For the year ended March 31, 2013

CONTENTS

02

Financial Summary

04

A World Leader in the Non-Ferrous Metals Industry & an Excellent Company of Japan12

2012 3-Year Business Plan Summary

14

Message from the President

22

Review of Operations

28

Business Network

30

Corporate Governance33

Corporate Social Responsibility

34

Directors and Audit & Supervisory Board Members

35

Financial Section

78

Glossary

80

Consolidated Subsidiaries and Equity-Method Affiliates

83

Corporate Data and Investor Information

The Sumitomo Business Spirit
Article 1

Sumitomo shall achieve strength and prosperity by placing prime
importance on integrity and sound management in the conduct of its
business.
Article 2

Sumitomo shall manage its activities with foresight and flexibility inorder to cope effectively with the changing times. Under nocircumstances, 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
s 3UMITOMO -ETAL -INING #O ,TD 3-- IN ACCORDANCE WITH THE 3UMITOMO "USINESS
Spirit, shall, through the performance of sound corporate activities and the promotion ofsustainable co-existence with the global environment, seek to make positive
contributions to society and to fulfill its responsibilities to its stakeholders, in order to win
ever greater trust.
s 3-- SHALL BASED ON RESPECT FOR ALL INDIVIDUALS AND RECOGNIZING EACH PERSONS DIGNITY
and value, seek to be a forward-minded and vibrant company.

SMM Group Management Vision

Specialized industry terms:
Specialized terms are covered in the Glossary on pages 78 to 79.
Note regarding forward-looking statements:
The forward-looking statements in this annual report, including business result forecasts, are based on information available to theCompany 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 specifically stated otherwise, information in this annual report is as of July 1, 2013.

s "Y DEVELOPING AND EMPLOYING INNOVATIVE TECHNOLOGY WE SHALL FULFILL OUR SOCIAL
responsibilities as a manufacturing enterprise.
s "ASED ON THE PRINCIPLES OF COMPLIANCE ENVIRONMENTAL PROTECTION AND OPERATIONAL
safety, the Sumitomo Metal Mining Group shall pursue maximum corporate value
through the provision, via its global network, of high-quality materials such as
non-ferrous metals and electronics and advanced materials.

Hishikari Mine (Kagoshima Prefecture)01

Financial Summary

2012

Fiscal year

2011

2010

2009

2008

2007

2006

2005

Results for the year (Millions of yen)
Net sales

808,540

847,897864,077

725,827

793,797

1,132,372

966,764

625,579

Operating income

95,78588,577

96,03866,265

10,534

155,394

162,632

82,756

Recurring profit

115,034

108,829

123,701

87,791

32,572

217,866

205,285

99,716

Income (loss) before
taxes and minority
interests

122,455

87,962

123,394

82,776

22,942

216,504

205,617

92,974

Net income (loss)

86,64065,286

83,962

53,952

21,974

137,808

126,054

62,800Net Sales

Operating Income

Recurring Profit(¥ billions)(¥ billions)(¥ billions)

1,000

150

150

800

120

120

600

90

90

400

60

60

200

30

30

Financial position at year-end (Millions of yen)
Total assets

1,351,153 1,146,759 1,052,353

981,458

880,001

1,091,716

929,208

772,562

Net assets

844,547

726,039

684,103629,684

547,251

640,345528,921394,899

Long-term debt
due after one year

212,323

157,119

135,128

132,311

141,716

169,394

93,800114,405

Interest-bearing debt 330,073

265,951

210,969

200,939

218,534

258,054

189,910

190,891

Net income

155.58116.17149.38

96.26

38.87

238.13220.49109.96

Net assets

1,393.02

1,173.97

1,121.19

1,043.50

913.92

1,017.96

859.82654.15

34.0

0
2009

2010

2011

2012 (FY)

Total Assets / Equity Ratio

Amounts per share (Yen)

Cash dividends

0

28.0

32.0

20.0

13.0

30.0

27.0

0
2009

2010

2011

2012 (FY)Net Assets

2009

2010

2011

2012 (FY)Net Income /Cash Dividends per ShareTotal assets (left scale)
Equity ratio (right scale)

Net income (left scale)
Cash dividends per share (right scale)(¥ billions)(%)(¥ billions)(¥ billions)

1,500

100

1,000

100

(Yen)

50

1,200

80

800

80

40

900

60

600

60

30

600

40

400

40

20

300

20

200

20

10

0

0

14.0

Key ratios (%)
ROA

6.94

5.94

8.26

5.80

2.23

13.64

14.81

9.33

ROE*

12.13

10.12

13.80

9.89

4.02

25.39

28.99

19.10

Equity ratio*

56.9

57.5

59.9

59.8

57.3

54.0

53.4

48.4

Interest-bearing debt
to total assets ratio

24.4

23.2

20.0

20.5

24.8

23.6

20.4

24.7

Debt-to-equity ratio(times)*

0.43

0.40

0.33

0.34

0.43

0.44

0.38

0.51
0

* Shareholders' equity is defined as follows:

02

Shareholders' equity = Total shareholders' equity + Accumulated other comprehensive income

2009

2010

2011

2012 (FY)

0

0
2009

2010

2011

2012 (FY)

2009

2010

2011

2012 (FY)03

A World Leader in the Non-Ferrous Metals

Industry & an Excellent Company of Japan

Sumitomo Metal Mining Co., Ltd. (SMM) aims to become a World Leader
in the Non-Ferrous Metals Industry and an Excellent Company of Japanby deploying advanced technical capabilities cultivated over a history ofCore Advantages

SMM will undertake to grow its business and enhance its
enterprise value with technology and R&D expertise,
deployed with the capacity to expand business globallyand underpinned by a sound financial position.

Core Businesses

SMM focuses its management resources in three corebusiness areas: Mineral Resources, Smelting &Refining, and Materials, and is reinforcing its
competitive capabilities.

Long-Term Vision

SMM will pursue its continuous growth strategy, which has
been formulated to leverage our strengths. With this strategy,
we aim to become a World Leader in the Non-Ferrous
Metals Industry and an Excellent Company of Japan.

more than 400 years.

Sierra Gorda Project (Chile)

04

05

Technology
andR&D Expertise

Capacity to
Expand Business
GloballySound
Financial
Position

Technology and R&D Expertise

The DNA of 400 Years
The Sumitomo Group's copper business began in Kyoto in 1590. Using the nanban-buki
technology the founder of the group developed, Sumitomo was the first in Japan to separate
silver from copper. Manufacturing with cutting-edge technology is a principle we haveadhered to ever since. Our most recent achievement was our world-first commercialization of
HPAL technology for extracting nickel from low-grade oxide ore. Cost-efficient resource
utilization through superior technical capabilities―this is an SMM strength.

Capacity to Expand Business Globally

A Globally Expanding Business
Sumitomo's full-scale entry into the mining business dates to our development of the Besshi
Copper Mine in 1691. More than three centuries later, we are carrying out operations at theHishikari Mine in Japan and the Pogo Gold Mine in Alaska. Since 2011, we have also been
participating in Chile's Sierra Gorda Copper Mine development project. Sumitomo'sCore Advantages
SMM will undertake to grow its business and enhance its enterprisevalue with technology and R&D expertise, deployed with thecapacity to expand business globally and underpinned by asound financial position.

tradition of technical strength is playing an active role in today's world.

Sound Financial Position

A Sound Financial Foundation to
Support Large-Scale Project Investment
Our Mineral Resources business and Smelting & Refining business require the capacity tomake extremely large investments in individual projects, and recovering the invested capitalcan take many years. If project finance is to be carried out with the right timing, and the
project is to be progressed on a stable basis, a sound financial foundation is essential. SMM
utilizes its sound financial position to carry out optimal investment strategies accompanied byfirm risk control.

Port of Matarani, Peru (loading point for production from Cerro Verde Mine)

06

07

Core Businesses

MineralSmelting

Resources& Refining

Materials

Mineral Resources Business

Promoting Expanded Proﬁtability:
From Raw Material Procurement
to Resources Development and Mine Management
Since the start of the 2009 3-Year Business Plan, we have been pursuing stable raw material
procurement for our smelting and refining business and own profitability for our mining
business. Going forward, we will promote stable operations at our mines, and will makeefforts to secure mineral resources interests.

Smelting & Refining Business

Cost-Eﬃcient Operations
with World-Leading Reﬁning Technology

Core Businesses

For nickel, we are using HPAL technology to produce intermediates from low-grade ore in
the Philippines. We then refine these intermediates into electrolytic nickel in Japan. SMM isJapan's sole producer of electrolytic nickel. We are also producing electrolytic copper at
the Toyo Smelter & Refinery, which has world-class production capacity and costcompetitiveness. Using its advanced technology, SMM is generating further initiatives forcost-efficient operations with reduced environmental footprints.

SMM focuses its management resources in three core business

Materials Businessareas: Mineral Resources, Smelting & Refining, and Materials,

Together with Our Supply Chain toward Environmental
Preservation and Energy Conservationand is reinforcing its competitive capabilities.

In the 1960s, SMM leveraged its accumulated metals technology to enter the electronics
materials business. Now we are promoting advanced material development in the field ofenvironmental preservation and energy conservation, particularly for the hybrid vehicle
battery material market, where we hold a significant share.
Toyo Smelter & Refinery (Ehime Prefecture)

08

09

Long-Term Vision

Long-Term Vision

SMM will pursue its continuous growth strategy, which has

FY2013-2015
12 3-Yr Business Plan

been formulated to leverage our strengths. With this strategy,
we aim to become a World Leader in the Non-Ferrous Metals

FY2010-2012
09 3-Yr Business Plan

Become a World Leader in
the Non-Ferrous Metals
Industry and an Excellent
Company of Japan

Execute acontinuous
growth strategy

Strengthen global
competitivenessIndustry and an Excellent Company of Japan.
Strengthen
platform for
global competition

FY2004-2009
03 & 06 3-Yr
Business Plans

World Leader in the Non-Ferrous Metals Industry
Cu
productionNiproduction

Au
production

Newmaterials

300 ktpa

150 ktpa

30 tpa¥5 billion
recurring profit

Excellent Company of JapanNet sales¥1 trillion

Copper:Annual Production Interest

300 kt

Net income¥100 billion

Nickel:Annual Production
Capacity

150-ktcapacity

SMM is pursuing investment in overseas mining
projects. In 2011, we acquired an interest in Chile's
Sierra Gorda Project. We currently maintain interests
in copper mines located in the US, Chile, Peru,
Australia, and Indonesia. Going forward, we willseek to participate in new development initiatives,
expand production at existing mines, and takeother steps to raise our annual copper production
interest to 300,000 tonnes.

Once operation at the Taganito Project starts in
2013, and production capacity at the Niihama
Nickel Refinery is expanded, we will have achieved
our intermediate goal of 100,000 tonnes of annual
production capacity. Our goal will then be tofurther expand our capacity to 150,000 tonnes, witha focus on development initiatives suitable forapplication of our HPAL technology.

Gold:

New
Materials

Annual Production Interest

30 t

SMM owns the Hishikari Mine, the only commerciallyoperated metal mine in Japan. We also operate
and manage the Pogo Gold Mine in Alaska, US.
Using our accumulated expertise in mine management, we are seeking to raise our annual gold
production interest to 30 tonnes, principally throughnew mine development.

¥5 billion

recurring proﬁt

Through collaboration between the Materials
Division and the Research & Development Division,
we aim to accelerate new materials development
and raise profitability.

Taganito Project (Philippines)

10

11

2012 3-Year Business Plan Summary
SMM's long-term vision is to become a World Leader in the Non-Ferrous Metals Industry
and an Excellent Company of Japan by pursuing its continuous growth strategy.
Pogo Gold Mine (Alaska, U.S.A.)

Principal Strategies
Research and Development

Mineral Resources Business
Complete construction of Sierra Gorda Project and start
production on schedule and within budget
Promote expansion projects for copper mines where we
maintain an interest
Pursue new development project participation
Promote exploration activities, expand areas

Pursue long-term vision
strategy for annual production
interest of 300,000 tonnes ofcopper, 30 tonnes of gold

Smelting & Refining Business
Complete Taganito Project construction, launch
operations smoothly
Pursue strengthening competiveness of HPAL,
particularly by expanding types of recoverable metals
Promote search for new nickel resources

Increase nickel production
capacity to 150,000 tonnes,
strengthen cost competitivenessin copper smelting

Accelerate development of new products in material businessTechnical innovation in mineral resources, smelting & refining
Promote process development

Financial Strategy
Maintain sound financial constitution
Maintain ample liquidity to support large projects
Maintain minimum consolidated equity ratio of 50%
Dividend Policy
Continue in line with business results
Investor return: Raise consolidated dividend ratio from minimum 20% to minimum 25%

Materials Business
Concentrate management resources in environmental
and energy fields, particularly battery materials
Market new materials based on closer collaboration
with R&D and on market needs

Select and focus, complete
structural reform shift

Income by Business(¥ billions)
150
125
100
75

Cu/Ni/Au Roadmap■ Adjusted amount■ Other50■ Materials

25

Cu

300,000 t

Ni

150,000 t

30 t

Au

(kt)

(kt)

(t)

300

150

30

■ Smelting & Refining■ Mineral Resources
2010

2011

2012

12 3-Yr Plan 2015

Financial Strategy(¥ billions)

250

(%)
75

1,500

200

100

Equity ratio:
61%

20
1,250

150
100

50

Debt-to-equity
ratio: 0.35
(trial calculation)

1,000

10

■ Total assets■ Interest-bearing debt

2012 2013 2014 2015 2016

2021

■ New mines■ Existing mines (Sierra Gorda included)02012 2013 2014 2015 2016

2021

■ New ■ Existing0

2012 2013 2014 2015 2016

2021

■ New mines ■ Existing mines

25

500
ROE: 12%(trial calculation)

250■ Shareholders' equity
Equity ratio
Debt-to-equity ratio

0

0
2010

12

50

750

50
0

0

2011

2012

ROE

12 3-Yr Plan 201513

Message fromthe PresidentManagement Policy
It gives me great pleasure to issue my first message to Sumitomo Metal
Mining’s stakeholders as the company’s new president.
Since assuming my post, I have occasionally been asked whether, and how,the company's management strategy might now change. The operations
undertaken by SMM, however – especially our Mineral Resources and Smelting& Refining businesses – involve long time spans between the initial investment
decision and the commencement of production. Moreover, considerable
time is then needed before profits are realized from one investment to theextent that allows them to be applied to a subsequent investment.
Consequently, our business operations are not of a nature that readily invites
sudden changes in management policy.
In addition, during my tenure as representative director I participated in thecompany’s management and frequently engaged in discussions ofmanagement policy with other management members. So although I may
now have assumed the leading management position, I will keep thecompany's management policy without significant change. What I believe tobe important is to continue implementing the 2012 3-Year Business Plan drawn
up in February 2013 in our quest to enhance the company’s enterprise value.
In my new position I pledge to demonstrate strong leadership and perform
my management duties in ways that will ensure that Sumitomo Metal Mining
will continue to be a company in which all stakeholders place their trust andhopes, and whose operations will continue to be needed – and welcomed –by society.

Business Environment
In fiscal 2012 the global economic picture was mixed, with recovery under
way in the US but stagnation entrenched in Europe. The emerging economies,in particular China, suffered modest slowdowns in their growth rates.
Non-ferrous metal prices halted their declines midway through the term butwere generally weak throughout the year due to contraction in actual
demand. The yen depreciated sharply during the second half of the term.
Because SMM is presently expanding its business operations overseas,
metal market prices and foreign exchange rates have a major impact on thecompany’s management. Although the company cannot control theseexternal environmental factors, my aim is to stay the course in implementing
the growth strategies hoisted in our 2012 3-Year Business Plan while paying
close attention to keeping volatility risk in check.

Yoshiaki Nakazato
President & Representative Director

1415

Message from the President

Fiscal 2012 Results and Summary of 2009 3-Year Business Plan
In fiscal 2012 consolidated recurring profit reached ¥115 billion. As this outcome
surpassed the company’s ¥110 billion target for the final year of its 2009 3-YearBusiness Plan, I believe we achieved a certain degree of success. It signifies
that our growth strategies are beginning to yield clear results, and I am
confident that, as a consequence, it contributed to enhancing our
stakeholders’ trust in the company.
That said, the foregoing results were partially attributable to wide
divergences in the year’s exchange rates and non-ferrous metal prices fromthe assumptions that had been made at the time the 2009 3-Year Business Plan
was put together. Nevertheless, what is important, I believe, is to implement themeasures necessary to the expansion of our business operations over the longterm: i.e. to elevate our enterprise value by pursuing quantitative expansion,according to plan, through the development of large-scale projects.

Mineral Resources
Concerning copper operations, during the time frame of the 2009 3-YearBusiness Plan we made significant strides in expanding our interests in mines,
thanks to our successful participation in the Sierra Gorda Project. Other
projects to boost production at the copper mines in which we have interests
are also progressing smoothly.
Development costs relating to the Sierra Gorda Project, however, are now
projected to reach approximately US$3.9 billion, which is US$1 billion over the
US$2.9 billion originally anticipated. Principal factors behind the upwardly
revised figure include changes in the economic environment – higher
material costs, foreign exchange rate movements and sharply higher laborcosts – and costs incurred due to changes in construction specifications. This

there to be applied to the Taganito Project. Meanwhile at the Niihama Nickel
Refinery, where electrolytic nickel is produced from intermediates, a system
has now been completed that enables production of up to 65,000 tonnes per
year, thereby expanding the company’s nickel production capacity close toschedule.
In the area of copper smelting, operations at the Toyo Smelter & Refinery
are stabilizing after the complete overhaul of its furnace carried out in 2011.
Going forward, we will now strive to achieve efficient cost reductions.

Materials
Earnings from our Materials business finished significantly below target, an
outcome that was extremely disappointing. Compared to operations in
Mineral Resources or Smelting & Refining, the Materials business ischaracterized by short product cycles and dramatic changes. In line with ourpolicy of focusing management resources into the environment and energy
fields, going forward we aim to forge stronger relationships with our major
customers, for example by supplying battery materials to the leading
automakers. We will also strive to enhance and strengthen our businessstructure through such efforts as new product development.
In the semiconductor materials arena, two new companies have recently
been inaugurated: one integrating our leadframe business with the leadframe
operations of Hitachi Cable, Ltd. (now Hitachi Metals, Ltd.); and one
representing a large investment by SMM into Hitachi Cable’s copper alloy
businesses. We anticipate that this pooling of management resources – SMM
and Hitachi Cable’s leadframe operations, and our investment into Hitachi
Cable’s copper alloy business, which encompasses upstream copper strip
operations – will enable even greater synergy merits going forward.

increased investment outlay aside, we are holding ongoing deliberations with
our project partners and working assiduously toward achieving the target
launch of operations in 2014, with SMM committed to aggressively investing its
human resources into this project.
With respect to our gold operations, the Hishikari and Pogo mines, both ofwhich are under SMM operation, are proceeding smoothly and making
significant contributions to our bottom line.

Smelting & Refining
In our smelting and refining segment, our biggest undertaking is the Taganito
Project, under which high-pressure acid leach (HPAL) technology is to be used
to produce intermediate nickel products. Smooth progress continues to bemade toward launching commercial production this autumn. Operations
remain stable also at Coral Bay Nickel Corporation, another HPAL technology
user that began operations in 2005, and we expect the experience gained16

17

Message from the President

2012 3-Year Business Plan and Long-Term Vision:
Aiming to be “A World Leader in the Non-Ferrous Metals
Industry and an Excellent Company of Japan”

corporate philosophy and management vision and b) practices corporate
governance and undertakes CSR activities as the core of its management
stance, these attributes collectively providing a strong foundation for

In each of its earlier 3-Year Business Plans Sumitomo Metal Mining has not only

continuous achievement of growth strategies enabling scale and profitability

hoisted quantitative goals but also made a point of setting forth qualitative

levels of 1 trillion yen in net sales and 100 billion yen in net income per annum.

goals designed to enable stakeholders to understand what the company is

By hoisting the foregoing numerical targets, all employees involved in ourenvisioning for the future beyond the specific plan at hand. The newthree core businesses – Mineral Resources, Smelting & Refining, and Materials“Long-Term Vision” incorporated into the 2012 3-Year Business Plan looks for– will, by having shared goals, work in unison and contribute to the

SMM to strive to become “a World Leader in the Non-Ferrous Metals Industry

achievement of our growth strategies. I firmly believe that through this cycle ofand an Excellent Company of Japan.”target attainment we will be able to advance, step by step, toward our vision

At SMM we define “a World Leader in the Non-Ferrous Metals Industry" as acompany that independently operates its own mines, smelters and refineriesof becoming “a World Leader in the Non-Ferrous Metals Industry and an
Excellent Company of Japan.”both domestically and overseas and that ranks within the top five globally interms of production volume. We also characterize “a World Leader in the
Non-Ferrous Metals Industry” as a company that contributes to society by

Fiscal 2013 Business Strategies

securing outstanding mineral resources, smelting and refining those resources

What we must do is clear. First, we must get production under way at the

into base metals, and supplying them to end users, and that pursues added

Taganito Project as planned. Second, we must move forward toward thevalue in materials operations utilizing non-ferrous metals.

launch of the Sierra Gorda Project in 2014. A third key point will be to enhance

Our long-term annual production targets for our Mineral Resources andearnings in our Materials business, and to achieve that we will need to gather

Smelting & Refining businesses now stand as follows: copper, interest-based

information and build, or strengthen, relationships of trust with valued

production 300,000 tonnes; gold, interest-based production 30 tonnes; andcustomers.

nickel, production capacity 150,000 tonnes.

Meanwhile to promote these various growth strategies I hope to see theInterest-based copper production presently is on track to rise from theorganization of our Enterprise Value Enhancement Committee revamped

current 120,000 tonnes per year to 250,000 tonnes, assuming stable progress inand improved, to implement our PDCA (plan, do, check, act) cycle more

the Sierra Gorda Project and in the expansion projects under way at existing

effectively, and to steadily make ongoing improvements to our management

mines. Although today we do not own a majority-share interest in any copper

system.

mines, going forward we will seek, from a long-range perspective, to acquire

Our Hishikari Mine, which plays an indispensable role in the company’s

new interests through participation in new mine development projects andbusiness operations, boasts one of the world’s highest grades of gold ore, andexploration activities as a way toward achieving our long-term copper

it constitutes an important and stable source of income. At the same time, we

production goal of 300,000 tonnes per year.

strive for stable operation of the Hishikari Mine over the long term for another

Concerning gold, we currently operate our own mines at Hishikari andreason: namely, because it is the only place in Japan where mining engineers

Pogo. In the future, we will continue exploration activities in a quest to acquire

can undergo the practical training essential for SMM to pursue its goal offurther mine interests.

acquiring overseas mineral resources.

Regarding nickel, once operations get under way at Taganito this autumn,

Sumitomo Metal Mining seeks to acquire majority ownership interests in

we will achieve a 100,000-tonnes-per-year production capacity, advancing

overseas copper mines, and to develop such mines the company must be

us significantly toward our goal of 150,000 tonnes. Going forward we will takeable to independently train and dispatch the personnel needed. Key toa variety of projects under consideration for securing the remaining 50,000

achieving that ability will be to extend the operating life of the Hishikari Minetonnes.

for as long as possible. In line with that objective, whereas until now we have

In our Materials business, we will focus on the development of new products
as we seek to generate ¥5 billion in recurring profit from new materials.

maintained the mine’s production output at a uniform annual level, going
forward we will implement output plans according to the grade of ore.

The other element of our Long-Term Vision is to become an “Excellent
Company of Japan.” We define this as a company that a) embraces a solid

18

19

Message from the President

technology developed at our Niihama Research Laboratory for efficiently
recovering such rare metals as scandium and chromium during the mixed
nickel-cobalt sulfide production process.
Initiatives such as these are based on our growth strategies and on theconcept for enhancing our enterprise value, and we believe it is necessary tohave a corresponding concept for our Materials business as well.

CSR Stance
I believe that contributing to society through our business activities is the

Future Priority Measures
Development of Human Resources

essence of SMM’s corporate social responsibility. There is no denying the factthat development of mineral resources has an impact on both the global andlocal environments. At the same time, it is also a fact that the resources we

Ultimately, the underlying basis of corporate management is human resources.

extract serve as the basic materials for everyday life and thereby contribute to

The company’s human resources constitute a critical factor for executing oursociety. Against this backdrop, I think it is important for us to apply our

growth strategies, and going forward I hope to see improvements made to ourtechnologies for society's benefit and, through our business activities, tohuman resources development structure by aligning it with the strategic

respond to the expectations of our stakeholders.

directions indicated by management. In particular, as we move forward as a
global enterprise pursuing overseas business expansion, we need tostrengthen the development of human resources to handle Head OfficeFinancial Policies, Message to Shareholders and Investors

functions that set in place the infrastructure to support our business operations.

As we confirmed in our 2012 3-Year Business Plan, SMM will continue its financial

For example, within each division we need to have personnel who know how

policy of maintaining an equity ratio above 50%. In addition, the company will

to cope with overseas tax and legal requirements and who can decide how toraise its dividend payout ratio to above 25% during the term of the plan. In

address matters such as diversity issues. As a company policy, I believe weorder to respond to the expectations of our shareholders and investors, we willneed to accelerate the hiring and use to best effect of non-Japanese andsteadily implement measures toward achieving our net income target of 100

female employees.

billion yen for 2015, the final year of the 3-Year Business Plan.

Research & Development

I believe that enhancing our enterprise value is the best return we can offer
to our investors. Based on the Sumitomo Business Spirit – the foundation of our

At SMM we believe that research and development is crucial to achieving

business philosophy for four centuries – we will continue the steady promotion

further growth of our three core businesses and enhancing our enterpriseof our growth strategies and respond to the trust and expectations of ourvalue, based on full awareness of the company’s strengths, knowing how thoseshareholders and investors.

strengths can be applied, and understanding how further strengths can becreated.
In this connection, in 2012 we established a new Materials Research &August 2013

Development Center, and in 2014 we will be opening a new Resource &Hydrometallurgy Process Center. Together these new facilities will focus on
further enhancing our technical strengths, which form the basis of our ability
to compete.
As an example, our HPAL technology currently leads the industry, but
eventually our competitors will surely catch up. However, by enhancing our

Yoshiaki Nakazato

technical capabilities further and moving further into the lead, we hope to

President & Representative Director

maintain our sole position at the front of the pack, allowing no othercompanies to match us. One example where we have achieved this is the20

21Review of Operations

Mineral Resources Business

Copper Mine Project

Sumitomo's Mineral Resources business got under way in the mid-17th century. In 1691,
operations began at the Besshi Copper Mine, one of the richest in the world at that time.
The expertise cultivated through those operations was applied to the Hishikari Mine,
which opened in 1985. Today, SMM is engaged in exploration and development activities
around the globe.

Sierra Gorda ProjectSegment Profit

Location

Region 2 of the Republic of Chile

Start of
Production

2014 (Planned)

Minable Ore

Approx. 1.3 billion tonnes(sulfide ore only)

Open-pit mining andMining andMilling Methods conventional flotation methods
Metal Volume
Content

Copper: 5 million tonnes
Molybdenum: 300,000 tonnes

Average Annual Copper: 220,000 tonnes
Molybdenum: 11,000 tonnes
Production

63.4 %
Gold ore (Hishikari Mine)

Fiscal 2012 Review

OutlookIn fiscal 2012, the volume of gold sold from theHishikari Mine totaled 7.5 tonnes, equal to theyear before. A drop in ore quality at the PogoGold Mine resulted in 9.7 tonnes of sales
volume, a reduction from fiscal 2011.
Production of copper concentrates andelectrolytic copper continued on a stablebasis at the Morenci Copper Mine (USA).
However, production of copper concentrates
and electrolytic copper at the Candelaria
Mine (Chile), the Cerro Verde Mine (Peru) andother copper mines fell relative to theprevious year.

With respect to copper, we will continue topromote preparations for the launch of Sierra
Gorda Project operation in 2014. We will also
promote operational expansion at overseas
copper mines where we have an interest. With
respect to gold, we are projecting productionof 7.0 tonnes of gold at the Hishikari Mine and10.8 tonnes at the Pogo Gold Mine in fiscal
2013.
We will also continue to actively explore
the vicinity of mines that are currently inoperation, as well as evaluate possible
participation in development projects.

Net Sales

Segment Profit

Capital Expenditure / Depreciation(¥ billions)150(¥ billions)100

The Sierra Gorda Project is a copper minedevelopment project in the Republic of Chile,
owned by KGHM International Ltd. of Canada.
In May 2011, SMM concluded an investment
participation agreement with the then-ownerof the project, Quadra FNX Mining Ltd. SMM
has dispatched engineers to the project, andpre-stripping work and mine facility construction is proceeding.
In addition to its interest, SMM has a 50%
copper concentrates off-take right. Copper
concentrates will be supplied to the Toyo
Smelter & Refinery, facilitating stable raw

Exploration Costs(¥ millions)

10,000104.87

75

0

7,123

65.23
50

2011

2012

(FY)

0

5,000

2011

2012

(FY)

0

■■ Capital expenditure

22(gold: t)

200
143

6,524
100

4

2012

SMM: 31.5%
KGHM International Ltd.: 55%
Sumitomo Corporation: 13.5%

169

4,163

2011

Equity Interests

materials procurement for the smelting andrefining business.
Due to the impact of such factors asincreased higher labor costs, materials costs
and exchange rate fluctuations, the investment amount for this project was revised to
US$3.9 billion as of March 2013. However, ourcommitment to promote the launch of the
project in 2014 remains unchanged.
SMM will continue to work closely with
KGHM International Ltd. and its parent
company, KGHM Polska Miedz’ S.A., topromote the project.

(¥ billions)

80.62
105.7420 years

SMM's Metal Interests by Mine

8

8,987

Mine Life(FY)■■ Depreciation

0

2011
2012
2013
(FY)
Results
Results
Planned■ New deposit exploration■ Exploration around existing mines0

HishikariPogo(as of December 31, 2012)

Note:s(ISHIKARI -INE
Recoverable metal, JIS standard: 169 t
s0OGO 'OLD -INE
Reserve: 69 t
Resource: 74 t
(Canadian standard)

23

Review of Operations

Smelting & Refining Business

Nickel Smelter

SMM smelts and refines raw materials procured from a variety of sources into such metals
as copper, nickel, and gold. SMM possesses world-class smelting and refining
technologies and has forged a solid position within its industry. As an example, SMM
became the first in the world to successfully commercialize HPAL technology for therecovery of nickel from low-grade ore, which had been difficult with conventional
technologies.

Taganito ProjectSegment Profit

32.9%
Electrolytic nickel

Fiscal 2012 Review

Outlook

Operation at the Toyo Smelter & Refinery is
proceeding smoothly following a complete
overhaul of its flash furnace, and productionrose compared to the previous term.
Electrolytic copper production increased
102,000 tonnes to 435,000 tonnes. Electrolytic
nickel production amounted to 42,000 tonnes
and ferronickel production was 22,000 tonnes,
both substantially the same as the previous
year.
Production of nickel intermediates at Coral
Bay Nickel Corporation proceeded on a stablebasis, totaling higher than the previous year.

SMM will make continuous efforts to increase
its cost competitiveness in copper smelting
and refining.
With regard to nickel refining, capacity
expansion at the Niihama Nickel Refinery toreceive mixed sulfide from the Taganito
Project has been completed, and operations
are scheduled to begin in 2013. This step willachieve our intermediate goal of a nickel
production capacity of 100,000 tonnes
annually.

Net Sales

Segment Profit

Capital Expenditure / Depreciation(¥ billions)

800

688.58(¥ billions)50(¥ millions)

80,000637.8059,193

33.93
25.64
400

25

40,14640,00013,611

0

2011

2012

(FY)

0

2011

2012

(FY)

0

2011

■■ Capital expenditure

24

Location

Mindanao Island, the Philippines

Start of
Production

2013

Raw
Materials

Low-grade nickel oxide ore

Products

Nickel/Cobalt mixed sulfide (MS)Annual
Production
Capacity

Nickel: 30,000 tonnes

EquityInterests

SMM: 62.5%
Nickel Asia Corporation: 22.5%
Mitsui & Co.: 15%

SMM has been promoting the Taganito Project on
Mindanao Island in the Philippines. Scheduled tocommence operation this autumn to produce mixed
sulfide containing 30,000 tonnes of nickel per annum.
The Taganito Project uses HPAL technology, which
SMM has successfully commercialized through CBNC. To
promote the project launch, we have confirmed that
our HPAL technology is capable of processing the ore for
the Taganito Project through a trial process at the Coral
Bay Plant. In addition, process improvements were incorporated in the design of the new plant.
With the completion of production complete at theNiihama Nickel Refinery in Japan, which is slated toprocess the mixed sulfide produced by the project, thelaunch of the project will bring SMM's annual nickel
production capacity to 100,000 tonnes.
By launching the project, SMM will be positioned tobuild a leading presence in the global nickel industry.

12,1692012(FY)■■ Depreciation

25

Review of Operations

Materials Business
A wide range of metals are used in the manufacture of electronic equipment. Copper, forexample, is a critical input for electric circuitry manufacture, while nickel is used in the
production of battery materials and capacitors. SMM has been engaged in the Materials
business since the 1960s and will continue to process and supply advanced metal
products by leveraging its accumulated technologies.

Battery Materials

Segment Profit

Nickel hydroxide is used as a cathode material

lithium-ion batteries. Consequently, SMM isin nickel metal hydride batteries, which arefocusing on development of next-generation

used in leading hybrid vehicles. SMM products

ternary and other nickel battery materials.

boast a commanding share of the market forthis material.
Lithium nickel oxide serves as a secondary

3.7%

batterycathodematerialforcompactbatteries that power such devices as personal
computers.

Thismaterial

enablestheproduction of batteries with high recharging
efficiency.
Battery materials (Isoura Plant)

Going forward, in-vehicle batteries are

Fiscal 2012 Review

Outlook

expected to see a shift from nickel metal

Supported by sales to hybrid vehicle
manufacturers, sales from battery materialsrose. Demand for leadframes continued firm.
Total sales for the Materials business fellsignificantly, but this was largely due to ourwithdrawal from the bonding wire business.
On July 1, 2012, the Semiconductor
Materials, Advanced Materials, and Energy,
Catalysts & Construction Materials Divisions
were merged into a newly-launched Materials
Division. With the organization restructure, theEnergy, Catalysts & Construction Materials
Division moved from the “Other Businesses”
segment to the Materials business.

SMM will undertake to expand battery
materials sales in the secondary battery
market, principally for automotive use. We will
also promote battery materials R&D for
next-generation vehicles.
On July 1, 2013, we merged our leadframe
business with that of Hitachi Cable Co., Ltd.
(currently Hitachi Metals, Ltd.) into a newenterprise, SH Materials Co., Ltd. Goingforward, the new company will combine thestrengths of its partners to bolster its business.

hydride to next-generation batteries such as
Nickel hydroxide

Catalyst Business
N.E. Chemcat Corporation is a joint venture of

relatedSMM and BASF SE of Germany, one of thetechnicallyworld’s leading chemical companies. As an

solutions for the oil refining industry, Nippon

SMM affiliate, N.E. Chemcat is one of Japan’s

Ketjen is working to protect the global

largest developer-manufacturers of precious

environment.

metal

Past fiscal year results on this page have been restated toreflect the current organizational structure.

catalysts,

forlicensing.

advancedandBy

deploying
economicalhazardous

The two catalyst manufacturers continue tosubstances in automobile exhaust gases, andpost steady business results, and SMM will

chemicalcontinue working with BASF SE and Albemarlecatalysts

purifyingprocessforpetrochemicals,

pharmaceuticals, aromatic chemicals andCorporation to develop growth strategies.

other purposes. N.E. Chemcat will continue toutilize its accumulated catalyst technology to
Net Sales

Segment Profit

Capital Expenditure / Depreciation(¥ billions)300(¥ billions)5(¥ millions)

12,000

Nippon Ketjen Co., Ltd., is a joint venture
between SMM and Albemarle Corporation of

3.78

8,425

200.697,151

156.61150

develop new catalysts.

2.5

8,221
6,811

the United States, a leader in high polymer
chemistry, catalysts, and related fields. Nippon

6,000

Ketjen develops and manufactures petroleum

1.43hydrogenation and hydroprocessing catalysts,
0

2011

2012

(FY)

0

2011

2012

(FY)

0

offers off-site catalyst regeneration, provides
2011■■ Capital expenditure

26

2012

(FY)

■■ Depreciation

other technical services, and is engaged in
Catalytic converter for automobile use

27

Business Network

SMM Mines and Refineries● Pogo (85.0%)■ Toyo Smelter & Refinery
Copper

Metal, SMM’s interest,
annual production capacity

450,000 tonnes■ Niihama Nickel Refinery
Nickel■ Harima Smelter

65,000 tonnes■ Shisaka Smelting Co., Ltd.

Crude zinc oxide processing capacity
120,000 tonnes

Zinc 50,000 tonnes(2013 plan)● Hishikari Mine

● Morenci (12.0%)

Mineral Resources
Business

Smelting &Refining Business● Copper● Gold■ Copper■ Nickel■ Other■ Hyuga Smelting Co., Ltd.

■ Jinlong Copper Co., Ltd.

(60%)
Ferronickel(27.1%)■ Coral Bay Nickel Corporation

22,000 tonnes■ Taganito HPAL Corporation(62.5%)(54.0%)■ Sorowako (20.1%)● Batu Hijau (3.5%)● Cerro Verde (16.8%)■ Figesbal (25.5%)■ Goro (7.6%)● Sierra Gorda Project (31.5%)● Ojos del Salado (16.0%)● Candelaria (16.0%)● Northparkes (13.3%)

Materials Business:
Major Affiliates & Sites

1

22

23 24
27 28

2 3

25 26

30 31 32

1 Sumiko Kunitomi Denshi Co., Ltd.

14 Nittosha Co., Ltd.

27 SH Electronics Chengdu Co., Ltd.

2 SMM Precision Co., Ltd.

15 SumikoTec Co., Ltd.

28 SH Precision Chengdu Co., Ltd.

3 GRANOPT Ltd.

16 Shinko Co., Ltd.

29 Dongguan Sumiko Electronic Paste Co., Ltd.

4 SH Precision Co., Ltd.

17 Isoura Plant

30 Sumiko Electronics Taiwan Co., Ltd.

5 SH Copper Products Co., Ltd.

18 Niihama Electronics Co., Ltd.

31 SH Electronics Taiwan Co., Ltd.

6 Japan Irradiation Service Co., Ltd.

19 Niihama Materials Co., Ltd.

32 Taiwan Sumiko Materials Co., Ltd.

7 Ome District Div.

20 Okuchi Electronics Co., Ltd.

33 Malaysian SH Electronics Sdn. Bhd.

8 SH Materials Co., Ltd.

21 Ohkuchi Materials Co., Ltd.

34 Malaysian SH Precision Sdn. Bhd.

9 N. E. Chemcat Corporation

22 SMM KOREA Co., Ltd.

35 Malaysian Electronics Materials Sdn. Bhd.

10 Nippon Ketjen Co., Ltd.

23 Shanghai Sumiko Electronic Paste Co., Ltd. 36 SH Asia Pacific Pte. Ltd.

4

29

5 6
16
7 8 9
10 11 1217 18 19
13 14 15

11 Sumitomo Metal Mining Siporex Co., Ltd. 24 SH Electronics Suzhou Co., Ltd.
33 34 35

12 Sumico Lubricant Co., Ltd.

25 Suzhou SH Precision Co., Ltd.

13 Sagami Plant

26 Sumiko Advanced Materials (Suzhou) Co., Ltd.

37 Sumiko Tape Materials Singapore Pte. Ltd.

20 21
36 37

28

29

Corporate Governance
SMM is committed to building and developing an outstanding corporate governance structureand systems that balance the requirements of maximizing enterprise value and securing asound financial position as a part of efforts to garner the trust and fulfill the expectations of all
stakeholders including shareholders.

Basic Policy Stance, Structure and Systems
s 4HE 3-- 'ROUP VIEWS CORPORATE GOVERNANCE AS ADISCIPLINARY FRAMEWORK BOTH FOR MAXIMIZING THE
ENTERPRISE VALUE OF THE 3-- 'ROUP AND FOR ENSURING
SOUND MANAGEMENT PRACTICES !S SUCH IT IS AN
IMPORTANT MANAGEMENT ISSUEs 3-- IS COMMITTED TO STRIVING TO ACHIEVE THE GOALSCONTAINED IN THE BUSINESS PHILOSOPHY TO CONDUCTINGEFFICIENT AND SOUND BUSINESS ACTIVITIES TO MAKING A
VALUABLE SOCIAL CONTRIBUTION AND TO FULFILLING RESPONSIBILITIES TO STAKEHOLDERS

s 3-- HAS INSTITUTED THE 3-- 'ROUP #ORPORATE
0HILOSOPHY BASED ON THE 3UMITOMO "USINESS 3PIRITAND HAS FORMULATED THE 3-- 'ROUP #ODE OF#ONDUCT AS A SET OF BEHAVIORAL STANDARDS TO GUIDEEXECUTIVES AND EMPLOYEESs 3-- HAS A "OARD OF $IRECTORS AND HAS ALSO ADOPTEDEXECUTIVE OFFICER AND !UDIT  3UPERVISORY "OARDSYSTEMS TO ENSURE THAT DECISION MAKING SUPERVISIONAND EXECUTION OF BUSINESS MANAGEMENT EACH
FUNCTION EFFECTIVELY WITHIN GOVERNANCE SYSTEMS

Executive Officer System%XECUTIVE OFFICERS ARE APPOINTED BY THE "OARD OF $IRECTORS !S
PREVIOUSLY MENTIONED SUBSTANTIAL AUTHORITY HAS BEEN DELEGATEDTO EXECUTIVE OFFICERS WHOSE AUTHORITY AND RESPONSIBILITIES HAVEBEEN CLEARLY DEFINED TO REINFORCE THEIR EXECUTIVE FUNCTION%XECUTIVE OFFICERS ARE ENTRUSTED WITH IMPORTANT POSITIONS SUCH AS
HEADING AN OPERATIONAL DIVISION A DEPARTMENT OR AN OFFICE AT THE#OMPANYS HEADQUARTERS AND EXPECTED TO PERFORM THEIR DUTIESWITH THE SPECIFIC AUTHORITY ASSIGNED TO EACH POSITION )N ADDITIONEXECUTIVE OFFICERS REPORT ON THE STATUS OF BUSINESS EXECUTION ONCE
A MONTH AT EXECUTIVE OFFICER MEETINGS

Auditing System

Corporate Governance Framework'ENERAL -EETING OF 3HAREHOLDERS$ECISION -AKING AND 3UPERVISION!UDITING)NDEPENDENT0UBLIC !CCOUNTANT!UDIT  3UPERVISORY "OARD"OARD OF $IRECTORS"USINESS %XECUTION

0RESIDENT"USINESS /PERATIONS%XECUTIVE /FFICERS-ANAGEMENT #OMMITTEE/PERATING $EPARTMENT)NTERNAL !UDIT $EPARTMENT
(EADQUARTERS

3OCIAL 2ESPONSIBILITY#32 #OMMITTEE)NTERNAL #ONTROL#OMMITTEE%NTERPRISE 6ALUE%NHANCEMENT #OMMITTEE

3IX #32 3UBCOMMITTEES#OMPLIANCE 7'

2ISK -ANAGEMENT 7'%FFICIENT 2ESOURCE 5TILIZATION%NVIRONMENTAL 0ROTECTION#ORPORATE #ITIZENSHIP(UMAN 2IGHTS AND(UMAN 2ESOURCES $EVELOPMENT/CCUPATIONAL (EALTH  3AFETY#OMMUNICATIONSManagement Decision-Making andBusiness Execution Structures and Systems
3-- DELEGATES SUBSTANTIAL AUTHORITY TO EXECUTIVE OFFICERS 4HISIN TURN HAS CLARIFIED THE AUTHORITY AND RESPONSIBILITIES OF
DIRECTORS AND EXECUTIVE OFFICERS ALLOWING THE "OARD OF$IRECTORS TO CHANNEL ITS ENERGIES TOWARD FULFILLING TIMELYDECISION MAKING AND SUPERVISORY FUNCTIONS
Directors and the Board of Directors
3--S !RTICLES OF )NCORPORATION PROVIDES FOR A "OARD OF$IRECTORS OF UP TO TEN MEMBERS 4HIS NUMBER IS CONSIDERED
APPROPRIATE TO ENSURE AGILITY TOGETHER WITH LIVELY DISCUSSION
DURING "OARD OF $IRECTORS MEETINGS
4HE "OARD OF $IRECTORS MEETS ON A REGULAR BASIS ONCE A
MONTH WITH EXTRAORDINARY MEETINGS HELD AS AND WHEN
REQUIRED TO ENSURE THAT DECISIONS ARE MADE EXPEDITIOUSLY!NY RESOLUTIONS TAKEN BY AND ANY MATTERS REPORTED TO THE"OARD OF $IRECTORS ARE IN TURN REPORTED AT MEETINGS OF
EXECUTIVE OFFICERS TO ENSURE THAT INFORMATION IS PROPERLY SHAREDAMONG OFFICERSManagement Committee
3-- HAS ESTABLISHED THE -ANAGEMENT #OMMITTEE AS A FORUM
TO ENGAGE IN PRELIMINARY DELIBERATIONS WITH RESPECT TO MATTERS
THAT REQUIRE A DECISION BY MANAGEMENT 4HE -ANAGEMENT#OMMITTEE ACCORDINGLY DELIBERATES ON MATTERS REQUIRING
CAREFUL CONSIDERATION FROM A WIDER POINT OF VIEW PRIOR TO THEIRSUBMISSION FOR RESOLUTION BY THE "OARD OF $IRECTORS OR SANCTION
BY THE PRESIDENT )N THIS REGARD THE -ANAGEMENT #OMMITTEEPLAYS AN IMPORTANT ROLE IN ENSURING RATIONAL DECISION MAKING
INCREASING THE EFFICIENCY OF THE DECISION MAKING PROCESS ANDPROMOTING APPROPRIATE INTERNAL CONTROL

Audit & Supervisory Board
3-- IS A COMPANY WITH AN !UDIT  3UPERVISORY "OARD !UDIT 
3UPERVISORY "OARD -EMBERS REMAIN INDEPENDENT OF THE "OARD OF$IRECTORS AND AUDIT THE STATUS OF MANAGEMENT DECISION MAKING
BUSINESS EXECUTION AND ACCOUNTING 3--S !RTICLES OF)NCORPORATION PROVIDE FOR UP TO FIVE !UDIT  3UPERVISORY "OARD-EMBERS 4HE !UDIT  3UPERVISORY "OARD MEETS ON A REGULAR BASIS
ONCE A MONTH WITH EXTRAORDINARY MEETINGS HELD AS AND WHEN
REQUIRED IN CONJUNCTION WITH MEETINGS OF THE "OARD OF $IRECTORS!UDIT  3UPERVISORY "OARD -EMBERS ATTEND MEETINGS OF THE"OARD OF $IRECTORS -ANAGEMENT #OMMITTEE AND ALL OTHERMEETINGS CONSIDERED OF IMPORTANCE !UDITS ARE CONDUCTED ON THE
BASIS OF REPORTS RECEIVED FROM DIRECTORS CONSIDERATION OF FINANCIALREPORTS AND MATERIALS AND ONSITE VISITS TO BUSINESS OFFICES AND
PLANTS AS WELL AS SUBSIDIARIES !UDIT  3UPERVISORY "OARD -EMBERS
BELONGING TO THE #OMPANY PRESENT THEIR OPINIONS AT IMPORTANT
MEETINGS INCLUDING MEETINGS OF THE "OARD OF $IRECTORS BASED ON
THE AUDITS THEY HAVE CONDUCTED AS !UDIT  3UPERVISORY "OARD-EMBERS 3TANDING INDEPENDENTLY FROM THE #OMPANY WHILEOUTSIDE !UDIT  3UPERVISORY "OARD -EMBERS PRESENT THEIR OPINIONSBASED ON THEIR RESPECTIVE EXPERIENCES AND EXPERTISE IN SPECIALISTFIELDS !UDIT  3UPERVISORY "OARD -EMBERS 3TANDING SHALL REPORTTHE DETAILS OF ONSITE AUDITS THAT HAVE BEEN CONDUCTED SOLELY BY!UDIT  3UPERVISORY "OARD -EMBERS 3TANDING AS WELL AS
MEETINGS THAT WERE NOT ATTENDED BY OUTSIDE !UDIT  3UPERVISORY"OARD -EMBERS AT MEETINGS OF THE !UDIT  3UPERVISORY "OARD
Collaboration between the Internal Audit Department,
Independent Public Accountant andAudit & Supervisory Board Members
4HE )NTERNAL !UDIT $EPARTMENT UNDERTAKES INTERNAL AUDITS ON A
REGULAR BASIS ON THE STATUS OF BUSINESS EXECUTION ACROSS THE 3-'ROUP !T THE SAME TIME THE )NTERNAL !UDIT $EPARTMENT PROVIDES
AN EXPLANATION OF ITS AUDIT PLANS TO !UDIT  3UPERVISORY "OARD-EMBERS WHILE PASSING ON ALL RELEVANT INFORMATION !UDIT 
3UPERVISORY "OARD -EMBERS PROVIDE DETAILS OF AUDIT PLANS
DETERMINED DURING MEETINGS OF THE !UDIT  3UPERVISORY "OARD TO
THE )NTERNAL !UDIT $EPARTMENT ACCOMPANY OFFICERS OF THE)NTERNAL !UDIT $EPARTMENT WHEN CONDUCTING INTERNAL AUDITS AS
REQUIRED AND ATTEND MEETINGS WHEN REPORTS ON THE RESULTS OF
INTERNAL AUDITS ARE DELIVERED TO EXECUTIVE OFFICERS AND THE HEADSOF OPERATIONAL DIVISIONS
+0-' !:3!  #O IS CURRENTLY THE #OMPANYS INDEPENDENTPUBLIC ACCOUNTANT AND CONDUCTS ACCOUNTING AS WELL AS INTERNALCONTROL AUDITS IN ITS CAPACITY AS AN INDEPENDENT PUBLICACCOUNTING FIRM !UDIT  3UPERVISORY "OARD -EMBERS PROVIDEDETAILS OF AUDIT PLANS TO THE INDEPENDENT PUBLIC ACOUNTANT !UDIT

 3UPERVISORY "OARD -EMBERS IN TURN RECEIVE EXPLANATIONSREGARDING AUDIT PLANS AND REPORTS ON AUDIT RESULTS FROM THE
INDEPENDENT PUBLIC ACCOUNTANT )N THIS MANNER CLOSECOLLABORATION IS MAINTAINED BETWEEN THE INDEPENDENT PUBLICACCOUNTANT AND !UDIT  3UPERVISORY "OARD -EMBERSRemuneration System for Directors andAudit & Supervisory Board Members,IMITS ON THE TOTAL AMOUNTS OF REMUNERATION PAID TO DIRECTORS AND!UDIT  3UPERVISORY "OARD -EMBERS ARE RATIFIED AT SHAREHOLDERS
MEETINGS )N ADDITION THE TOTAL AMOUNT OF BONUSES TO BE PAID TO
DIRECTORS WITH THE EXCEPTION OF OUTSIDE DIRECTORS IF APPLICABLE IS
ALSO RATIFIED AT SHAREHOLDERS MEETINGS
7HILE THE AMOUNT OF REMUNERATION PAID TO EACH DIRECTOR IS
DETERMINED BY THE REPRESENTATIVE DIRECTOR UNDER THE AUTHORITY OF
THE "OARD OF $IRECTORS THE BASIC REMUNERATION EXCLUDING BONUS
PAYMENTS TAKES INTO CONSIDERATION PREDETERMINED CRITERIA BASEDON THE #OMPANYS PERFORMANCE AS WELL AS OTHER FACTORS INCLUDING
AN EVALUATION OF THE PERFORMANCE OF EACH DIVISION AND THE STATUS
OF BUSINESS EXECUTION TOGETHER WITH THE PERFORMANCE OF EACH
INDIVIDUAL BASED ON SPECIFIC OFFICE ASSESSMENT CRITERIA "ONUSESWITH THE EXCEPTION OF OUTSIDE DIRECTORS ARE DETERMINED BASEDON THE SAME REMUNERATION CRITERIA TOGETHER WITH AN ASSESSMENT OF
EACH INDIVIDUALS PERFORMANCE 4AKING INTO CONSIDERATION THE
INDEPENDENT STATUS OF OUTSIDE DIRECTORS AND THE FOCUS PLACED ON
OUTSIDE DIRECTORS OVERSIGHT FUNCTION AN ASSESSMENT OF INDIVIDUALPERFORMANCE IS NOT REFLECTED IN THE PAYMENT OF REMUNERATION TO
OUTSIDE DIRECTORS !CCORDINGLY THE PAYMENT OF REMUNERATION TO
OUTSIDE DIRECTORS IS LIMITED TO BASIC REMUNERATION AND DOES NOTINCLUDE ANY BONUS PAYMENT
7HILE THE PAYMENT OF REMUNERATION TO INDIVIDUAL !UDIT 
3UPERVISORY "OARD -EMBERS IS DETERMINED THROUGH DELIBERATIONSBETWEEN !UDIT  3UPERVISORY "OARD -EMBERS TAKING INTOCONSIDERATION THE INDEPENDENT STATUS OF !UDIT  3UPERVISORY"OARD -EMBERS IN THE EXECUTION OF THEIR DUTIES AND THE FOCUS
PLACED ON THE AUDIT FUNCTION AN ASSESSMENT OF INDIVIDUALPERFORMANCE IS NOT REFLECTED IN THE PAYMENT OF REMUNERATION TO!UDIT  3UPERVISORY "OARD -EMBERS !CCORDINGLY THE PAYMENT OFREMUNERATION TO !UDIT  3UPERVISORY "OARD -EMBERS IS LIMITED TO
BASIC REMUNERATION AND DOES NOT INCLUDE ANY BONUS PAYMENT
3-- DOES NOT PROVIDE FOR SUCH LONG TERM INCENTIVEREMUNERATION AS STOCK OPTIONS -OREOVER THE #OMPANYABOLISHED ITS SYSTEM OF RETIREMENT AND SEVERANCE BENEFITS FOR
DIRECTORS AND !UDIT  3UPERVISORY "OARD -EMBERS IN 
4HE TOTAL AMOUNTS OF REMUNERATION BY OFFICER CLASSIFICATION AND
TYPE AS WELL AS THE NUMBER OF OFFICERS TO WHOM REMUNERATION WAS
PAID INCLUDING OFFICERS WHO RETIRED DURING THE PERIOD FOR THE
FISCAL YEAR UNDER REVIEW ARE PRESENTED AS FOLLOWSc MILLIONS.UMBER
4OTAL 2EMUNERATION BY 4YPE
/FFICER
4OTAL
OF
"ASIC
#LASSIFICATION /FFICERS 2EMUNERATION 2EMUNERATION"ONUS$IRECTORS

12

359

269

90

EXCLUDING ONE OUTSIDE DIRECTOR!UDIT 3UPERVISORY"OARD-EMBERS5/UTSIDE $IRECTORS
AND /UTSIDE!UDIT  3UPERVISORY"OARD -EMBERS

4

56

56

―

EXCLUDING THREE OUTSIDE !UDIT 
3UPERVISORY "OARD -EMBERS

35

35

―

.OTE )N ADDITION TO THE AFOREMENTIONED AN EMPLOYEE SALARY PORTION TOTALING cMILLION WAS PAID TO EMPLOYEES WHO HOLD THE CONCURRENT POSITION OF DIRECTOR

30

31

Corporate Social Responsibility
The Sumitomo Group has been developing its business for around four centuries through continuous
adherence to the Sumitomo Business Spirit.
Acknowledging the importance of the values and ethics our forerunners built into the Sumitomo BusinessSpirit, we will make every effort to strengthen SMM Group business and consolidate society’s trust in us.

Information Disclosure and IR Activities
In order to ensure the integrity and transparency ofmanagement and to garner the trust of stakeholders, SMM
recognizes the importance of accountability and information
disclosure. As a result, the Company aggressively engages ininvestor relations (IR) activities as a part of efforts to provide all
stakeholders, particularly shareholders and investors, with adeeper understanding of the Group. In specific terms, SMM
posts information on its homepage and issues shareholder
and annual reports. Furthermore, the president provides
explanations of the Group’s business strategies and otherimportant details to analysts and institutional investors several
times each year.
Complementing these activities, and in order tocontinuously upgrade and expand the Company’s IR
activities, management and the IR Department conductindividual meetings with analysts and institutional investors inJapan and overseas as well as plant inspection tours. Looking
ahead, the Company will endeavor to upgrade and expand
its IR activities for the benefit of individual investors.

Takeover Defense Measures
SMM introduced takeover defense measures in2007 and updated these in 2010. Revisions to andrenewal of these measures were ratified at theCompany’s 88th Ordinary General Meeting of
Shareholders, held in June 2013. The Company will
maintain these measures with an effective periodof three years, to expire at the conclusion of theCompany’s 91st Ordinary General Meeting of
Shareholders in June 2016. In the event of alarge-scale acquisition by a third party of theCompany's shares, an independent committee
shall consider any takeover proposal and make anappropriate recommendation regarding anapplication of takeover defense measures topreserve the Company’s enterprise value andpreserve and enhance shareholder profits.

Outside Director and Outside Audit & Supervisory Board Members
Outside Director

Tsutomu Ushijima

Relationship with SMM

He has signed a contract for Limitation of Liability 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 was appointed an outside director to provide advice to SMM on business matters,
particularly from a compliance perspective.

Independence

He is appointed as an independent director (an individual with no conflict of interest with generalshareholders) based on the regulations of the Tokyo Stock Exchange.

Attendance at
Meetings

In the year ended March 31, 2013, the Board of Directors convened 25 times (12 regular meetings and 13
extraordinary sessions). He attended 24 of these meetings (12 regular meetings and 12 extraordinary sessions).

Outside Audit &Hikoyuki Miwa
Supervisory Board Member
Relationship with SMM

He has signed a contract for Limitation of Liability with SMM and has no relationship with SMM Group
companies.

Reason for
Appointment

Based on his auditing experience accumulated over many years at audit firms as well as his extensive
knowledge in corporate management, he was appointed an outside Audit & Supervisory Board Member.

Independence

He is appointed as an independent auditor (an individual with no conflict of interest with generalshareholders) based on the regulations of the Tokyo Stock Exchange.

Attendance at
Meetings

In the year ended March 31, 2013, he attended 24 of 25 Board of Directors meetings (12 regular meetingsand 12 extraordinary sessions) and all 17 meetings of the Audit & Supervisory Board.

CSR Objectives
Sustainable Co-Existence with Society and the Global Environment

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

CSR Policy
1. SMM shall work to combat global warming by promoting recycling and effective resource utilization while
also targeting technological innovation and continuous improvements in energy efficiency.
2. SMM shall promote sustainable co-existence with society by respecting the needs of local communities inwhich we operate around the world.
3. To continue sound business activities, SMM shall respect human rights and shall try to be a company inwhich diverse human resources take active parts.
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, trust-based relationships.

Six Key CSR Areas and CSR Vision for 2020
In 2008, SMM determined six key areas of CSR activity for the Group and a CSR Vision for 2020 based on theimpact of those areas 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 “sustainableco-existence with society and the global environment.”
A company that generates resources
using innovative technology

A company in which
employees are proud to work
along with the company onsocial contribution activities
rooted in local areas

Outside Audit &Shigeru Nozaki
Supervisory Board Member
Relationship with SMM
Reason for
Appointment

32

He has signed a contract for Limitation of Liability with SMM and has no relationship with SMM Group
companies.
Based on his wealth of financial institution experience he was appointed an outside Audit & Supervisory
Board Member to provide his knowledge on business matters, particularly from an international perspective.

Independence

He is appointed as an independent auditor (an individual with no conflict of interest with generalshareholders) based on the regulations of the Tokyo Stock Exchange.

Attendance at
Meetings

After his appointment, he attended all 20 subsequent Board of Directors meetings (9 regular meetingsand 11 extraordinary sessions) in the year ended March 31, 2013, and all 11 subsequent meetings of the
Audit & Supervisory Board.

A company that accords
safety the highest priority andprovides comfortable working
environments

A company that meets internationalanti-global warming standards byusing advanced technologies
Effective use ofresources

Contribution
to society
and local
communities

Environmental
preservation
Reduced CO2 emissions(energy savings)
and conservationof biodiversity

CSR Vision
for 2020 Respect for
Occupational
healthand safetypeople andhuman rights
Stakeholder
communication

A company that is open to communication
with stakeholder groups worldwide

A company that respects humanrights and diversity, develops
employees with high human rights
awareness, and gives them equal
opportunity based on employee
motivation and ability
A company that respects the humanrights of those affected by Groupbusiness activities
A company that avoids involvementwith entities violating human rights inareas with undeveloped social
infrastructure and in conflict areas

33

Directors and Audit & Supervisory Board Members

Financial Section

Hajime Sato

Naoyuki Tsuchida Yukio Kawaguchi

DirectorStanding Senior
Audit & Supervisory
Board Member
Standing
Audit & Supervisory
Board Member

34

Director

Representative
DirectorTakeshi Kubota

Mikinobu Ogata

Tsutomu Ushijima

Director

Director

Outside Director

Nobumasa Kemori

Yoshiaki Nakazato

Chairman,
Representative Director

President,
Representative Director

Naoki Tajiri

OutsideAudit & Supervisory
Board Member

Hikoyuki Miwa

Kazuo Nakashige

OutsideAudit & Supervisory
Board Member

Shigeru Nozaki

36

Eleven-Year Financial Summary

38

Management’s Discussion & Analysis of Financial Position andOperating Results

42

Consolidated Balance Sheets

44

Consolidated Statements of Income and Consolidated Statements ofComprehensive Income

45

Consolidated Statements of Changes in Net Assets

47

Consolidated Statements of Cash Flows48

Notes to Consolidated Financial Statements

77

Independent Auditors’ Report35

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

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

20132012 *2

2011

2010

2009

2008

2007

2006

2005

2004

2003

Net sales¥ 808,540¥ 847,897¥ 864,077¥ 725,827¥ 793,797¥ 1,132,372¥ 966,764¥ 625,579¥ 484,585¥ 402,131¥ 355,242

Gross profit

140,650

132,421

138,810

105,956

56,887

198,147

203,180

120,137

82,87853,714

51,764

155,394

162,632

82,75647,893

22,778

16,593Years ended March 31
Results for the year:

Operating income

95,78588,577

96,03866,265

10,534

Other income (expenses)

26,670(615)

27,356

16,511

12,408

61,11042,985

10,218

6,024

8,416

(24,098)

Income (loss) before income taxes and minority interest

122,455

87,962

123,394

82,776

22,942

216,504

205,617

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

Net income (loss)

86,64065,286

83,962

53,952

21,974

137,808

126,054

62,80037,017

19,882(1,172)Equity in earnings of affiliated companies

17,10023,217

34,832

26,09031,53673,956

46,70821,915

13,513

7,112

3,400

Capital expenditures

59,291

73,143

53,105

26,41447,72365,14551,56750,56836,48846,54018,927

Depreciation

27,57831,132

34,62534,74634,26830,50525,693

22,951

20,57817,824

18,283

(144)

663

257

(654)

(271)

(2,209)(2,606)(1,281)(893)(1,098)(1,459)Net interest expenses
Net cash flows from operating activities

114,665

144,999

102,458

44,153

128,000

157,383

95,98570,77240,15032,324

26,105

Net cash flows from investing activities(88,745)(135,932)(75,735)(75,443)(28,386)(126,413)(77,429)(102,384)(31,725)(17,448)(21,246)

Net cash flows from financing activities

21,54950,314

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

55,727(10,073)

28,723

6,097(9,293)(14,163)

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

14,876

4,859

573,925

517,930

470,774

25,9209,067

26,723(31,290)

99,614

Total assets

1,351,153

1,146,759

1,052,353

981,458

880,001

1,091,716

929,208

772,562

Net assets

844,547

726,039

684,103629,684

547,251

640,345528,921394,899

−

−

−

−

−

−

−

−

−

−

−

283,897

253,071

223,341

Long-term debt due after one year

212,323

157,119

135,128

132,311

141,716

169,394

93,800114,405

109,777

86,43776,470Interest-bearing debt

330,073

265,951

210,969

200,939

218,534

258,054

189,910

190,891

160,533

148,351

154,799

Working capital

338,866

312,542

267,072

229,259

206,123

266,250

103,791

72,22886,382

52,79535,945155.58116.17149.38

96.26

38.87

238.13220.49109.96

64.77

34.76

(2.05)

231.50213.67108.87

Free cash flows

Financial position at Year-end:

Shareholders' equity *1

Amounts per share (Yen):
Net income (loss)− Basic

142.40106.84136.98

88.75

36.18

−

−

−

1,393.02

1,173.97

1,121.19

1,043.50

913.92

1,017.96

859.82654.15497.57443.29391.14

34.0

28.0

32.0

20.0

13.0

30.0

27.0

14.0

8.0

6.0

5.0

ROA (%)

6.94

5.94

8.26

5.80

2.23

13.64

14.81

9.33

6.78

4.02

−

ROE (%) *1

12.13

10.12

13.80

9.89

4.02

25.39

28.99

19.10

13.79

8.35

−

Equity ratio (%) *1

56.9

57.5

59.9

59.8

57.3

54.0

53.4

48.4

49.5

48.9

47.4

Interest-bearing debt to total asset ratio (%)

24.4

23.2

20.0

20.5

24.8

23.6

20.4

24.7

28.0

28.6

32.9

Debt-to-equity ratio (times) *1

0.43

0.40

0.33

0.34

0.43

0.44

0.38

0.51

0.57

0.59

0.69

Current ratio (times)

2.60

2.67

2.30

2.19

2.17

2.04

1.39

1.33

1.61

1.38

1.26

− Diluted
Shareholders' equity
Cash dividends

Key ratios:*1 Shareholders’ equity are defined as following equation.
Shareholders’ equity = Total shareholders’ equity + Accumulated other comprehensive income*2 As described in Note 2 “Change in accounting policies”, the Company applied the new accounting method retroactively and restated the consolidated
financial statements for the year ended March 31, 2012.

36

37

Management’s Discussion & Analysisof Financial Position and Operating Results

In the Smelting & Refining segment, the major R&D themes

current liabilities increased ¥24,433 million to ¥211,386 million,

Medium- to Long-Term Business Strategy and Financial Policies

included the development of refining technologies that will

due to such factors as an increase in corporate tax payable.

The short-term performance of SMM’s three core businesses—Mineral Resources, Smelting & Refining, and Materials—is significantly

foster the ability to handle a wide range of raw materials andMeanwhile, long-term liabilities climbed ¥61,453 million toaffected by fluctuations in non-ferrous metals prices, demand for electronic and other related materials, and movements in foreignore grades and improved cost competitiveness, as well as the¥295,220 million. This largely reflected the increase in long-termcurrency exchange rates. In addition, considerable time is required to generate returns from investments in development ofdevelopment of new metal-refining processes. In addition, thedebt to fund aggressive investment in large-scale projects.

non-ferrous metal resources. In view of these unique business factors, SMM recognizes the vital importance of adopting businesssegment moved ahead with the development of recycling

strategies that focus on the medium to long term, opportune investment timing, and securing sustainable growth.

processes with respect to rare and other metals, including

Net Assets

nickel from used hybrid-vehicle secondary batteries.

Net assets as of March 31, 2013 stood at ¥844,547 million, up

SMM consistently maintains a sound financial position to ensure that the Company is well positioned to undertake medium- tolong-term investments and address any and all risks. In particular, SMM has maintained a consolidated equity ratio in excess ofIn the Materials segment, R&D initiatives were mainly¥118,508 million from the balance of ¥726,039 million as of

50% since fiscal 2006. Under the Company’s 2012 3-Year Business Plan, which covers the period from fiscal 2013 to fiscal 2015, SMM

directed toward functional and wiring materials related tothe end of the previous fiscal year. Net income for the periodplans to selectively channel management resources into priority fields, acquire and expand its interests in overseas mines, andsecondary batteries, solar cells, fuel cells, energy-efficientwas ¥86,640 million, and positive foreign currency translation

invest aggressively in construction of cutting-edge smelting and refinery facilities. Moving forward, SMM will continue to emphasize

lighting, and other energy-efficient products, which areadjustments were substantial as a result of depreciation in thea strong financial position based on financial policies of maintaining a consolidated equity ratio of at least 50% and a low level ofcurrently drawing attention in the energy- and environment-

value of the yen. In line with the increase in net assets, net assets

gearing as measured by the debt-to-equity (D/E) ratio.

related field. In particular, we are working to enhance the cost

per share improved from ¥1,173.97 to ¥1,393.02 as of March 31,

competitiveness, capacity, safety, and other functions of lithium

2013.

nickelite, a cathode material for lithium secondary batteries to
Scope of Consolidation: For fiscal 2012, the year ended March

Other Income / Income before Income Taxes and Minority

aggressively extend the use of this material into next-generation

Major Financial Indicators

31, 2013, the SMM Group comprised the parent company

Interests

hybrid vehicles and PC power supplies.

Accounting for each of the aforementioned factors, the D/E(Sumitomo Metal Mining Co., Ltd.), 58 subsidiaries (three

Turning to other income (expenses), appraised loss on

subsidiaries fewer than in the previous fiscal year), and 15

investment securities shrank, and a declining yen led to gains

Financial Position

equity ratio experienced a minor deterioration from 57.5% toequity-method affiliates (one fewer equity-method affiliate) on

on foreign exchange, while equity in earnings of affiliated

Assets

56.9%, this level remains generally sound.

a global basis.

companies increased. Due to these and other factors, income

As of March 31, 2013, total assets amounted to ¥1,351,153

before taxes and minority interests increased ¥34,493 million, or

million, up ¥204,394 million from ¥1,146,759 million as of the end

Cash Flows

39.2%, to ¥122,455 million.

of the previous fiscal year.

Net cash provided by operating activities came to ¥114,665

Of this total, current assets climbed ¥50,757 million to ¥550,252

million, down from ¥144,999 million in the previous fiscal year,

Non-ferrous metal prices ceased their decline during the second

Net Income

million. This increase largely reflected an increase in marketable

while net income increased before adjustments for taxes andquarter, but soft demand continued due to such developments

After accounting for taxes and minority interests, net income

securities included in negotiable deposits. Total fixed assets

other expenses, trade accounts payable, interest income, andas summer and subsequent inventory adjustments of such items

increased ¥21,354 million, or 32.7% to ¥86,640 million. As a result,rose ¥153,637 million to ¥800,901 million, mainly as the result ofdividend income declined.

as components for high-end mobile phones, which had beenbasic net income per share rose from ¥116.17 to ¥155.58.

an increase in investment securities due to such factors as a

Net cash used in investing activities was ¥88,745 million

rise in equity earnings of affiliated companies and the influencecompared with ¥135,932 million in fiscal 2011. During the

Operating Results
Overview of Operations and Consolidated Operating Results

selling well, on the part of electronics-related companies, whichratio slightly improved year on year from 0.40 to 0.43. While the

Operating Results by Business Segmentof the yen’s depreciation; an expansion in property, plant andprevious term, we provided financing to the Sierra Gorda

Under these circumstances, and based on the 2009 3-Year

For details regarding results and the status of business progressequipment due to capital expenditures in the Taganito Project;

Project and other overseas resource development projects,

Business Plan, SMM is promoting a new growth strategy basedby business segment, please refer to the Review of Operations

and long-term loans to the Sierra Gorda Project.

but during the term under review, such financing did not takeon its long-term vision as the underlying platform for bolstering

section on pages 22 to 27.

are major customers of the Materials Division.

the competitiveness of its three core businesses—Mineralplace, leading to a drop in financing expenditures.
Net cash provided by financing activities amounted to

Liabilities

Resources, Smelting & Refining, and Materials—while channeling

Capital Expenditures

Total liabilities amounted to ¥506,606 million as of the end of¥21,549 million, down from ¥50,314 million in the previous fiscal

business resources into growth sectors by revamping its businessTotal capital expenditures in fiscal 2012 were ¥59,291 million,

fiscal 2012, an increase of ¥85,886 million compared withyear. Income from long-term liabilities increased, but the net

structure.

a decline of ¥13,852 million, or 19.0%. By segment, capitalthe balance of ¥420,720 million a year earlier. Of this total,

cash decreased overall due to such factors as a lack of income

Shareholders’ Equity and Equity Ratio

Debt-to-Equity Ratio and Interest-Bearing Debt

■ Shareholders’ Equity■ Interest-Bearing Debt

expenditures were ¥8,987 million in the Mineral Resources
Net Sales

segment; ¥40,146 million in the Smelting & Refining segment,

In fiscal 2012, consolidated net sales decreased ¥39,357 million,

principally for the Taganito Project; and ¥8,221 million in theor 4.6% compared with the previous term, to ¥808,540 million.

Materials segment.

This decrease was largely attributable to a drop in income for
our Smelting & Refining segment, owing mainly to falling nickel

Research and Development (R&D) Expenses

prices, and a sales decline in the Materials segment due to our

Total fiscal 2012 R&D expenses amounted to ¥4,999 million, awithdrawal from the bonding wire business.

decrease of ¥104 million, or 2.1% compared with the previous
term.

Operating Income

38

Equity Ratio

Debt-to-Equity Ratio(¥ billions)(%)(¥ billions)(Ratio)

800

80

400

0.50

400

40

200

0.25

0

0

In the Mineral Resources segment, we are carrying out

Consolidated operating income increased ¥7,208 million, or

R&D relating to non-ferrous ore processing, including dressing

8.1%, to ¥95,785 million, mainly due to favorable acceleration oftechnology development to improve refined ore quality andthe depreciation of the yen toward the end of the term as wellyield, as well as processing of effluent from the Hishikari Mineas an increase in sales of electrolytic copper.

and inactive mines in Japan.

0
2009

2010

2011

2012

2013
(As of March 31)

0.00
2009

2010

2011

2012

2013
(As of March 31)

39

from bond issuance, as conducted in the previous term, andores, nickel matte and other raw materials for non-ferrous

In accordance with these statutory and regulatory

The SMM Group recognizes the importance and value of

an increase in expenditures for share buybacks. Taking into

metal refining operations based on long-term ore-purchasing

requirements, operators may be charged with compensationacquiring intellectual property rights and managing such rights

account each of the previously mentioned activities and after

contracts that are not backed by investment.

for loss or damages, irrespective of the existence of negligenceproperly in accordance with related laws and regulations.

or

and

However, it is not always possible to secure such rights even if

deducting the effect of exchange rate change, cash andEach year, the raw materials purchasing terms andcash equivalents as of March 31, 2013 stood at ¥239,691 million,

conditions of long-term ore-purchasing contracts are subject tomanagement of abandoned mines. Moreover, operators may

the necessary procedures are followed. As such, our use of the

an increase of ¥53,983 million compared with the end of thenegotiation. In each case, there are instances in which required

incur the burden of additional expenses due to requirements

fruits of our R&D activities could be threatened by disputes withprevious fiscal year.

volumes cannot be purchased at an appropriate price due toimposed under new environmental standards and regulations.

third parties or unlawful third-party use of intellectual property.

a variety of market factors. Furthermore, as product prices are

At the same time, both the mining and non-ferrous metals

To reduce the impact of such risk, the SMM Group has

Risk Information

generally determined by such factors as supply and demand—refining industries incur the risks and associated responsibilities

established an R&D structure aimed at rapid utilization of its end

The following section provides an overview of the risk factors thatparticularly factors relating specifically to non-ferrous metals—

for environmental pollution as well as the disposal of mining

products. We have also established a specialized department

could exert a significant effect on the business performance

there are instances where the transfer of any deteriorationand industrial waste. Ongoing regulatory compliance costs areto manage our intellectual property rights, and are working toand financial position of the SMM Group. All forward-looking

in the purchasing terms and conditions of raw materials to

substantial and subject to unexpected increases as the result

reliably obtain and preserve such rights.

statements in the text refer to management decisions based

product prices is difficult.

of the sudden emergence of previously unknown risks. The

on the best information available at the end of fiscal 2012.
(1) Fluctuations in non-ferrous metals prices and exchange
rates

demandsforthemaintenanceSupplies of ore can also be delayed or suspended due

costs of ensuring regulatory compliance could therefore exert(6) Overseas investments

to unpredictable disruptive events beyond the control ofa negative impact on the Group’s business performance and

The Group strives to develop its overseas business, both in

the Group, such as extreme weather conditions, large-scalefinancial position.

terms of the location of production bases as well as the sale

earthquakes, supplier operational accidents and industrial

To mitigate such risks, the Group seeks to ensure thatof its products. In the conduct of overseas business, however,

1. Sustained downturn in non-ferrous metals prices

disputes. Such factors could impose various constraints on

operations are in full compliance with environmental protection

SMM is subject to a wide range of political and economic

The prices of nickel, copper, gold and other non-ferrous metals

Group production volumes, which as a result could exert aand other laws and regulations through the operation ofrisks that vary by country. These include, but are not limited

are essentially determined by the London Metal Exchange

negative impact on the Group’s business performance andenvironmental and risk management systems based on strict

to, political instability; changes in statutory and regulatory(LME) and other international markets (hereinafter referred tofinancial position.

standards. The Group also endeavors to manage operations so

requirements with respect to the environment, labor, taxes,

that related compliance costs are kept within reasonable limits.

currency management and controls as well as trade; limited

as “LME and other market prices”). LME and other market prices

To mitigate such risks, the Group continues to seek toare influenced by a number of factors, including international

develop overseas mines and invest in high-grade overseas

supply and demand, political and economic circumstances,mines to secure reliable within-Group supplies of ore.

(5) Risks associated with market shifts, new productin connection with intellectual and other property rights;

development and intellectual property rights

fluctuations in foreign currency exchange rates; and the

A sharp and sustained downturn in non-ferrous metals prices(3) Uncertainty inherent in mining investments

In those markets related to the Group’s Materials business,confiscation or nationalization of assets. The emergence ofcould have a significant negative impact on the Group’s

As described above, the raw materials procurement policy of

increasingly longer periods are required for the development

various developments could prevent the Group from earningbusiness performance and financial position.

the SMM Group is to develop within-Group mining resources toof new products due largely to rapid changes in applieda suitable return on overseas investments. Such risks include

boost the proprietary ore ratio. Amounts of extractable ore andtechnologies, customer requirements and product life. This is

the development of mineral resource projects by organizations

2. Appreciation of the yen

extraction costs can only be estimated based on the results ofeven as product development programs in these areas require

funded by national or regional governments against theNot only imported raw materials, including copper concentrates

exploratory surveys.

the investment of increasingly large amounts of time andbackdrop of high non-ferrous metals prices, or the levying ofresources.

higher taxes on such operations. Increased environmental

speculative trading, and competition from alternative materials.

protection under the law or inadequate enforceability

and nickel matte but also the domestic prices of non-ferrous

With respect to mining development, the development costs

metals, are determined under U.S. dollar-denominated LMEof a mining project can rise due to a variety of factors, suchand other market standards. Accordingly, the refining margins

as compliance with environmental or regulatory actions. Any

product development programs may not materialize due

To mitigate such risks, the SMM Group makes overseas

earned by SMM from its Smelting & Refining business are

additional investment or increase in the burden of extraction

to obsolescence caused by technological progress, delays

investment decisions based on careful consideration of all

effectively denominated in U.S. dollars. In addition, returns on

costs arising from the inherent uncertainty associated withcaused by responding to customer requests, or the launch of

relevant country risks.

investments in overseas mining developments, income earned

mining developments could have a negative impact on thecompetitor products among other factors. Customer demand

from investments in the Materials business, and revenues fromGroup’s business performance and financial position.

for products may also decline in the future. All these various(7) Disaster-related risks

factors could have a negative impact on the Group’s business

The SMM Group locates production operations based on

performance and financial position.

considerations such as customer relationships, raw material

exports of products in each of the aforementioned businesses
are also denominated in foreign currencies.

To mitigate such risks, the SMM Group employs a selective
investment policy and undertakes strict assessments of the

Expected

returnsoninvestment

fromrelatednew

demands from various quarters constitute a further risk.

A substantial appreciation of the yen against thesepotential profitability of individual mining developments,

In addition, sales volumes of the Group’s mainstay Materials

procurement, linkage to other Group operations, and effective

currencies over a sustained period could exert a significant

based on extensive experience in mining extraction and minebusiness products are dependent upon customer productionuse of management resources. Unexpected large-scale natural

negative impact on the Group’s business performance andvaluation accumulated over many years.

levels of such items as mobile handsets, PCs, and electric

disasters such as earthquakes or typhoons that affect thehousehold appliances. Accordingly, performance is subject toregions where such facilities are located could result in majora variety of factors including cyclical demand for the products

financial losses arising from such factors as onsite damage andmanufactured by customers, advances in technologicalloss of production.

financial position.
To mitigate these external risks, the SMM Group continues tomake progress in implementing a variety of measures aimed at(4) Environmental protection and regulatory compliancerisks

boosting competitiveness, both in materials procurement and

SMM Group businesses, notably its mining and non-ferrous

manufacturing.

metal smelting and refining operations, are subject to a broad

As a result of such factors, the development of new products

where this is possible at reasonable cost and has maderange of laws and regulations in such areas as occupationaland sales of existing products in the Group’s Materials businessplans containing suitable countermeasures to minimize any

safety and health, environmental protection, pollution preven-

may not progress in accordance with plans. This in turn could

secondary effects due to such disasters.

tion, industrial waste disposal and management of potentiallyexert a negative impact on the Group’s business performance

toxic substances.

and financial position.

(2) Deterioration in terms of non-ferrous metal ore purchasing
contracts and supply disruptions
Currently, the SMM Group procures the majority of copper40

otherwise, or

innovation, and general economic trends.

To mitigate such risks, the Group insures such facilities

41

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

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012

2013

185,708$ 2,549,633

2013

As of March 31, 2013 and 2012
Current assets:
Cash and cash equivalents
Time deposits

239,691
1,100

¥

37

11,701

88,53096,591

941,708

Unconsolidated subsidiaries and affiliated companies

3,597

2,908

38,263

(252)

(242)

(2,681)

142,962

151,068

1,520,711

1,774

2,165

Deferred tax assets (Note 9)
Other current assets
Total current assets

Thousands of
U.S. dollars(Note 1)

2012

2013

2013

As of March 31, 2013 and 2012
Bank loans (Note 8)Long-term debt due within one year (Note 8)¥

56,288¥56,253$598,745

11,462

2,579

121,923

28,60035,908304,223

Notes and accounts payable:

Trade

Inventories (Note 6)

Millions of yen

Current liabilities:¥

Notes and accounts receivable:

Allowance for doubtful accounts

LIABILITIES AND NET ASSETS

Trade
Unconsolidated subsidiaries and affiliated companies

6,612

7,608

70,333

Other

18,923

17,167201,287

Accrued income taxes (Note 9)

20,2794,132

215,711

Accrued expenses

4,304

3,784

45,782

18,870

Advances received

909

1,007

9,669

Accrued restructuring charges

8

1,764

85

Accrued environmental measures

66

109

702

72,85061,260774,917550,252

499,495

5,853,122

Deferred tax liabilities (Note 9)
Other current liabilities
Total current liabilities

426

−

4,531

63,50956,642

675,557

211,386

186,953

2,248,548

Investments and long-term receivables:
Long-term liabilities:

Investment securities (Note 4):
Unconsolidated subsidiaries and affiliated companies
Other

259,581
143,807

255,763
76,8132,761,206

Long-term debt (Note 8)

262,323

207,1192,790,373

1,529,699

Deferred tax liabilities (Note 9)

16,346

6,667

173,875

Accrued retirement benefits (Note 10)

5,728

7,027

60,930

37

21

394

(6)

(6)

(64)

Unconsolidated subsidiaries and affiliated companies

22,6293,180

240,708

Other

12,932

3,991

137,560

Other long-term receivables

8,200

4,730

87,226

Allowance for doubtful accounts

(210)

(224)

(2,234)446,933

344,247

4,754,101

Allowance for loss on investments
Long-term loans receivable

Total investments and long-term receivables

Accrued restructuring charges
Accrued environmental measures

52

39

553

Other accruals

238

214

2,532

Asset retirement obligations (Note 16)

5,337

4,317

56,771Other long-term liabilities

5,159

8,363

54,876295,220

233,767

3,140,304

991,831

Total long-term liabilities
Contingent liabilities (Note 13)
Net assets (Note 12):

Property, plant and equipment (Notes 7 and 8):

Shareholders’ equity:Land

28,26628,070300,670

Buildings and structures

186,906

171,959

1,988,150

Machinery and equipment

381,917

361,025

4,062,515

Construction in progress

Accumulated depreciation
Net property, plant and equipment

131,733

90,2691,401,266

728,822651,323

7,752,601(386,755)(360,101)(4,113,977)

342,067

291,222

3,638,624

Common stock
Authorized - 1,000,000,000 shares
93,242

93,242

Capital surplus

86,062

86,063

915,455

Retained earnings

644,642

572,576

6,857,164

Treasury stock, at cost

(31,895)(21,845)(339,272)

792,051

730,036

8,425,178

Net unrealized holding gains (losses) on securities

24,645

10,986262,153

Deferred gains (losses) on hedges(1,856)(4,854)(19,743)

Foreign currency translation adjustments(45,590)(76,448)(484,948)(22,801)(70,316)(242,538)

Minority interests

75,29766,319800,947

Total net assets

844,547

726,039

8,983,587¥ 1,351,153¥ 1,146,759$ 14,372,439

Issued - 581,628,031 shares

Total shareholders’ equity
Accumulated other comprehensive income:Deferred tax assets (Note 9)

1,520

1,384

16,168Other assets

10,381

10,411

110,424¥ 1,351,153¥ 1,146,759$ 14,372,439

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

Total accumulated other comprehensive income:

Total liabilities and net assets

42

43

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIESSUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Millions of yen

For the years ended March 31, 2013, 2012
Net sales (Note 15)

Thousands of
U.S. dollars(Note 1)

2013

2012

2013

¥ 808,540¥ 847,897$ 8,600,574

Shareholders’ Equity

Costs and expenses:

Number ofshares issued

Cost of sales

667,890

715,476

7,104,457

Selling, general and administrative expenses (Note 11)

44,86543,844477,236

712,755

759,320

7,581,693

95,78588,577

1,018,881

Interest and dividend income

3,157

4,073

33,582

Interest expense(3,301)(3,410)(35,113)

Foreign currency translation adjustments(908)(6,167)(9,659)Adjustments for unrealized gains on securities

Operating income
Other income (expenses):

Write-down of investment securities

For the years ended March 31, 2013, 2012
Balance at April 1, 2011

232

(264)

2,468

Acquisition of treasury stock(198)(11,102)(2,106)

−

(548)

−

Sale of treasury stock

5,618

(934)

59,760−(1,743)

−

(527)

(573)

(5,606)

Provision for restructuring charges
Maintenance cost for ceased projects(15)(1,608)(160)

Equity in earnings of affiliated companies

17,10023,217

181,896

Gain (loss) from valuation of derivative instruments(1,311)(1,588)(13,945)

Casualty loss

Gain on change in equity

8,435

−

89,724

Other, net(1,612)

32(17,148)

Millions of yen¥ 93,242¥ 86,063¥ 524,978

407

65,28665,28627,247

15,091

289,831¥ 93,242¥ 86,063¥ 572,576

Deferred

1,658

4,391

17,63628,905

19,482

307,467

Income before minority interests

93,55068,480995,107

Minority interest

Minority interests in net income of consolidated subsidiaries(6,910)(3,194)(73,503)

Cash dividends paid

¥ 86,640¥ 65,286

921,604

Balance at March 31, 2013

2013

(1)

Sale of treasury stock¥ 155.58
142.4034.00¥ 116.17
106.84
28.00

$

1.65
1.51
0.36

(10,053)(10,053)3

2(14,574)
581,628¥ 93,242¥ 86,062¥ 644,642(14,574)¥ (31,895)¥ 792,051

CapitalsurplusRetainedearnings$ 991,831$ 915,466$ 6,090,586$ (232,369) $ 7,765,514

921,604

921,604

For the year ended March 31, 2013
Balance at April 1, 2012

SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Treasury
stock

Total
shareholders’equityCommonstock

Thousands of U.S. dollars (Note 1)

Net income

Consolidated Statements of Comprehensive Income

Foreign currency translation adjustments
Adjustments for unrealized gains on securities

Millions of yen

Thousands of
U.S. dollars(Note 1)

2013

2012

2013

¥ 93,550¥ 68,480$ 995,107

13,631(6,740)144,995

Cash dividends paid

Other comprehensive income
Net unrealized holding gains (losses) on securities

86,640Shareholders’ Equity

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

Income before minority interests¥ 730,036

Deferred gains (losses) on hedges

Net income (Note 19)

For the years ended March 31, 2013, 2012

(20,232)¥ (21,845)

Adjustments for unrealized gains on securities

Amounts per share of common stock:− Basic− Diluted
Cash dividends applicable to the year

2,137

86,640Acquisition of treasury stock

2012

9

Foreign currency translation adjustments

Current

2013

(66)

9

(20,232)
581,628

Net income

283,693

U.S. dollars(Note 1)

(66)

2,137

Cash dividends paid
Balance at April 1, 2012

1,302,574

Yen¥ 682,495

Minority interest

(615)

$

¥ (21,788)

407

0

of affiliated companies

87,962

Net income

581,628

Total
shareholders’equityIncrease resulting from change in accounting policy

26,670
Income taxes (Note 9):

Treasurystock

Deferred gains (losses) on hedges

122,455

Income before income taxes and minority interests

Retainedearnings

thousands

Net income

Loss on impairment of fixed assets (Note 7)
Exchange gain (loss)

Capitalsurplus

Cumulative effect of change in accounting policy (Note 2)

Gain (loss) on sale and disposal of property, plant and equipment
Loss from valuation of gold loans

Commonstock

Acquisition of treasury stock(11)

Sale of treasury stock(106,935)(106,935)

32

21

Deferred gains (losses) on hedges
Minority interest

Deferred gains (losses) on hedges

3,012

(250)

32,039Balance at March 31, 2013

Foreign currency translation adjustments

18,153(4,634)

193,097

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

$ 991,831$ 915,455(155,026)(155,026)$ 6,857,164$ (339,272) $ 8,425,178

Share of other comprehensive income of
17,121(9,595)

182,119

Total other comprehensive Income

51,917(21,219)552,250

Comprehensive Income (Note 14)

145,467

47,261

1,547,357

Owners of the parent

134,155

47,3491,427,029

Minority interests

11,312(88)

120,328

affiliated companies accounted for using equity method

Comprehensive income attribute to:

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

44

45

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

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

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

Deferred gains(losses) onhedgesForeigncurrencytranslation
adjustments

Total accumulated othercomprehensive
incomeMinority
interests

For the years ended March 31, 2013, 2012
Balance at April 1, 2011

Millions of yen¥ 17,738¥ (4,636)¥ (65,481)¥ (52,379)¥ 53,987

Cumulative effect of change in accounting policy (Note 2)¥ 684,103407

Net income

65,286

Foreign currency translation adjustments
Adjustments for unrealized gains on securities

Total net
assets(10,967)(6,752)

2,106(6,752)(6,752)

Loss (Gain) on sale and disposal of property, plant and equipment

(232)

264

(2,468)(218)
534

Minority interest

11,798Cash dividends paid
¥ (70,316)¥ 66,319

908

6,167

9,659

Loss (Gain) from valuation of derivative instruments

1,311

1,588

13,945Interest and dividend income(3,157)(4,073)(33,582)

Interest expense

3,301

3,410

35,113(17,100)(23,217)(181,896)

Write-down of investment securities

Restructuring charges

−

480

−

11,798Casualty loss

15

1,608

160

(20,232)

Decrease (Increase) in trade receivables

6,372

4,523

67,780Decrease (Increase) in inventories

9,952

18,566

105,861

Increase (Decrease) in trade payables(13,046)

7,791(138,772)

Others(19,754)

4,792(210,126)

118,801

152,095

1,263,706¥ 726,039

13,65930,85830,85813,65913,659Interest and dividend received

10,472

23,252

111,392(10,053)

Interest paid

(3,421)(3,390)(36,390)

Payments for maintenance costs for ceased projects

(527)

(573)

(5,606)

Payments for recovery costs

(15)

(488)

(160)

(10,645)(25,897)(113,231)

114,665

144,999

1,219,711(560,036)

Acquisition of treasury stock

2

Sale of treasury stock
2,998

Deferred gains (losses) on hedges

2,998

2,998
8,978

Minority interest

8,978(14,574)

Cash dividends paid
Balance at March 31, 2013

Depreciation

2,671

86,640Net income
30,858¥ 24,645¥ (1,856)¥ (45,590)¥ (22,801)¥ 75,297¥ 844,547

Sub total

Payments for/Refund of income taxes
Net cash provided by operating activities

Cash flows from investing activities:(52,649)(75,013)

Payments for acquisition of intangible assets

(286)

(498)

(3,042)

Proceeds from sale of property, plant and equipment

1,005

1,125

10,690(10,562)(3,009)(112,350)(139)(58,902)(1,479)(25,672)(725)(273,077)

Payments for acquisition of property, plant and equipment

Payments for purchases of investment securities
Accumulated other comprehensive income
Net unrealized
holding gains(losses) on
securities

Deferred gains(losses) onhedgesForeigncurrencytranslation
adjustments

For the year ended March 31, 2013
Balance at April 1, 2012

Total accumulated othercomprehensive
incomeaffiliated companies
Minority
interests$ (51,633)$ (813,190)$ (747,963)$ 705,446

Net income
328,242

Foreign currency translation adjustments
Adjustments for unrealized gains on securities

145,293328,242
145,293

Total net
assets$ 7,722,998

31,890

Deferred gains (losses) on hedges

31,890$ 262,153

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

$ (19,743)$ (484,948)$ (242,538)$ 800,947

292

2,936

(718)

798

(7,637)(88,745)(135,932)(943,995)

Net cash used in investing activities
Proceeds from long-term debt

151,205

26,6201,608,393

145,293

Repayments of long-term debt

(102,527)(10,305)(1,090,597)(1,989)95,500(155,026)

Cash dividends paid

276

Other

328,242

31,89095,500Minority interest

Collection of loans repaid

Cash flows from financing activities:

21

Sale of treasury stock

Payments for loans lended

921,604(106,935)

Acquisition of treasury stock

Balance at March 31, 2013

Payments for purchases of securities of subsidiaries andThousands of U.S. dollars (Note 1)$ 116,860

293,352

31,132

accounting policy of affiliated companies

Foreign currency translation adjustments$ 1,302,574

11,102(218)¥ (76,448)

87,962¥minority interests to net cash provided by operating activities:

Equity in earnings of affiliated companies¥ (4,854)¥ 122,455

Adjustments to reconcile income before income taxes and198

Increase resulting from change in

Adjustments for unrealized gains on securities

Income before income taxes and minority interests

27,5789¥ 10,986

2013

Loss on impairment of fixed assets

Sale of treasury stock

Balance at April 1, 2012

2012

2013

Cash flows from operating activities:(10,967)
(66)

(218)

Thousands of
U.S. dollars(Note 1)

(10,967)

Acquisition of treasury stock
Deferred gains (losses) on hedges

For the years ended March 31, 2013, 2012

Millions of yen$ 8,983,587

(187)

2,668

Payments for redemption of bonds−(10,000)−

Proceeds from issuance of bonds−

49,736−

Net increase (decrease) in bank loans

25

17,687

266

Increase in treasury stocks(10,051)(59)(106,914)

Cash dividends paid

(14,574)(20,232)(155,026)

Cash dividends paid to minority in consolidated subsidiaries(2,342)(5,801)(24,913)

21,54950,314229,220

Contribution from minority in consolidated subsidiaries

Net cash provided by (used in) financing activities
Effect of changes in exchange rate on cash and cash equivalents

6,514(1,984)69,290Net increase (decrease) in cash and cash equivalents

53,98357,397574,226

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

185,708

128,311

1,975,407¥ 239,691¥ 185,708$ 2,549,633

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

46

47

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 haveimmaterial effect on the consolidated financial statements.
In the elimination of investments in subsidiaries, the assets

entitled to a lump-sum payment at the time of retirement. The

If derivative transactions are used as hedges and meetamount of retirement benefits is, in general, determined bybeen prepared in accordance with the provisions set forth inand liabilities of the subsidiaries, including the portion

certain hedging criteria, the Company and its consolidated

reference to their current basic rate of pay, the length of

the Japanese Financial Instruments and Exchange Act, and in

attributable to minority shareholders, are recorded based on

subsidiaries defer recognition of gains or losses resulting fromservice and the cause thereof.

conformity with accounting principles generally accepted in

the fair value at the time the Company acquired control of thechanges in fair value of derivative transactions until theJapan (“Japanese GAAP”), which are different in certain

respective subsidiaries.

related losses or gains on the hedged items are recognized.

respects as to the application and disclosure requirements ofInternational Financial Reporting Standards (“IFRSs”).

Goodwill (consolidation difference between the investment
cost and the underlying equity in its net assets at the date of

The Company and certain consolidated domestic
subsidiaries also have a non-contributory funded pension plan,
which covers substantially all employees.

If interest rate swap contracts are used as hedges and meet

The Company and its consolidated domestic subsidiaries

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

certain hedging criteria, the net amount to be paid orprovided accrued retirement benefits based on the estimatedbased on their accounting records maintained in conformity

With respect to subsidiaries in the United States, goodwill isreceived under the interest rate swap contract is added to or

amounts of projected benefit obligation and the fair value ofwith generally accepted accounting principles prevailing inamortized over twenty years on a straight-line basis.

deducted from the interest on the assets or liabilities for which

the plan assets at the fiscal year-end.

The accounts of consolidated overseas subsidiaries are

the swap contract was executed.

the respective countries of domicile. The accompanying

Actuarial gains and losses are recognized in expenses using

consolidated financial statements have been restructured

Cash and cash equivalents and cash flow statements —The Company evaluates hedge effectiveness monthly by

and translated into English with some expanded descriptions

Cash on hand, readily available bank deposits, negotiable

comparing the cumulative changes in cash flows from or the

average of the estimated remaining service lives,

from the consolidated financial statements of Sumitomo Metal

certificates of deposits and short-term highly liquid investmentschanges in fair value of hedged items and the corresponding

commencing with the following period. Prior service costs are

Mining Co., Ltd. (“the Company”) prepared in accordancewith maturities not exceeding three months at the time ofchanges in the hedging derivative instruments.

recognized in expenses using the straight-line method over ten

with Japanese GAAP and filed with the appropriate Localpurchase are considered to be cash and cash equivalents.

the straight-line method over ten years, which within theyears, which within the average of the estimated remaining
Foreign currency translation — Receivables and payables

Finance Bureau of the Ministry of Finance as required by theservice lives.

Japanese Financial Instruments and Exchange Act. Some

Allowance for doubtful accounts — The allowance fordenominated in foreign currencies are translated into

supplementary information included in the statutory Japanese

doubtful accounts is provided at an amount determinedJapanese yen at the fiscal year-end rates.

language consolidated financial statements, but not required

based on the historical experience of bad debt with respect

for fair presentation, is not presented in the accompanying

to ordinary accounts, plus an estimate of uncollectible

translated into Japanese yen at the fiscal year-end rates

consolidated financial statements.

amount determined by reference to specific doubtful

except for account components of net assets, which areaccounts from customers who are experiencing financialtranslated at historical rates. Income statements of

Accrued restructuring charges — Accrued restructuring

difficulties.

consolidated overseas subsidiaries are translated at averagecharges are provided by the Company and its consolidated

rates except for transactions with the Company, which are

subsidiaries to cover the costs of business reconstruction.

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

Balance sheets of consolidated overseas subsidiaries are

Accrued retirement benefits in the consolidated balance
sheets also include estimated liabilities for the unfunded
lump-sum benefit plan covering directors and corporate
auditors.

31, 2013, which was ¥94.01 to US$1.00. The convenience

Investment securities — Securities are classified into twotranslations should not be construed as representations thatcategories based on the intent of holding: available-for-salethe Japanese yen amounts have been, could have been, or

securities; and securities issued by unconsolidated subsidiaries

Inventories — Inventories are mainly stated at the lower of costmeasures is estimated and recorded to provide for future

could in the future be, converted into U.S. dollars at this or any

and affiliated companies.

determined by the first-in first-out (FIFO) method or net selling

potential costs, such as costs related to the disposal ofvalue of inventories regarded as the decreased profitability ofpolychlorinated biphenyl (PCB).

other rate of exchange.

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

translated at the rates used by the Company.
Accrued environmental measures — Accrued environmental

assets, whose write-downs are included in cost of sales.
Research and development — Research and development

2. Summary of significant accounting policies

gains and losses on these securities are reported, net ofConsolidation — The consolidated financial statements

applicable income taxes, as a separate component of net

Property, plant and equipment — Property, plant andinclude the accounts of the Company and its significant

assets. The cost of securities sold is determined by the moving-equipment are stated at cost.

subsidiaries (58 subsidiaries in 2013, 61 in 2012). All significant

average method. Other available-for-sale securities with nointer-company balances and transactions have been

available fair values (non-marketable securities) are stated atby the straight-line method, based on the estimated usefuleliminated. Investments in affiliated companies of which themoving-average method. Securities issued by unconsolidated

lives of respective assets. The depreciation period generally

Company has the ability to exercise significant influence oversubsidiaries and affiliated companies are carried at cost.

ranges from 2 years to 60 years for buildings and structures

Accounting for certain lease transactions — Finance leases,

and 2 years to 22 years for machinery and equipment.

except for certain immaterial leases, are capitalized andfinancial and operating policies, are accounted for by the48

are used for hedging purposes.

Depreciation of property, plant and equipment is computed

expense is charged to income as incurred.

Bond issue expense — Bond issue expense is charged toincome as incurred.

equity method (15 affiliated companies in 2013, 16 in 2012).

Derivatives and hedge accounting — Derivative instruments

Investments in the remaining unconsolidated subsidiaries andare stated at fair value. Changes in the fair values are

Accrued retirement benefits — Under the terms of theprior to April 1, 2008, which do not transfer ownership of theaffiliated companies are carried at cost because of theirrecognized as gains and losses unless derivative transactions

Company’s retirement plan, substantially all employees areleased property to lessees are accounted for in the samedepreciated over the lease term. Finance leases commencing

49

proof documents for seven years. Therefore the expenditures

are currently in the process of determining the effects ofof digging tunnels that serve as the transportation of ore

these new standards on the consolidated financial

Notes and accounts receivable, which are trade

Income taxes — Deferred tax assets and liabilities are

incurred on or after April 1, 2005 was retrospectively adjusted

statements.

receivables, are exposed to the credit risk of customers. In

determined based on the differences between financial

and capitalized as “Structures” in the consolidated balance

reporting and the tax bases of assets and liabilities, andsheets.

manner as operating leases.

measured using the statutory tax rates which will be in effectwhen the differences are expected to be realized.

As a result of the retrospective application of the accounting
policy, operating income, income before income taxes andminority interests in the consolidated statements of income for

addition, foreign currency-denominated trade receivables,
Amount per share of common stock — Basic net income perwhich are generated by global business operations, areshare is computed based on the weighted-average number

also exposed to fluctuations in foreign currency exchangeof shares of common stock issued during each year.

rates. Turning to the metals business, trade receivables are

Diluted net income per share assumes that outstanding

also exposed to the risk of movements in the prices ofSales — Sales of merchandise and finished products are

the year ended March 31, 2012 increased by ¥79 million.

convertible bonds were converted into common stock at the

non-ferrous metals. Investment securities, which largely

recognized when the products are shipped to customers.

Income before income taxes and minority interests for the

beginning of the period at the current conversion price.

represent shares of companies with whom the Group

year ended March 31, 2012 in the consolidated statements ofCash dividends per share represent the actual amounttrades or has formed an equity alliance, are exposed to the

Accounting Standards for Accounting Changes and Error

cash flows increased by ¥79 million compared to the amounts

Corrections — Effective for April 1, 2011, the Company and its

previously reported, but there was no effect on cash and cash

consolidated domestic subsidiaries adopted “Accounting

equivalents as at March 31, 2012 and 2013, respectively. In

Reclassifications — Certain reclassifications have been madeobligations, generally have maturity dates of one year orStandard for Accounting Changes and Error Corrections”

addition, due to the cumulative effect of the change to pastin the 2012 financial statements to conform to theless. In similar fashion to trade receivables, trade obligations(ASBJ Statement No. 24 issued on December 4, 2009) andperiods reflected in net assets as at April 1, 2011, retained

presentation of 2013.

in the metals business are subject to the risk of movements“Guidance on Accounting Standard for Accounting Changes

earnings as at April 1, 2011 increased by ¥407 million.

and Error Corrections” (ASBJ Guidance No. 24, issued on
December 4, 2009) that have been applied retrospectively to

The Company has changed its accounting policy with respect
to certain expenditures of digging tunnels for undergroundmines from the year ended March 31, 2013. The Company now

risk of changes in their market prices.
Notes and accounts payable, which are tradein the prices of non-ferrous metals. A certain portion of
3. Notes to financial instruments

trade obligations are related to the import of raw andshare information is explained in Note 19 “Earning per share”.

1. Status of financial instruments

other materials and as such are denominated in foreign(1) Policies on the handling of financial instruments

currencies. On this basis, they too are open to the risk of

Accounting Standards issued but not yet effective —(Change in accounting policy)

applicable to the respective year.

The effect of the change in the accounting policy on perprior periods.

Accounting Standard for Retirement Benefits(ASBJ Statement No. 26, May 17, 2012)
Guidance on Accounting Standard for Retirement Benefits(ASBJ Guidance No. 25, May 17, 2012)(1) Summary

The Sumitomo Metal Mining Group (“the Group”) procuresfluctuations in the foreign currency exchange rates. Within

the funds necessary for its capital expenditure, investment

loans and bonds payable, bank loans payable primarily

and loan plans mainly through bank loans and therepresent funding applicable to operating transactions

issuance of bonds. Short-term operating funds are funded

while long-term debt (with a maximum maturity up to

through bank loans as required. In the event of a need forMarch 21, 2025) and bonds mainly concern funding

new funds, the Group, in principle, looks to the issuance ofrelating to capital expenditures. A certain portion of loans

the transportation of ore and reports as “Structures” in the

Under the amended rule, actuarial gains and losses andshort-term bonds (commercial paper). This is supplemented

and bonds payable is provided on a floating rate of

consolidated balance sheets. Prior to this change, thepast service costs that are yet to be recognized in profit orby bank loans and the use of liquidation schemesinterest basis. Accordingly, this portion is exposed to the risk

Company expensed the expenditure as incurred andloss would be recognized within the net asset section, after

applicable to notes and accounts receivable. The Groupof fluctuation in interest rates.

reported as “Cost of sales” or “Selling, general andadjusting for tax effects, and the deficit or surplus would betakes great care to monitor the status of its funding needs

administrative expenses” in the consolidated statements ofrecognized as a liability or asset without any adjustments.

and financial position. This is to ensure that the Group does

aforementioned risks include forward foreign currency

income.

capitalizes the expenditures of digging tunnels that serve as

Derivative transactions employed in an effort to offset the

For determining method of attributing expected benefit to

not overly rely on specific procurement methods andexchange rate contracts; forward and option transaction

The digging of the new tunnels in the Hishikari Mine wasperiods, the Standard now allows to choose benefit formulafinancial instruments. Accordingly, steps are taken to ensureagreements; interest rate swap transaction agreements;

intended mainly for exploration since beginning operations.

basis, as well as straight-line basis. Method for determination

a balanced funding portfolio from both the short and longand interest rate cap transaction agreements, which seek

However, in recent years, on the basis of information related toof discount rate has also been amended.

term as well as direct and indirect financing perspectives.

to provide hedges for the risks of fluctuations in the foreign

Temporary surplus funds are utilized only for highly safe

currency exchange rates of trade receivables and tradedeposits or veins obtained by exploration activities, such(2) Effective dates

tunnels have been also used for transportation purpose in a

Effective for the end of annual periods ending on or after

financial assets for which there is a low probability of a loss

obligations; the prices of non-ferrous metals applicable toview of efficient mining. Based on the situation, the Company

March 31, 2014. Amendments relating to determination ofof principal.

non-ferrous metal trade receivables and trade obligations;has changed its accounting policy in order to match costs

retirement benefit obligations and current service costs are

and expenses with mining revenues more appropriately.

effective from the beginning of annual periods ending on

attributable to fluctuations in the prices of non-ferrous

respectively. For hedging instruments and hedged items,

or after March 31, 2015.

metals as well as foreign currency exchange and interest

hedging policy, the method of assessing the effectivenessrates. The Group does not engage in derivative translationsof hedges and other details in connection with hedge

for speculative purposes.

accounting, refer to the “Derivative and hedge

Full retrospective application of this accounting change onprior year’s consolidated financial statements is impracticablesince the Company makes it a rule to retain its accounting

50(2) Details of and risks associated with financial instruments(3) Effect of application of the standard
The Company and its consolidated domestic subsidiaries

Derivative transactions are only used to avoid the risks

and interest rates applicable to loans and bonds payable,51

accounting” described in the note 2 Summary of significant

basis taking into consideration its relationships with

2. Fair values, etc. of financial instruments

2012 are shown as follows. Certain financial instruments were

accounting policies.

counterparties.

Amounts on the consolidated balance sheets, fair values andexcluded from the following table as the fair values were not

the differences between the two as of March 31, 2013 andavailable (Refer to the table shown in *2 below).

As for derivative transactions, in accordance with
(3) Risk management systems relating to financial instruments

derivative transaction management rules and regulations(i) Management of credit risk (risk relating tothat outline the purpose and objectives of derivative

nonperformance of a contract obligation by atransactions while providing authority and setting limits andcounterparty, etc.)

scope, individual departments and divisions are responsible

2013

for formulating operating rules with respect to the

Cash and cash equivalents

department and division within the Sumitomo Metal Mining

implementation of derivative transactions, executing andTime deposits

Group is guided by its own set of management rules andbooking transactions and reconciling balances withregulations. Sales and marketing departments and divisions

Notes and accounts
receivable

92,127

92,127−

979,970979,970−

counterparties on a regular basis. Consolidated subsidiaries

Investment securities

regularly monitor the status of customers, managing due

179,901

337,589

157,688

1,913,637

3,590,990

1,677,353

also adhere to the Company’s derivative transaction

Total Assets¥ 512,819¥ 670,507¥ 157,688$ 5,454,941$ 7,132,294$ 1,677,353

With respect to trade receivables, each operating

dates and balances on an individual customer basis. In thismanner, every effort is made to ensure early detection andthe mitigation of concerns regarding collection due todeterioration in financial standing or other factors. With
respect to the use of derivative transactions, steps aretaken 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 in thevalue 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.)

provide hedges for the risks of fluctuations in the prices ofimported raw materials with respect to non-ferrous metals
as well as the sales prices of commodity metals andcopper concentrate on international commodities markets.
At the same time, the Group utilizes forward foreign
currency exchange rate contracts in an effort to offset therisks of movements in foreign currency exchange rates inFair Values¥ 239,691¥ 239,691

¥

1,100

1,100

Thousands of U.S. dollars

DifferenceBook values ofConsolidated
Balance Sheets

Fair Values−$ 2,549,633$ 2,549,633−

11,701

11,701

Difference

−

$

−

management rules and regulations while working to build
the aforementioned management structure under which

Notes and accounts
payable35,21235,212−

374,556

374,556−

derivative transactions are managed.

Bank loans

67,75067,750−720,668

720,668−(iii) Management of liquidity risks associated with theLong-term debt due after
one year262,323

263,916

1,593

2,790,373

2,807,318

16,945

Total Liabilities

365,285

366,878

1,593

3,885,597

3,902,542

16,945procurement of funds (the risk of being unable to makepayments on due dates)
The Group manages liquidity risk by preparing and

Derivative transactions¥(2,581)*¥(3,914)*¥ (1,333)$(27,455)*$(41,634)*$(14,179)

updating a cash management plan six months in advance
Millions of yen

based on reports from each department and division.
Certain domestic consolidated subsidiaries have adopted

2012

a cash management system and are efficiently

Cash and cash equivalents

maintaining appropriate levels of liquidity and cash on

Time deposits

hand.

Notes and accounts
receivable

Book values ofConsolidated
Balance Sheets

Fair Values

Difference¥ 185,708¥ 185,708

¥

37

37

−

99,49999,499−Investment securities

The Group employs commodity forward transaction andcommodity option transaction agreements, which seek toMillions of yen
Book values ofConsolidated
Balance Sheets(4) Supplementary explanation for fair values, etc. of financial

Total Assets−

127,786

343,474

215,688¥ 413,030¥ 628,718¥ 215,688

instruments
Fair values of financial instruments are determined byNotes and accounts
payable43,51643,516−

market prices. If no market price is available, the fair value

Bank loans

58,832

58,832−is based on the value that is calculated in a reasonable

Long-term debt due after
one year

207,119

207,579460

Total Liabilities

309,467

309,927460

manner. The determination of such values contains variablefactors and as such the adoption of wide ranging anddiffering assumptions may cause values to change. In

connection with trade receivables and obligations

addition, with respect to contract and other amounts

denominated in foreign currencies, interest rate swap

applicable to derivative transactions outlined as follows intransaction agreements, and interest rate cap transaction“2. Fair values, etc. of financial instruments” such amounts

agreements aimed at hedging the risks of fluctuations inthemselves do not indicate the size of market risksinterest rate.

associated with derivative transactions.

Derivative transactions¥(8,780)*¥ (10,045)*¥(1,265)* Net receivables and obligations arising from derivative transactions are shown as a net amount and items for which aggregatedresults lead to net obligations are shown in asterisk.

With respect to investment securities, the Group regularly
monitors fair values as well as the financial status of issuers(counterparties), and reviews it holdings on a continuous

52

53

*1

*4

Fair values of financial instruments, and matters pertaining to securities and derivative transactions.

The amount scheduled to be repaid after the consolidated account settlement date of bonds, long-term debt, lease obligations andother interest-bearing liabilities.

AssetsLiabilities

1. Cash and cash equivalents, 2. Time deposits

1. Notes and accounts payable, 2. Bank loans

Refer to the Note 8 Bank loans and long-term debt.

The book values approximate to the fair values due to their

The book values approximate to the fair values due to short-

4. Securities

high liquidity.

term settlement of these instruments.

(1) The following tables summarize acquisition costs and book values (available fair values) as of March 31, 2013 and 2012:

3. Notes and accounts receivable

3. Bonds

The book values approximate to the fair values due to short-

The fair values are based on market prices.

term maturities of these instruments.

Available-for-sale securities

4. Long-term debt

4. Investment securities

The discounted cash flow method was used to estimate the fair

The fair values of investment securities are based on the

Securities with book values (available fair values) exceeding acquisition costs

values, based on marginal borrowing rates as discount rate.

Millions of yen

market prices of securities exchanges on which shares arelisted.

2013

Derivative transactions

For details regarding securities on an individual holding

Refer to the Note 5. Derivative transactions.

Equity securities

purpose basis refer to the Note 4. Securities.

2012

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥ 52,658¥ 90,727¥ 38,069¥ 29,855¥ 49,780¥ 19,925

Thousands of U.S. dollars

2013

*2
The financial instruments excluded from the above table as of March 31, 2013 and 2012 are as follows:
Equity securities
Millions of yen

Thousands of U.S. dollars

2013

2012

2013

Book values ofConsolidated Balance
SheetsBook values ofConsolidated Balance
SheetsBook values ofConsolidated Balance
Sheets¥ 216,322¥ 198,161$ 2,301,053

Unlisted equity securities

Book value

Difference$ 560,132$ 965,078$ 404,946

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

2013
Acquisition cost

Equity securities

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

Acquisition cost

¥ 10,901

2012

Book value

Difference

Acquisition cost

Book value

Difference¥¥ (3,145)¥ 23,657¥ 18,064¥ (5,593)

7,756

Thousands of U.S. dollars

2013

*3
The aggregate maturities subsequent to March 31, 2013 and 2012 for financial assets are as follows:
Millions of yen

Thousands of U.S. dollars

2013

Due after
Due after
Due within one year and5 years andone year within 5 years within 10 years

Cash and cash
equivalents¥ 239,691

¥−

¥−

¥−

$ 2,549,633

$−

$−

$−

1,100

−

−

−

11,701−−−Time deposits
Notes and accounts
receivable

Due over10 years

Due after
Due after
Due within one year and5 years andone year within 5 years within 10 years

Equity securities

Acquisition cost

Book value

Difference$ 115,956$ 82,502$ (33,454)

Due over10 years

92,127−−−

979,970

−

−

−

Total

¥ 332,918

¥−

¥−

¥−

$ 3,541,304

$−

$−

$−

2012

Due after
Due after
Due within one year and5 years andone year within 5 years within 10 years

Cash and cash
equivalents¥ 185,708

¥−

¥−

¥−

37

−

−

−

Millions of yen

Time deposits
Notes and accounts
receivable
Total

54

Due over10 years

99,499−−−¥ 285,244

¥−

¥−

¥−

55

(2) The following table summarizes book values of the securities with no available fair values as of March 31, 2013 and 2012:

The following tables summarize the market value information as of March 31, 2013 and 2012 of derivative transactions for which hedge
accounting has not been applied:Available-for-sale securities
Millions of yen
Millions of yen Thousands of U.S. dollars

Unlisted equity securities

2013

2012

2013

Contracted amount¥ 45,132¥ 8,786$ 480,077

Total

Over
one year(3) Total sales of available-for-sale securities sold during thesubsidiaries or London Metal Exchange (LME) brokers guar-

year ended March 31, 2013 amounted to ¥203 million

anteed by banks, so that the Company and its consolidated(US$2,159 thousand) and the related gains amounted

subsidiaries might reduce the risk of default on an obligation.

to ¥154 million (US$1,638 thousand). No losses on sales

Each department of the Company and its consolidatedof available-for-sale securities were recognized for thesubsidiaries involving derivative transactions have their own

period.

rules for derivative transactions which stipulate the purposes

Total sales of available-for-sale securities sold during theand scope of using derivatives, standards for choosing trans-

year ended March 31, 2012 amounted to ¥628 million andaction counterparties and procedures with respect to report-

the related gains amounted to ¥240 million.

ing and administration.

No losses on sales of available-for-sale securities wererecognized for the period.

2013

Derivative transactions are subject to approval by theGeneral Manager of the department in charge after consulting with related departments. Based on these rules, the person

5. Derivative transactions

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

Status of derivative transactions — The Company and its con-directors monthly.

solidated subsidiaries utilize derivative transactions in order to

Derivative positions are confirmed semi-annually with thehedge various risks, such as fluctuations in the price of metals,

transaction counterparties. Also, the internal audit department

exchange rates and interest rates, in the normal course ofof the Company regularly examines derivative transactions.

business. Derivative instruments include futures contracts

The Company and its consolidated subsidiaries are notfor hedging against fluctuations in the international priceexposed to market risks arising from commodity derivativeof metals, forward foreign exchange contracts for hedging

transactions, because the risk of a fluctuation in market prices

against fluctuations in exchange rates, interest rate swaps

that is caused by the time lag between the purchase and sale

Sell position − U.S. dollars

Total

Over
one yearMarket value

Recognized
gains (losses)

−

¥−

−

¥ 10,613―¥ −¥ (637)¥ (637)

11,380

−

(100)

(100)

8,232

−

(22)

(22)

¥ 11,380¥−¥ (100)¥ (100)¥ 18,845¥−¥ (659)¥ (659)¥

Buy position − U.S. dollars

―¥

−

―¥

Interest:
Interest rate cap contracts:
Buy position¥ 1,350

¥−

¥

800

¥ (550)

―¥

−

―¥ −

―¥

−

―¥

−

¥ 1,350

¥−

¥

800

¥ (550)

―¥

−

¥−

―¥

−

―¥

−

¥

¥

38

¥

¥

89

¥

89

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

515

¥−

38

¥ 1,409

―¥ −

8,367

−

(106)

(106)

8,468

−

−

−

10,686

−

(101)

(101)

−

−

−

−

Option contracts:
Sell position
Call option − Metal
Buy position
Put option − Metal

−

−

−

−

514

−

(144)

(144)

¥ 19,568¥−¥ (169)¥ (169)¥ 10,391¥−¥ (55)¥ (55)

Thousands of U.S. dollars

2013

of materials and products is hedged by corresponding futureinterest rates of floating-rate bonds and term loans payable.

contracts. The Company and its consolidated subsidiaries also

Total

Over
one year

Derivative transactions of the Company and its consoli-

utilize currency derivative transactions to hedge against theCurrency:

dated subsidiaries are subject to market and credit risks.

market risk of exchange rate or interest rate fluctuation. Taking

Forward contracts:

Market risk is the potential loss the Company and its consoli-

receivables and payables denominated in foreign currencies

Sell position − U.S. dollars

dated subsidiaries may incur as a result of changes in market

into account, the Company and its consolidated subsidiaries

Buy position − U.S. dollars

values. The Company’s and its consolidated subsidiaries’

are not exposed to market risk.

and interest rates. Credit risk is the potential loss the Company

Market value

Forward contracts:

and interest rate caps for hedging against fluctuations in thetors, including fluctuations in market prices, exchange rates

Contracted amount
Recognized
gains (losses)

Currency:

Contracted amountexposure to market risk are determined by a number of fac-

2012

Market value−$−

121,051−(1,064)(1,064)$ 121,051$−$ (1,064)$ (1,064)

$

―$

−

Recognized
gains (losses)―$−

Interest:
Interest rate cap contracts:
Buy position$ 14,360$−$ 8,510$ (5,850)$ 14,360$−$ 8,510$ (5,850)

$

5,478

$−

$

$

89,001−and its consolidated subsidiaries could incur if counterparties default on their obligations. Derivative transactions are

Commodity:

entered into solely with highly rated financial institutions, their

Forward contracts:
Sell position − Metal
Buy position − Metal

404(1,128)404(1,128)

Option contracts:
Sell position
Call option − Metal

56

113,669−(1,074)(1,074)$ 208,148$−$ (1,798)$ (1,798)

57

Derivative transactions for which hedge accounting has been applied for the year ended March 31, 2013 and 2012 consist ofThousands of U.S. dollars

the following:
Millions of yen
Contracted
amount and
other

2013
Type of transaction

Type of derivative transaction

Interest

Interest rate swap contracts:
Paid fixed/received floating

Fair Value

2013
Type of transaction

Type of derivative transaction

Interest

Interest rate swap contracts:
Paid fixed/received floating

Major hedged items

Long-term loans

Total
Commodity

Contracted
amount andover one year

¥

8,649

¥ 8,649

¥

(67)

¥

8,649

¥ 8,649¥(67)

Sell position − Metal

Accounts receivable¥ 17,675

Buy position − Metal

Accounts payable

20,163

¥

−

¥

609

77,73072,739(4,082)¥ 115,568¥ 73,348¥ (3,046)

Sell position − Metal

Accounts receivable

Buy position − Metal

Accounts payable

Call position − Metal¥ 25,693¥ 25,693¥ (1,334)¥ 25,693¥ 25,693¥ (1,334)

Interest

Long-term loans

Total* All commodity option contracts are based on zero cost option contracts. There is no transfer of option fees.
**The interest rate swap contracts are used as hedges and meet certain hedging criteria. The net amount to be paid or received underthese 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.

92,001―$ 92,001

―$

(713)

―$

92,001―$ 92,001

―$

(713)

̶−

―$

8,615

―$ 188,012―$

214,477

6,478

2,404

Accounts receivable

826,827

773,737(43,421)―$1,229,316―$ 780,215―$ (32,402)―$ 273,301―$ 273,301―$ (14,190)―$ 273,301―$ 273,301―$ (14,190)

Interest rate swap contracts**:
Paid fixed/received floating

Long-term loans

Total

Interest rate swap contracts**:
Paid fixed/received floating―$

Forward contracts:

Total

Total
Interest

Long-term loans

Sell position

226

Option contracts*:
Accounts receivable

Fair Value

Option contracts*:

810

Sell position

Contracted
amount andover one year

Major hedged items

Total
Commodity

Forward contracts:

Call position − Metal

Contracted
amount andother* All commodity option contracts are based on zero cost option contracts. There is no transfer of option fees.
**The interest rate swap contracts are used as hedges and meet certain hedging criteria. The net amount to be paid or received underthese 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.

6. Inventories
Millions of yen
Contracted
amount and
other

2012
Type of transaction

Type of derivative transaction

Currency

Forward contracts:
Buy position

Interest

Inventories as of March 31, 2013 and 2012 consist of the following:

Fair Value

Major hedged items

Merchandise
Foreign currency expected transaction

2013

5

Semi-finished products and work in process¥5

Raw materials and supplies

−

¥

(748)

−

¥

(748)

¥

¥

−

¥

21,806
738,050

¥

−

¥

$

76,200

−

¥
¥

1,845

69,384¥137¥ 100,000¥

333,305137¥ 100,000

2,050

37,879¥Interest rate swap contracts:¥

31,334¥Long-term loans

Thousands of U.S. dollars

2012

Finished products

EUR

Total

Millions of yen

2013

Total
Paid fixed/received floating
Commodity

Contracted
amount andover one year

40,19435,144

427,550¥ 142,962¥ 151,068$1,520,711

Forward contracts:
Sell position − Metal

Accounts receivable

Buy position − Metal

Accounts payable

19,832435

420

Accounts receivable

105,673

88,550(7,668)¥ 134,491¥ 88,985¥ (7,323)¥ 22,446¥ 22,446¥ (1,265)¥ 22,446¥ 22,446¥ (1,265)

8,986

(75)

Option contracts*:
Sell position
Call position − Metal
Total
Interest

Interest rate swap contracts**:
Paid fixed/received floating
Total

Long-term loans* All commodity option contracts are based on zero cost option contracts. There is no transfer of option fees.
**The interest rate swap contracts are used as hedges and meet certain hedging criteria. The net amount to be paid or received underthese 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.

58

59

7. Loss on impairment of fixed assets

The Company categorized operating assets by such businessdrawal from the business in production of bonding wire.

Loss on impairment of fixed assets for the year ended March 31, 2013 consists of the following:

units as plants and manufacturing processes based on the(7) The book value of electron beam irradiation facilities weredivision of managerial accounting.
2013
Location

Major use

Asset category

Choiseul, Solomon Islands

Building for camping

Building

Millions ofyen

Thousands of
U.S. dollars

Loss

Loss

¥ 52

Niihama City, Ehime Prefecture, Manufacturing facilities for certain
Machinery and vehicles
Japan
copper-clad polyimide film substrates
Total

$

553

146

1,553

¥ 198

$ 2,106(2) The book value of manufacturing facilities for certain

units as plants and manufacturing processes based on thecopper-clad polyimide film substrates were reduced todivision of managerial accounting.

their recoverable amounts due to expectations that these

Losses on impairment are recognized for the following

decline in orders from main customers.

reasons:(1) The book values of manufacturing facilities for prime

The net sales prices (fair value less cost to sell) of assets arewestern grade zinc were reduced to their recoverable

used as their recoverable amounts for the measurement ofamounts due to the deterioration of business environment.

impairment losses.

(2) The book values of manufacturing facilities for powdermaterials were reduced to their recoverable amounts due

8. Bank loans and long-term debt

to a decline in sales volume of nickel powder.

Bank loans are generally represented by short-term notes(3) The book value of manufacturing facilities for certain chip
The Company categorized operating assets by such business

reduced to their recoverable amounts due to a significant

Losses on impairment are recognized for the following(most of which are unsecured) and bank overdrafts, and bore

on film (COF) were reduced to their recoverable amounts

interest at annual rates of 0.55% to 5.60% and 0.40% to 6.10%

due to withdrawal from the business in production of

as of March 31, 2013 and 2012 respectively.

subtractive COF.

facilities would cease to operate.

(4) The book value of manufacturing facilities for lead frames

On February 25, 2013, the Company passed a resolution toissue stock acquisition rights by way of third-party allotment

were reduced to their recoverable amounts due to with-and to execute a loan agreement for the purpose of pro-reasons:

drawal from the business in production of lead frame incuring funds through a loan with stock acquisition rights. By(1) The book value of building for camping was reduced toThailand.

executing this loan agreement, the Company procures ¥100

its recoverable amount due to expectation that it would(5) The book value of manufacturing facilities for certain

cease to use due to close of exploration activities.

The net sales prices (fair value less cost to sell) of assets are used as their recoverable amounts for the measurement of impairment
losses.

billion from March 15, 2013 to March 13, 2020. The exercise

copper-clad polyimide film substrates were reduced toprice of the stock acquisition rights will be revised in accor-

their recoverable amounts due to expectations that thesedance with market prices. The stock acquisition rights have afacilities would cease to operate due to their aging.

structure that prevents dilution of the share price to a price(6) The book value of manufacturing facilities for bonding wire

lower than ¥1,436 (US$15) as of March 31, 2013.

were reduced to their recoverable amounts due to withLoss on impairment of fixed assets for the year ended March 31, 2012 consists of the following:

2012
Location

Major use

Asset category

Kako-gun, Hyogo Prefecture,Japan

Manufacturing facilities for prime western
grade zinc

Building and structures and machineryand other assets¥ 5,477

Niihama City, Ehime Prefecture,Japan

Manufacturing facilities for powder materials

Building and structures and machineryand other assets

442

Kaohsiung City, Taiwan

Manufacturing facilities for certain chip on
film (COF)

Building and machinery and equipment

Ayutthaya Province, Thailand

Manufacturing facilities for lead frames

Building and equipment

Niihama City, Ehime Prefecture,Japan

Manufacturing facilities for certain
copper-clad polyimide film substrates

Machinery and equipment

Isa City, Kagoshima Prefecture,Japan

Manufacturing facilities for bonding wire

Building and machinery and otherassets203

Shanghai, China

Manufacturing facilities for bonding wire

Building and machinery and otherassets426

Kaohsiung City, Taiwan

Manufacturing facilities for bonding wire

Building and machinery and equipment

372

Selangor, Malaysia

Manufacturing facilities for bonding wire

Building and machinery and equipment

97

Naka-gun, Ibaraki Prefecture,
Japan

Electron beam irradiation facilities

Building and structures and machineryand other assets

Total

60

Millions of yen

Long-term debt as of March 31, 2013 and 2012 consist of the following:

Loss

Millions of yen

Thousands of U.S. dollars

2012

2013

2013
Long-term loans from:
Banks, insurance companies and other financial institutions,

2,439
562
50

maturing through 2022 at interest rates of 0.66% to 3.50%:¥ 10,892

Unsecured

136,858

133,023

1,455,781

Secured

3,000

3,000

31,911

Unsecured

68,592

23,675

729,625

0.48% domestic bonds due in 2016

10,00010,000106,372

0.77% domestic bonds due in 2018

30,00030,000319,115¥ 11,102¥$

115,860

Government owned banks and government agencies,
maturing through 2025 at interest rates of 0.20% to 2.10%:

1.26% domestic bonds due in 2021

1,034

−

SecuredAmount due within one year

10,00010,000106,372

269,342

209,698

2,865,036(7,019)(2,579)(74,663)¥ 262,323¥ 207,119$ 2,790,373

61

The aggregate annual maturities of long-term debt as of March 31, 2013 are as follows:
Years ending March 31,

Millions of yen

2014

¥

7,019

Thousands of U.S. dollars$

Significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities as of March 31, 2013 and2012 are as follows:

74,662

2015

12,582

133,837

2016

11,383

121,083

2017

28,803

274,471

2018

6,858

72,950202,697

2,156,122¥ 269,342$ 2,833,125

Thousands of U.S. dollars

2012

2013

2013
Deferred tax assets:
Net operating loss carry forwards

¥

5,598

¥

6,417

$

59,547Retirement benefits

4,827

5,021

51,346

Loss on impairment of fixed assets

2,649

3,361

28,178

Unrealized profits

1,717

1,560

18,264

Deferred losses on hedges

1,586

3,650

16,870Overseas exploration cost

1,496

978

15,913

Allowance for bonus payable

1,308

1,352

13,913

Accrued business taxes

1,095

412

11,648Contribution gains on securities to employee retirement benefits trust

1,078

955

11,467

670

915

7,127

4,804

3,398

51,101

26,82828,019285,374(8,800)(11,447)(93,607)

18,028

16,572

191,767

Net unrealized holding gain on available-for-sale securities(10,425)(2,525)(110,893)

Depreciation(6,646)(4,723)(70,695)

Reserve for losses on overseas investment(4,205)(4,216)(44,729)

The following table summarizes the significant differences

Accumulated earnings of overseas subsidiaries(4,091)(2,905)(43,517)of income comprise corporation taxes, inhabitants’ taxes

between the statutory tax rate and the Company’s and its

Deferred gains on properties for tax purpose(2,203)(2,163)(23,434)

and enterprise taxes. Consolidated overseas subsidiaries areconsolidated subsidiaries’ effective tax rate for financial state-

Reserve for explorations(1,424)(1,446)(15,147)

subject to income taxes of the countries in which they arement purposes for the years ended March 31, 2013 and 2012:

Gain on securities contributed to employee retirement benefits trust

(520)

(520)

(5,531)

Thereafter

Assets pledged as collateral for bank loans and long-term debt as of March 31, 2013 and 2012 are as follows:
Millions of yen

Thousands of U.S. dollars

2012

2013

Depreciation

2,893

Others2013¥

Cash and cash equivalents

272

¥

−

$

Property, plant and equipment, at net book value

38,87540,551

413,521

Investment securities

62,68356,573

666,769

Other long term receivables

16,911−

179,885¥ 118,741¥ 97,124$ 1,263,068

9. Income taxes
Income taxes in the accompanying consolidated statements

domiciled.

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

OthersDeferred tax liabilities

62

Millions of yen

2013

2012

Statutory tax rate

38.0%

40.7%

Equity in earnings of unconsolidated subsidiaries and affiliated companies

(4.5)

(8.8)

Effect of eliminating intercompany dividends received

14.2

24.0

Permanently nontaxable dividends received(14.9)(26.1)Tax credit

(0.5)

(0.8)

Effect of Mining Tax

(2.2)

(2.0)

Undistributed earnings of foreign subsidiaries

0.6

(1.2)

Difference in local tax system

(3.0)

(3.1)

Increase (decrease) in valuation allowance

(0.8)

(0.1)

Transfer of net operating loss carried forward resulting from liquidation of consolidated subsidiaries

(0.9)

−

Loss (gain) on change in equity

(1.8)

−

Others

(0.6)

(0.5)

Effective tax rate

23.6%

22.1%

Net deferred tax assets (liabilities)(1,992)(1,192)(21,189)(31,506)(19,690)(335,135)¥ (13,478)¥ (3,118)$ (143,368)

63

10. Retirement benefits and pension costs

11. Research and development expense

Accrued retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2013 and 2012 con-

Research and development expense included in selling, gen-31, 2013 and 2012 are ¥4,999 million (US$53,175 thousand),sist of the following:eral and administrative expenses for the years ended March¥5,103 million, respectively.

Millions of yen

Thousands of U.S. dollars

2013

2012

2013

12. Net assets

included in retained earnings in the accompanying consoli-

Projected benefit obligation¥ (57,150)¥ (53,241)$ (607,914)

Net assets comprise three subsections, which are sharehold-dated balance sheets.

Fair value of pension assets

45,854

41,861

487,757

ers’ equity, accumulated other comprehensive income, and¥ (11,296)¥ (11,380)$ (120,157)

Unrecognized actuarial differences

5,735

5,359

61,004

Unrecognized prior services costs

15

(303)

160

Net retirement benefits¥ (5,546)¥ (6,324)$ (58,993)

Prepaid pension costs

(155)

(649)

(1,649)¥ (5,701)¥ (6,973)$ (60,642)

Excess of projected benefit obligation over pension assets

Accrued retirement benefits

minority interests.
Under Japanese laws and regulations, the entire amount

could capitalize by a resolution of the shareholders’ meeting.

paid for new shares is required to be designated as common

Additional paid-in capital and legal earnings reserve may

stock. However, a company may, by resolution of the Board of

not be distributed as dividends. Under the Law, however, all

Directors, designate an amount not exceeding one-half of theadditional paid-in-capital and all of the legal earning reserve

price of the new shares as additional paid-in capital, which ismay be transferred to other capital surplus and retained earn-

included in capital surplus.

ings, respectively, however which are potentially available for

Under the Japanese Corporate Law (“the Law”), in cases
The Company contributed securities to the employee retirement benefit trust, which are included in pension assets.

Under the Law, legal earnings reserve and additional paidin capital could be used to eliminate or reduce a deficit, or

dividends.

where a dividend distribution of surplus is made, the smaller of

The maximum amount that the Company can distribute as

an amount equal to 10% of dividend or excess, if any, of 25% ofdividends is calculated based on the unconsolidated financial

common stock over the total of additional paid-in capital andstatements of the Company in accordance with Japanese

for the unfunded lump-sum benefit plan covering directors and corporate auditors of ¥27 million (US$287 thousand) and ¥54 million,

legal earnings reserve must be set aside as additional paid-

laws and regulations.

respectively.

in-capital or legal earnings reserve. Legal earnings reserve is

Accrued retirement benefits in the consolidated balance sheets as of March 31, 2013 and 2012 also include estimated liabilities

Included in the consolidated statements of income for the years ended March 31, 2013 and 2012 are severance and retirement
benefit expenses comprised of the following:

13. Contingent liabilities
Contingent liabilities as of March 31, 2013 are as follows:
Millions of yen

Thousands of U.S. dollars

2013

2012

2013

Service cost-benefits earned during the year

¥ 1,838¥ 2,234$ 19,551

Interest cost on projected benefit obligation

966

941

10,275

Expected return on plan assets

(809)

(862)

(8,605)

Amortization of actuarial differences

473

761

5,031

Amortization of prior services costs

(319)

(318)

(3,393)¥ 2,149¥ 2,756$ 22,859

Severance and retirement benefit expense

The discount rates used by the Company are primarily 1.4%

years. Actuarial gains and losses are recognized in the incomeand 2.0% for the years ended March 31, 2013 and 2012,

statement using the straight-line method over ten years, which

respectively. The rates of expected return on plan assets usedwithin the average of the estimated remaining service lives,by the Company are primarily 3.5% for the years ended

commencing with the following period. Prior service costs are

March 31, 2013 and 2012.

recognized in expenses using the straight-line method over ten

The estimated amount of all retirement benefits to be paid
at the future retirement date is allocated equally to each

Millions of yen

Notes and accounts receivable sold to factoring companies with recourse¥

370

Thousands of U.S. dollars

$

3,936

As guarantor for loans of:Non-consolidated subsidiaries and affiliated companies

61,549654,707¥ 61,919$ 658,643

Besides the above, as to providing electric power to Pogo Gold Mine, there are ¥751 million (US$7,989 thousand) to guarantee construction costs of electric facilities.

years, which within the average of the estimated remaining
service lives.

service year using the estimated number of total service

6465

14. Comprehensive Income

zinc and lead, as well as smelting and sales of precious metals(2) Basis of measurement about reported segment

Amounts reclassified to net income (loss) in the current period that were recognized in other comprehensive income in the current orsuch as gold, silver and platinum.

income (loss), segment assets and other material items

In the Materials segment, the Group mainly engages in man-previous periods and tax effects for each component of other comprehensive income are as follows:
Millions of yen

Millions of yen

Thousands of U.S. dollars

2013

2012

2013

Net unrealized holding gains (losses) on securities
Increase (Decrease) during the year

¥ 19,814¥ (12,039)$ 210,765

almost the same as those set forth in the Note 2 “Summary ofsuch as lead frames, tape materials (copper-clad polyimide

significant accounting policies”, excluding the allocation offilm, chip-on-film (COF) substrates (electronic packaging mate-“cost of capital” to each segment.

rials used to make LCD panel integrated circuits) and bonding

Cost of capital refers to an interest rate burden to be borne

wires, as well as of advanced materials such as pastes, powder

by each business segment of the parent company, whichmaterials (e.g., nickel powder), battery materials (e.g., nickel

does not financially assume interest expenses, in proportion toits holding assets in calculating segment income for internal

766

5,927

8,148

Sub-total, before tax

20,580(6,112)

218,913

Tax effect(6,949)(628)(73,918)hydroxide) and crystalline materials, manufacturing and sales$ 144,995

of automotive exhaust processing catalysts, chemical cata-

administration purposes. The cost of capital is obtained bylysts, petroleum refinery and desulfurization catalysts, as well as

multiplying total assets held by each segment of the parent

autoclaved lightweight concrete (ALC) products.

company by an “internal interest rate.” An amount that cor-

Reclassification adjustments

Sub-total, net of tax¥ 13,631¥ (6,740)

Deferred gains (losses) on hedges
4,696(2,967)

49,952

Reclassification adjustments

328

2,599

3,489

Cost adjustments of assets

−

(9)

−

Sub-total, before tax

5,024

(377)

53,441

Tax effect(2,012)

127(21,402)(250)$ 32,039

17,918(4,937)

235

Increase (Decrease) during the year

Sub-total, net of tax
Increase (Decrease) during the year

cost of capital and cost of liability is used as the internal inter-tion)

est rate. The same amount as a total of the cost of capital

On July 1, 2012, The Company launched a new “Materials

allocated to each segment is reported as a negative value

Division”, an integration of the Semiconductor Materials

in “Adjustments.” The cost of capital is offset in the total for all

190,597

Division, Advanced Materials Division and Energy, Catalysts &segments Companywide. The cost of capital therefore has no

303

2,500

Construction Materials Division with the aim of strengthening its

effect on the consolidated financial statements.

18,153(4,634)

193,097

materials business. Prior to this change, Semiconductor Materi-

−

−

−

¥ 18,153¥ (4,634)$ 193,097

als Division and Advanced Materials Division were integrated¥ 3,012

Reclassification adjustments
Sub-total, before tax
Tax effectSub-total, net of tax¥

Share of other comprehensive income of affiliated companies
accounted for using equity method
Increase (Decrease) during the year

11,208(9,595)

119,221

Reclassification adjustments

5,913

−

62,898Sub-total
Total other comprehensive income
15. Segment information

responds to the weighted average of the parent company’s(Change in classification of reported segments by reorganiza-

Foreign currency translation adjustments

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

into “Materials” and Energy, Catalysts & Construction Materials
Division were included in “Others”. From the year ending(The effect of change in accounting policy)

March 31, 2013, those businesses are integrated into “Materials”.

As described in Note 2 “Change in accounting policy”, theSegment information for the year ended March 31, 2012 wasCompany changed the accounting policy retrospectively¥ 17,121¥ (9,595)$ 182,119

retrospectively restated to represent the information by the¥ 51,917¥ (21,219)$ 552,250

new segment classification.

and restated the consolidated financial statements for theyear ended March 31,2012.
As a result of this change, “Mineral Resources” segment

The Group integrated these five business segments into

income in the Mineral Resources segment for the year ended(1) General information about reported segments

three reported segments: “Mineral Resources” “Smelting(a) Basis of decision about reported segments& Refining”, “Materials” and “Others.” In determining these

The reported segments of the Group refer to business units, forreported segments, the Sierra Gorda Project are into Min-

which separate financial information is available and that areeral Resources and the Taganito Project are into Smelting

subject to periodic reviews by the Board of Directors as the& Refining, in accordance with the integration criteria and(3) Information about reported segment income (loss), segment assets and other material items

supreme, managerial decision-making body to determine thequantitative standards set forth in the “Accounting Standard

Segment information as of and for the years ended March 31, 2013 and 2012 are as follows.

allocation of management resources and assess their respec-

for Disclosures about Segments of an Enterprise and Related

tive operating results.

March 31, 2012 increased by ¥79 million compared to those
before restatement.

Millions of yen

Information” (ASBJ Statement No. 17 issued on March 27, 2009)
and “Guidance on Accounting Standard for Disclosures about

2013

Mineral Resources Div., Non-Ferrous Metals Div., Materials Div.—

Segments of an Enterprise and Related Information” (ASBJ

Net sales:in the pursuit of effective business operations by products andGuidance No. 20 issued on March 21, 2008).

The Company currently has three business divisions—services. Each of these business divisions plans its own compre-

As described above, the Group consists of three segments

hensive strategies to be carried out in Japan and overseas for

identified by products and services based on the businessits own product and service lines and engages in diverse busi-

divisions.

ness activities.
The three aforementioned business divisions and the(b) Types of products and services of each reported segment

Taganito Project—the purpose of which is to construct a

In the Mineral Resources segment, the Group mainly engages

second High Pressure Acid Leach (HPAL) plant in the Taganito

in the exploration, development and production of non-ferrous

area of Mindanao Island in the Philippines—and the Sierra

metal resources in Japan and overseas, as well as sales of ores

Gorda Project—the purpose of which is to participate in aand other products.

copper mine development project in the Republic of Chile
are classified as “business segments” of the Group.

66

The accounting methods for each reported segment are

ufacturing, processing and sales of semiconductor materials

In the Smelting & Refining segment, the Group mainly
engages in smelting and sales of copper, nickel, ferro-nickel,

Outside customers
Inter segment
Total

MineralResources

Smelting &Refining

Materials

Total ofreportedsegment¥ 63,318¥ 602,395¥ 139,618 ¥

805,331¥ 3,209 ¥41,55535,40816,995

93,95812,734(106,692)−

104,873

637,803

156,613899,289

15,943(106,692)

808,540

3,776 ¥

Others*Adjustment** Consolidated− ¥10,537 ¥808,540

Segment income¥ 65,234¥ 33,928¥

102,938¥ 1,559¥

Segment assets¥ 293,373¥ 621,299¥ 138,284 ¥ 1,052,956¥ 16,595¥ 281,602 ¥ 1,351,153

115,034

6,524

12,1696,811

25,504317

1,757

Amortization of goodwill

89

−

1

90

−

−

90

Interest income

256

175

61

492

−

1,043

1,535

Depreciation

Interest expense
Equity in earnings of affiliated companies
Investment in equity-method
affiliated companies
Capital expenditures

27,578

10

559

259

828

19

2,454

3,301

18,519(3,424)

2,071

17,166−(66)

17,100166,323

74,75522,324263,402259,739

40,146

8,221

57,354−522(3,663)

8,987

1,415

59,291

67

Millions of yen
Mineralresources

2012

Smelting &Refining

1. Adjustments for segment income are as follows:

Total ofreportedsegment

Materials** “Adjustments” are as follows:

Others*Adjustment**

Consolidated

Net sales:
Outside customers¥

Inter segment
Total¥ 601,459¥ 179,257

42,535

87,121

21,434

151,090

11,072(162,162)−

105,743

688,580

200,691995,014

15,045(162,162)

847,897

Segment income¥

Segment assets¥ 249,116
7,123

Depreciation

80,619¥25,644¥¥

843,924

¥

3,973

1,878

¥

−

63,208¥¥(745) ¥

847,897

1,433¥

107,696¥

108,829¥ 564,171¥ 145,839¥

959,126¥ 16,674¥ 170,959¥ 1,146,759

13,611

8,425

29,159348

1,625

31,132

Amortization of goodwill

89

−

4

93

−

−

93

Interest income

367

129

23

519

−

508

1,027

Interest expense

47

466

361

874

11

2,525

3,410

Equity in earnings of affiliated companies

28,311(9,377)

2,863

21,797−

1,420

23,217

Investment in equity-method
affiliated companies

152,104

143,136

21,963

317,203−(61,516)

255,687

4,163

59,193

7,151

70,507806

1,928

73,241

Materials

Total ofreportedsegment

Capital expenditures

Thousands of U.S. dollars
Mineralresources

2013

Smelting &Refining

Others*Adjustment**a

Head Office expenses not allocated to each reported segment*
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$

Inter segment
Total

673,524$ 6,407,776$ 1,485,140 $ 8,566,440$ 34,134$

442,027

376,641

180,779

999,447

135,454(1,134,901)−

1,115,551

6,784,417

1,665,919

9,565,887

169,588(1,134,901)

8,600,574

Segment income$

Segment assets$ 3,120,657$ 6,608,861

69,397

129,444

72,450271,291

3,372

18,689293,352

947

−

10

957

−

−

957

Depreciation
Amortization of goodwill

693,905$

360,898

40,166 $ 1,094,969$ 16,583$$ 1,470,950 $ 11,200,468$$ 176,524$ 2,995,446 $ 14,372,439

112,084 $ 1,223,636Interest income

2,723

1,862

649

5,234

−

11,094

16,328Interest expense

106

5,946

2,755

8,807

202

26,104

35,113

196,990(36,422)

22,030

182,598−(702)

181,896

Equity in earnings of affiliated companies
Investment in equity-method
affiliated companies
Capital expenditures

1,769,205

795,181

237,464

2,801,850−(38,963)2,762,887

95,596

427,040

87,448610,084

5,553

15,051

630,688* The “Others” segment refers to businesses other than thoseincluded in the reported segments and other profitseeking business directly operated by Head Office divisions/departments.

Other businesses include technical engineering and real estatebusinesses.

¥ (10,261)$ (123,476)

14,356

15,731

152,707

4,566(2,928)48,569¥(3,287)34,284(745)$ 112,084

segment mainly consist of general administrative expenses

reported segment mainly consist of foreign exchange

and R&D expenses (hereinafter “Head Office expenses”),

gains/losses and interest expenses, which are not attribut-

which are not attributable to the reported segments.

able to the reported segments.

2. Adjustments for segment assets are as follows:

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

Millions of yen

Thousands of U.S. dollars

2013

2012

2013

¥ 330,804¥ 266,726$ 3,518,817(49,202)(95,767)(523,370)¥ 281,602¥ 170,959$ 2,995,447* 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 the6. Adjustments on equity in earnings (losses) of affiliated com-

Head Office divisions/departments, which are not allocatedpanies refer to the deduction of unrealized income relating

to the reported business segments.

to the inter-segmental transactions among the reported
segments.

4. Adjustments on interest income consist of interest income at
the Head Office divisions/departments, which is not allo-

7. Adjustments on investment in equity method affiliatedcated to the reported segments, and eliminations of trans-companies represent the amount corresponding to “Foreign

actions among the reported segments.

currency translation adjustments.”

5. Adjustments on interest expenses consist of interest68¥ (11,608)*b Non-operating income/expenses not allocated to each

Consolidated− $ 8,600,574

2013

3,223

Net sales:
Outside customers

Thousands of U.S. dollars

2012¥ 10,537

Total*a Head Office expenses not allocated to each reported

Millions of yen

2013

8. Adjustments on increase in property, plant and equipment

expenses at the Head Office divisions/departments, which

and intangible assets refer to increases thereof at the Headare not allocated to the reported segments, and elimina-

Office divisions/departments, which are not allocated totions of transactions among the reported segments.

the reported segments.

69

Related information(3) Information about impairment loss of fixed assets by reported segment(1) Information about geographic areas

Millions of yen(a) Sales
2013

Millions of yen
Japan

¥

474,408¥

China

East Asia

Southeast Asia

North America

Others102,322¥ 88,450¥ 73,952¥ 60,138¥ 9,270

2012

Total

¥

¥

514,539¥

China

East Asia

Southeast Asia

North America

Others88,316¥ 99,862¥ 74,850¥ 60,549¥ 9,781

Total¥

Smelting &Refining

Materials

OthersAdjustment

¥ 52

−

146

−

−

MineralResources

Smelting &Refining

Materials

OthersAdjustment

Consolidated

¥ −

5,477

5,625

−

−

¥ 11,102

MineralResources

Smelting &Refining

Materials

OthersAdjustment

Consolidated

$ 553

−

1,553

−

−

$ 2,106

Loss on impairment of fixed assets

808,540

Millions of yen
Japan

2013

MineralResources

Consolidated¥

198

Millions of yen

2012
Loss on impairment of fixed assets

847,897
Thousands of U.S. dollars

2013

Thousands of U.S. dollars
Japan$ 5,046,357

China

East Asia$ 1,088,416

Southeast Asia

$ 940,857$ 786,640

North America$ 639,698

Others$ 98,606

Total$ 8,600,574

2013
Loss on impairment of fixed assets*1*3

Net sales are segmented by country or region according to

Major countries or regions that belong to the segments arecustomers’ location data.

as follows:*2

1. East Asia: South Korea, Hong Kong and Taiwan

Regions are segmented based on their geographical proxim-

2. Southeast Asia: Thailand, Indonesia, Malaysia, etc.

2013

ity, and only those countries for which the net sales amount

3. North America: United States, Canada and Mexico

Balance at end of fiscal year

accounts for more than 10% of the net sales stated in the

4. Others: Australia, India, Bangladesh, Greece, etc.

(4) Information about unamortized balance of goodwill by reported segment
Millions of yen
Smelting &Refining

Materials

OthersAdjustment

482

−

−

−

−

MineralResources

Smelting &Refining

Materials

OthersAdjustment

519

−

1

−

−

MineralResources

Smelting &Refining

Materials

OthersAdjustment

Consolidated$ 5,127

−

−

−

−

$ 5,127¥

2012
Balance at end of fiscal year(b) Property, plant and equipment

¥

Japan

East Asia

136,036¥ 8,366

Philippines

Southeast Asia

North America

Others161,365¥ 1,053¥ 28,950¥ 6,297

Japan

East Asia

Philippines

Southeast Asia

North America

Others132,841¥ 8,074

120,975¥ 1,022¥ 22,852¥ 5,458

Japan

East Asia

Philippines

Southeast Asia

North America

OthersTotal$ 1,447,038$ 88,991$ 1,716,466$ 11,201$ 307,946$ 66,982$ 3,638,624

¥

2012

Total

¥

¥

482

342,067

Consolidated¥

520

Thousands of U.S. dollars

Millions of yen¥

Consolidated

Millions of yen

Consolidated Statements of Income are separately listed.

2013

MineralResources

2013
Balance at end of fiscal year

Millions of yen

¥

¥

2013

Total

¥

291,222

Thousands of U.S. dollars*1*2

Regions are segmented based on their geographical prox-

Major countries or regions that belong to the segments areimity, and only those countries for which the property, plantas follows:

and equipment amount accounts for more than 10% of the

1. East Asia: China and Taiwan

property, plant and equipment stated in the Consolidated

2. Southeast Asia: Malaysia, Thailand and Singapore

Balance Sheets are separately listed.

3. North America: United States
4. Others: Australia, Solomon Islands, Peru, Chile, Brazil(2) Information about major customers

2013
Customer’s designation or name70

Millions of yen

Thousands of
U.S. dollars

2012

2013

Sales

Sales

Sales

Sumitomo Corporation¥ 125,184¥ 138,685$ 1,331,603

Smelting & Refining, Materials

MITSUI&CO.,LTD.

¥ 58,841¥ 79,333$

Smelting & Refining

625,901

Related reported segments

7116. Asset retirement obligations

regulations of asbestos-related regulations and occupational

17. Information for certain leases

lease period using the straight-line method with no residual(1) Asset retirement obligations that are recorded in the con-health and safety regulations of dioxin-related regulations,(1) Finance leases

value. For finance lease transactions other than those involv-

and posts these amounts as asset retirement obligations.

Lease assets

ing a transfer of title that began prior to the application of

For lease assets related to non-ownership transfer financethe new accounting standards, the previous operating lease

leases, depreciation of leased assets is computed over the

method has been applied.

solidated balance sheets
With regard to mines and quarries in operation in Japan, theSumitomo Metal Mining Pogo LLC, Sumitomo Metal Mining

Company is required by the Mining Safety Act, the Law on

Arizona Inc., Sumitomo Metal Mining Oceania Pty. Ltd. andSpecial Measures for Mine Damages Caused by the Metal

Coral Bay Nickel Corporation are subject to the U.S. GAAP

Mining Industry, etc., the Quarrying Act and leasing agree-

or International Financial Reporting Standards, as well as thements to undertake mine pollution prevention activities formining laws and regulations of the United States, Australia andpost-use specified facilities and to restore such facilities to their

the Republic of the Philippines, respectively. Based on its busi-

original condition. Based on these requirements, the Company

ness plans, the Company determines asset retirement obli-

records as asset retirement obligations a rational estimate ofgations by making rational estimates of its obligations underthe expenses required for mine pollution prevention activities
and any removal expenses.
For the domestic facilities of the Group in Japan, the Com-

As a lessee
A summary of assumed amounts inclusive of interest of acquisition cost, accumulated depreciation and net book value of financeleases accounted for in the same manner as operating leases as of March 31, 2013 and 2012 are as follows:
Millions of yen

2013such regulations of restoring operating mines and smeltersto their original condition and the expenses of fulfilling theseobligations. Asset retirement obligations are calculated basedpany makes rational estimates of the costs of demolishing andon determining the estimated period until expenditure, theconducting surveys in accordance with requirements regard-

remaining useful life of facilities and the mine life (6 to 30) anding special removal methods and obligations to conduct

discounted by the rates of 1.5% to 11.0%.

Machinery and equipment

Acquisition cost

Accumulated
depreciation

Net book value

¥ 2

¥ 2

¥0

2012
Acquisition cost

Accumulated
depreciation

Net book value

¥ 53

¥ 49

¥4

Thousands of U.S. dollars

2013

environmental surveys under asbestos damage prevention
Machinery and equipment

Acquisition cost

Accumulated
depreciation

Net book value

$ 21

$ 21

$0

The asset retirement obligations as of March 31, 2013 and 2012 are as follows:

Balance at the beginning of the fiscal year
Newly recorded obligations

Millions of yen

Thousands of U.S. dollars

2013

2012

2013

Future lease payment, inclusive of interest as of March 31, 2013 and 2012 under such leases are as follows:¥ 4,317¥ 4,268$ 45,921

Millions of yen

Thousands of U.S. dollars

260

2

2,766

233

205

Decrease due to fulfillment of obligations

−

(1)

−

Increase due to change in estimates

70

20

745

Adjustment due to passage of time

Other
Foreign exchange adjustment
Year-end balance(2) Asset retirement obligations other than those recorded in
the balance sheets

2,478

5

̶−

53

452

(177)

4,808

¥ 5,337¥ 4,317$ 56,771

2013

2012

2013

Due within one year

¥1

¥3

$ 11

Due after one year

−

1

−

¥1

¥4

$ 11

Total

Total lease expenses and assumed depreciation charges for the years ended March 31, 2013 and 2012 are as follows:

Pollution Control Act, and at the time of removing its facilities

Total lease expenses

the Company is required to conduct soil remediation surveys

Assumed depreciation charge

Thousands of U.S. dollars

2012

2013

¥3

¥8

$ 32

3

8

32

Millions of yen

Thousands of U.S. dollars

The Group is required under leasing agreements to restore

in accordance with the Soil Contamination Countermeasurescertain facilities on borrowed buildings and sites to theirLaw. However, as the responsibility for fulfilling this obligation isoriginal condition at the time of removal. In cases where theestimated to be deferred, the timing for performing such sur-period of use for lease assets is unclear or for which no reloca-

veys is unclear. Therefore, asset retirement obligations cannot(2) Operating leases

tion plans are in existence, asset retirement obligations cannot

be rationally estimated. Consequently, no corresponding asset

Future minimum lease payments as of March 31, 2013 and 2012 are as follows:

be rationally estimated. Furthermore, certain sites at our facili-

retirement obligations are included in these obligations.

ties employ hazardous substances specified under the Water

2013
Due within one year
Due after one year
Total

72

Millions of yen

2013

¥ 139

¥

2012

2013

139

$ 1,479

757

896

8,052

¥ 896

¥ 1,035$ 9,53173

18. Related party transaction

Compania Contractual Minera Candelaria(1) Related party transaction

2011

Related party transaction for the years ended March 31, 2013 and 2012 are as follows:

Total current assets

2013
Name of related party

Location

Capitalinvestment

Segment

Description of thebusiness relationship

Votinginterest

Transaction detailThousands of
U.S. dollars

Sierra Gorda S.C.M.

Santiago,Chile$ 934,302

Mineralresources

Debt guarantee and pledge
as security for the loan etc.
Indirectly from the financial institution
45.0%
Loans

Vale New Caledonia S.A.S.
Millions of yen

Amounts
Millions ofyen

Thousands of
U.S. dollars

Debt guarantee*¥ 60,049$ 638,751

Pledge as security**

52,646Loans receivable***22,628¥2011

Millions of yen

52,043

Total current assets

Total long-term assets

78,687

Total long-term assets¥

21,860Total current liabilities

18,974

Total current liabilities

42,958

Total long-term liabilities

9,955

Total long-term liabilities

137,565
122,655

281,318

Total net assets

101,801

Total net assets

560,004

Net sales

122,489

Net sales

240,698

Net income before tax

66,404

Net income (loss) before tax(76,582)

Net income

49,713

Net income (loss)(76,582)

8,358* The Company guarantees the loan etc. from the financial institution** The Company pledges its owned shares in Sierra Gorda S.C.M. as security for the loan from the financial institution to finance developmentsof the Sierra Gorda copper project. The Amounts of security is the debt balance as of March 31, 2013.

19. Earnings per share***The Company determined terms and conditions of loan based on market interest rates, etc.

Reconciliation of the difference between basic and diluted net income per share (“EPS”) for the years ended March 31, 2013 and2012 are as follows:
2012
Name of related party

Location

Capitalinvestment

Segment

Votinginterest

Description of thebusiness relationshipTransaction detailThousands of
U.S. dollars
Sierra Gorda S.C.M.

Santiago,
Chile

Amounts

MineralIndirectly Pledge as security for the loan
45.0% from the financial institution
Pledge as security*

Thousands of U.S. dollars

2012

2013

¥ 86,640¥ 65,286$ 921,604

Basic net income per share calculation

Millions ofyen$ 800,142 resources

Millions of yen

2013

Numerator:¥ 11,498

Net income* The Company pledges its owned shares in Sierra Gorda S.C.M. as security for the loan from the financial institution to finance developments

Denominator (thousands of shares):Weighted average number of sharesof the Sierra Gorda copper project. The Amounts of security is the debt balance as of March 31, 2012.

Basic EPS (yen and U.S. dollars)−

556,883

561,981¥ 155.58¥ 116.17$¥ 86,640¥ 65,286$ 921,604

87,52066,153930,965

556,883

561,981−

1.65

Diluted net income per share calculation(2) Condensed financial information of a major affiliatedcompanies

2011

Millions of yen

Total current assets¥

Net income
Adjusted net income

Pursuant to the relevant accounting standards, condensed

Total long-term assets

95,396

financial information of major affiliated companies which are

Total current liabilities

26,115

Total long-term liabilities

14,229Weighted average number of shares

Total net assets

208,159

Assumed conversion of convertible bonds

57,742

57,176−

Adjusted weighted average number of shares

614,625

619,157−¥ 142.40¥ 106.84

disclosed for the year ended December 31, 2012 and 2011 are
as follows:

Net sales

201,100

Net income before tax

124,657

Net income

86,056Sociedad Minera Cerro Verde S.A.A.
2012

74

Numerator:

153,107

Millions of yen

2012

Thousands of
U.S. dollars

Total current assets¥ 188,184

Total current assets$ 2,001,744

Total long-term assets

161,759

Total long-term assets

1,720,657

Total current liabilities

23,584

Total current liabilities

250,867

Total long-term liabilities

27,750Total long-term liabilities

295,181

Total net assets

298,609

Total net assets

3,176,354

Net sales

169,758

Net sales

1,805,744

Net income before tax

96,998Net income before tax

1,031,784

Net income

61,619Net income

Denominator (thousands of shares):

Diluted EPS (yen and U.S. dollars)

$

1.51

As described in Note 2 “Change in accounting policy”, theAs a result of this change, basic net income per share andCompany changed the accounting policy retrospectively

diluted net income per share for the year ended March 31,

and restated the consolidated financial statements for the2012 increased by ¥0.12, ¥0.10, respectively, compared toyear ended March 31, 2012.

those before restatement.

655,45275

Independent Auditors’ Report

20. Subsequent event

Integrated lead frame business(1) Company split and change in scope of consolidation

Corporate name:		

SH Materials Co., Ltd.

Effective from July 1, 2013, lead frame business in the Com-

Capitalization:		

1 billion yenpany and Hitachi Cable, Ltd. (“Hitachi Cable”) were inte-

Ownership:		
			

Sumitomo Metal Mining Co., Ltd.
(“SMM”) 51%, Hitachi Cable* 49%

Business scope:					

Manufacture and sales of leadframes and related products

Annual sales:		

35 billion yen (estimated)

Employees: 		Approx. 2,600

grated, and a joint venture for Hitachi Cable’s copper
products business with the Company was established.
Company split( i ) The name of the subject business and the content of its
business
Type of business:

Lead frame businessBusiness scope:

Manufacture and sales of lead frames
and related products( ii ) Effective date of company split
July 1, 2013(iii) The legal structure of company split
Absorption-type company split method with the Company
as the splitting company and SH Materials Co., Ltd.
(“SH Materials”) wholly owned by the Company, as the
successor company(iv) The name of the company after company split

Integrated copper products businessCorporate name:		SH Copper Products, Ltd.

Capitalization:		

1 billion yen

Ownership:		

Hitachi Cable* 50%, SMM 50%

Business scope:		
		
		
			

Manufacture and sales ofcopper products (copper 		
strips, copper products forelectric applications)

Annual sales:		

50 billion yen (estimated)

Employees:		

Approx. 550* Hitachi Cable, Ltd. merged with Hitachi Metals, Ltd. on
July 1, 2013. The present company name is Hitachi Metals, Ltd.

SH Materials Co., Ltd.
(2) Appropriation of retained earnings
Change in scope of consolidation

The following appropriation of retained earnings of the Com-

The Company transferred parts of its shareholdings in SH

pany, which has not been reflected in the accompanying

Materials’s common stock to Hitachi Cable as of July 1, 2013

consolidated financial statements for the year ended March(stock transfer date). As a result, the shareholding ratio of the31, 2013, was approved at a shareholders’ meeting held on

Company and Hitachi Cable against the total number of SH

June 24, 2013:

Materials’s outstanding shares became 51% and 49%, respectively. SH Materials is included in consolidated subsidiaries from
July 1, 2013.
Hitachi Cable transferred parts of its shareholdings in common
stock of SH Copper Products Ltd. (SH Copper Products) to theCompany as of July 1, 2013 (stock transfer date). As a result,the shareholding ratio of Hitachi Cable and the Company
against the total number of SH Copper Products’s outstanding
shares became 50% each. SH Copper Products is included inaffiliated companies accounted for using equity method from
July 1, 2013.

Year-end dividends of ¥20.00 per share

76

Millions of yen

Thousands of U.S. dollars¥ 11,044$ 117,477

77

Glossary

Mineral Resources Business andSmelting & Refining Business
Metal tradingin the Champagne region of central

sulfur, such ores are generally refineda nickel matte (of about 75% to 80%(MCLE) is the technology used in the

Materials BusinessFrance that was the site of a majorusing pyrometallurgical techniques.

purity) sourced from PT Vale Indonesia.

manufacturing process at SMM’s

Copper-clad polyimide film (CCPF)

nickel refinery. The matte and mixed

CCPF is a polyimide film that is coated

London Metal Exchange (LME)

Originally used as a unit of exchange

Oxide ores

Resource reserves

sulfide ores are dissolved in chlorine

using a copper base. It is used as a

The LME specializes in trading of non-for valuing goods in terms of gold or

These ores contain metals in

at high pressure to produce high-material for making COF substrates.

ferrous metals such as copper, nickel,

silver weights, the troy ounce is still

oxidized forms. Unlike sulfide ores,Gold
Canadian standard

aluminum, lead and zinc. The LME

used today in gold trading.

oxides need much more energy•Reserve

is competitive in cost terms, but poses

Chip-on-film (COF) substrates

to achieve melting. For this reason,

Amount of ore evaluated to havesignificant operational challenges,

COF substrates are electronic

market in Europe in medieval times.

trading prices for metals are used as
the international pricing benchmarks

Metal refining

the hydrometallurgical approach ispurity at or above the level indicatedand only two other producers besides

packaging materials used to makefor sales of refined metal andSmelting and refining

generally used to refine these ores.

in the prefeasibility study that is judged

SMM have commercialized it, using

integrated circuits for use with LCD

purchases of refining ores.

Refining processes extract valuable

to be economically recoverable.

similar technology.

drivers. They connect these circuits tometals from ores or other raw

Copper concentrates

Treatment Charge (TC) and
Refining Charge (RC)materials. They fall into two basic

Used as raw materials in copper•Resource

Main applications for metals

types: pyrometallurgical (dry) andsmelting, copper concentrates have

Ore of purity or quality that is

CopperLeadframes

These are commonly used in the terms

hydrometallurgical (wet). At SMM’sa copper content of about 30%

estimated to be economically

Copper is fabricated into wires,

Leadframes are electronic packaging

of purchase for copper concentrateToyo site (Saijo, Ehime Prefecture)

by weight. The remainder consists

extractable.

pipes and other forms. Besides

materials used to form connections

or nickel ore for refining.

copper concentrate preprocessing

mostly of sulfur and iron. Copper

power cables, copper is used widelyin semiconductor chips and printed

They are amounts designed to cover(treatment processes) areconcentrates are made mostly

Japanese standard (JIS)in consumer applications such as

circuit boards. They contain thin strips

refining costs. For example, copper

pyrometallurgical, while the nickelfrom sulfide ores. Ores extracted•Recoverable ore

wiring in vehicles or houses, and in airof a metal alloy containing mostly

concentrate contracts may define

plant (Niihama, Ehime Prefecture)from overseas mines have a typicalAmount of ore expected to beconditioning systems.

nickel or copper.

a purchase price based on the LME

makes use of hydrometallurgicalgrade of about 1%. The ores are thenrecovered, consisting of actually

price at a certain date, minus the TC

processes throughout. The term

“dressed” at the mine to increase

recoverable ore plus slag.

Electrolytic nickel

Secondary batteries

or RC being used at the time.

‘smelting’ is used for the extraction

the purity and produce concentrate.

This form of nickel, which has a

Secondary batteries are ones thatof metal from ores using melting andMost of the copper ores imported•Identified resources

purity of at least 99.99%, is used incan be recharged and used again.

London fixing

heating (pyrometallurgy). The termby SMM for smelting in Japan are

Total ore identified at the site.

specialty steels, electronics materials

SMM supplies battery materials thatGold is not traded on the LME. Its price‘refining’ refers to any process thatconcentrates.

and electroplating, among otherare used in the anodes of nickel metal

is determined for each transaction

increases the grade or purity of a

Nickel production processapplications. SMM is the only producer

hydride batteries and lithium-ion

between market participants. The

metal.

of electrolytic nickel in Japan.

rechargeable batteries, which supply

Whilst the higher-grade sulfide ores are

Coral Bay Nickel Corporation(CBNC)

financial institutions in the London

Nickel oxide ores

the LCD panel.

power for hybrid vehicles or notebook

Bullion Market Association (LBMA)

Pyrometallurgical refining

used predominantly in nickel refining,

Based in the Philippines, this SMM

Ferronickel

computers, among other consumer

agree on a standard price for

The precursor ore is melted at highnickel oxide ores are more prevalent

subsidiary produces mixed nickel-

Ferronickel is an alloy containing nickel

applications.

gold based on these transactions

temperature in a furnace, and refining

than nickel sulfides. The sulfide-oxide

cobalt sulfides using HPAL technology(about 20%) and iron. Its main use isand publish it on the morning andtechniques are applied to separate

ratio in current nickel reserves isand exports the raw materials to thein the manufacture of stainless steel,afternoon of each trading day. This

the metal in a molten state. While thisbelieved to be about 3:7. High refining

SMM Group’s nickel refining facilities inwhich is about 10% nickel by weight.

“London fixing” price is the benchmark

technique allows large-volume ore

costs and technical issues have limited

Niihama, Ehime Prefecture.

Based in Hyuga, Miyazaki Prefecture,

for trading in gold.

processing, it also requires periodic

use of oxide ores in nickel refining

furnace maintenance.

to date, but SMM has succeeded in

High Pressure Acid Leach (HPAL)

refining nickel from low-grade oxide

HPAL technology enables theores based on HPAL technology.

recovery of nickel from low-gradeGold

Pound (lb)

SMM Group firm Hyuga Smelting Co.,
Ltd. produces ferronickel.

Part of the imperial system ofHydrometallurgical refining

measures, the pound is the standard

The ore and impurities are dissolved

nickel oxide ores that traditionallyGold is in demand worldwide forunit of weight used in measuring andin a solution, and chemical reactions

Mixed sulfide (MS) ores

were difficult to process. SMM wasinvestment and decorative purposes.

pricing base metals such as copper

are used to separate out the metal.

CBNC and Taganito produce a mixed

the first company in the world toGold is widely used in Japaneseand nickel, and in TC/RC calculations.

This refining method is stable andnickel-cobalt sulfide intermediate

apply it successfully on a commercial

industry within the electronics sector

One pound equals approximately

allows for continuous refining, but thecontaining about from 55% to 60%

scale. The oxide ores are subjected tobecause of its high malleability and453.59 g; a metric ton equals

solutions required are costly.

nickel by weight. This is used as ahigh temperature and pressure andductility.

raw material in electrolytic nickel

reacted under stable conditions withproduction.

sulfuric acid to produce a nickel-richapproximately 2,204.62 lb.

Metal ores

78

grade nickel using electrolysis. MCLE

Troy ounce (toz)Sulfide ores

The troy ounce is the standard unit

These ores contain copper, nickel orMatteof weight for precious metals such asother metals chemically bonded to

A matte is another term for metalgold and silver. It equals approximately

sulfur. Since the application of heatsulfides. For raw material, electrolytic

Matte Chlorine Leach
Electrowinning (MCLE)

31.1 g. It is named after Troyes, a city

breaks these bonds, releasing thenickel production at SMM also uses

Matte Chlorine Leach Electrowinningrefining intermediate.

79Consolidated Subsidiaries and Equity-Method Affiliates
As of July 1, 2013

Percentage
of VotingShares (%)

Location

Sumiko Resources Exploration & Development
Co., Ltd.

100

Japan

Geological survey of resources, test boring

Sumitomo Metal Mining America Inc.

100

USA

Exploration, management of mining subsidiaries in North
America

Sumitomo Metal Mining Arizona Inc.

80

USA

Mining and related operations

USA

Investments in local companies in Chile operating theCandelaria Mine

Mineral Resources

Equity-Method Affiliates
Principal Operations
27

China

Acids Co., Ltd.

50

Japan

PT Vale Indonesia Tbk.

20

Indonesia

Nickel ore mining, nickel smelting

Nickel Asia Corporation

25

Philippines

Nickel ore mining

Figesbal

26

New Caledonia

MS Zinc Co., Ltd.

50

Japan

Manufacture and sale of zinc and related operations

Mitsui Sumitomo Metal Mining Brass & Copper
Co., Ltd.

50

Japan

Manufacture and sale of copper and brass products
and processed copper and brass products

Percentage
of VotingShares (%)

Location

SH Materials Co., Ltd.

51

Japan

Manufacture and sale of leadframes

Okuchi Electronics Co., Ltd.

100

Japan

Recovery and recycling of non-ferrous metals,
manufacture of functional ink

Ohkuchi Materials Co., Ltd.

100

Japan

Manufacture of leadframes

Niihama Electronics Co., Ltd.

100

Japan

Manufacture of substrate material(two-layer plated boards)

Japan

Manufacture of leadframes

Consolidated Companies

SMMA Candelaria Inc.

100

Nickel ore mining, harbor transportation

Sumitomo Metal Mining Canada Ltd.

100

CanadaExploration, consulting

Sumitomo Metal Mining Oceania Pty. Ltd.

100

Australia

Resource surveys, mine development and related
operations in Oceania

Sumitomo Metal Mining Pogo LLC

100

USA

Investment in the Pogo Mine

SMM Resources Inc.

100

CanadaMineral resources business

SMM Cerro Verde Netherlands B.V.

80

Netherlands

SMM Exploration Corporation

100

USA

SMM Solomon Ltd.

100

Solomon Islands

Sumitomo Metal Mining Peru S.A.

100

Peru

Exploration in South America

Sumitomo Metal Mining Chile Ltda.

100

Chile

Exploration in South America

Sumiko Solomon Exploration Co., Ltd.

70

Japan

Exploration in the Solomon Islands

Niihama Materials Co., Ltd.

100

Sumac Mines Ltd.

100

CanadaExploration

SH Precision Co., Ltd.

100

Japan

Manufacture of leadframes

97

Japan

Design, manufacture and sale of printed circuit boards

100

Singapore

Investments in local companies in Peru operating the
Cerro Verde Mine
Mineral resources business

Materials

Principal Operations

Consolidated Companies

Exploration in the Solomon Islands

Stone Boy Inc.

80

USA

Exploration

Shinko Co., Ltd.

SMM Sierra Gorda Inversiones Ltda.

70

Chile

Investment in the Sierra Gorda Project

SH Asia Pacific Pte. Ltd.

Sumitomo Metal Mining do Brasil Ltda.

100

BrazilExploration

Sumiko Tape Materials Singapore Pte. Ltd.

100

Singapore

Regional headquarters for tape material operations

Malaysian SH Electronics Sdn. Bhd.

100

Malaysia

Manufacture and sale of leadframes

Equity-Method Affiliates

Regional headquarters for overseas leadframe
operations

Sociedad Minera Cerro Verde S.A.A.

21

Peru

Cerro Verde Mine

Malaysian SH Precision Sdn. Bhd.

100

Malaysia

Manufacture and sale of leadframes

Compania Contractual Minera Candelaria

20

Chile

Candelaria Mine

Malaysian Electronics Materials Sdn. Bhd.

100

Malaysia

Manufacture and sale of thick-film paste

Compania Contractual Minera Ojos Del Salado

20

Chile

Ojos Del Salado Mine

Sumiko Electronics Taiwan Co., Ltd.

70

TaiwanManufacture and sale of tape materials

Sierra Gorda S.C.M.

45

Chile

Sierra Gorda Project

SH Electronics Taiwan Co., Ltd.

70

TaiwanManufacture and sale of leadframes

Cordillera Exploration Co., Inc.

25

Philippines

Exploration

Taiwan Sumiko Materials Co., Ltd.

100

TaiwanManufacture of target materials

SH Electronics Chengdu Co., Ltd.

70

China

Manufacture and sale of leadframes

SH Precision Chengdu Co., Ltd.

70

China

Manufacture of leadframes

SH Electronics Suzhou Co., Ltd.

100

China

Manufacture and sale of leadframes

Suzhou SH Precision Co., Ltd.

100

China

Manufacture of leadframes

Sumiko Advanced Materials (Suzhou) Co., Ltd.

100

China

Manufacture and sale of alloy products

Smelting & Refining

Percentage
of VotingShares (%)

Location

Principal Operations

Consolidated Companies

80

Manufacture and sale of electrolytic copper and sulfuricacid
Manufacture and sale of sulfuric acid and related
products

Jinlong Copper Co., Ltd.

Hyuga Smelting Co., Ltd.

60

Japan

Ferronickel smelting

Shisaka Smelting Co., Ltd.

100

Japan

Manufacture of crude zinc oxide

Sumiko Logistics Co., Ltd.

100

Japan

Sumic Nickel Netherlands B.V.

52

Netherlands

Coral Bay Nickel Corporation

54

Philippines

Taganito HPAL Nickel Corporation

62.5

Sumitomo Metal Mining Philippine Holdings
Corporation

100

Sumiko Metal Mining Management (Shanghai)Co., Ltd.

100

Taihei Metal Industry Co., Ltd.

97

Maritime trading, harbor transportation and services,land transportation
Investment in nickel and cobalt development businesses,
sale of nickel and cobalt

Terminals and connectors for electronic and electric
equipment; related components, electric wire, powercords and pressure bonding machines and theirmaintenance; manufacture and sale of formed products
for optical equipment
Plating of metal products, surface treatment processing
and distribution

Sumiko Tec Co., Ltd.

100

Japan

Manufacture of nickel and cobalt intermediates

Nittosha Co., Ltd.

100

Japan

Philippines

Taganito Project

Sumiko Kunitomi Denshi Co., Ltd.

100

Japan

Manufacture of crystal products and magnetic materials

Philippines

Regional headquarters for the nickel businessShanghai Sumiko Electronic Paste Co., Ltd.

69

China

Manufacture and sale of thick-film paste

Sale of Group products, operations management
support for Group companies in the China region,
consulting business
Manufacture of heat-, corrosion- and friction-resistantsteel castings

Dongguan Sumiko Electronic Paste Co., Ltd.

85

China

Manufacture and sale of thick-film paste

SMM Korea Co., Ltd.

100

South Korea

SMM Precision Co., Ltd.

100

Japan

China
Japan

Sales support for advanced materials and business
operations
Manufacture and sale of optical communications
components

81Corporate Data and Investor Information
As of March 31, 2013

Corporate Data

Consolidated Companies (continued)
Sumico Lubricant Co., Ltd.

100

Japan

Manufacture and sale of lubricants,
in particular molybdenum-containing special lubricants

Sumico Lubricant Trading (Shanghai) Co., Ltd.

100

China

Sale of lubricants

Sumitomo Metal Mining Siporex Co., Ltd.

100

Japan

JCO Co., Ltd.

100

Japan

Igeta Heim Co., Ltd.

100

Japan

Japan Irradiation Service Co., Ltd.

100

Japan

Manufacture and sale of ALC (autoclaved lightweightaerated concrete), base-isolating dampers, and otherconstruction materials
Management of facilities using uranium and related
wastesConstruction of steel frame and reinforced concreteapartments and condominiums
Irradiation sterilization service for pharmaceuticalproducts, medical instruments and pharmaceuticalcontainers; modification of various industrial materials

50

Japan

Nippon Ketjen Co., Ltd.

50

Japan

SH Copper Products Co.,Ltd.

50

Japan

Granopt Ltd.

50

Japan

Other

1590

Public Relations & Investor Relations Department

Incorporated

1950

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

Paid-In Capital¥93.2 billion

Phone: +81-3-3436-7705

Number of Employees

8,370 (Consolidated)

Facsimile: +81-3-3434-2215

Head Office11-3, Shimbashi 5-chome,

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

Minato-ku, Tokyo 105-8716,
Registrar of Shareholders

Japan

Sumitomo Mitsui Trust Bank, Limited
4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8233, Japan

Investor Information

Stock Transfer Agency Department:

Closing Date

4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8233, Japan

March 31

Equity-Method Affiliates
N.E. Chemcat Corporation

Contact Information

Founded

Percentage
of VotingShares (%)

Location

100

Japan

Manufacture of catalysts, recovery and refining of
precious metals
Manufacture and sale of desulfurization catalysts for
petroleum processing
Manufacture and sale of copper strip, copper alloy
fabricated products, and processed copper products
Manufacture and sale of rare earth iron garnet (RIG)

Principal Operations

Ordinary General Meeting

Method of Public Notice

JuneElectronic notification (However, if electronic notification is

Common Stocknot available due to unavoidable circumstances, notice

Number of authorized shares: 1,000,000,000

will be published in the Nihon Keizai Shimbun newspaper.)Number of issued and outstanding shares: 581,628,031
Number of shareholders: 55,453

Independent Public Accountant

Listing of Shares: Tokyo, Osaka

KPMG AZSA LLC

Stock Transaction Unit: 1,000 shares

1-2, Tsukudo-cho, Shinjuku-ku, Tokyo 162-8551, Japan

Consolidated Companies

Sumiko Techno-Research Co., Ltd.

Sumiko Technical Service Co., Ltd.

100

Japan

Sumitomo Metal Mining Engineering Co., Ltd.

100

Japan

Sumiko Plantech Co., Ltd.

SMM Holland B.V.

100

100

Japan

Netherlands

Environmental measurement verification operations suchas water quality, air, soil, noise and vibration; datacollection, adjustment and product evolution as well as
technological development
Commission-based work in area of non-ferrous smelting,personnel agency business
Survey, design, manufacturing, repair and maintenanceof various types of machinery, equipment and plants inwide-ranging fields including non-ferrous metal smelting,chemicals, and the environment
Manufacture of machinery and equipment and repair
work for non-ferrous metal smelting and chemical plants;
installation of machinery and equipment and piping
work; steel structure work
Investment in nickel and cobalt development businesses

Number ofshares held Shareholding
ratio (%)
(thousands)

Major Shareholders

Breakdown of Shareholders(thousands of shares)

Japan Trustee Services Bank, Ltd. (Trust Account)

34,435

6.2

The Master Trust Bank of Japan, Ltd. (Trust Account)

29,627

5.4

SSBT OD05 OMNIBUS ACCOUNT—TREATY CLIENTS

12,767

2.3

THE CHASE MANHATTAN BANK, N.A. LONDON SECS LENDING OMNIBUS ACCOUNT

9,778

1.8

Nippon Steel & Sumitomo Metal Corporation

8,715

1.6

NT RE GOVT OF SPORE INVT CORP P.LTD

8,309

1.5

Sumitomo Mitsui Banking Corporation

7,650

1.4

Sumitomo Life Insurance Company

7,474

1.4

ForeignInvestors
176,769
30.39%

Japan Trustee Services Bank, Ltd. (Trust Account 9)

7,410

1.3

Sumitomo Corporation

7,000

1.3

Toyota Motor Corporation

7,000

1.3

Treasury Stock
29,410
5.05%
Financial
Institutions

Individuals
and Others

181,29331.17%

110,427
18.99%

Securities
Companies
17,3792.99%
Other entities
66,347
11.41%

Note: Shareholding ratio is calculated excluding treasury stock.

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

TOPIX (points) (left)

Trading volume (millions of shares) (right)

1,500

60

1,000

30

500
Apr. 2011

0Oct. 2011

Apr. 2012

Oct. 2012

Apr. 2013

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

82

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