

2011Type of transaction
Currency

Interest

CommodityInterest

Type of derivative transaction
Forward contracts:
Buy position
Australian dollars
EUR
U.S. dollars
Canadian dollars
TotalInterest rate swap contracts:
Paid fixed/received floating
Total
Forward contracts:
Sell position
Metal
Buy position
Metal
Option contracts**:
Sell position
Call
Metal
Total
Interest rate swap contracts:
Paid fixed/received floating
Total

Contracted
amount and other

Contracted
amountover one year

Fair Value

35
284
51
73
443

—
—
—
—
—

6
14
—
3
23

Major hedged items
Foreign currency
expected transaction

¥

¥

¥

Long-term loans

100,000¥100,000

100,000¥100,000(1,270)¥(1,270)

Accounts receivable¥ 18,006

¥

¥

—

291

9,958

827

1,141

Accounts receivable

147,796¥175,760

131,436¥132,263(7,837)¥(6,405)

Long-term loans

26,025¥ 26,025

22,725¥ 22,725(316)¥ (316)

Account payable*The following interest rate swap contracts are used as hedges and meet certain hedging criteria. The net amount to be paid or received under these interest rate swap contracts
is added to or deducted from the interests on the assets or liabilities for which these interest rate swap contracts were executed. Main items hedged are long term loans.
**All commodity option contracts are based on zero cost option contracts. There is no transfer of option fees.

67Sumitomo Metal Mining

Millions of yen
Contracted
amount and other2010

Type of transaction
Currency

Interest

CommodityInterest

Type of derivative transaction
Forward contracts:
Buy position
EUR
Total
Interest rate swap contracts:
Paid fixed/received floating
Total
Forward contracts:
Sell position
Metal
Buy position
Metal
Option contracts**:
Sell position
Call
Metal
Total
Interest rate swap contracts:
Paid fixed/received floating
Total

Contracted
amountover one year

Fair Value

Major hedged items
Foreign currency
expected transaction
¥

326
326

¥

—
—

¥

11
11

Long-term loans

100,000¥100,000

100,000¥100,000(1,592)¥(1,592)

Accounts receivable

¥

¥

—

¥ (513)

8,539

Account payable

14,156205

1,896

Accounts receivable

161,081¥183,776

161,081¥161,286(2,267)¥ (884)Long-term loans
¥

3,300
3,300

¥

3,300
3,300

¥

(47)
(47)

*The following interest rate swap contracts are used as hedges and meet certain hedging criteria. The net amount to be paid or received under these interest rate swap contracts
is added to or deducted from the interests on the assets or liabilities for which these interest rate swap contracts were executed. Main items hedged are long term loans.
**All commodity option contracts are based on zero cost option contracts. There is no transfer of option fees.

68Annual Report 2011

Thousands of U.S. dollars

2011Type of transaction
Currency

Interest

CommodityInterest

Type of derivative transaction
Forward contracts:
Buy position
Australian dollars
EUR
U.S.dollars
Canadian dollars
TotalInterest rate swap contracts:
Paid fixed/received floating
Total
Forward contracts:
Sell position
Metal
Buy position
Metal
Option contracts**:
Sell position
Call
Metal
Total
Interest rate swap contracts:
Paid fixed/received floating
Total

Contracted
amount and other

Contracted
amountover one year

Fair Value

421
3,416
613
878
5,328

—
—
—
—
—

72
168
—
36
276

Major hedged items
Foreign currency
expected transaction

$

$

$

Long-term loans

1,202,646$1,202,646

1,202,646$1,202,646(15,274)$(15,274)

Accounts receivable$ 216,548$$

Account payable

119,759

9,946

13,722

Accounts receivable

1,777,462$2,113,769

1,580,710$1,590,656(94,251)$(77,029)

Long-term loans

312,989$ 312,989

273,301$ 273,301(3,800)$ (3,800)

—

3,500

*The following interest rate swap contracts are used as hedges and meet certain hedging criteria. The net amount to be paid or received under these interest rate swap contracts
is added to or deducted from the interests on the assets or liabilities for which these interest rate swap contracts were executed. Main items hedged are long term loans.
**All commodity option contracts are based on zero cost option contracts. There is no transfer of option fees.

6. Inventories
Inventories as of March 31, 2011 and 2010 consists of the following:Thousands of
U.S. dollars

Millions of yen

2011

¥

2,098
48,89279,80739,449¥170,246

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

2011

2010

¥

815
35,23676,357
37,167¥149,575$

25,232587,998
959,796474,432$2,047,458

7. Loss on impairment of fixed assets
Loss on impairment of fixed assets for the fiscal year ended March 31, 2011 consists of the following:
2011

Millions of yen

Thousands of
U.S. dollars

Location

Major use

Asset category

Loss

Loss

Isa City, Kagoshima Prefecture, Japan
Total

Idle land

Land

¥63
¥63

$758
$758

69

Sumitomo Metal Mining

The Company categorized operating assets by such business
units as plants and manufacturing processes based on thedivision of managerial accounting.
A breakdown of major use is as follows.
The book values of several idle land lots in the Hishikari
Mine for which market prices have considerably declined

along with the drop in land prices were reduced to theirrecoverable amounts because of the considerable decline intheir market prices along with the drop in land prices.
The net sales prices (fair value less cost to sell) of assets
are used as their recoverable amounts for the measurementof impairment losses.

Loss on impairment of fixed assets for the fiscal year ended March 31, 2010 consisted of the following:
2010

Millions of yen

Location

Major use

Asset category

Niihama City, Ehime Prefecture, Japan

Manufacturing facilities forthe recovery and recycling ofvaluable metals
Facilities for milling
Manufacturing facilities forchemical products
Facilities for IC package plating

Building and structures andmachinery and other assets

Niihama City, Ehime Prefecture, Japan
Niihama City, Ehime Prefecture, Japan
Usa City, Oita Prefecture, Japan
Kamiina District, Nagano Prefecture, Japan
Matsudo City, Chiba Prefecture, Japan
Kaohsiung, Taiwan

Manufacturing facilities forprinted circuit boards
Facilities for soil contamination
survey and asbestos analysis
Manufacturing facilities forcertain chip on film (COF)

Total

The Company categorized operating assets by such business
units as plants and manufacturing processes based on thedivision of managerial accounting.
A breakdown of major use is as follows.
(1) The book values of manufacturing facilities for the recovery and recycling of non-ferrous metals were reduced totheir recoverable amounts because of the Company’s
decision to withdraw from these operations. This decision
was based on the forecast of the shrinkage in the domestic petroleum market leading to a decrease in the waste
and raw material catalysts produced by the petroleum
refining process; as well as the existing levels of excess
processing capacity in Japan.
(2) The book values of existing facilities for milling werereduced to their recoverable amounts because of expectations that these facilities would cease to operatefollowing the installation of new facilities.
(3) The book value of manufacturing facilities for chemical
products were reduced to their recoverable amounts
because of expectations that these facilities would cease tooperate following the termination of production of certain
products during the fiscal year ended March 31, 2010.

70

Machinery and equipment
Machinery and equipment

Loss¥1,91875
25

Building and structures andmachinery and equipment
Building and structures

24

Building and structures andmachinery and equipment
Machinery and equipment

13

21

11
¥2,087(4) The book value of facilities for IC package plating werereduced to their recoverable amounts because of theCompany’s decision to withdraw from these operations.
This decision was based on the ongoing shift of production by domestic semiconductor assembly manufacturers
to overseas locations and the changeover to semiconductors packages that no longer require solder plating.
(5) The book value of manufacturing facilities for printed
circuit boards were reduced to their recoverable amounts
because of expectations that these facilities would cease
to operate following withdrawal from the chip scale
package (CSP) business.
(6) The book value of facilities for soil contamination survey
and asbestos analysis were reduced to their recoverable
amounts because of expectations that these facilities
would cease to operate following the decision to withdraw from these operations. This decision was based on
the sharp increase in competition in line with the growing
number of survey institutions and generalization of
know-how.
(7) The book value of manufacturing facilities for certain chipon film (COF) were reduced to their recoverable amounts
because of expectations that these facilities would cease
to operate due to their aging.

Annual Report 2011

The net sales prices (fair value less cost to sell) of assets are used as their recoverable amounts for the measurement of impairment losses.
Loss on impairment of fixed assets for the year ended March 31, 2009 consisted of the following:
2009
Location

Millions of yen
Major use

Kamiina District, Nagano Prefecture,Japan
Usa City, Oita Prefecture, Japan

Asset category

Manufacturing facilities for printed Machinery and equipment and othercircuit boards
assetsFacilities for IC package plating
Land, building and structures, machineryand equipment, and other assets
Niihama City, Ehime Prefecture, Japan Manufacturing facilities for copper- Building and structures and machineryclad polyimide filmand equipment
Isa City, Kagoshima Prefecture, Japan Manufacturing facilities for lead
Machinery and equipment
framesNiihama City, Ehime Prefecture, Japan Manufacturing facilities for battery Machinery and equipment and othermaterials
assetsIwanai District, Hokkaido, Japan
Manufacturing facilities for single- Building and structures and machinery
crystal materials
and equipment
Yokohama City, Kanagawa Prefecture, Manufacturing facilities for
Machinery and equipment
Japanelectronic terminals and connectors
Miscellaneous
Miscellaneous
Machinery and equipment
Total

The Company categorized operating assets by such business
units as plants and manufacturing processes based on thedivision of managerial accounting.
A breakdown of major use is as follows.
(1) The book value of manufacturing facilities for printed
circuit boards in Nagano Prefecture was reduced to the recoverable amount because the products were not profitable.
(2) The book value of facilities for IC package plating in Oita
Prefecture was reduced to the recoverable amount due to a
decline in sales volume.
(3) The book value of manufacturing facilities for copper-cladpolyimide film in Ehime Prefecture scheduled for diversion toanother use was reduced to the recoverable amount because
the Company has found an alternative method more effective and efficient and because the Company has decided not
to divert them.
(4) The book value of manufacturing facilities for lead framesin Kagoshima Prefecture was reduced to the recoverable
amount based on the sales volume for domestic customers
because the Company has decided to focus on the domestic
market.
(5) The book value of manufacturing facilities for battery
materials in Ehime Prefecture was reduced to the recoverable
amount because they were no longer expected to be in use.
(6) The book value of manufacturing facilities for single-crystal materials was reduced to the recoverable amount due to a
decline in demand, the strong yen and an unfavorable mix ofproducts.

Loss¥1,183
640
550
476
275
247
141
2
¥3,514(7) The book value of manufacturing facilities for electronic
terminals and connectors in Kanagawa Prefecture was
reduced to the recoverable amount because the products
were not profitable due to a decline in the market price.
The Company used the value in use or net selling prices forcalculating the recoverable amount. The discounted rate used
for calculating the value in use was 11%.
8. Bank loans and long-term debt
Bank loans are generally represented by short-term notes(most of which are unsecured) and bank overdrafts, and boreinterest at annual rates of 0.64% to 5.60% and 0.74% to4.86% as of March 31, 2011 and 2010 respectively.
On January 31, 2008, the Company passed a resolution toissue stock acquisition rights by way of third-party allotment
and to execute a loan agreement for the purpose of procuring funds through a loan with stock acquisition rights. By
executing this loan agreement, the Company procures ¥100
billion from February 15, 2008 to February 13, 2015. The
exercise price of the stock acquisition rights will be revised inaccordance with market prices. The stock acquisition rights
have a structure that prevents dilution of the share price to a
price lower than ¥1,749 (US$21) as of March 31, 2011.

71Sumitomo Metal Mining

Long-term debt as of March 31, 2011 and 2010 consists of the following:
Millions of yen

Thousands of U.S. dollars

2010

2011

2011

Long-term loans from:
Banks, insurance companies and other financial institutions,maturing through 2020 at interest rates of 0.82% to 1.86%:
SecuredUnsecured
Government owned banks and government agencies,
maturing through 2025 at interest rates of 0.60% to 3.70%:
SecuredUnsecured¥—
131,145¥—
110,114$—
1,577,210

3,110
11,2863,370
14,35137,402
135,731

10,000155,541(20,413)¥135,128

10,000137,835(5,524)¥132,311

120,265
1,870,608(245,496)$1,625,112

Years ending March 31,

Millions of yen

Thousands of U.S. dollars

2012
2013
2014
2015
2016
Thereafter¥ 20,413
2,542
5,390
108,066
7,087
12,043$ 245,496
30,57164,823
1,299,651
85,232
144,835

1.42% domestic bonds due in 2012
Amount due within one year

The aggregate annual maturities of long-term debt as of March 31, 2011 are as follows:

Assets pledged as collateral for bank loans and long-term debt as of March 31, 2011 and 2010 are as follows:
Millions of yen

Property, plant and equipment, at net book value

72

Thousands of U.S. dollars

2011

2010

2011

¥43,713¥43,713¥53,979¥53,979$525,713$525,713

Annual Report 2011

9. Income taxes
Income taxes in the accompanying consolidated statements
of income comprise corporation taxes, inhabitants’ taxes andenterprise taxes. Consolidated overseas subsidiaries are
subject to income taxes of the countries in which they are
domiciled.

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 fiscal years ended March 31,
2011, 2010 and 2009:

Statutory tax rate
Equity in earnings of unconsolidated subsidiaries and affiliated companies
Effect of eliminating intercompany dividends received
Difference in tax rates among the Company and its consolidated subsidiaries
Permanently nondeductible expenses
Permanently nontaxable dividends received
Tax credit
Effect of Mining Tax
Effect of consolidated taxation
Increase (decrease) in valuation allowance
Undistributed earnings of foreign subsidiaries
Others
Effective tax rate

2011

2010

2009

40.7%
(8.1)
16.2
(5.0)
0.1
(15.0)
(0.9)
(1.5)
0.3
(0.4)
1.4
(2.9)
24.9%

40.7%
(9.8)
17.4
(6.7)
0.2
(11.4)
(1.1)
(2.9)
2.1
(0.6)
—
0.1
28.0%

40.7%
(43.1)
46.4
(6.6)
4.2
(25.8)(14.1)(4.2)—
7.3(24.6)(1.0)(20.8)%

73

Sumitomo Metal Mining

Significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities as of March 31,
2011 and 2010 are as follows:
Millions of yen Thousands of U.S. dollars

2011

Deferred tax assets:
Net operating loss carry forwards
Retirement benefits
Deferred losses on hedges
Loss on impairment of fixed assets
Allowance for bonus payable
Loss from valuation of gold loans
Contribution gains on securities to employee retirement
benefits trust
Unrealized profits
Overseas exploration cost
Loss from devaluation of inventories
OthersGross deferred tax assets
Less valuation allowance
Deferred tax assets-less valuation allowance
Deferred tax liabilities:
Accumulated earnings of overseas subsidiaries
Deferred gains on properties for tax purpose
Depreciation
Reserve for explorations
Net unrealized holding gain on available-for-sale securities
Gain on securities contributed to employee retirement
benefits trust
OthersDeferred tax liabilities
Net deferred tax assets (liabilities)

¥

¥

5,455
5,404
3,221
2,034
1,278
1,005

2011

2010

¥

5,058
5,504
656
1,732
1,152
1,269

$

65,60464,991
38,737
24,462
15,37012,087967

870

11,630

829
754
337
3,617
24,901(10,483)
14,418

563
516
398
5,587
23,305(11,529)
11,776

9,970
9,068
4,053
43,500299,471(126,074)
173,397(4,403)(2,709)(2,586)(1,741)(1,114)(2,014)(2,878)(4,343)(1,836)(2,348)(52,952)(32,580)(31,100)(20,938)(13,397)

(594)

(594)

(7,144)(1,050)(14,197)(947)(14,960)(12,628)(170,739)221¥ (3,184)

$

2,658

10. Retirement benefits and pension costs
Accrued retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2011 and 2010
consist of the following:
Millions of yen Thousands of U.S. dollars

Projected benefit obligation
Fair value of pension assets
Excess of projected benefit obligation over pension assets
Unrecognized actuarial differences
Unrecognized prior services costs
Net retirement benefits
Prepaid pension costs
Accrued retirement benefits

2011

2010

2011

¥(52,441)
41,056¥(11,385)
5,986
(621)
¥ (6,020)(1,138)¥ (7,158)¥(53,111)
40,845¥(12,266)
6,910
(941)
¥ (6,297)(1,555)¥ (7,852)$(630,679)
493,758$(136,921)
71,990(7,468)$ (72,399)(13,686)$ (86,085)

The Company contributed securities to the employee retirement benefit trust, which are included in pension assets.

74

Annual Report 2011Retirement benefits in the consolidated balance sheets as of March 31, 2011 and 2010 also include estimated liabilities forthe unfunded lump-sum benefit plan covering directors and corporate auditors of ¥58 million (US$698 thousand) and¥198million, respectively.
Included in the consolidated statements of income for the years ended March 31, 2011, 2010 and 2009 are severance andretirement benefit expenses comprised of the following:
Millions of yen

Service cost-benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial differences
Amortization of prior services costs
Severance and retirement benefit expense
The discount rates used by the Company are primarily 2.0%
for the fiscal years ended March 31, 2011, 2010 and 2009.
The rates of expected return on plan assets used by theCompany are primarily 3.5%, respectively for the years ended
March 31, 2011, 2010 and 2009.
The estimated amount of all retirement benefits to be paid
at the future retirement date is allocated equally to eachThousands of
U.S. dollars

2011

2010

2009

2011

¥2,237
949
(800)
1,018
(318)
¥3,086¥1,984
923
(664)
1,573
(319)
¥3,497¥3,165
907
(824)
402
(296)
¥3,354$26,903
11,413(9,621)
12,243(3,824)$37,114service year using the estimated number of total service
years. Actuarial gains and losses are recognized in the income
statement using the straight-line method over ten years
commencing with the following period. Prior service costs
are recognized in expenses using the straight-line method
over the average of the estimated remaining service lives often years.

11. Research and development expense
Research and development expense included in selling, general and administrative expenses for the fiscal years ended March 31,
2011, 2010 and 2009 are ¥5,271 million (US$63,391 thousand), ¥4,746 million and ¥5,896 million, respectively.
12. Special reserves
For the purpose of obtaining tax benefits, the Company andsome consolidated subsidiaries have set up special reserves
mainly for losses on overseas investments and explorations inaccordance with the Special Taxation Measures Law of Japan.

Such reserves, which are included in retained earnings, are¥262,762 million (US$3,160,096 thousand) and ¥218,808
million as of March 31, 2011 and 2010, respectively.

75

Sumitomo Metal Mining

13. Net assets
Net assets comprise three subsections, which are shareholders’equity, accumulated other comprehensive income, andminority interests.
Under Japanese laws and regulations, the entire amount
paid for new shares is required to be designated as common
stock. However, a company may, by resolution of the Board of
Directors, designate an amount not exceeding one-half of theprice of the new shares as additional paid-in capital, which isincluded in capital surplus.
Under the Japanese Corporate Law (“the Law”), in cases
where a dividend distribution of surplus is made, the smallerof an amount equal to 10% of dividend or excess, if any, of
25% of common stock over the total of additional paid-in
capital and legal earnings reserve must be set aside as additional paid-in-capital or legal earnings reserve. Legal earnings

reserve is included in retained earnings in the accompanying
consolidated balance sheets.
Under the Law, legal earnings reserve and additional
paid-in capital could be used to eliminate or reduce a deficit,
or could capitalize by a resolution of the shareholders’meeting.
Additional paid-in capital and legal earnings reserve may
not be distributed as dividends. Under the Law, however, alladditional paid-in-capital and all of the legal earning reserve
may be transferred to other capital surplus and retained
earnings, respectively, however which are potentially available for dividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the unconsolidated financial
statements of the Company in accordance with Japaneselaws and regulations.

14. Contingent liabilities
Contingent liabilities as of March 31, 2011 are as follows:
Millions of yen Thousands of U.S. dollars

Notes and accounts receivable sold to factoring companies with recourse
As guarantor for loans of:Non-consolidated subsidiaries and affiliated companies
Other

¥ 404

$ 4,859

4,000
1,500
¥5,904

48,106
18,040$71,005

Besides the above, as to providing electric power to Pogo Gold Mine, there are ¥997 million (US$11,990 thousand) to guarantee
construction costs of electric facilities.

76

Annual Report 201115. Segment information(1) General information about reported segments(a) Basis of decision about reported segments
The reported segments of the Group refer to business units,
for which separate financial information is available and thatare subject to periodic reviews by the Board of Directors as
the supreme, managerial decision-making body to determine
the allocation of management resources and assess theirrespective operating results.
The Company currently has five business divisions—
Mineral Resources Div., Non-Ferrous Metals Div.,
Semiconductor Materials Div., Advanced Materials Div. andEnergy Catalysts & Construction Materials Div.—in the
pursuit of effective business operations by products andservices. Each of these business divisions plans its own
comprehensive strategies to be carried out in Japan andoverseas for its own product and service lines and engages indiverse business activities within the Company and throughthe consolidated subsidiaries and equity method affiliatedcompanies.
The five aforementioned business divisions and theTaganito Project—the purpose of which is to construct asecond High Pressure Acid Leach (HPAL) plant in the Taganito
area of Mindanao Island in the Philippines—are classified as“business segments” of the Group.
The Group integrated these six business segments into
three reported segments: “Mineral Resources” “Smelting &Refining”, “Materials” and “Others.” In determining thesereported segments, the metal businesses and the Taganito
Project were integrated into Smelting & Refining, whereas thesemiconductor materials and advanced materials businesses
were integrated into Materials, in accordance with the integration criteria and quantitative standards set forth in the“Accounting Standard for Disclosures about Segments of anEnterprise and Related Information” (ASBJ Statement No.17
issued on March 27, 2009) and “Guidance on AccountingStandard for Disclosures about Segments of an Enterpriseand Related Information” (ASBJ Guidance No.20 issued on
March 21, 2008).

As described above, the Group consists of three segments
identified by products and services based on the businessdivisions.
(b) Types of products and services of each reported segment
In the Mineral Resources segment, the Group mainly engages
in the exploration, development and production of nonferrous metal resources in Japan and overseas, as well as
sales of ores and other products.
In the Smelting & Refining segment, the Group mainly
engages in smelting and sales of copper, nickel, ferro-nickel,
zinc and lead, as well as smelting and sales of precious metals
such as gold, silver and platinum.
In the Materials segment, the Group mainly engages inmanufacturing, processing and sales of semiconductor materials such as lead frames, tape materials (copper-cladpolyimide film, chip-on-film (COF) substrates (electronic
packaging materials used to make LCD panel integrated
circuits) and bonding wires, as well as of advanced materials
such as pastes, powder materials (e.g., nickel powder),battery materials (e.g., nickel hydroxide) and crystalline
materials.
(2) Basis of measurement about reported segment
income(loss),segment assets and other material items
The accounting methods for each reported segment arealmost the same as those set forth in the “Basis of presenting the consolidated financial statements,” excluding theallocation of “cost of capital” to each segment.
Cost of capital refers to an interest rate burden to beborne by each business segment of the parent company,
which does not financially assume interest expenses, in
proportion to its holding assets in calculating segment
income for internal administration purposes. The cost ofcapital is obtained by multiplying total assets held by eachsegment of the parent company by an “internal interest
rate.” An amount that corresponds to the weighted averageof the parent company’s cost of capital and cost of liability isused as the internal interest rate. The same amount as a total

77

Sumitomo Metal Miningof the cost of capital allocated to each segment is reported
as a negative value in “Adjustments.” The cost of capital isoffset in the total for all segments Companywide. The cost ofcapital therefore has no effect on the consolidated financial
statements.

Inter-segment net sales are calculated based on arm’s
length transaction prices.

(3) Information about reported segment income (loss), segment assets and other material items
Segment information as of and for the fiscal years ended March 31, 2011 and 2010 are as follows.
Millions of yen

2011

Net sales:
Outside customers
Inter segment
Total
Segment income (loss)
Segment assets
Depreciation
Amortization of goodwill
Interest income
Interest expense
Equity in earnings ofaffiliated companies
Investment in equity-method
affiliated companies
Capital expenditures

Mineralresources

Smelting& Refining

Materials

Total ofreportedsegment¥ 61,474
26,51487,988¥ 70,410¥176,250
8,337
99
115
79

¥590,646
94,399685,045¥ 49,518¥583,193
14,296—52
216¥188,630
18,528207,158¥ 5,386¥113,879
8,897
11
16
332

¥840,750
139,441
980,191¥125,314¥873,322
31,530110
183
627¥23,327
7,101
30,428¥ 2,336¥53,485
1,483
—
7
67

¥
—
(146,542)(146,542)¥ (3,949)¥ 125,546
1,612
—
548
1,790

¥ 864,077—
864,077¥ 123,701¥1,052,353
34,625
110
738
2,484

29,8494,180

104

34,133

2,372(1,673)

34,832

72,816
3,816

158,175
41,373

414
5,829

231,405
51,01824,802624(54,554)1,463

201,653
53,105

Others*Others*Adjustment**

Consolidated

Millions of yen

2010

Net sales:
Outside customers
Inter segment
Total
Segment income (loss)
Segment assets
Depreciation
Amortization of goodwill
Interest income
Interest expense
Equity in earnings ofaffiliated companies
Investment in equity-method
affiliated companies
Capital expenditures

78

Mineralresources

Smelting& Refining

Materials

Total ofreportedsegment¥ 47,492
27,09374,585¥ 49,759¥168,612
7,225
104
209
412

¥485,494
86,690572,184¥ 34,514¥509,171
14,207—89
401¥170,142
14,342
184,484¥ 2,213¥120,202
9,867
12
15
431

¥703,128
128,125
831,253¥ 86,486¥797,985
31,299
116
313
1,244

¥23,506
8,304
31,810¥ 1,597¥56,449
2,038
—
10
91

21,316

3,689

66

25,07164,997141,085

335

2,110

17,5894,224

Adjustment**

Consolidated

¥

(807)
(136,429)(137,236)¥(292)¥ 127,024
1,409
—
494
1,653

¥725,827—
725,827¥ 87,791¥981,458
34,746
116
817
2,988

1,742

(723)

26,090206,417

24,904(34,421)

196,900

23,923780

1,711

26,414

Annual Report 2011

Thousands of U.S. dollars

2011

Net sales:
Outside customers
Inter segment
Total
Segment income (loss)
Segment assets
Depreciation
Amortization of goodwill
Interest income
Interest expense
Equity in earnings ofaffiliated companies
Investment in equity-method
affiliated companies
Capital expenditures

Materials

Total ofreportedsegment$ 739,314 $7,103,379 $2,268,551
318,870 1,135,286
222,826
1,058,184 8,238,665 2,491,377$ 846,783 $ 595,526 $ 64,775$2,119,663 $7,013,746 $1,369,561
100,265
171,930
106,999
1,191
—
132
1,383
625
192
950
2,598
3,993

$10,111,244
1,676,982
11,788,226$ 1,507,084$10,502,970
379,194
1,323
2,200
7,541

Mineralresources

Smelting& Refining

Others*Adjustment**$280,542 $—
85,400 (1,762,382)
365,942 (1,762,382)$ 28,093 $ (47,492)$643,235 $ 1,509,874
17,835
19,387
—
—
84
6,591
806
21,527

Consolidated$10,391,786—
10,391,786$ 1,487,685$12,656,079
416,416
1,323
8,875
29,874358,978

50,271

1,251

410,500

28,526(20,120)

418,906

875,719
45,893

1,902,285
497,571

4,978
70,102

2,782,982
613,566

298,280
7,504(656,091)
17,5952,425,171
638,665* The “Others” segment refers to businesses other thanthose included in the reported segments and other profitseeking business directly operated by Head Office divisions/departments. Other businesses include manufacturing andsales of automotive exhaust processing catalysts, chemical

catalysts, petroleum refinery and desulfurization catalysts,
and autoclaved lightweight concrete (ALC) products, as wellas technical engineering and real estate businesses.

** “Adjustments” are as follows:
1. Adjustments for segment income are as follows:
Millions of yen Thousands of U.S. dollars

Head Office expenses not allocated to each reported segment*a
Cost of capital to be borne by each reported segment
Eliminations of inter-segmental transactions among
the reported segments
Non-operating income/expenses not allocatedto each reported segment*b
Difference in scope of consolidation*cOther adjustments
Total*a Head Office expenses not allocated to each reported
segment mainly consist of general administrative
expenses and R&D expenses (hereinafter “Head Office
expenses”), which are not attributable to the reported
segments.
*b Non-operating income/expenses not allocated to eachreported segment mainly consist of foreign exchange
gains/losses and interest expenses, which are not
attributable to the reported segments.

2011

2010

2011

¥(10,281)
15,084¥ (8,944)
13,159$(123,644)
181,407(3,816)(1,737)(45,893)(5,422)(2,493)(65,207)—486¥ (3,949)

(700)
423
(292)

—
5,845
$ (47,492)¥*c The difference in scope of consolidation reflects thedifferent scope of consolidated subsidiaries for theprevious fiscal year between the administrative andfinancial accountings. For the current fiscal year ended
March 31, 2011, there is no effect of different scope of
consolidation because the scope of consolidated subsidiaries agreed with each other between theadministrative and financial accountings.

79

Sumitomo Metal Mining

2. Adjustments for segment assets are as follows:
Millions of yen Thousands of U.S. dollars

Corporate assets not allocated to each reported segment*
Offsets and eliminations of inter-segmental receivables among
the reported segments, including those toward Head Officedivisions/departments
Difference in scope of consolidation
Total

2011

2010

2011

¥205,301¥183,311$2,469,044(79,755)—¥125,546(56,269)(18)¥127,024(959,170)—$1,509,874* Corporate assets not allocated to each reported segment mainly refer to the assets under the control of the Administration
Dept. at the Head Office, which are not allocated to the reported segments.
3. Adjustments on depreciation refer to depreciation at the
Head Office divisions/departments, which are not allocated to the reported business segments.
For the fiscal year ended March 31, 2010, the effect ofdifferent scope of consolidation of ¥220 million is included.
4. Adjustments on interest income consist of interest income
at the Head Office divisions/departments, which is notallocated to the reported segments, and eliminations oftransactions among the reported segments.
5. Adjustments on interest expenses consist of interest
expenses at the Head Office divisions/departments, which
are not allocated to the reported segments, and eliminations of transactions among the reported segments. For
the fiscal year ended March 31, 2010, the effect of different scope of consolidation of ¥32 million is included.

6. Adjustments on equity in earnings (losses) of affiliatedcompanies refer to the deduction of unrealized income
relating to the inter-segmental transactions among thereported segments.
7. Adjustments on investment in equity method affiliatedcompanies represent the amount corresponding to“Foreign currency translation adjustments.”
8. Adjustments on increase in property, plant and equipment
and intangible assets refer to increases thereof at the
Head Office divisions/departments, which are not allocated to the reported segments. For the fiscal year ended
March 31, 2010, the negative effect of different scope of
consolidation of ¥145 million is included.

Related information(1) Information about geographic areas(a) Sales
2011

Millions of yen
Japan

China

TaiwanEast Asia

Southeast Asia

North America

OthersTotal¥502,614¥95,375¥91,496¥13,295¥90,911¥60,374¥10,012¥864,077

Japan

China

TaiwanEast Asia

Southeast Asia

North America

OthersTotal$6,044,666$1,147,023$1,100,373$159,892$1,093,337$726,085$120,410$10,391,786

Thousands of U.S. dollars*1
Net sales are segmented by country or region according tocustomers’ location data.
*2
Regions are segmented based on their geographical proximity, and only those countries for which the net sales amountaccounts for more than 10% of the net sales stated in theConsolidated Statements of Income are separately listed.

80*3
Major countries or regions that belong to the segments are
as follows:
1. East Asia: South Korea and Hong Kong
2. Southeast Asia: Thailand, Indonesia, Malaysia, etc.
3. North America: United States, Canada and Mexico
4. Others: Bangladesh, Australia, United Kingdom, etc.

Annual Report 2011(b) Property, plant and equipment
2011

Millions of yen
Japan

East Asia

Philippines

Southeast Asia

North America

OthersTotal¥158,849¥11,286¥61,252¥1,824¥26,486¥5,392¥265,089

Japan

East Asia

Philippines

Southeast Asia

North America

OthersTotal$1,910,391$135,731$736,645$21,936$318,533$64,846$3,188,082

Thousands of U.S. dollars*2
Major countries or regions that belong to the segments are
as follows:
1. East Asia: China and Taiwan
2. Southeast Asia: Thailand, Malaysia and Singapore
3. North America: United States
4. Others: Australia, Solomon Islands, Peru and Chile*1
Regions are segmented based on their geographical proximity, and only those countries for which the property, plantand equipment amount accounts for more than 10% of theproperty, plant and equipment stated in the Consolidated
Balance Sheets are separately listed.

(2) Information about major customers
2011
Customer’s designation or name

Sumitomo Corporation
MITSUI & CO., LTD.

Thousands of
U.S. dollars

Millions of yen
Sales

Sales

¥113,063¥ 80,619

Related reported segments$1,359,747 Smelting & Refining, Materials$ 969,561 Smelting & Refining

Information about impairment loss of fixed assets by reported segment
Millions of yen

2011

Loss on impairment of fixed assets

MineralResources

Smelting& Refining

Materials

OthersAdjustment

Consolidated

¥63

¥—

¥—

¥—

¥—

¥63

MineralResources

Smelting& Refining

Materials

OthersAdjustment

Consolidated

$758

$—

$—

$—

$—

$758

Thousands of U.S. dollars

Loss on impairment of fixed assets

Information about unamortized balance of goodwill by reported segment
Millions of yen

2011

Balance at end of fiscal year

MineralResources

Smelting& Refining

Materials

OthersAdjustment

Consolidated

¥635

¥—

¥5

¥—

¥—

¥640

MineralResources

Smelting& Refining

Materials

OthersAdjustment

Consolidated$7,637

$—

$60

$—

$—

$7,697

Thousands of U.S. dollars

Balance at end of fiscal year

Effective from the fiscal year ended March 31, 2011, the Company adopted “Accounting Standard for Disclosures about
Segments of an Enterprise and Related Information”(ASBJ Statement No.17 issued on March 27, 2009) and “Guidance on
Accounting Standard for Disclosures about Segments of an Enterprise and Related Information”(ASBJ Guidance No.20 issued on
March 21, 2008).

81

Sumitomo Metal Mining

16. Asset retirement obligations(1) Asset retirement obligations that are recorded in thebalance sheets
With regard to mines and quarries in operation in Japan, theCompany is required by the Mining Safety Act, the Law on
Special Measures for Mine Damages Caused by the Metal
Mining Industry, etc., the Quarrying Act and leasing agreements to undertake mine pollution prevention activities forpost-use specified facilities and to restore such facilities totheir original condition. Based on these requirements, theCompany records as asset retirement obligations a rational
estimate of the expenses required for mine pollution prevention activities and any removal expenses.
For the domestic facilities of the Group in Japan, theCompany makes rational estimates of the costs of demolishing and conducting surveys in accordance with requirements
regarding special removal methods and obligations to conduct
environmental surveys under asbestos damage prevention
regulations of asbestos-related regulations and occupational
health and safety regulations of dioxin-related regulations,and posts these amounts as asset retirement obligations.
Asset retirement obligations are calculated based on theestimated period until expenditure, the remaining useful lifeof facilities and the mine life (3 to 32) and discounted by therates of 1.656% to 2.285%.
Sumitomo Metal Mining Pogo LLC, Sumitomo Metal Mining
Arizona Inc., Sumitomo Metal Mining Oceania Pty. Ltd. andCoral Bay Nickel Corporation are subject to the U.S. GAAP orInternational Financial Reporting Standards, as well as themining laws and regulations of the United States, Australia
and the Republic of the Philippines, respectively. Based on its
business plans, the Company determines asset retirement
obligations by making rational estimates of its obligations
under such regulations of restoring operating mines andsmelters to their original condition and the expenses offulfilling these obligations. Furthermore, during the fiscal
year ended March 31, 2011, the Company revised its estimates in accordance with changes in the discount rates andthe mine life. Asset retirement obligations are calculated
based on determining the estimated period until expenditure, the remaining useful life of facilities and the mine life
(8 to 18) and discounted by the rates of 2.1% to 11.0%.

82

The asset retirement obligations as of March 31, 2011 are as
follows:
2011

Balance at the beginning of the fiscal year*
Newly recorded obligations
Adjustment due to passage of time
Decrease due to fulfillment of obligations
Increase due to change in estimates
Foreign exchange adjustment
Year-end balance
2011

Balance at the beginning of the fiscal year*
Newly recorded obligations
Adjustment due to passage of time
Decrease due to fulfillment of obligations
Increase due to change in estimates
Foreign exchange adjustment
Year-end balance

Millions of yen¥3,484
701
148
(17)
214
(262)
¥4,268
Thousands of
U.S. dollars$41,900
8,431
1,780
(204)
2,574
(3,151)$51,329* The balance of the asset retirement obligation at beginningof the fiscal year was determined based upon the guidance
set forth in “Accounting Standards for Asset Retirement
Obligations” (ASBJ Statement No.18 issued on March 31,2008) and “Guidance on Accounting Standards for Asset
Retirement Obligations” (ASBJ Guidance No.21, issued on
March 31, 2008).
(2) Asset retirement obligations other than those recorded in
the balance sheets
The Group is required under leasing agreements to restore
certain facilities on borrowed buildings and sites to their
original condition at the time of removal. In cases where theperiod of use for lease assets is unclear or for which no relocation plans are in existence, asset retirement obligations
cannot be rationally estimated. Furthermore, certain sites at
our facilities employ hazardous substances specified under
the Water Pollution Control Act, and at the time of removing
its facilities the Company is required to conduct soil remediation surveys in accordance with the Soil Contamination
Countermeasures Law. However, as the responsibility forfulfilling this obligation is estimated to be deferred, thetiming for performing such surveys is unclear. Therefore,
asset retirement obligations cannot be rationally estimated.
Consequently, no corresponding asset retirement obligations
are included in these obligations.

Annual Report 2011

17. Information for certain leases(1) Finance leases
Lease assets
Lease assets related to non-ownership transfer financeleases. Leases can depreciate assets over the lease periodusing the straight-line method with no residual value. For
finance lease transactions other than those involving a transfer of title that began prior to the application of the new
accounting standards, the previous operating lease method
will continue to be applied.

As a lessee
A summary of assumed amounts inclusive of interest of acquisition cost, accumulated depreciation and net book value offinance leases accounted for in the same manner as operating leases as of March 31, 2011 and 2010 are as follows:
Millions of yen

2011

Machinery and equipment

Acquisition cost

Accumulated
depreciation

Net book value

¥91

¥79

¥12

2010
Acquisition cost

Accumulated
depreciation

Net book value

¥97

¥75

¥22

Thousands of U.S. dollars

2011

Machinery and equipment

Acquisition cost

Accumulated
depreciation

Net book value$1,094$950$144

Future lease payment, inclusive of interest as of March 31, 2011 and 2010 under such leases are as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of U.S. dollars

2011

2010

2011

¥ 8
4
¥12

¥13
9
¥22

$ 96
48
$144

Total lease expenses and assumed depreciation charges for the fiscal years ended March 31, 2011, 2010 and 2009 are
as follows:
Millions of yen

Total lease expenses
Assumed depreciation charge

Thousands of U.S. dollars

2011

2010

2009

2011

¥14
14

¥22
22

¥38
38

$168
168

As a lessor
As of March 31, 2011 and 2010, there was no lease asset related to non-ownership transfer the Company leased as a lessor.
(2) Operating leases
Future minimum lease payments as of March 31, 2011 and 2010 are as follows:.
Millions of yen

Due within one year
Due after one year
Total

Thousands of U.S. dollars

2011

2010

2011

¥ 138
1,035
¥1,173¥ 139
1,173¥1,312$ 1,660
12,447$14,10783

Sumitomo Metal Mining

18. Business combination
The fiscal year ended March 31, 2010
Acquisition of Teck Pogo Inc. by the purchase method(1) OUTLINE OF THE TRANSACTIONS(a) Name and business of the acquiree
Company name: Teck Pogo Inc.
Description of business: Participation in the management and operation of the Pogo Gold Mine, locatedin the state of Alaska in the U.S., based on thecompany’s 34% equity interest.
(b) Outline and details of the purpose of the transaction
The principal reason for business combination
Sumitomo Metal Mining Co., Ltd. continues to pursue
its objective of becoming a major player in the global
non-ferrous metals market. Currently, SMM Pogo LLC,
a consolidated subsidiary of the Company’s wholly
owned subsidiary Sumitomo Metal Mining America Inc.,
holds a 51% in the mine. Using SMM Pogo LLC as its
vehicle, the Company acquired Teck Pogo Inc., whichholds a 34% interest in the subject mine. In completing
this acquisition, the Company gained a majority sharein the Pogo Gold Mine enabling it to manage andoperate the mine in its own right. This acquisition also
serves to further advance the Company’s overseas
resource development business.
(c) Effective date of business combination
July 7, 2009(d) The legal structure of the business combination andthe name of the company after business combination
The legal structure of the business combination:
Acquisition of shares whose consideration was cash
was executed based on the share purchaseagreement
The name of the company after business combination:
After reorganization of the structure of Teck Pogo
Inc. to Teck Pogo LLC, the name of the company waschanged to Sumitomo Metal Mining Pogo LLC(e) Share of voting rights acquired
100%(2) THE PERIOD OF THE OPERATING RESULT OF THE ACQUIREEINCLUDED IN CONSOLIDATED FINANCIAL STATEMENTS
The account settlement date of the company involved in
the relevant acquisition is December 31. The operating
results for the period from July 7, 2009 to December 31,
2009 have been brought to account.
84(3) ACQUISITION COST
¥20,203 million(4) GOODWILL(a) The amount of negative goodwill¥985 million(b) Principal reason for the incidence of negative goodwill
After confirming the acquisition cost applicable to the
Teck Pogo shares with its parent company Teck
Resources Ltd. the market price of gold increased. This
gave rise to an unrealized gain on the transaction.
(c) The amortization method and amortization period
The amortization of negative goodwill is subject to theprovisions outlined under the US accounting standard
for business combinations. Negative goodwill has beenamortized as a lump sum in the accounting period inwhich it occurred.
(5) BREAKDOWN OF MAJOR ASSETS AND LIABILITIES RECEIVED
AND THEIR AMOUNTS ON THE DATE OF BUSINESSCOMBINATION

Current assets
Long-term assets
Current liabilities
Long-term liabilities
Negative goodwill
Acquisition cost of the company
involved in the relevant acquisition

Millions of yen

Thousands of
U.S. dollars¥ 1,920
21,514(798)(1,448)(985)$ 20,634
231,211(8,576)(15,561)(10,586)¥20,203$217,120(6) ESTIMATED IMPACT ON THE CURRENT FISCAL YEAR’SCONSOLIDATED FINANCIAL STATEMENTS IF THE BUSINESSCOMBINATION HAD OCCURRED AT THE BEGINNING OF THE
FISCAL YEAR (UNAUDITED)Net sales
Operating income
Ordinary income
Income before income taxes andminority interests
Net income
Net income per share(yen and dollars respectively)

Millions of yen

Thousands of
U.S. dollars¥5,448
1,787
1,357$58,549
19,205
14,584

1,357
¥ 811

14,584$ 8,716¥ 1.45$ 0.016* The pro forma information disclosed in the above table expressed the difference
between the estimated sales and earnings assuming that the business combination had been completed at the beginning of the current fiscal year and the actual
sales and earnings presented in the consolidated statements of income of theacquirer.

Annual Report 2011

Establishment of Sumiko Kunitomi Denshi Co., Ltd.
(1) OUTLINE OF THE TRANSACTIONS BY THE TRANSACTION
UNDER COMMON CONTROL(a) The name of the subject business and the content of
its businessType of business: A business whose principal functionis the manufacture of crystalline and magnetic
materials
Description of business activities: Primarily the manufacture of crystalline and magnetic materials at theCompany’s former Kunitomi District Division(b) Outline and details of the purpose of the transaction
In an effort to further strengthen and expand its business operations in electronics and advanced materials,
the Company reorganized its activities in each of theseareas on October 1, 2008. Under this restructuring theElectronics Division and the Advanced Materials
Division were reorganized into the Semiconductor
Materials Division and a newly constituted Advanced
Materials Division. Historically, the former Kunitomi
District Division served as a manufacturing base forcrystalline materials including tantalic acid lithium andniobic acid lithium crystals as well as such magnetic
materials as samarium iron-nitrogen. These businesses,
however, continue to feel the effects of sharp anddramatic market adjustments peculiar to electronicsrelated industries as well as unforeseen substantial
declines in prices. Buffeted by a harsh operating environment, the crystalline and magnetic materials
businesses which had been operated at the former
Kunitomi District Division were transferred as a shortform corporate split to the Sumitomo Kunitomi Denshi
Co., Ltd., which was newly established, on April 1, 2009.
(c) Effective date of business combination
April 1 2009(d) The name of the company after business combination
Sumiko Kunitomi Denshi Co., Ltd. (a consolidated
subsidiary of the Company)(e) The legal structure of the business combination
The business combination was accomplished utilizing
an incorporation-type corporate split method (shortform merger) with the Company as the corporate split
company and Sumiko Kunitomi Denshi Co., Ltd., acompany engaged in the manufacture of crystalline
and magnetic materials, as the newly establishedcompany.

(2) OUTLINE OF THE ACCOUNTING PROCEDURE IMPLEMENTED
The Company implemented the accounting procedure fora business combination under common control based on
the “Accounting Standards for Business Combinations”
issued by the Business Accounting Council on October 31,
2003 and the “Guidance on Accounting Standard forBusiness Combination and Accounting Standard forBusiness Divestitures” (Guidance No.10 issued by the
Accounting Standards Board of Japan, revised on
November 15, 2007).
Absorption merger between Sumitomo Metal Mining Pogo
LLC and SMM Pogo LLC(1) OUTLINE OF THE TRANSACTIONS(a) Name and business of the acquirer
Company name: Sumitomo Metal Mining Pogo LLC
Description of business: Holder of an equity interest in
the Pogo Gold Mine located in the state of Alaska in
the United States while at the same time serving as
mine manager and operator.
(b) Name of the company of the acquiree
Name of the combining company: SMM Pogo LLC
Description of business activities: Holder of an equity
interest in the Pogo Gold Mine located in the state of
Alaska in the United States.
(c) Outline and details of the purpose of the transaction
With the aim of managing and operating the PogoGold Mine in its own right, the Company utilizing SMM
Pogo LLC, a consolidated subsidiary which held a 51%
interest in the mine, acquired all of the issued andoutstanding shares of Teck Pogo Inc., a company
which held a 34% interest in the mine (following theacquisition of shares, the name of Teck Pogo Inc. waschanged to Sumitomo Metal Mining Pogo LLC). In orderto unify management of such subsidiaries with interests in the Pogo Gold Mine as Sumitomo Metal Mining
Pogo LLC and SMM Pogo LLC, they undertook an
absorption-type merger.
(d) Date of the merger
July 8, 2009(e) The name of the company after business combination
Sumitomo Metal Mining Pogo LLC

85

Sumitomo Metal Mining(f) The legal structure and method of the businesscombination
The business combination was accomplished utilizing
an absorption-type merger method with Sumitomo
Metal Mining Pogo LLC as the surviving company and
SMM Pogo LLC as the liquidated company.
(2) OUTLINE OF THE ACCOUNTING PROCEDURE IMPLEMENTED
Accounting procedures implemented for the merger werein accordance with accounting standards and practices
generally accepted in the United States. These accounting
procedures had no impact on the consolidated financial
statements.
The fiscal year ended March 31, 2011
Establishment of Shisaka Smelting Co., Ltd(1) OUTLINE OF THE TRANSACTIONS BY THE TRANSACTION
UNDER COMMON CONTROL(a) The name of the subject business and the content of
its businessType of business: Manufacture of crude zinc oxide
Description of business activities: Primarily manufactureof crude zinc oxide at the Company’s Shisaka Plant(b) Outline and details of the purpose of the transaction
The Company previously performed operations in the
manufacture of crude zinc oxide at its Shisaka Plant byrecovering zinc from steelmaking dust produced byelectric furnace manufacturers. However, sluggish
growth in the volume of steelmaking dust collected
was resulting in reduced production ratios and a severe
operating environment for Shisaka Plant. In order toaddress this situation, the Company established a newcompany dedicated to the manufacture of crude zincoxide in the form of a spin-off. This company wasestablished to strengthen production systems by
separating the maintenance and management ofassets relating to past operations at Shisaka Plant
from the manufacture of crude zinc oxide.
Another goal of this establishment was fortifying
raw material procurement capabilities through direct
collaboration for the collection of steelmaking dustwith the consignee, MS Zinc Co., Ltd., an equity-method
affiliate of the Company.
(c) Effective date of establishment
October 1, 201086(d) The name of the company after business combination
Shisaka Smelting Co., Ltd. (a consolidated subsidiary of
the Company)(e) The legal structure of the business combination
The business combination was accomplished utilizing
an incorporation-type corporate split method (shortform merger) with the Company as the corporate split
company and Shisaka Smelting Co., Ltd., a company
engaged in the manufacture of crude zinc oxide, as the
newly established company.
(2) OUTLINE OF THE ACCOUNTING PROCEDURE
IMPLEMENTED
The Company implemented the accounting procedures
for a business combination under common control
based on the “Accounting Standard for Business
Combinations” (ASBJ Statement No.21, of December 26,2008) and “Guidance on Accounting Standard forBusiness Combination and Accounting Standard forBusiness Divestitures” (Revised guidance No.10, issued
on the ASBJ on December 26, 2008).
Formation of a jointly controlled company(1) OUTLINE OF THE TRANSACTIONS(a) The name of the subject business and the content of
its businessType of business: Copper and copper alloy fabricatedbusiness of consolidated subsidiary Sumitomo Metal
Mining Brass & Copper Co., Ltd.
Description of business activities: Primarily
manufacture and sales of brass strips, sheets, androlled products(b) Outline and details of the purpose of the transaction
Previously, the Company’s copper and copper alloy
fabricated business achieved its high profitability
through constructing an integrated supply system
handled by consolidated subsidiary Sumitomo Metal
Mining Brass & Copper Co., Ltd., while placing a particular focus on the utilization of rolling, plating, and othertreatment technologies. Meanwhile, Mitsui Mining &Smelting Co., Ltd. had established a leading position inbrass production in Japan through the integrated
supply system of its Rolled Copper & Zinc Division,
which covered all aspects for production from raw
materials to fabrication.
However, demand for copper and copper alloy fabricated products has rapidly declined since around 2000,
and competition within the industry has been intensi-

Annual Report 2011

fying every year. To prosper in this environment, Mitsui
and Sumitomo have decided to integrate their copperand copper alloy businesses to establish a system todevelop synergies through more effective utilizationof production facilities, improved operational andmanagerial efficiency, and the supplementation andaugmentation of each companies’ manufacturing
technologies.
This integration will enable the companies to createa stable supply system for high-quality rolled copperand copper alloy products that responds quickly todemand, establish overwhelming supremacy in thebrass business in the Japanese market, and aggressively develop operations in other Asian markets tofurther increase the scale of operations.
(c) Effective date of business combination
July 1, 2010(d) The name of the company after business combination
Mitsui Sumitomo Metal Mining Brass & Copper Co., Ltd.
(e) The legal structure of the business combination
The business combination was accomplished utilizing
an absorption-type split with Mitsui Mining & Smelting
Co., Ltd. as the splitting company and Sumitomo Metal
Mining Brass & Copper Co., Ltd. (consolidated subsidiaryof the company) as the succeeding company.
(f) Reason for definition as a jointly controlled company
In regard to Mitsui Sumitomo Metal Mining Brass &Copper Co., Ltd.’s definition as a jointly controlled
company, the Company and Mitsui Mining & Smelting
Co., Ltd. have concluded a shareholders’ agreement
defining the company as a jointly controlled company.
Further, consideration for the business combination
was paid entirely in the form of stock with voting
rights. Moreover, there is nothing that suggests a
different type of control. Therefore, the company after
the business combination is defined as a jointly
controlled company.
(2) Outline of the accounting procedure implemented
The Company implemented the accounting proceduresfor the formation of a jointly controlled company
based on the accounting standards “AccountingStandard for Business Combinations” (ASBJ Statement
No.21, issued by the ASBJ on December 26, 2008) and“Guidance on Accounting Standard for Business

Combination and Accounting Standard for Business
Divestitures” (Guidance No.10, revised by the ASBJ on
December 26, 2008).
Further, Mitsui Sumitomo Metal Mining Brass &Copper Co., Ltd. is an equity-method affiliate of theCompany with the Company and Mitsui Mining &Smelting Co., Ltd. each possessing 50% of its voting
rights.
19. Condensed financial information of a major affiliatedcompany
Pursuant to the relevant accounting standards, condensed
financial information of Sociedad Minera Cerro Verde S.A.A.,
which is disclosed for the year ended December 31, 2010 and2009 is as follows.
2010

Millions of yen

Total current assets
Total long-term assets
Total current liabilities
Total long-term liabilities
Total net assets
Net sales
Net income before tax
Net income¥ 93,590
92,697
39,832
20,056
126,399
207,997
146,335
92,5782009

Millions of yen

Total current assets
Total long-term assets
Total current liabilities
Total long-term liabilities
Total net assets
Net sales
Net income before tax
Net income¥ 71,081
105,120
24,841
18,175133,185
164,608
105,099
66,361

2010

Thousands of
U.S. dollars

Total current assets
Total long-term assets
Total current liabilities
Total long-term liabilities
Total net assets
Net sales
Net income before tax
Net income$1,125,556
1,114,817
479,038
241,2031,520,132
2,501,467
1,759,892
1,113,385

87

Sumitomo Metal Mining

20. Earnings per share
Reconciliation of the difference between basic and diluted net income per share (“EPS”) for the fiscal years ended March 31,
2011, 2010 and 2009 were as follows:
Millions of yen Thousands of U.S. dollars

Basic net income per share calculation
Numerator:
Net income
Denominator (thousands of shares):Weighted average number of shares
Basic EPS (yen and U.S. dollars)
Diluted net income per share calculation
Numerator:
Net income
Adjusted net income
Denominator (thousands of shares):Weighted average number of shares
Assumed conversion of convertible bonds
Adjusted weighted average number of shares
Diluted EPS (yen and U.S. dollars)

2011

2010

2009

2011

¥ 83,962¥ 53,952¥ 21,974$1,009,765

562,067¥ 149.38¥

560,48596.26¥

565,33838.87$¥ 83,962
84,826¥ 53,952
54,816¥ 21,974
22,838$1,009,765
1,020,156

562,067
57,176619,243¥ 136.98

560,485
57,176617,661¥ 88.75

565,338
65,842
631,180¥ 36.18

—
—
—
1.65

$

—
1.80

21. Subsequent event
The following appropriation of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial statements for the year ended March 31, 2011, was approved at a shareholders’ meeting held on June 27, 2011:
Millions of yen Thousands of U.S. dollars

Year-end dividends of ¥20.00 per share

88¥11,240$135,177

Annual Report 2011

Independent Auditors’ Report89Sumitomo Metal Mining

Glossary
Mineral resources segment andSmelting & refining segment
Metal trading
London Metal Exchange (LME)The LME specializes in trading of nonferrous metals such as copper, nickel,
aluminum, lead and zinc. The LME
trading prices for metals are used as theinternational pricing benchmarks forsales of refined metal and purchases ofrefining ores.
TC/RC
Treatment Charge (TC) and Refining
Charge (RC) are commonly used in theterms of purchase for copper concentrate or nickel ore for refining. They areamounts designed to cover refining
costs. For example, copper concentrate
contracts may define a purchase pricebased on the LME price at a certain
date, minus the TC or RC being used at
the time.
London fixing
Gold is not traded on the LME. Its priceis determined for each transaction
between market participants. The
financial institutions in the London
Bullion Market Association (LBMA)
agree on a standard price for gold
based on these transactions and publish
it on the morning and afternoon of eachtrading day. This “London fixing” priceis the benchmark for trading in gold.
Pound (lb)Part of the imperial system ofmeasures, the pound is the standard
unit of weight used in measuring andpricing base metals such as copper andnickel, and in TC/RC calculations. One
pound is equal to 453.59 grams; animperial ton equals 2,204.62lb.
Troy ounce (toz)The troy ounce is the standard unit ofweight for precious metals such as goldand silver. It equals approximately 31.1

90

grams. It is named after Troyes, a city in
the Champagne region of central France
that was the site of a major market inEurope in medieval times. Originallyused as a unit of exchange for valuing
goods in terms of gold or silver weights,
the troy ounce is still used today in gold
trading.
Metal refining
Smelting and refining
Refining processes extract valuable
metals from ores or other raw materials.
They fall into two basic types: pyrometallurgical (dry) and hydrometallurgical(wet). At SMM’s Toyo facilities in Ehime
Prefecture, the copper concentrate preprocessing undertaken at Saijo uses
pyrometallurgical processes and thenickel refining at the Niihama site useshydrometallurgical processes entirely.
The term ‘smelting’ is used for the
extraction of metal from ores using
melting and heating (pyrometallurgy).
The term ‘refining’ refers to any processthat increases the grade or purity of ametal.
Pyrometallurgical refining
The precursor ore is melted at hightemperature in a furnace, and refining
techniques are applied to separate themetal in a molten state.
Hydrometallurgical refining
The ore and impurities are dissolved ina solution, and chemical reactions areused to separate out the metal.
Metal ores
Sulfide ores
These ores contain copper, nickel orother metals chemically bonded tosulfur. Since the application of heatbreaks these bonds, releasing the sulfur,
such ores are generally refined using
pyrometallurgical techniques.

Oxide ores
These ores contain metals in oxidized
forms. Unlike sulfide ores, oxides needmuch more energy to achieve melting.
For this reason, the hydrometallurgicalapproach is generally used to refine
these ores.
Copper concentrates
Used as raw materials in copper smelting, copper concentrates have a copper
content of about 30% by weight. The
remainder consists mostly of sulfur andiron. Copper concentrates are mademostly from sulfide ores. Ores extracted
from overseas mines have a typicalgrade of about 1%. The ores are then“dressed” at the mine to increase thepurity and produce concentrate. Most of
the copper ores imported by SMM for
smelting in Japan are concentrates.
Nickel oxide ores
Whilst the higher-grade sulfide ores areused predominantly in nickel refining,
nickel oxide ores are more prevalentthan nickel sulfides. The sulfide-oxide
ratio in current nickel reserves isbelieved to be about 3:7. High refining
costs and technical issues have limited
use of oxide ores in nickel refining todate, but SMM has succeeded in refining
nickel from low-grade oxide ores basedon HPAL technology.
Mixed sulfide (MS) ores
CBNC produces a mixed nickel-cobalt
sulfide intermediate containing about
60% nickel by weight. This is used asa raw material in electrolytic nickel
production.
Matte
A matte is another term for metalsulfides. For raw material, electrolytic
nickel production at SMM also uses anickel matte (of about 75–80% purity)sourced from PT Inco.

Annual Report 2011

Proprietary ore ratio
This ratio is the proportion by volume ofore procured from overseas mining
interests relative to the overall volumeof smelting ores used as raw materials.
Typically, off-take rights are proportional to the equity interest in a mine.
In the case of Cerro Verde, SMM has
secured 50% off-take rights for the firstten years of production from 2006,
based on a 21% equity interest.
Nickel production process
Coral Bay Nickel Corporation (CBNC)
Based in the Philippines, this SMM
subsidiary produces mixed nickel-cobalt
sulfides using HPAL technology andexports the raw materials to the SMM
Group’s nickel refining facilities in
Niihama, Ehime Prefecture.
High Pressure Acid Leach (HPAL)
HPAL technology enables the recoveryof nickel from nickel oxide ores thattraditionally were difficult to process.
SMM was the first company in the world
to apply it successfully on a commercial
scale. The oxide ores are subjected tohigh temperature and pressure andreacted under stable conditions withsulfuric acid to produce a nickel-richrefining intermediate.
Matte Chlorine Leach Electrowinning(MCLE)MCLE is the technology used in the
manufacturing process at SMM’s nickel
refinery. The matte and mixed sulfide
ores are dissolved in chlorine at highpressure to produce high-grade nickel
using electrolysis. MCLE is competitivein cost terms, but poses significant
operational challenges.

Main applications for metals
CopperCopper is fabricated into wires, pipes
and other forms. Besides power cables,
copper is used widely in consumer applications such as wiring in vehicles orhouses, and in air conditioning systems.
Electrolytic nickel
This form of nickel, which has a purityof at least 99.99%, is used in specialty
steels, electronics materials and electroplating, among other applications. SMM
is the only producer of electrolytic nickel
in Japan.

Materials segment
Copper-clad polyimide film (CCPF)
CCPF is a polyimide film that is coatedusing a copper base. It is used as amaterial for making COF substrates.
SMM commands a top share of the CCPF
supplied for use in large liquid crystal
displays (LCDs).

Ferronickel
Ferronickel is an alloy containing nickel(about 20%) and iron. Its main use isin the manufacture of stainless steel,which is about 10% nickel by weight.
Based in Hyuga, Miyazaki Prefecture,
SMM Group firm Hyuga Smelting
produces ferronickel.

Lead frames (L/F)
Lead frames are electronic packaging
materials used to form connections insemiconductor chips and printed circuitboards. They contain thin strips of ametal alloy containing mostly nickel orcopper.

Gold
Gold is in demand worldwide for investment and decorative purposes. Gold iswidely used in industry within the electronics sector because of its highmalleability and ductility. Part of SMM’sgold production goes to SMM Group
companies engaged in fabricating andselling bonding wire.

Chip-on-film (COF) substrates
COF substrates are electronic packaging
materials used to make integrated
circuits for LCD drivers. They connect
these circuits to the LCD panel.

Bonding wire
Composed of gold wire that is just a few
micrometers thick, bonding wire is used
to make electrical connections between
lead frames and the electrodes on semiconductor chips.
Secondary batteries
Secondary batteries are ones that canbe recharged and used again. SMM
supplies battery materials that are usedin the anodes of nickel metal hydride
batteries and lithium-ion rechargeable
batteries, which supply power for
hybrid vehicles or notebook computers,
among other consumer applications.

91Sumitomo Metal Mining

Corporate Data and Investor Information
As of March 31, 2011

Corporate Data
FoundedIncorporated
Paid-In Capital
Number of Employees
Head Office

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
Website URL: http://www.smm.co.jp/E/

1590
1950
¥93.2 billion
2,130
11-3, Shimbashi 5-chome,
Minato-ku, Tokyo 105-8716, Japan

Investor Information
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 Juneeach 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:
57,204
Listing of Shares
Tokyo, Osaka
Stock Transaction Unit 1,000 shares

Major Shareholders
Japan Trustee Services Bank, Ltd. (Trust accounts)
The Master Trust Bank of Japan, Ltd. (Trust accounts)
SSBT OD05 OMNIBUS ACCOUNT—TREATY CLIENTS
Sumitomo Metal Industries, Ltd.
NT RE GOVT OF SPORE INVT CORP P.LTD
THE CHASE MANHATTAN BANK, N. A. LONDON SECS
LENDING OMNIBUS ACCOUNT
Sumitomo Mitsui Banking Corporation
Sumitomo Life Insurance Company
Sumitomo Corporation
Japan Trustee Services Bank, Ltd. (Trust accounts 9)

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 NoticeElectronic notification (However, if electronic notification is
not possible due to an accident or other unavoidable circumstances, notice will be published in the Nihon Keizai Shimbun
newspaper.)Independent Public Accountant
KPMG AZSA LLC
1-2, Tsukudo-cho, Shinjuku-ku, Tokyo

Number ofshares held
(thousands)

Shareholding
ratio
(%)

49,12540,955
11,320
8,715
8,052

8.7
7.3
2.0
1.6
1.4

7,795

1.4

7,650
7,474
7,000
6,756

1.4
1.3
1.2
1.2

Breakdown of Shareholders(Thousands of shares)
Treasury Stock
19,621
3.37%
Individuals
and Other
112,846
19.40%

Financial
Institutions
214,31936.84%

ForeignInvestors
164,432
28.29%

Securities
Companies
15,707
2.70%
Other Corporations
54,702
9.40%

Note: Shareholding ratio is calculated excluding treasury stock.

Stock Price and Trading Volume
SMM (Yen) (left)

TOPIX (Point) (left)

Trading volume (Millions of shares) (right)

1,500

60

1,000

30

500

04/2009

10/2009

Note: TOPIX began on 4 January 1968 with a base level of 100.
92

04/2010

10/201004/20110

Contents
2 Consolidated Financial Highlights
3 Introduction
Our story
11 Message to our stakeholders
19 Feature
New growth
29 Year in review
30 Review of Operations
36 Working to Realize a Sustainable Society
39 Corporate Governance
43 Financial Section
90 Glossary
92 Corporate Data and Investor Information– For explanations of specialized industry terms, please see the Glossary on pages 90 to 91.
–	Note Regarding Forward-Looking Statements: The forward-looking statements in this annual
report, including business results forecasts, are based on information available to the Company
and on certain assumptions deemed to be reasonable as of the date of release of this report.
Actual business results may differ substantially due to a number of factors. Unless specificallystated otherwise, information in this annual report is as of July 1, 2011.

SUMITOMO METAL MINING CO., LTD.
11-3, Shimbashi 5-chome, Minato-ku,
Tokyo 105-8716, Japan
http://www.smm.co.jp

Annual report 2011
SUMITOMO METAL MINING CO., LTD.

Printed in Japan