Annual Report2012
For the year ended March 31, 2012

2 Financial Summary
4 SMM Growth Strategies
CopperNickel

Gold

6

8

10

Sierra Gorda Project

Acquiring New Mine Interests:
On the Verge of a Long-Term Production
Vision of 300,000 Tonnes per Year

Coral Bay Nickel Corporation

Pogo Gold Mine

Working toward a Production Capacity
Structure of 150,000 Tonnes per Year:On the Back of World-Leading Refining
Technologies Nurtured Over Many Years

Harnessing Our Gold Mining Development
and Operational Track Record at theHishikari and Pogo Gold Mines:
Working toward a Mining Interest of
30 Tonnes per Year

12 Message to Our Stakeholders
19 Review of Operations
Mineral Resources Segment ........... 20
Copper Mines
Gold Mines

22

24

Exploration Projects

25

Smelting & Refining Segment ........ 26
Refineries in Japan

27

Overseas Refineries

28

Materials Segment ......................... 30
Other Businesses............................ 31

32 Corporate Governance
35 Corporate Social Responsibility
36 Directors and Corporate Auditors
37 Financial Section
80 Glossary
82 Consolidated Subsidiaries and Equity-Method Affiliates
85 Corporate Data and Investor Information
Notes:
1. For explanations of specialized industry terms, please see the Glossary on pages 80 to 81.
2. Note Regarding Forward-Looking Statements: The forward-looking statements in this annual report, including business results forecasts, are based on
information available to the Company and on certain assumptions deemed to be reasonable as of the date of release of this report. Actual businessresults may differ substantially due to a number of factors. Unless specifically stated otherwise, information in this annual report is as of July 1, 2012.

The Sumitomo Business Spirit
Article 1
Sumitomo shall achieve strength and prosperity by placing prime importance on

Copper ore

integrity and sound management in the conduct of its business.
Article 2
Sumitomo shall manage its activities with foresight and flexibility in order to cope effectively withthe changing times. Under no circumstances, however, shall it pursue easy gains or act imprudently.
“Business principles” forming the Rules Governing the House of Sumitomo.
(version formulated in 1928)

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

Long-Term Vision

To Become a Non-Ferrous Major
Sumitomo Metal Mining (SMM) Group is endeavoring to become a top-5 player in the global non-ferrous majors throughthe practice of the Sumitomo Business Spirit, which boasts a history spanning four centuries, and through efforts to realize
its corporate philosophy. Under its current mid term business plan, which covers the three-year period from fiscal 2010 tofiscal 2012 (09 3-Yr Business Plan), the Group is realigning its business structure, concentrating its management resources oncore businesses, and working diligently to become globally competitive.

Long-term vision beyond FY2013

FY2010–FY2012
09 3-Yr Business Plan
New long-term vision-oriented growth strategy

FY2004–FY2009
03 & 06 3-Yr Business Plans

Globallycompetitive

Globallycompetitive(base)In Top 5
non-ferrous
majorsNon-ferrous major

Enter non-ferrous major ranks

Strategic Points
Mineral Resources
Cu/Au: Expand mine interests
Ni: Promote the Solomons project

Nickel ore

Smelting & Refining
Cu: More cost competitive
Ni: Commence operations at Taganito; Expand electrolytic
nickel production capacity to 65,000 tonnes
Materials
Expand materials business in the environment and energy fields
Adopt “select and concentration” initiatives involving theclarification of businesses

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 1

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

2011

2010

2009

2008

Net sales

847,897864,077

725,827

Operating income

88,49896,038Recurring profit

108,750

Income before taxes andminority interests
Net income

Fiscal Year (See note)

2007

2006

2005

793,797 1,132,372

966,764

625,579

66,265

10,534

155,394

162,632

82,756

123,701

87,791

32,572

217,866

205,285

99,716

87,883

123,394

82,776

22,942

216,504

205,617

92,97465,21983,962

53,952

21,974

137,808

126,054

62,8001,145,994 1,052,353

981,458

880,001 1,091,716

929,208

772,562

Results for the year (Millions of yen)

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

725,565

684,103629,684

547,251

640,345528,921394,899

Long-term debt due after one year

157,119

135,128

132,311

141,716

169,394

93,800114,405

Interest-bearing debt

265,951

210,969

200,939

218,534

258,054

189,910

190,891

Net income

116.05149.38

96.26

38.87

238.13220.49109.96

Shareholders’ equity

1,173.1

1,121.2

1,043.5

913.9

1,018.0

859.8

654.2

28.0

32.0

20.0

13.0

30.0

27.0

14.0

ROA

5.93

8.26

5.80

2.23

13.64

14.81

9.33

ROE*

10.12

13.80

9.89

4.02

25.39

28.99

19.10

Equity ratio (%)*

57.5

59.9

59.8

57.3

54.0

53.4

48.4

Interest-bearing debt to total assets ratio

23.4

20.0

20.5

24.8

23.6

20.4

24.7

Debt-to-equity ratio (times) *

0.40

0.33

0.34

0.43

0.44

0.38

0.51

Amounts per share (Yen)

Cash dividends

Key ratios (%)* Shareholders’ equity is defined as follows.
Shareholders’ equity = Total shareholders’ equity + Accumulated other comprehensive income
Note: The fiscal year concludes on March 31, so Fiscal 2011 (FY2011) is the year ended March 31, 2012.

2 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Net sales

Operating income

Recurring profit(¥ billions)(¥ billions)(¥ billions)

1,000

120

160

750

90

120

500

60

80

250

30

40

0

0

2008

2009

2010

2011 (FY)

Total assets/Equity ratio

0

2008

2009

2010

2011 (FY)Net assets

2008

2009

2010

2011 (FY)Net income/Cash dividends per share

Total assets (left scale)— — Equity ratio (right scale)

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

1,200

100

800

100

40

900

75

600

75

30

600

50

400

50

20

300

25

200

25

10

0

0

0

2008

2009

2010

2011 (FY)

(Yen)

0

2008

2009

2010

2011 (FY)02008

SUMITOMO METAL MINING CO., LTD.

2009

2010

2011 (FY)

Annual Report 2012

| 3

SMM Growth Strategies
Under 09 3-Yr Business Plan, SMM’s long-term vision calls for increasing the Company’s total production
interest in copper to 300 ktpa* and in gold to 30 tpa as well as expanding nickel operations to achieve a
150 ktpa production set-up. A number of projects have already been launched in an effort to achievethese targets. SMM is committed to further enhancing its enterprise value by ensuring steady progress
toward each of the aforementioned goals.
*Kilo tonnes per annum (300 ktpa=300,000 tonnes per year)

Cu equity interest production

Ni production capacity

Au equity interest production(Thousand tonnes (kt))(Thousand tonnes (kt))(Tonnes (t))

300

150

30

200

100

20

100

50

10

0

0
2011

2014

2017 Long-Term
Vision

0
2011

2013

Long-Term
VisionHarima Smelter (Japan)

Long-Term
Vision2011

Toyo Smelter & Refinery (Japan)
Niihama Nickel Refinery (Japan)
Shisaka Smelting Co., Ltd. (Japan)
Hyuga Smelting Co., Ltd. (Japan)

Jinlong Copper Co., Ltd. (China)
Hishikari (Japan)

Coral Bay Nickel Corporation (the Philippines)

Taganito Project (the Philippines)

Sorowako (Indonesia)
Batu Hijau (Indonesia)

Goro (New Caledonia)
Figesbal (New Caledonia)

Northparkes (Australia)

Ni

Coral Bay Nickel Corporation(the Philippines)

Ni

Taganito Project (the Philippines)

4 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Au

Hishikari Mine (Kagoshima Prefecture)

Ferronickel

Hyuga Smelting Co., Ltd.
(Miyazaki Prefecture)

Au

Pogo (United States)

Cu

Morenci (United States)

Pogo (United States)

Morenci (United States)

Cerro Verde (Peru)

CopperMineral Resources Segment

NickelSmelting & Refining Segment

Gold

Sierra Gorda Project (Chile)
Candelaria (Chile)
Ojos del Salado (Chile)

Zinc/Other

Cu

Toyo Smelter & Refinery/Toyo Facilities(Ehime Prefecture)Ni

Niihama Nickel Refinery(Ehime Prefecture)

Cu

Cerro Verde (Peru)

Cu

Sierra Gorda Project (Chile)

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 5

The Sierra Gorda Project is located in the
Republic of Chile where a large portion of
the world’s copper is produced. New
mines are generally situated at high altitudes with little or no surrounding infrastructure. This project, on the other hand,
is at the relatively low altitude of 1,700
meters and in close proximity to highways,
railways and the convenience of all necessary infrastructure. Considerable potential
exists to contain development costs tocomparatively low levels.
Sierra Gorda Project

Chile

Acquiring New Mine Interests:
On the Verge of a Long-Term Vision of
300,000 Tonnes per Year
Sierra Gorda Project (production scheduled to commence in 2014)
Copper reserves for the Project are approximately five million tonnes with an average annual production of around 220,000
tonnes of refined copper equivalent. In addition to its interest of 31.5%, SMM also has acquired off-take rights to 50% of
produced copper concentrate.

Please refer to page 23 for details.

6 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Cu
Further Expanding Mine Rights
Amid Increasingly Intense
Competition to Secure Resources
Approximately 19.5 million tonnes of copper
was consumed globally in 2011, exceeded
only by iron and aluminum among metals.
Copper offers outstanding electricity andheat conductivity, high malleability, andcorrosion resistance. As such, copper iswidely used in electric cables, air conditioning heat-exchange units and wiring for avariety of electrical products.
In descending order, the countries that
consume the largest amounts of copper
metals are China, the United States,
Germany and Japan. Consumption in Asia
including China has grown substantiallysince around 2000. As a result, global
demand has increased approximately 30%
over the past decade. Under these circumstances, the London Metal Exchange (LME)price of copper has appreciated sharply from
US$1,600 per tonne (average in 2001) toUS$8,800 per tonne (average in 2011).
During this period, and in tune with themarket’s expansion, SMM has worked diligently to secure mine interests, bolster its
copper smelting capacity and increase
productivity. Looking ahead, every effort will
be made to further obtain resource rights
and to boost productivity.
Copper Metal Consumption by Country (2010)
India
RussiaBrazil

2%
2%
3%

Other
22%

Taiwan3%
Italy3%South Korea 4%Japan
6%Germany 7%

China 39%

United States
9%

Copper Price (LME)($/tonne)

12,00010,000
8,000
6,000
4,000
2,000
0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 7

Working toward a Production Capacity
Structure of 150,000 Tonnes per Year:On the Back of World-Leading Refining
Technologies Nurtured Over Many Years
Coral Bay Nickel Corporation
Coral Bay Nickel Corporation (CBNC) engages in the production of nickel-cobalt mixed sulfide (MS), a nickel intermediate. MS with a 60%
nickel grade is transported to the Niihama Nickel Refinery in Japan where it is refined into electrolytic nickel. The current production capacity
is 24,000 tpa of refined nickel equivalent.

Please refer to page 28 for details.

8 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Ni

Coral Bay Nickel Corporation(CBNC)

CBNC is located in the site adjacentto the Rio Tuba Mine in the southern
region of Palawan Island in the

Utilizing Its World-Class
Technological Capabilities to
Expand Production

Philippines. With little or no practical

Worldwide consumption of nickel wascommercial application, the raw mate-estimated at 1.6 million tonnes in 2011.

rial low-grade nickel oxide ore mined

Offering outstanding corrosion resistance,at the Rio Tuba Mine was effectively
stockpiled. Harnessing its outstand-the principal applications of nickel are

ing technological capabilities, SMM

stainless steel (60%), specialty steel

is utilizing this ore to recover nickel.

(10%), and other alloys and plating.
In descending order, the largest usersof nickel by country are China, Japan,
South Korea and the United States.
Demand over the past decade has
climbed approximately 40% on the backof growing application in newly emerging
countries and especially in China.
Through CBNC, SMM was the firstcompany in the world to effectively use
High Pressure Acid Leach (HPAL) technology on a large-scale commercial basis.
Harnessing the Company’s outstanding
technological capabilities, SMM will
endeavor to further increase nickel
production.

Nickel Metal Consumption by Country (2010)

South Africa 3%
Italy
4%
Taiwan5%Germany

6%

Other
18%

United States 7%

China 37%

Japan
12%

South Korea 8%

Nickel Price (LME)($/lb)

25.00

20.00

15.00

10.00

5.00

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 9

Harnessing Our Gold Mining Development andOperational Track Record at the Hishikari andPogo Gold Mines:
Working toward a Mining Interest of
30 Tonnes per Year
Pogo Gold MineIn July 2009, SMM and Sumitomo Corporation acquired the interest held by Teck Resources Ltd. in the Pogo Gold Mine. As a result, theCompany’s share in the mine rose to 85%. Current annual production is set at approximately 11 tonnes with resources of 155 tonnes as ofDecember 31, 2011.

Please refer to page 24 for details.

10 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Au
The Pogo Gold Mine is located in an
inland area of Alaska in the U.S.
During winter months, temperatures
can fall as low as -50°.

Operating Gold Mines in Japanand Overseas
Annual global production of gold isestimated at 4,600 tonnes. Of this total,
2,800 tonnes is mined and the remainder
recycled (2011). Around 40% is used to
manufacture jewelry, 40% for investment
purposes and the remainder is used as
an electronics material due mainly to its

Pogo Gold Mine

outstanding conductivity and corrosion
resistance properties.
The price of gold has witnessedsignificant appreciation since 2005. This
increase has largely been attributable tothe tendency of newly emerging countries
to maintain substantial holdings, growing
demand for use in jewelry and thecontinued upswing in market interestfor gold as an investment instrument.
SMM maintains the long-term vision ofincreasing its annual equity interest of
production from 20 tonnes to 30 tonnes.
To achieve this vision, the Company willcontinue to engage in exploration andother activities.

Gold Price (London)($/Toz)

2,000

1,500

1,000

500

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 11

Message to Our Stakeholders

Nobumasa Kemori
President and Representative Director

Business Environment
In fiscal 2011, ended March 31, 2012, I felt that the following three factors would cause considerable
difficulties: the sovereign debt crisis in Europe, concerns surrounding inflation in newly emerging countries,and economic trends in the United States. Entering the second half of fiscal 2011, as each of these threefactors continued to deteriorate, funds deserted the commodities markets, triggering a downturn inmetal markets.
These factors, on the other hand, did not overly affect demand and supply. In recent years, China
has had significant impact on the demand side. China alone is purported to account for around 70%of the total increase in demand for copper and nickel. In this context, economic trends in China holdconsiderable sway on the overall balance of global demand and supply.
The Company recognizes the considerable impact of fluctuations in metal prices on its performance.
From both the financial as well as demand-and-supply perspectives, future market conditions willundoubtedly shift in line with trends in financial conditions in Europe and the status of China’s economy,
respectively. Currently, I am of the opinion that there remains little room for complacency in either area.

12 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012Results in 2011
In fiscal 2011, we recorded recurring profit of ¥108.8 billion. While this result fell short of the estimate
for fiscal 2012 of ¥110.0 billion identified under the 09 three-year business plan, we are essentially on
track in terms of profitability.
Having said this, however, consolidated recurring profit for the fiscal year under review was close to¥15.0 billion lower than the amount recorded for the previous fiscal year. This downturn in earnings waslargely attributable to the strong yen and increased running costs at overseas mines, which effectively
offset the rise in metal prices; the growing incidence of loss in the materials business; and burgeoning
deficits in the Goro Project.
Recognizing that our performance is at the mercy of metal market conditions and trends in foreign
currency exchange rates, our results do not always match the progress achieved in implementing growthstrategies. The prices of metals, for example, may fall at the time a project is completed. Despite this andother scenarios, steadfastly promoting our strategies and securing quantitative growth are the means bywhich we enhance our enterprise value.

Progress under the 09 Three-Year Business Plan and Fiscal 2012 Business Strategies
Currently, SMM continues to advance its 09 three-year business plan announced in February 2010.
During the previous 06 three-year business plan, the Company was successful in securing quantitative
growth by putting a second CBNC processing line into operation and acquiring additional interests in the
Pogo Gold Mine. During the three-year period of the current plan, however, we have seen little in theway of new project activity that is appreciably contributing to earnings. Our efforts are expected to bear
fruit during the period of the next plan. As we work toward promoting the 12 three-year business plan,
it is imperative that we push forward in a sure-footed manner each project currently in hand. In thisregard, SMM is confident that it has taken positive steps forward in fiscal 2011.

Global Copper Consumption
Copper consumption (Thousand tonnes)

Global Nickel Consumption
Nickel consumption (Thousand tonnes)

25,0002,000

20,0001,600

15,000

1,200

10,000

800

5,000

400

0

0

01 02 03 04 05 06 07 08 09 10 11

01 02 03 04 05 06 07 08 09 10 11(Source: ICSG)(Source: INSG)SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 13

Mineral Resources
In the Mineral Resources business, we successfully joined the Sierra Gorda copper-molybdenum mining
project in May 2011. SMM’s interest in the mine is 31.5%. Together with Sumitomo Corporation, theJapanese partners hold interests totaling 45%. This enables us to meaningfully participate in the mine’s
management and operations and provides invaluable experience for when we eventually engage infuture overseas large-scale copper mining operations in our own right.
In endeavoring to expand earnings from stand-alone mining businesses, SMM has adopted threemethods in boosting its overseas mine rights: 1) conduct independent exploration, 2) participate in minedevelopment projects, and 3) increase output at existing mines. The Sierra Gorda Project utilizes thesecond method, entailing participation in a mine development project. Operations are scheduled tocommence in 2014. On the completion of expansion work in 2017, SMM has the off take right to about
70,000 tonnes of copper per year. Turning to the Company’s efforts to increase output at existing mines,
SMM is working together with managing partners at each mine to put forward appropriate proposals.
In determining the Company’s interest in projected output increases between 2014 and 2016, SMM
anticipates an upswing of 60,000 tonnes in annual production volume. Taking this into account, SMM haslaid the foundation to lift its equity interests in copper output from the current level of 120,000 tonnes
per year to 250,000 tonnes, a significant step toward the Company’s long-term vision of 300,000 tonnes
annually (300 ktpa).
In striving to secure the remaining 50,000 tonnes per annum (ktpa), we will place particular weight
on independent exploration and development. From a grass roots perspective, development in the
Company’s own right is expected to take between 10 and 15 years. Moving forward, we are continuing
to participate in ongoing feasibility studies with the aim of quickly entering the development phase.

Smelting & Refining
In the Smelting & Refining business, SMM is making the most of its HPAL technology, an area of particular strength, to pursue projects that help increase the Company’s output of nickel. Currently, SMM isconstructing facilities at the Taganito Project that are projected to increase output of refined nickel by

Share of Annual Copper Production (ktpa)
30.0

25.4

Other existing mines
Sierra Gorda

20.0

Northparkes
Cerro VerdeMorenci

10.0

0.0

2011

2012

2013

2014

2015

2016

14 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

2017

2018

2019

2020

30 ktpa. At the same time, the Company is close to completing work on construction aimed at boosting
electrolytic nickel production at Niihama nickel refinery. As a result, we are well on track to establishing the
100 ktpa nickel production structure outlined in our FY2010-12 three-year business plan.
In October 2011, the Taganito Project came under the attack of armed rebels. Various measures wereimmediately taken to bolster onsite security. Despite a slight delay in construction, operations are scheduled to commence in 2013 according to original plans. As a company that engages in business development activities with the aim of becoming a non-ferrous major, reality dictates that we continuously
confront political and security risks. This recent incident was an opportunity for SMM to again review its
various overseas project development activities and to put in place all necessary countermeasures toaddress those risks specific to its business.
Turning to copper smelting and refining activities, and amid the ongoing competitive advantage of theworld’s resource majors, the terms and conditions including treatment charges and refining charges(TC/RC) for the purchase of copper concentrate are said to have slightly improved. Despite this favorable
environment, smelting and refining companies continue to confront considerable difficulties and for themost part remain unable to generate earnings. Notwithstanding these circumstances, copper smelting was
the original business of the Sumitomo Group and has supported SMM’s growth for over four centuries.
In addition to the pride we take in the continuous contribution to society through the stable supply ofhigh-quality metals, we are confident in our technological capabilities encompassing methods to remove
impurities during the smelting and refining process and to protect the environment. Moving forward,
SMM will continue to fortify its standing as a going concern by making the most of these technologicalcapabilities and strengthening its cost competitiveness. In working toward this goal, the Company completely re-bricked the flash furnace at its Toyo Smelter & Refinery facilities in 2011. As a result, SMM has
taken positive steps toward stabilizing furnace operations and facilitating high-capacity performance.
Taking full advantage of these attributes, we will strive to further improve costs.
The rise of resource nationalism is becoming another major concern. Indonesia, for example, will
enforce new mining laws from 2014 that mandate the production of higher value-added metal mineral
resources. In the event that SMM is unable to import ore mined in Indonesia, its ferronickel smelting
activities will be severely impacted. Looking ahead, SMM is considering every possible step to secure thenecessary raw materials for its ferronickel operations.

Materials
In fiscal 2011, results in the materials business declined, mainly owing to intense price competition in theelectronics industry and the slump in demand. Under these circumstances, SMM took steps to withdraw
from businesses that lacked clear growth strategies in accordance with the shift toward structural reformoutlined in the 09 three-year business plan.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 15

More specifically, the Company decided to exit the bonding wire business for which it could not foreseea growth strategy. This decision took into consideration structural changes as the market shifts from gold
to copper wires, as well as the drop in profitability due largely to intense price competition. In addition,
we decided to forego the resumption of leadframe production in Thailand. This decision largely reflected
the considerable length of time required to reconstruct production facilities following recent flood damage.
Furthermore, SMM terminated production of chip-on-film (COF) substrates using existing subtractive
processes with a view to focusing solely on production via the semi-additive process.
Meanwhile, we will ramp up the selective allocation of management resources to the environment andenergy fields, which are expected to experience growth. In the Company’s battery materials operations,where further development is forecast particularly in the hybrid vehicle field, SMM is boosting sales ofanode materials to existing customers by harnessing its strengths in nickel raw material integrated
production. Moreover, we will substantially expand our precursor production capacity (an anode materialintermediate) and increase sales through commercial distribution to new customers.
Another area where demand is expected to grow is that of sapphire substrates for use in white LEDs.
SMM is leveraging its integrated production capabilities in crystal growth and fabrication to expand its
share of the market for large substrates.

Future Priority Measures
Promoting Human Resource Development
SMM believes that personnel are themselves management resources, and is aggressively implementing
human resource development measures in accordance with this belief. In addition to conventional on the
job training (OJT) as well as group education, the Company is augmenting its selective training programs.
Currently, we are also implementing training that focuses on the resolution of issues from a variety ofperspectives including, management, R&D and safety for middle management and rank and file employees.
Taking into consideration the degree to which individual OJT and training can hone the skills of each
employee, SMM is looking to expand its efforts in the area of selective education and training.

Research and Development Policy
In order for SMM to become a non-ferrous major, I have long believed that we must elevate our researchand development capabilities. As a part of ongoing efforts to build the necessary and appropriate foundation, the Company has decided to establish a smelting & refining development center. The new centeris scheduled to open in 2013 and will focus on several key areas including mineral processing, enhancing
yields and developing the necessary processes required to produce 150,000 tonnes of nickel each year.
Of these fields, SMM is particularly strong in nickel production processes. However, if refineries exist
in 10 locations, it is said that 10 different production processes will accrue reflecting discrepancies insuch factors as the type of ore applied and market environments. For example, SMM is manufacturing

16 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

plate-like electrolytic nickel using chlorine at its Niihama Nickel Refinery. Other methods include thecollection of powder using ammonia. Each method has its merits and demerits. In this context, undertaking
research into new processes and accumulating increased technological expertise will play an extremely
important role when considering any increase in smelting and refining capacity.
From a production facility perspective, SMM will call on technicians from its engineering activities toparticipate in efforts to reduce component costs when working to improve production facilities with theoverarching goal of strengthening cost competitiveness.
Meanwhile, engineers involved in materials business segment activities have for the most part been
assigned to manufacturing lines and related areas where they have played a significant role in improving
onsite production. While many small enhancements have been made, this system has yet to generate
any major breakthrough. Accordingly, we have revised our policies in this area and decided to gather alarge number of engineers at the development center. This initiative will enable engineers from several
areas to interact. We hold high expectations that this new method will trigger major results in both new
product development and the improvement of the production process.

Stance toward CSR Activities
SMM has engaged in smelting activities for four centuries. Its mining operations encompass a non-ferrous
metals business that spans over three centuries. In this regard, our profits are derived from the Earthitself and we must seriously consider the impact of our resource development activities on the Earth andits ecosystems.
At the same time, the valuable resources mined through these development activities are refined
to produce materials that form the very basis of life and industry for people throughout this country.
In this sense, SMM’s activities deliver considerable benefits to society while supporting economic growthand development.
Against the backdrop of these conflicting considerations, SMM strives to contribute to the resolution ofwide-ranging issues that confront society through every facet of its business activities in accordance with theSumitomo Business Spirit that emphasizes sustainable co-existence with society and the global environment.
For example, at the time of the Great East Japan Earthquake, when other copper, zinc and ferronickel
smelters in our industry were forced to suspend production due to facility damage, we did our best to

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 17

bolster the supply of such materials, as we have production bases in western Japan. In addition,in curtailing the use of crude oil and electricity, successful efforts are being made to both reduce theCompany’s costs while containing the atmospheric concentration of CO2. Moreover, these endeavors
will contribute to the preservation of fossil fuels for the next generation.
SMM believes that uncovering the significance of its mainstay activities from a comprehensive
perspective and bolstering its operations will help the Company contribute to society.

Financial Policies and Message to Shareholders
SMM identified the quantitative target of lifting its equity ratio to 50% or more under its 09 three-yearbusiness plan. As of March 31, 2012, the Company’s equity ratio stood at 57.5%. In the event of acredit squeeze, some companies may be unable to take a desired course due to a lack of working capital.
These conditions can provide the opportunity to secure mine rights. Based on this understanding,
SMM places the utmost importance on maintaining a sound financial position to better prepare for the
aforementioned conditions.
SMM strongly believes that increasing its enterprise value is the most effective manner in which toreturn profits to investors and shareholders. Based on the Sumitomo Business Spirit that the Company
has continued to pass from one generation to the next over a period of four centuries, SMM will
steadfastly promote its growth strategies going forward and work to maintain the trust and meet the
expectations of its shareholders and investors.

August 2012

Nobumasa Kemori
President and Representative Director

18 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Review of Operations

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 19

Review of Operations

Mineral Resources Segment
SMM’s mineral resources business began during the 17th century with the launch of operations at the Besshi
Copper Mine in 1691. The expertise gained over a lengthy period was put to good use with the opening of theHishikari Mine in 1983. Currently, the Company is actively engaged in the development, production and sale ofnon-ferrous metal resources. Moreover, SMM conducts independent exploration while evaluating development
projects from all over the world.

Segmental Income

76.1%

Main Products: Gold and silver ores,
Copper concentrates, Copper, Gold

Gold ore (Hishikari Mine)

Fiscal 2011 Review

Exploration Activities

In fiscal 2011, total ore production at the Hishikari Mine

Continuing to target the expansion of its overseas mineralcontracted 4,000 tonnes to 132,000 tonnes while the total

production interests, SMM stepped up its exploration activities

volume of gold in the ore sold was 7.5 tonnes, the same as inin a large number of projects around the world in fiscal 2011.

the previous fiscal year. Ore grade degradation and an increase

In expanding the scope of its exploration activities, explorationin spring water due to heavy rain resulted in a year-on-year

costs increased from ¥4.0 billion to ¥6.0 billion year on year.

1.9 tonne decline in gold produced at the Pogo Gold Mine to

At the Stone Boy exploration project in Alaska, the United

10.1 tonnes. Production of copper concentrates and electrolytic

States, the Company confirmed the presence of a goldcopper at the principal overseas copper mining operations inmineralization zone. Moving forward, SMM is continuing towhich SMM is a management participant—namely Morenci

promote boring surveys to accurately ascertain the volume of(United States), Candelaria (Chile) and Cerro Verde (Peru)—

minable reserves.

remained firm.

In fiscal 2012, exploration expenses are projected to again
increase to ¥7.0 billion with the aim of promoting ongoing
global exploration.

Net Sales

Segmental Income(¥ billions)150

Capital Expenditure/Depreciation(¥ billions)

120

105.7

7,104

80.5

75

5,000

60

0
2010

2011

(FY)

4,065

0

0
2009

(¥ millions)

10,000

2009

2010

2011

(FY)

2009

2010

Capital Expenditure

20 | SUMITOMO METAL MINING CO., LTD. Annual Report 20122011
Depreciation(FY)SMM’s principal metal targets are copper, nickel and gold. Promoting

Three Methods

efforts to increase its interests in each of these metal resources ispositioned as SMM’s most important growth strategy priority. To carryfor Increasingout this strategy, SMM will continue to pursue each of the following

Interests

three methods: 1) conduct independent exploration, 2) participate inmine development projects and 3) increase output at existing mines.

Conduct independent exploration
Quite literally, SMM engages in ore deposit

Participate in mine development
projects

discovery, development and mining operation

Under this method, SMM takes equity stakes

increase output at mines that are already inin its own right. With the majority share, thisin joint-development projects where otheroperation. Projects of this nature are centeredmethod offers the potential for substantial

companies have already discovered oreon the company that is leading the mine

profit compared with the two other alterna-

deposits and have progressed to the devel-

operation.

tives. However, a considerable amount of

opment plan stage. Bypassing the explora-

Currently, progress is being made ontime, between five to 10 years, may betion phase shortens the period until the start

expansion plans at the Cerro Verde Mine,required for exploration before undevelopedof operations relative to projects where thethe Morenci Copper Mine and theore is discovered. Moreover, even if a body

Company opts for independent exploration.

Northparkes Mine.

of undeveloped ore is identified, long addi-

However, taking into consideration thetional lead times are required for development

increased number of companies looking toand operating preparation.

join projects, competition to secure rights

Increase output at existing mines
Under this method, SMM is looking to

has intensified driving up entry costs. Making

In fiscal 2011, the Company engaged
in exploration activities centered on Norththe most of its technological competitive

America, South America and Oceania.

advantage, SMM will work to join projects

Total exploration expenses for the fiscal

on favorable terms and conditions.

year under review were ¥6.0 billion.

SMM’s Metal Interests by Mine
As of December 31, 2011
Copper (Thousand tonnes)

Nickel (Thousand tonnes)

Approx. Total 7,100 kt

Gold (Tonnes)

Approx. Total 1,800 kt

Approx. Total 280 t

Morenci

Sorowako

Hishikari
Pogo

Candelaria

Figesbal

Ojos del Salado

Goro

Cerro Verde

Nickel Asia

Northparkes

0

0

500

100

200

1,000

Batu Hijau– Based on SMM equity interests

Sierra Gorda
0

1,500

– SMM share of reserves = Reserves x SMM equity
interest in mine (%)

3,000

Exploration Costs(¥ billions)8(¥ billions)

8

4

4

0

4

0
2010 Results

2011 Results

New deposit exploration2012 Plans(¥ billions)

8

0

(FY)

2010 Results

2011 Results2012 Plans(FY)2010 Results

Exploration around existing mines

North America

South America

Oceania

Asia

Au

SUMITOMO METAL MINING CO., LTD.

2011 ResultsCu

Ni

2012 Plans(FY)

OthersAnnual Report 2012| 21

Mineral Resources Segment

Copper Mines
Cerro Verde Mine

Morenci Copper Mine

Location

Arequipa, Peru

Production Volume

Start of
Production

2006

400

Products

Copper concentrates and electrolytic copper

EquityInterests

SMM: 16.8%
Freeport-McMoRan Copper & Gold Inc.: 53.6%
Compania de Minas Buenaventura S.A.A.: 18.25%
Sumitomo Corporation: 4.2%

(Thousand tonnes)

294

Location

Arizona, United States

Production Volume

EquityParticipation

1986

400

Products

Copper concentrates and electrolytic copper

EquityInterests

SMM: 12%
Freeport-McMoRan Copper & Gold Inc.: 85%
Sumitomo Corporation: 3%

200(Thousand tonnes)

279
200

0

0

2009

2010

2011

2009

(FY)

2010

2011
(FY)

The Cerro Verde Mine is a copper mine located in Peru and owned

The Morenci Mine is a copper mine located in Arizona, in the United

by Freeport-McMoRan Copper & Gold Inc. (Head Office: Arizona,States and is owned by Freeport-McMoRan Copper & Gold Inc. SMM

United States). SMM acquired an equity interest in March 2005

first joined this project through the formation of a joint-businesswith production from sulfide ore deposits commencing in 2006.

structure with Phelps Dodge Corporation (subsequently acquired byCurrently, a plan for increasing the copper production from

Freeport-McMoRan Copper & Gold Inc.) in 1986.

300,000 tonnes per year to 500,000 tonnes per year (data presented

Currently, plans are in place to increase the copper production fromon a refined copper equivalent basis) is under discussion. Expansion

280,000 tonnes per year to 380,000 tonnes per year (data presented

work broke ground in 2013 with completion scheduled in 2016.

on a refined copper equivalent basis). Expansion work commenced
in 2012 and is scheduled for completion in 2014.

Candelaria Mine
Location

Atacama, Chile

Start of
Production

1995

Products

Copper concentrates

EquityInterests

SMM: 16%
Freeport-McMoRan Copper & Gold Inc.: 80%
Sumitomo Corporation: 4%

Ojos del Salado Copper Mine
Production Volume(Thousand tonnes)
200

148

Location

Coquimbo, Chile

Production Volume

EquityParticipation

2005

40

Products

Copper concentrates

EquityInterests

SMM: 16%
Freeport-McMoRan Copper & Gold Inc.: 80%
Sumitomo Corporation: 4%

100

0(Thousand tonnes)

26
20

0

2009

2010

2011

2009

2010

2011

(FY)

(FY)

The Candelaria Mine is operated by Freeport-McMoRan Copper &The Ojos del Salado Copper mine is an underground mine locatedGold Inc. using open pit and underground mining techniques. SMM

approximately four kilometers northeast of the Candelaria Mine.

acquired an interest in 1992.

Northparkes Mine
Location

New South Wales, Australia

Start of
Production

1994

Products

Copper concentrates

EquityInterests

SMM: 13.3%
Rio Tinto: 80%
Sumitomo Corporation: 6.7%

Batu Hijau Mine
Production Volume(Thousand tonnes)
80

50

Location

Sumbawa, Indonesia

Production Volume

Start of
Production

1999

300

Products

Copper concentrates

EquityInterests

SMM: 3.5%
Newmont Mining Corporation: 31.5%
Sumitomo Corporation: 18.2%
Others: 46.8%

40

0

2009

2010

2011

(Thousand tonnes)

128

150

0

2009

2010

2011

(FY)

(FY)

Plans to expand annual production from the current level of

The Batu Hijau Mine is a large-scale open pit and undergroundapproximately 40,000 tonnes to 150,000 tonnes are underway atmining endeavor located approximately 1,500 kilometers east of

the Northparkes Mine.

Jakarta in the Sumbawa West Nusa Tenggara Province of Indonesia.
Plans are in place to produce gold as a copper by-product.

22 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Sierra Gorda Project

Location

Region 2 of the Republic of Chile

to be supplied to Toyo Smelter & Refinery, a company

Start of Production

2014 (Planned)

that engages in copper smelting and refining activi-

Minable Ore

Approximately 1.3 billion tonnes(sulfide ore only)

ties. This will further facilitate the stable procurement

Mining and Milling
Methods

Open pit mining and conventional
flotation methods

Metal Volume
Content

Copper: 5 million tonnes; molybdenum:
300,000 tonnes; gold: 80 tonnes

Average Annual
Production

Copper: 220,000 tonnes; molybdenum:
11,000 tonnes; gold: 2 tonnes

Mine Life

20 yearsconcentrates imported into Japan, this project andEquity Interests

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

SMM’s participation will play an important andof raw materials for the smelting and refining
business. On completion of the project, Japanese
partners will maintain an annual copper volume
off-take right of 110,000 tonnes. Equivalent toapproximately 9% of the total amount of copper

meaningful role in meeting Japan’s copper resource
requirements.

Ichiro Abe
General Manager
Sierra Gorda Project of Div.

SMM owns a 31.5% interest in

The Sierra Gorda Project is a copper mine develop-

KGHM Polska Miedz S.A. acquired Quadra FNX

ment project in the Republic of Chile owned by

Mining Ltd. in 2012 changing the company’s name

Quadra FNX Mining Ltd. (Head Office: Vancouver,

to KGHM International Ltd. SMM will continue torole. Although there is also a

Canada). SMM signed an investment agreement

foster close-knit ties with KGHM Polska Miedz S.A.

technical issue of selecting thewith Quadra FNX Mining Ltd. and decided to partici-

and KGHM International Ltd. and positively promotebeneficiation process best suitedpate in the project in May 2011. In September 2011,

the project.

for the nature of this mineral

the project and this allows theCompany to play a proactive

the joint-venture company Sierra Gorda S.C.M. wasore, we will positively promote

launched. SMM has dispatched engineers to thethe project in tandem with our

project with progress being made on surface

partner KGHM International

pre-stripping work and mine facility construction.

Ltd., fostering close-knit ties

SMM has an off-take right in copper concentrates

between two companies.

of 50%. Plans are in place for copper concentrates

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 23

Mineral Resources Segment

Gold Mines
Pogo Gold Mine
SMM has continued to play a leading role in the
exploration and development of the Pogo Gold
Mine. Exploration activities were launched in 1991
with ore deposits discovered in the Liese Zone in
1995. Thereafter, steps were taken to confirm thevolume of ore reserves, secure all necessary licenses
including environmental permits and approvals,
and commence construction. Taking a total of 11
years since discovery, the first gold was produced in
February 2006. More recently, SMM acquired from
Teck Resources Ltd., a company that was involvedin the project’s development, its interest in the PogoGold Mine in July 2009. In the ensuing period, theCompany has continued to manage the mine in its
capacity as operator.
Location

Alaska, United States

Start of Production

2006

Mining and Milling
Methods

Underground mining, gravity concentration andconventional flotation methods

Amount of Gold
Reserves

155 tonnes

Average Annual
Production

Approximately 11 tonnes

Products

Dore (Gold 94%, Silver 6%)

Equity Interests

SMM: 85%
Sumitomo Corporation: 15%

Production Volume(Tonnes)
20

10.1

10

0

2009

2010

2011
(FY)

Hishikari MineThe Hishikari Mine is currently the only commercial
scale gold mine in Japan. Surveys by the Metal Mining
Agency of Japan (currently Japan Oil, Gas and Metals
National Corporation (JOGMEC)) first confirmed amineral vein in 1981. Ore development activities werethen launched in 1985. Where most of the majorgold mines throughout the world produce an averageof around five grams of gold for each tonne of ore
mined, the Hishikari Gold Mine produces in excess
of 40 grams. In this regard, it is one of the world’s
leading high-grade gold mines.
In fiscal 2011, the volume of gold sold was 7.5
tonnes, unchanged from the previous fiscal year.
Looking ahead, SMM will continue to engage instable production while undertaking exploration
Location

Kagoshima Prefecture, Japan

Start of Production

1985

Mining and Milling
Methods

Underground mining, automatic and manual
selection methods

Amount of Gold
Reserves

150 tonnes

Average Annual
Production

Approximately 7.5 tonnes

Products

Gold ore

Equity Interests

SMM: 100%

Production Volume

activities in surrounding areas in an effort to secure(Tonnes)ore reserves.

10

7.8
5

0

2009

24 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

2010

2011
(FY)

Exploration Projects
Stone Boy Project
The Stone Boy Exploration Project began in 1991 leading to the discoveryof the Pogo Gold Mine. Between 2008 and 2010, boring surveys wereconducted in the Naosi section of the Monte Christo area. Thanks tothese surveys, the existence was confirmed of promising mineralization
zones for gold, silver and antimony within 27 of the 29 pits. Moving
forward, more extensive surveys will be conducted to obtain a moreaccurate volume of minable reserves. At the same time, mineralization
zones outside of the Naosi section will also be investigated.

Location

Alaska, United States

Target Minerals

Gold, silver, antimony

Equity Interests

SMM: 95%, Sumitomo Corporation: 5%

Background1991: Four companies including SMM commenced joint exploration
1995: Following the acquisition of all rights by SMM and Sumitomo
Corporation, a gold deposit was discovered in the Liese Zone

Solomons Project
The Solomons Project encompasses exploration activities in one miningzone of approximately 200 km2 on Choiseul Island and three mining
zones of approximately 150 km2 on Santa Isabel Island. Between 1950
and the 1960s, a company called Inco Ltd. was energetically undertaking
nickel exploration activities. Expectations were high that there wereconsiderable reserves of nickel resources, including low-grade ore thattechnologies of the day were unable to adequately handle.
Today, and in addition to ongoing exploration activities, steps are being
taken to apply for appropriate mining licenses and approvals. Looking
ahead, SMM will pursue the project with an eye to early development.

Location

The Solomon Island

Target Minerals

Nickel2005: Acquired exploration rights for the Choiseul Island and commenced
exploration

Equity Interests

SMM: 70%, JOGMEC: 30%

2007: Commenced exploration at Santa Isabel Island

Background

Alaska, United States
Independent exploration (gold)
Independent exploration (copper, gold)
Stone Boy Project (United States) Canada

Solomons Project (Solomon Islands)
Solomon Islands
Independent exploration (nickel)

Peru
Independent exploration(copper, gold)

Australia
Independent exploration (copper)

SUMITOMO METAL MINING CO., LTD.

BrazilIndependent exploration(copper, gold)
Chile
Independent exploration(copper, gold)

Annual Report 2012

| 25

Review of Operations

Smelting & Refining Segment
SMM smelts and refines raw materials procured from a variety of sources including overseas mining companies
and the Hishikari Mine into such metals as copper, nickel, and gold, which are then sold. The Company possesses
world-class refining technologies and has forged a solid position within its industry. We were quick, for example, tosuccessfully recover and commercialize nickel from low-grade ore, which had challenged conventional technologies.

Segmental Income

24.2%

Main Products: Copper, Gold, Silver, Nickel,
Ferronickel, Zinc, Chemical productsElectrolytic nickel

Fiscal 2011 Review

successful in increasing production compared with the previous

The volume of copper sales declined compared with the previ-fiscal year on the back of steady operations. In 2009, SMM

ous fiscal year. During the fiscal year under review, steps werecommenced construction at the Taganito Project (Mindanao,

taken to completely re-brick the flash furnace at Toyo Smelter

the Philippines). This is the Company’s second HPAL undertaking.

& Refinery over approximately two months. The volume ofWith steady ongoing progress on plant construction work,

electrolytic copper production in fiscal 2011 was 333,000

commercial production at the Taganito Project is expected totonnes, a year-on-year decrease of 71,000 tonnes.

begin on schedule in 2013.

Demand for nickel was slightly down over the second halfof the fiscal year. For the full fiscal year, however, sales volumes

Capital Expenditure Plans

were essentially unchanged from the previous period. The

In fiscal 2012, capital expenditure is budgeted at ¥47.6 billion,

volume of electrolytic nickel production was 41,000 tonnes,

a year-on-year decrease of ¥11.9 billion. Principal areas ofon par with the previous fiscal year. The volume of ferronickel

investment include the Taganito Project as well as construction

production was 20,000 tonnes, up 2,000 tonnes year on year.

of an electrolytic nickel 65,000 tonne production facility at the

CBNC (the Palawan Island, the Philippines), which processes

Niihama Nickel Refinery and a Nickel Sulfate production facility

low-grade nickel oxide ore using the HPAL method, was

Net Salesat the Harima Smelter.

Segmental Income(¥ billions)

800

Capital Expenditure/Depreciation(¥ billions)

60

688.5

(¥ millions)

70,00059,193

400

25.6

30

35,00013,611
0

0

0
2009

2010

2011

(FY)

2009

2010

2011

(FY)

2009

2010

Capital Expenditure

26 | SUMITOMO METAL MINING CO., LTD. Annual Report 20122011
Depreciation(FY)Refineries in Japan
Toyo Smelter & Refinery
Toyo Smelter & Refinery is a large-scale seaside copper smelter that boasts the world’s
leading technologies for smelting, production control and environmental preservation.
SMM has established stable raw material procurement channels through a variety ofmeasures focusing mainly on the mines in which it has an interest. In addition, the fluxing
Location

Saijyo City, Ehime Prefecture

Products

Electrolytic copper, precious metals, sulfuric acid

Annual Production
Capacity

Copper: 450,000 tonnes

material essential to copper smelting is procured from the gold ore produced at theCompany’s Hishikari Mine. Moreover, sulfuric acid by-products are also used at CBNC.

Niihama Nickel Refinery
Niihama Nickel Refinery is the only plant in Japan to produce electrolytic nickel andelectrolytic cobalt. Nickel raw materials are procured from the P.T. Vale Indonesia operationsin the form of nickel matte (nickel grade of approximately 75%) and the total volume of
mixed sulfide (nickel grade approximately 60%) produced by CBNC. These raw materials
Location

Niihama City, Ehime Prefecture

Raw Materials

Nickel matter (nickel grade approximately 75%),
mixed sulfide (nickel grade approximately 60%)

Products

Electrolytic nickel, electrolytic cobalt, nickel

Annual Production
Capacity

Electrolytic nickel: 41,000 tonnes
Electrolytic cobalt: 2,000 tonnes

are processed using Niihama Nickel Refinery’s Matte Chlorine Leach Electro-winning(MCLE) process. Together with the Taganito Project, which is scheduled to come online in2013, steps are being taken to boost production capacity from the current level of
41,000 tonnes to 65,000 tonnes.

Hyuga Smelting Co., Ltd.
Hyuga Smelting Co., Ltd. engages in the production of ferronickel. In addition to procuring
raw materials from New Caledonia, the materials necessary for production are sourced
from such areas as Indonesia and the Philippines.
Ferronickel is an alloy made from iron and nickel with a grade of around 20% and is
Location

Hyuga City, Miyazaki Prefecture

Raw Materials

Nickel ore (nickel grade of aroundapproximately 2%)

Products

Ferronickel

Annual Production
Capacity

Ferronickel: 22,000 tonnes

used as a raw material for nickel-based stainless steel (nickel grade of approximately 10%).

Harima Smelter
The Harima Smelter introduced the Imperial Smelting Process (ISP) to Japan and commenced
production as a zinc and lead smelter in 1966. Since 2012, the Harima Smelter has
focused mainly on the use of recycled raw materials including crude zinc oxide produced
at Shisaka Smelting Co., Ltd. The distilled zinc that is subsequently produced is shipped
Location

Harima-cho, Kako-gun, Hyogo Prefecture

Raw Materials

Crude zinc oxide (recycled materials)

Products

Distilled zinc

Annual Production
Capacity

50,000 tonnes (Fiscal 2012 plan)

mainly for use in hot-dip galvanized products.
Construction of a new Nickel Sulfate production facilities is currently underway.
Completion is scheduled in 2014.

Shisaka Smelting Co., Ltd.
Scrap iron, used in the manufacture of iron, contains large quantities of zinc. This zinc isfound in the steelmaking dust that is generated during the iron manufacturing process.
Shisaka Smelting collects this steelmaking dust and recovers the crude zinc oxide throughrecycling.
Location

Imabari City, Ehime Prefecture

Raw Materials

Steelmaking dust

Products

Crude zinc oxide, iron pellets

Annual Production
Capacity

Crude zinc oxide processing capacity:
120,000 tonnes

The crude zinc oxide produced is transported to the Harima Smelter and used as a raw
material in the production of distilled zinc.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 27

Overseas Refineries
Coral Bay Nickel Corporation
CBNC engages in the manufacture of nickel/cobalt
mixed sulfide from low-grade nickel oxide ore
mined at Palawan Island in the Philippines. At thetime the project was under consideration, the technologies required to process low-grade nickel oxideore were not yet available. As a result, low-grade
oxide ore was allowed to accumulate in the areas
surrounding the Rio Tuba Nickel Mine. With theconstruction of an HPAL plant in close proximity to
the Rio Tuba Nickel Mine, SMM forged a path for theapplication of unused ore. This initiative has played
an important role in enhancing the effective use ofresources while facilitating low-cost operations.
The total amount of mixed sulfide produced isprocessed as a raw material for electrolytic nickeland electrolytic cobalt at the Company’s Niihama
Location

Palawan Island, the Philippine

Start of Production

2005

Raw Materials

Low-grade nickel oxide ore(nickel grade approximately 1%)

Products

Nickel/cobalt mixed sulfide

Annual Production
Capacity

Nickel: 24,000 tonnes
Cobalt: 1,500 tonnes

Equity Interests

SMM: 54%
Mitsui & Co.: 18%
Sojitz Corporation: 18%
Rio Tuba Nickel Mining Corporation: 10%

Production Volume

Nickel Refinery. In addition, the sulfuric acid used in(Thousand tonnes)

the production process is mainly procured from the

30

22.5

Toyo Smelter & Refinery.

15

0

2009

2010

2011
(FY)

P.T. Vale Indonesia Tbk

Figesbal

Location

Indonesia

Location

New Caledonia

Equity Participation

1988

Equity Participation

1990

Products

Nickel matte

Products

Nickel ore

Equity Interests

SMM: 20.1%
Vale S.A.: 60.8%

Equity Interests

SMM: 25.5%
Ballande: 61.0%

P.T. Vale Indonesia is engaged in the processing of nickel matte from

SMM purchases nickel ore for Hyuga Smelting Co., Ltd fromnickel ore mined at Sulawesi Island in Indonesia.

Figesbal’s large-scale nickel mine in New Caledonia.

Vale New Caledonia S.A.S.

Jinlong Copper Co., Ltd.

Location

New Caledonia

Location

Anhui, China

Equity Participation

2005

Equity Participation

1995

Products

Nickel oxide sinter

Products

Copper, sulfuric acid, precious metals

Equity Interests

SMM: 11%
Vale S.A.: 69%
Mitsui & Co.: 10%

Annual Production
Capacity

Copper: 400,000 tonnes

Equity Interests

SMM: 27.07%
Tongling Non-Ferrous Metals (China): 61.4%
Sumitomo Corporation: 7.86%

Known as the Goro Project, SMM took up an equity interest in 2005.

SMM took up an equity interest in 1995. The technologies of the

The nickel oxide sinter produced by this project is used as a stainless

Company’s Toyo Smelter & Refinery were introduced to the copper

raw material.

smelter. This initiative has significantly increased production volumes
compared with levels recorded when operations were first commenced.

28 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Taganito Project

Location

Mindanao Island, the Philippines

Start of Production2013 (Planned)

Raw Materials

Low-grade nickel oxide ore(nickel grade approximately 1%)

Products

Nickel/cobalt mixed sulfide

Annual Production
Capacity

Nickel: 30,000 tonnes
Cobalt: 2,600 tonnes

Equity Interests

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

SMM is promoting the Taganito Project at Mindanao

Together with the commencement of operations

Naoyuki Tsuchida

Island in the Philippines. Scheduled for completionin 2013, SMM intends to boost production its

General Manager of Taganito Project Div.

in 2013, plans are in place for the annual production

Niihama Nickel Refinery in Japan, which is slated toManaging Executive Officerof 30,000 tonnes of mixed sulfide on a refinedprocess the mixed sulfide raw material produced by

The creation of the world’s mostnickel equivalent basis.

the Taganito Project. Through these means,advanced HPAL plant will incor-

The Company has introduced HPAL technology

a structure that is capable of producing 100,000

porate further technologicalto the Taganito Project. This technology was initiallytonnes of nickel each year will be established within

innovation reflecting CBNC’s

launched on a successful commercial basis by CBNC.

the Group.

In working toward project commencement, oreachievements. With the smoothIn bringing the Project to completion, SMM willmined at the Taganito Mine was processed at the

secure a leading position within the global nickel

Coral Bay Plant on a trial basis. These trials confirmed

smelting and refining industry.

that the Company’s HPAL technology could belaunch of operations, SMM isaiming to offer the new direction of HPAL technologies tothe world. As we proceed withthe project, moreover, we wantsuccessfully used to process the ore. In addition,

the local people of Taganito toin constructing a new plant specific to the Project,

see that SMM is a company thatsteps were taken to incorporate processing

develops in tandem with theirimprovements.

community.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 29

Review of Operations

Materials Segment
A wide range of metals are used in the manufacture of electronic equipment. Copper, for example, is a criticalraw material in electric circuitry, while nickel is used in battery materials and capacitors. SMM has been engaged
in the materials business since 1960. Making the most of its accumulated technologies, the Company continues
to process and supply metals as advanced products.

Main Products: Semiconductor materials, Thick-film
materials, Target materials,
Battery materials, Single-crystal
products, Magnetic materials

Major Bases
Voting Shares (%)

Ome District Div.

—

Isoura Plant—

Fiscal 2011 Review

Sagami Plant—

Orders for leadframes remained weak due mainly to soft

Group Companies

demand for use in personal computers on the back of a down-

Sumiko Kunitomi Denshi Co., Ltd.

100

turn in the economy. Chip-on-film (COF) substrates (electronic

SMM Precision Co., Ltd.

100

packaging materials used to make LCD panel integrated circuits)

Shinko Co., Ltd.

94

as well as the tape materials including copper-clad polyimide

Sumiko Tec Co., Ltd.

100

film experienced a prolonged slump in sales owing largely to

Nittosha Co., Ltd.

100

delays in a recovery in demand. Taking into consideration the

Niihama Electronics Co., Ltd.

100

sudden market shift from gold to copper wires, and little pros-

Ohkuchi Electronics Co., Ltd.

100

pect for future business growth, the decision was made to

Korea

withdraw from the bonding wire business during fiscal 2012.

SMM KOREA Co., Ltd.

In thick-film pastes, which include nickel pastes for multi-layer

Chinaceramic capacitor (MLCC) applications, sales conditions

Shanghai Sumiko Electronic Paste Co., Ltd.

69

deteriorated.

Sumiko Electronics Suzhou Co., Ltd.

100

On a brighter note, sales of battery materials increased com-

Sumiko Leadframe Chengdu Co., Ltd.

70

pared with the previous fiscal year. This was primarily attributable

Sumiko Precision Chengdu Co., Ltd.

70

to the recovery in the sales environment for hybrid vehicles.

Dongguan Sumiko Electronic Paste Co., Ltd.

85

Battery materials (Isoura Plant)

100

TaiwanCapital Expenditure Plans

Sumiko Electronics Taiwan Co., Ltd.

Major capital expenditure planned for fiscal 2012 included

Malaysia

investments to boost production of nickel hydroxide, a battery

M-SMM Electronics SDN. BHD.

material precursor. This expenditure is projected to total ¥9.8

Singapore

billion, a year-on-year increase of ¥3.2 billion.

Sumitomo Metal Mining Asia Pacific Pte. Ltd.

Net Sales

Segmental Income(¥ billions)

240

100

100

Capital Expenditure/Depreciation(¥ billions)1070(¥ millions)

12,000

182
7,663
6,563

5
120

6,000

(0.2)

0
0

-2
2009

2010

2011

(FY)

0
2009

2010

2011

(FY)

2009

2010

Capital Expenditure

30 | SUMITOMO METAL MINING CO., LTD. Annual Report 20122011
Depreciation(FY)

Review of Operations

Other Businesses
Nickel Hydroxide and Lithium Nickellite

Main Products: Chemical, Oil refining,
Automotive-use catalysts
Operational Overview of Major SMM Group
Companies (Equity-Method Affiliates)(Two Catalyst Manufacturing Equity-Method Affiliates)
N.E. Chemcat Corporation is one of Japan’s largest manufacturers of precious metal catalysts. This company is a joint-venture
between SMM and BASF SE of Germany—one of the world’s

Nickel hydroxide is used as an anode material in nickel

leading chemical companies. Principal activities of this affiliate

metal hydride batteries. SMM products boast a substantial

encompass the development and manufacture of catalysts

share of the hybrid vehicle market. At the same time,used to purify hazardous substances contained in automobile

nickel is recovered from used batteries and recycled for

exhaust gases and chemical catalysts used for petrochemicals,reuse as battery materials.

pharmaceuticals, aromatic chemicals and for other purposes.

Lithium nickel oxide (lithium nickellite), which enables

Going forward, this company will continue to utilize its wealththe manufacture of batteries that boast outstandingof expertise in catalyst technology to push ahead with the

charging efficiency, is applied as a lithium secondary

development of new catalysts, such as high polymer chemistry/

battery cathode material for use in the compact batteries

catalytic agents.

that power such devices as personal computers.

Nippon Ketjen Co., Ltd., develops and manufactures

Looking ahead, in-vehicle batteries are expected to shifthydrodesulfurization catalyst used for petroleum oil refining.

from nickel metal hydride batteries to lithium-ion batteriesThis company is a joint-venture between SMM and Albemarleover the medium to long term. Against this backdrop, SMM

Corporation of the United States, a leading company that is

is placing considerable weight on the development ofconstructive in the high polymer chemistry, catalyst, and relat-

next-generation ternary and other nickel battery materials.

ed fields and is engaged in the development and manufac-

Sapphire Substrates

ture of oil refining catalysts and speciality chemical processing
products. Nippon Ketjen provides petroleum hydroprocessing
catalysts; offers services for off-site catalyst regeneration; provides other technical services; and conducts related process
licensing. Nippon Ketjen aims to help protect the global environment by developing businesses that deliver more technically advanced and economic solutions in oil refining industries.
Results at each of the two catalyst manufacturers remain
steady. Looking ahead, SMM will continue to work together
with BASF SE and Albemarle Corporation to develop growth

Sapphire substrates are employed as substrates thatstrategies for each company.

promote white and blue gallium nitride growth.
Distinguished by their high energy-efficiency, white LEDs

Changes in the Classification of Reported Segments

are expected to experience strong market growth for

Effective July 1, 2012, SMM reorganized its business divisions.

use in general lighting. Under these circumstances, SMM

The Company launched a new Materials Division through theintroduced facilities for the volume production of 6-inch

integration of the Energy, Catalysts & Construction Materials

diameter crystals at its affiliated company Ohkuchi

Division that formed the major component of the Other

Electronics Co., Ltd. in 2012.

Businesses Segment until fiscal 2012 with the Semiconductor

Moving forward, the Company will work to increase

Materials Division and the Advanced Materials Division.

its share within a market that is projected to expand by

As a result, the primary component of this new segment

leveraging the strengths of its comprehensive manufac-

which is comprised of the aforementioned divisions including

turing capabilities from incubation through to processing

the catalyst business shall be reported as the Materials seg-and its large-diameter crystals.

ment from the first quarter of fiscal 2012.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 31

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

Basic Policy Stance, Structure and Systems• The SMM Group views corporate governance as a disciplinary• SMM is committed to striving to achieve the goals containedframework both for maximizing the enterprise value of the SMM

in the business philosophy, to conducting efficient and soundGroup and for ensuring sound management practices. As such,business activities, to making a valuable social contribution,

it is an important management issue.

and to fulfilling responsibilities to stakeholders.

• SMM has instituted the SMM Group Corporate Philosophy based• SMM has a Board of Directors and has also adopted executiveon the Sumitomo Business Spirit, and has also formulated theofficer and corporate auditor systems to ensure that the decision-

SMM Group Code of Conduct as a set of behavioral standards

making, oversight and execution of business management eachto guide executives and employees.

function effectively within governance systems.

Corporate Governance Framework
General Meeting of Shareholders

Decision-Making and Supervision

Auditing

Board of Directors

Board of Corporate Auditors

Independent Public Accountant

Business Execution

President
Business
Operations

SocialResponsibility

Operating Department

Auditing Department(Headquarters)

CSR Committee

Internal Control Committee

Enterprise Value
Enhancement Committee

Efficient Resource Utilization
Compliance WG

Six CSR Subcommittees

Management Committee

Risk Management WG

Executive Officers

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

Management Decision-Making and Business Execution

The Board of Directors meets on a regular basis once a month,

Structures and Systems

with extraordinary meetings held as and when required, to ensure

Since introducing an executive officer system in 2001, SMM has

that decisions are made expeditiously. Any resolutions taken by, anddelegated substantial authority to executive officers. This in turn has

any matters reported to the Board of Directors are in turn reported

clarified the authority and responsibilities of directors and executive

at meetings of executive officers to ensure that information is

officers, allowing the Board of Directors to channel its energies

properly shared among officers.

toward fulfilling timely decision-making and oversight functions.
Management Committee
Directors and the Board of Directors

SMM has established the Management Committee as a forum to

SMM’s Articles of Incorporation provide for a Board of Directors

engage in preliminary deliberations with respect to matters thatof up to 10 members. This number is considered appropriate torequire a decision by management. The Management Committee

ensure agility together with lively discussion during Board ofaccordingly deliberates on matters requiring careful consideration

Directors’ meetings.

from a wider point of view prior to their submission for resolution

32 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

by the Board of Directors or sanction by the president. In this regard,of its audit plans to corporate auditors while passing on all rele-

the Management Committee plays an important role in ensuring

vant information. Conversely, corporate auditors provide details

rational decision-making, increasing the efficiency of the decision-of audit plans determined during meetings of the Board of

making process and promoting appropriate internal control.

Corporate Auditors to the Auditing Department, accompany
officers of the Auditing Department when conducting internal

Executive Officer System

audits as required, and attend meetings when reports on the

Executive officers are appointed by the Board of Directors. As

results of internal audits are delivered to executive officers andpreviously mentioned, substantial authority has been delegatedthe heads of operational divisions.

to executive officers whose authority and responsibilities have

KPMG AZSA & Co. is currently the Company’s independent

been clearly defined to reinforce their executive function. Executive

public accountant and conducts accounting as well as internal

officers are entrusted with important positions (such as heading ancontrol audits in its capacity as an independent public accounting

operational division, a department or an office at the Company’s

firm. Corporate auditors provide details of audit plans to theheadquarters) and expected to perform their duties with theindependent public accountant. Corporate auditors in turnspecific authority assigned to each position. In addition, executive

receive explanations regarding audit plans and reports on audit

officers report on the status of business execution once a monthresults from the independent public accountant. In this manner,at executive officer meetings.

close collaboration is maintained between the independent public
accountant and corporate auditors.

Auditing System
Corporate Auditors and the Board of Corporate Auditors

Remuneration System for Directors and Corporate Auditors

SMM is a company with a Board of Corporate Auditors. Corporate

Limits on the total amounts of remuneration paid to directors andauditors remain independent of the Board of Directors and audit

corporate auditors are ratified at shareholders meetings. In addition,

the status of management decision-making, business execution

the total amount of bonuses to be paid to directors (with theand accounting. SMM’s Articles of Incorporation provide for up to

exception of outside directors), if applicable, is also ratified atfive corporate auditors. The Board of Corporate Auditors meets onshareholders meetings.

a regular basis once a month, with extraordinary meetings held

While the amount of remuneration paid to each director isas and when required in conjunction with meetings of the Board

determined by the representative director under the authority ofof Directors.

the Board of Directors, the basic remuneration (excluding bonus

Corporate auditors attend meetings of the Board of Directors,

payments) takes into consideration predetermined criteria based

Management Committee and all other meetings considered ofon the Company’s performance as well as other factors including

importance. Audits are conducted on the basis of reports received

an evaluation of the performance of each division and the statusfrom directors, consideration of financial reports and materials,of business execution together with the performance of eachand onsite visits to business offices, plants as well as subsidiaries.

individual based on specific office assessment criteria. Bonuses

Corporate auditors belonging to the Company present their(with the exception of outside directors) are determined based on

opinions at important meetings including meetings of the Board

the same remuneration criteria together with an assessment ofof Directors based on the audits they have conducted as full-timeeach individual’s performance. Taking into consideration thecorporate auditors independently from the Company while outside

independent status of outside director and the focus placed on

corporate auditors present their opinions based on their respective

outside directors’ oversight function, an assessment of individual

experiences and expertise in specialist fields. Full-time corporate

performance is not reflected in the payment of remuneration toauditors shall report the details of onsite audits that have beenoutside director. Accordingly, the payment of remuneration to

conducted solely by full-time corporate auditors as well as meetingsoutside director is limited to basic remuneration and does notthat were not attended by outside corporate auditors at meetings

include any bonus payment.

of the Board of Corporate Auditors.

While the payment of remuneration to individual corporate
auditors is determined through deliberations between corporate

Collaboration between the Internal Auditing Department,

auditors, taking into consideration the independent status of

Independent Public Accountant and Corporate Auditors

corporate auditors in the execution of their duties and the focus

The Auditing Department undertakes internal audits on a regularplaced on the audit function, an assessment of individual perfor-

basis on the status of business execution across the SMM Group.

mance is not reflected in the payment of remuneration to corporate

At the same time, the Auditing Department provides an explanation

auditors. Accordingly, the payment of remuneration to corporate

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 33

auditors is limited to basic remuneration and does not include

Group. In specific terms, SMM posts information on its homepage

any bonus payment.

and issues shareholder and annual reports. Furthermore, theSMM does not provide for such long-term incentive remuner-president provides explanations of the Group’s business strategies

ation as stock options. Moreover, the Company abolished its

and other important details to analysts and institutional investors

system of retirement and severance benefits for directors andseveral times each year.

corporate auditors in 2005.

Complementing these activities, and in order to continuously

The total amounts of remuneration by officer classification

upgrade and expand the Company’s IR activities, management andand type as well as the number of officers to whom remuneration

the IR Department conduct individual meetings with analysts andwas paid (including officers who retired during the period) for the

institutional investors in Japan and overseas as well as plant inspec-

fiscal year under review are presented as follows.

tion tours. Looking ahead, the Company will endeavor to upgrade

Total Amount of
Total
Remuneration by Type
NumberAmount ofof
Basic
Remuneration
Officers(¥ Millions) Remuneration Bonus(¥ Millions)

Officers Classificationand expand its IR activities for the benefit of individual investors.

Takeover Defense Measures
SMM introduced takeover defense measures in 2007. Revisions

Directors (with the exceptionof outside director)

7

339

288

51

Corporate Auditors(with the exception of outside
corporate auditors)

2

53

53

—

Outside Director and Outside
Corporate Auditors

4

36

36

—

to and renewal of these measures were ratified at the Company’s
85th Ordinary General Meeting of Shareholders held in June

Note: In addition to the aforementioned, an employee salary portion totaling ¥28
million is paid to employees who hold the concurrent position of director.

2010. In the ensuing period, the Company has maintained thesemeasures with the effective period of three years to expire at theconclusion of the Company’s 88th Ordinary General Meeting of
Shareholders to be held in June 2013. These takeover defense
measures aim to protect any detrimental impact on the Company’s

Information Disclosure and IR Activities

enterprise value in the event of an inappropriate large-scale

In order to ensure the integrity and transparency of management

purchase by a third-party of its shares. An independent committee

and to garner the trust of stakeholders, SMM recognizes thecomprised of outside directors (independent officers) shall consider

importance of accountability and information disclosure. As athe details of any such proposal and make the appropriate

result, the Company aggressively engages in investor relations (IR)notification with respect to the application or otherwise ofactivities as a part of efforts to provide all stakeholders, particularly

takeover defense measures. In this manner, every effort is being

shareholders and investors, with a deeper understanding of themade to preserve and improve the profits of shareholders.

Outside Director and Outside Corporate Auditors
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 toprovide advice to SMM on business matters, particularly from a compliance perspective.

Independence

He is designated as an independent director (an individual with no conflict of interest with general shareholders) based on the regulations of theTokyo Stock Exchange and the Osaka Securities Exchange.

Attendance at Meetings

In the year ended March 31, 2012, the Board of Directors convened 22 times (12 regular meetings and 10 extraordinary sessions). He attended all
22 of these meetings.

Outside Corporate Auditor

Hikoyuki Miwa

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 wasappointed an outside corporate auditor.

Independence

He is designated as an independent auditor (an individual with no conflict of interest with general shareholders) based on the regulations of theTokyo Stock Exchange and the Osaka Securities Exchange.

Attendance at Meetings

He was appointed as a corporate auditor in June 2011. In the period following his appointment, and for the year ended March 31, 2012, the Boardof Directors convened 18 times (9 regular meetings and 9 extraordinary sessions). He attended all 18 of these meetings. In the period following his
appointment, and for the year ended March 31, 2012, the Board of Corporate Auditors convened 11 times. He attended all 11 of these meetings.

Outside Corporate Auditor

Shigeru Nozaki

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 wealth of financial institution experience he was appointed an outside corporate auditor to provide his knowledge on business matters,
particularly from an international perspective.

Independence

He is designated as an independent auditor (an individual with no conflict of interest with general shareholders) based on the regulations of theTokyo Stock Exchange and the Osaka Securities Exchange.

Attendance at Meetings

He was newly appointed at the Ordinary General Meeting of Shareholders held in June 2012.

34 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Corporate Social Responsibility
The Sumitomo Group has been developing its business for around 4 centuries through continuous
adherence to the Sumitomo Business Spirit. Acknowledging the importance of the values and ethics
our forerunners built into the Sumitomo Business Spirit, we will make every effort to strengthen
SMM Group business and consolidate society’s trust in us.

CSR Objectives
Sustainable Co-Existence with Society and the Global Environment
SMM Philosophy
The SMM Group upholds the Sumitomo Business Spirit in its Corporate Philosophy 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-existencewith society and the 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
in which we operate around the world.
3 To continue sound business activities, SMM shall respect human rights and shall try to be a company
in which 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 basedon the impact 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“sustainable co-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 thecompany on social contribution
activities rooted in the area

Effective useof resources
Environmental
preservation

Contribution
to society
and local
communities

CSR Vision
for 2020
A company that accords
safety the highest priorityand provides comfortableworking environments

Occupational
healthand safety

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

Reduced CO2 emissions(energy savings)
and conservationof biodiversity

Respect forpeople andhuman rights

A company that respects human rights and diversity of employees,
develops employees with high awareness of human rights, and gives equal
opportunities depending on motivations to work and abilities of employees
A company that respects human rights of people who are affectedby business activities of the SMM Group

Stakeholder
communication

A company that does not get involved in complicity with an entity thatcauses violations of human rights at areas with undeveloped social
infrastructure and at troubled areas

A company that is open to communication
with stakeholder groups worldwide

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 35

Directors and Corporate Auditors
As of June 25, 2012

Hajime Sato

Naoyuki Tsuchida

Takeshi Kubota

Yukio Kawaguchi

Mikinobu Ogata

Tsutomu Ushijima

Director

Director

Director

Director

Director

Outside Director

Nobumasa Kemori

Yoshiaki Nakazato

President,
Representative Director

Representative Director

Standing Senior Corporate Auditor

Outside Corporate Auditor

Naoki Tajiri

Shigeru Nozaki

Standing Corporate Auditor

Outside Corporate Auditor

Kazuo Nakashige

Hikoyuki Miwa

36 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Financial Section

38 Eleven-Year Financial Summary
40 Management’s Discussion & Analysis of Financial Position and Operating Results
44 Consolidated Balance Sheets
46 Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
47 Consolidated Statements of Changes in Net Assets
49 Consolidated Statements of Cash Flows
50 Notes to Consolidated Financial Statements
79 Independent Auditors’ Report

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 37

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

2012

Years ended March 31

2011

2010

2009

Results for the year:
Net sales

847,897864,077

725,827

793,797

Gross profit

132,342

138,810

105,956

56,887

Operating income

88,49896,03866,265

10,534(615)

27,356

16,511

12,408

Income (loss) before income taxes and minority interest

87,883

123,394

82,776

22,942

Net income (loss)

65,21983,962

53,952

21,974

Other income (expenses)

Equity in earnings of affiliated companies

23,217

34,832

26,09031,536

Capital expenditures

73,143

53,105

26,41447,723

Depreciation

31,11334,62534,74634,268

663

257

(654)

(271)

Net cash flows from operating activities

144,901

102,458

44,153

128,000

Net cash flows from investing activities(135,834)(75,735)(75,443)(28,386)

Net cash flows from financing activities

50,314

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

Free cash flows

9,067

26,723(31,290)

99,614

Total assets

1,145,994

1,052,353

981,458

880,001

Net assets

725,565

684,103629,684

547,251

—

—

—

—

Net interest expenses

Financial position at Year-end:

Shareholders' equity *Long-term debt due after one year

157,119

135,128

132,311

141,716

Interest-bearing debt

265,951

210,969

200,939

218,534

Working capital

312,542

267,072

229,259

206,123116.05149.38

96.26

38.87

Amounts per share (Yen):
Net income (loss)—Basic—Diluted

106.74136.98

88.75

36.18

1,173.13

1,121.19

1,043.50

913.92

28.0

32.0

20.0

13.0

ROA (%)

5.93

8.26

5.80

2.23

ROE (%) *

10.12

13.80

9.89

4.02

Equity ratio (%) *

57.5

59.9

59.8

57.3

Interest-bearing debt to total asset ratio (%)

23.2

20.0

20.5

24.8

Debt-to-equity ratio (times) *

0.40

0.33

0.34

0.43

Current ratio (times)

2.67

2.30

2.19

2.17

Shareholders' equity
Cash dividends

Key ratios:* Shareholders’ equity is defined as:
Shareholders’ equity = Total shareholders’ equity + Accumulated other comprehensive income

38 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

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

2008

2007

2006

2005

2004

2003

2002

1,132,372

966,764

625,579

484,585

402,131355,242

330,194

198,147

203,180

120,137

82,87853,714

51,764

38,152

155,394

162,632

82,75647,893

22,778

16,593

1,147

61,11042,985

10,218

6,024

8,416

(24,098)(13,735)

216,504

205,617

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

137,808

126,054

62,80037,017

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

73,956

46,70821,915

13,513

7,112

3,400

1,535

65,14551,56750,56836,48846,54018,92725,37930,50525,693

22,951

20,57817,824

18,283

17,822(2,209)(2,606)(1,281)(893)(1,098)(1,459)(1,775)

157,383

95,98570,77240,15032,324

26,10533,370(126,413)(77,429)(102,384)(31,725)(17,448)(21,246)(16,246)

55,727(10,073)

28,723

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

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

14,876

4,859

17,124

1,091,716

929,208

772,562

573,925

517,930

470,774

518,756

640,345528,921394,899

—

—

—

—

—

—

—

283,897

253,071

223,341

236,313

169,394

93,800114,405

109,777

86,43776,47073,972

258,054

189,910

190,891

160,533

148,351

154,799

167,077

266,250

103,791

72,22886,382

52,79535,94523,371238.13220.49109.96

64.77

34.76

(2.05)(11.56)231.50213.67108.87————

1,017.96

859.82654.15497.57443.29391.14413.28

30.0

27.0

14.0

8.0

6.0

5.0

4.0

13.64

14.81

9.33

6.78

4.02

—

—

25.39

28.99

19.10

13.79

8.35

—

—

54.0

53.4

48.4

49.5

48.9

47.4

45.6

23.6

20.4

24.7

28.0

28.6

32.9

32.2

0.44

0.38

0.51

0.57

0.59

0.69

0.71

2.04

1.39

1.33

1.61

1.38

1.26

1.14

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 39

Management’s Discussion & Analysis of Financial Position
and Operating Results
Medium- to Long-Term Business Strategy and Financial Policies
The short-term performance of SMM’s three core businesses—mineral resources, smelting & refining, and materials—is significantly affectedby fluctuations in non-ferrous metals prices, the status of demand for electronic and other related materials, and movements in foreign currency exchange rates. At the same time, the development of non-ferrous metal resources is an area in which it takes a long time before
investments start to generate returns. Taking into consideration these unique business attributes, SMM recognizes the vital importance ofadopting business strategies that focus on the medium to long term, engaging in investment activities at the most opportune time, and securing sustainable growth.
In terms of its finances, SMM consistently maintains a sound financial position to ensure that the Company is well positioned to undertake
medium- to long-term investments and address any and all risks. In specific terms, SMM has maintained a consolidated equity ratio in excess
of 50% since fiscal 2006. Under the Company’s medium-term business plan, which covers the three-year period from fiscal 2010 to fiscal
2012, SMM plans to selectively channel its management resources into priority fields, acquire and expand its interests in overseas mines, andaggressively invest in the construction of cutting-edge smelting and refinery bases. Moving forward, SMM will continue to emphasize a strong
financial position, based on the financial policies of maintaining a consolidated equity ratio of at least 50% and a low level of gearing as measured by the debt-to-equity (D/E) ratio.

Scope of Consolidation

Smelting & Refining segment owing mainly to the suspension of activities

For fiscal 2011, the year ended March 31, 2012, the SMM Groupto accommodate a complete overhaul of the Toyo Smelter & Refinery’scomprised the parent company (Sumitomo Metal Mining Co., Ltd.),

furnace and the overall sales decline in the Materials segment.

61 subsidiaries (up one subsidiary compared with the previous fiscal
year), and 16 equity-method affiliates (up two equity-method affili-

Operating Income

ates year on year) both in Japan and overseas.

Consolidated operating income decreased ¥7,540 million, or 7.9%,
year on year to ¥88,498 million mainly due to the decline in nickel

Operating Results

prices and lower sales in the Materials segment.

Overview of Operations and Consolidated Operating Results
In the non-ferrous metals industry, non-ferrous metal prices overall

Other Income / Income before Income Taxes and Minority Interests

remained at high levels owing to the strong influx of funds into theTurning to other income (expenses), net income expenses experi-

non-ferrous metal market throughout the fiscal year under review. In

enced a positive turnaround. In contrast, equity in earnings of affiliat-

exchange markets, the yen continued to appreciate in comparisoned companies declined. In the fiscal year under review, SMM alsowith many currencies due to the uncertainty surrounding economic

incurred extraordinary losses following the impairment of fixed assets

prospects centering on Europe. This significant appreciation in thein both the Smelting & Refining segment and Materials segment, andvalue of the yen leveled off by the end of the fiscal year. In the elec-

a write-down of investment securities reflecting deterioration in thetronics related industry, a major field of activity for the materials seg-prices of shares held. As a result, income before income taxes andment, price competition continuously intensified due mainly to theminority interests contracted ¥35,511 million, or 28.8%, comparedcommoditization of products while demand remained stagnant.

with the previous fiscal year to ¥87,883 million.

Under these circumstances, the SMM Group continued to carry out
the 09 3-Yr Business Plan. Guided by this Plan, the Group is

Net Income“Promoting a New Growth Strategy based on its Long-Term Vision”

After accounting for income taxes and minority interests, net income

as the underlying platform for bolstering the competitiveness of its

declined ¥18,743 million, or 22.3%, compared with the previous fis-three core Mineral Resources, Smelting & Refining, and Materials

cal year to ¥65,219 million in fiscal 2011. As a result, basic net

businesses while at the same time channeling business resources into

income per share fell from ¥149.38 in fiscal 2010 to ¥116.05 in thegrowth sectors via a change in its business structure.

fiscal year under review.

Net Sales

Operating Results by Business Segment

In fiscal 2011, consolidated net sales decreased ¥16,180 million, orFor details regarding results and the status of business progress by

1.9%, compared with the previous fiscal to ¥847,897 million. Despitebusiness segment, please refer to the “Review of Operations” section

steady growth in the Mineral Resources segment, this decrease wason pages 19 to 31.

largely attributable to the drop in sales of electrolytic copper in the

40 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Capital Expenditures

Of this total, current assets climbed ¥26,937 million year on year to

Total capital expenditures in fiscal 2011 were ¥73,143 million, an¥499,495 million. Despite a drop in the balance of inventories, thisincrease of ¥20,038 million, or 37.7%, compared with the previous

increase largely reflected the upswing in marketable securities includ-fiscal year. By segment, capital expenditures were ¥4,065 million in

ed in negotiable deposits. Total fixed assets were up ¥66,704 million

the Mineral Resources segment; ¥59,193 million in the Smelting &from the end of fiscal 2010 to ¥646,499 million, mainly comprising

Refining segment, principally for the Taganito Project; and ¥6,563

investment securities reflecting the investment in such mines as Sierra

million in the Materials segment.

Gorda, and as a result of higher property, plant and equipment due
to capital expenditures in the Taganito Project.

Research and Development (R&D) Expenses
Total R&D expenses in fiscal 2011 amounted to ¥5,103 million, aLiabilities

decrease of ¥168 million, or 3.2% compared with the previous fiscal year.

Total liabilities amounted to ¥420,429 million as of the end of fiscal 2011,

In the Mineral Resources segment, and with respect to non-ferrous

an increase of ¥52,179 million compared with the balance of ¥368,250

metal ores, R&D investment was focused on ore-dressing processes tomillion a year earlier. Of this total, current liabilities declined ¥18,533 mil-improve ore grades and yields as well as the development of ore

lion year on year due to such factors as the decrease in bank loans as well

deposit assessment, exploration, and other technologies that areas the redemption of long-term debt due within one year. Long-term lia-

capable of increasing the efficiency of ore mining techniques.

bilities, on the other hand, climbed ¥70,712 million compared with the

In the Smelting & Refining segment, the major R&D themes includ-previous fiscal year-end to ¥233,476 million. This largely reflected theed the development of refining technologies that will foster the abili-

issue of bonds for investment in overseas mines and the increase in long-ty to handle a wide range of raw materials and ore grades andterm debt for investment in the Taganito Project.

improved cost competitiveness, as well as the development of new
metal-refining processes. In addition, the segment moved ahead withNet Assets

the development of recycling processes with respect to rare and other

Net assets as of March 31, 2012 stood at ¥725,565 million, up

metals including nickel from used hybrid-vehicle secondary batteries.

¥41,462 million from the balance of ¥684,103 million as of the end

In the Materials segment, R&D initiatives were mainly directedof the previous fiscal year. While net income for the period wastoward functional and wiring materials related to secondary batteries,¥65,219 million, negative foreign currency translation adjustments

solar cells, fuel cells, and energy-saving products, which are currently

were substantial as a result of appreciation in the value of the yen. In

drawing attention in the field of energy and the environment.

line with the increase in net assets, shareholders’ equity per share

Particularly with regard to secondary batteries, steps are being taken

improved from ¥1,121.19 as of the end of the previous fiscal year toto enhance such functions as cost, capacity and safety. At the same

¥1,173.13 as of March 31, 2012.

time, energies are being actively channeled toward R&D to promote
application in next-generation hybrid vehicles and batteries for PC use.

Major Financial Indicators
Accounting for each of the aforementioned factors, the D/E ratio

Financial Position

slightly improved year on year from 0.33 times to 0.40 times. While

Assetsthe equity ratio experienced a minor deterioration from 59.9% as of

As of the fiscal 2011 year-end, total assets amounted to ¥1,145,994 mil-the end of the previous fiscal year to 57.5% as of March 31, 2012,

lion, up ¥93,641 million from ¥1,052,353 million as of March 31, 2011.

this level remains generally sound.

Shareholders’ Equity and Equity Ratio

Debt-to-Equity Ratio and Interest-Bearing Debt

왎 Shareholders’ Equity

왎 Interest-Bearing Debt

Equity Ratio

Debt-to-equity Ratio(¥ billions)(%)(¥ billions)(Times)

700

80

300

0.50

350

40

150

0.25

0

0

0
2008

2009

2010

2011

2012

(As of March 31)

0
2008

2009

2010

SUMITOMO METAL MINING CO., LTD.

2011

2012

(As of March 31)

Annual Report 2012

| 41

Cash Flows

A substantial appreciation of the yen against these currencies overNet cash provided by operating activities came to ¥144,901 million,a sustained period could exert a significant negative impact on theup from ¥102,458 million in the previous fiscal year. This was largely

Group’s business performance and financial position.

attributable to the reversal of inventories accumulated in preparation

To mitigate these external risks, the SMM Group continues to makefor the complete overhaul of facilities at Toyo Smelter & Refinery. Net

progress in implementing a variety of measures aimed at boosting

cash used in investing activities was ¥135,834 million compared withcompetitiveness, both in materials procurement and manufacturing.

¥75,735 million in fiscal 2010. This mainly reflected investments inthe overseas resources development business including the Sierra
Gorda Mine and capital expenditures undertaken for the Taganito
and other projects.

(2) Deterioration in terms of non-ferrous metal ore purchasing
contracts and supply disruptions
Currently, the SMM Group procures the majority of copper ores, nick-Net cash provided by financing activities amounted to ¥50,314 mil-el matte and other raw materials for non-ferrous metal refining oper-

lion, up from ¥7,379 million in the previous fiscal year. While cash

ations based on long-term ore-purchasing contracts that are notdividends paid increased year on year, this upswing was primarily thebacked by investment.

result of bonds issued to fund the aforementioned investing activities.

Each year, the raw materials purchasing terms and conditions of

Taking into account each of the previously mentioned activities andlong-term ore-purchasing contracts are subject to negotiation. In

after deducting the effect of exchange rate change, cash and cash

each case, there are instances in which required volumes cannot be

equivalents as of March 31, 2012 stood at ¥185,798 million, anpurchased at an appropriate price due to a variety of market factors.

increase of ¥57,397 million compared with the end of the previous

Furthermore, as product prices are generally determined by such fac-

fiscal year.

tors as supply and demand—particularly factors relating specifically to
non-ferrous metals—there are instances where the transfer of any

Risk Information

deterioration in the purchasing terms and conditions of raw materials

The following section provides an overview of the risk factors thatto product prices is difficult.

could exert a significant effect on the business performance andSupplies of ore can also be delayed or suspended due to unpredict-financial position of the SMM Group. All forward-looking statements

able disruptive events beyond the control of the Company, such as

in the text refer to management decisions based on the best informa-

extreme weather conditions, large-scale earthquakes, supplier opera-tion available at the end of fiscal 2011.

tional accidents and industrial disputes. Such factors could impose
various constraints on Group production volumes, which as a result(1) Fluctuations in non-ferrous metals prices and exchange rates

could exert a negative impact on the Group’s business performance

1. Sustained downturn in non-ferrous metals prices

and financial position.

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

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

essentially determined by the London Metal Exchange (LME) andoverseas mines and invest in high-grade overseas mines to secure reli-other international markets (hereinafter referred to as “LME andable (in-house) supplies of ore.

other market prices”). LME and other market prices are influenced bya number of factors, including international supply and demand,(3) Uncertainty inherent in mining investments

political and economic circumstances, speculative trading and compe-

As described above, the raw materials procurement policy of thetition from alternative materials. A sharp and sustained downturn in

SMM Group is to develop in-house mining resources to boost thenonferrous metals prices could have a significant negative impact on

proprietary ore ratio. Amounts of extractable ore and extraction costs

the Group’s business performance and financial position.

can only be estimated based on the results of exploratory surveys.
With respect to mining development, the development costs of a

2. Appreciation of the yen

mining project can rise as the result of a variety of situations, such as

Not only imported raw materials including copper concentrates and nickel

compliance with environmental or regulatory actions. Any additional

matte, but also the domestic prices of non-ferrous metals are determined

investment or increase in the burden of extraction costs arising fromunder U.S. dollar-denominated LME and other market standards.

the inherent uncertainty associated with mining developments could

Accordingly, the refining margins earned by SMM from its refining busi-

have a negative impact on the Group’s business performance andness are effectively denominated in U.S. dollars. In addition, returns on

financial position.

investments in overseas mining developments, income earned fromTo mitigate such risks, the SMM Group employs a selective investment

investments in the semiconductor as well as advanced materials business-

policy and undertakes strict assessments of the potential profitability ofes and revenues from exports of products in each of the aforementioned

individual mining developments based on extensive experience in mining

businesses are also denominated in foreign currencies.

extraction and mine valuation accumulated over many years.

42 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

(4) Environmental protection and regulatory compliance risks

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

SMM Group businesses, notably the mining and non-ferrous metalof existing products in the Company’s materials operations may not prog-

smelting and refining operations, are subject to a broad range of laws

ress in accordance with plans. This in turn could exert a negative impact

and regulations in such areas as occupational safety and health, envi-

on the Group’s business performance and financial position.

ronmental protection, pollution prevention, industrial waste disposal
and management of potentially toxic substances.

The SMM Group recognizes the importance and value of acquiring
intellectual property rights and managing such rights properly in

In accordance with these statutory and regulatory requirements,

accordance with related laws and regulations. Although the Group

operators may be charged with compensation for loss or damages,

strives to observe such laws, it remains exposed to such risks as fail-irrespective of the existence of negligence or otherwise, or demands

ure to acquire certain rights or damage done to the results of thefor the maintenance and management of abandoned mines.

Group’s R&D activities due to illegal actions by third parties. To miti-

Moreover, operators may incur the burden of additional expenses duegate such risks, the Group strives to minimize related problems by

to requirements imposed under new environmental standards andstructuring R&D activities to realize commercial opportunities asregulations. At the same time, both the mining and non-ferrous met-

quickly as possible. The Group has also created dedicated in-houseals refining industries incur the risks and associated responsibilities forteams to manage issues related to intellectual property rights toenvironmental pollution as well as the disposal of mining and indus-

ensure that such rights are acquired and protected properly.

trial waste. Ongoing regulatory compliance costs are substantial andsubject to unexpected increases as the result of the sudden emer-(6) Overseas investments

gence of previously unknown risks. The costs of ensuring regulatory

The Company strives to develop its business overseas both in terms ofcompliance could therefore exert a negative impact on the Group’s

the location of manufacturing bases as well as the sale of its prod-business performance and financial position.

ucts. In the conduct of its business overseas, however, SMM is subject

To mitigate such risks, the Group seeks to ensure that operations

to a wide range of political and economic risks that vary by country.

are in full compliance with environmental protection and other laws

These include but are not limited to political instability; changes inand regulations through the operation of environmental and risk

statutory and regulatory requirements with respect to the environ-management systems based on strict standards. The Group alsoment, labor, taxes, currency management and controls as well as

endeavors to manage operations so that related compliance costs aretrade; limited protection under the law or inadequate enforceability

kept within reasonable limits.

in connection with intellectual and other property rights; fluctuations
in foreign currency exchange rates; and the confiscation or national-(5) Risks associated with market shifts, new product development and intellectual property rights

ization of assets. The emergence of various developments could prevent the Group from earning a suitable return on overseas

In those markets related to the Company’s materials operations,investments. Such risks include the development of mineral resource

increasingly longer periods are required for the development of new

projects by organizations funded by national or regional governments

products due largely to rapid changes in applied technologies, cus-against the backdrop of high non-ferrous metals prices, or the levying

tomer requirements and product life. This is even as product develop-of higher taxes on such operations. Increased environmental

ment programs in these areas require the investment of increasingly

demands from various quarters constitute a further risk.

large amounts of time and resources.
Expected returns on investment from related new product develop-

To mitigate such risks, the SMM Group makes overseas investment
decisions based on careful consideration of all relevant country risks.

ment programs may not materialize due to obsolescence caused bytechnological progress, delays caused by responding to customer(7) Disaster-related risks

requests or the launch of competitor products, among other factors.

The SMM Group locates manufacturing operations based on consid-

Customer demand for products may also decline in the future. All

erations such as customer relationships, raw material procurement,these various factors could have a negative impact on the Group’s

the links to other Group operations and effective use of managementbusiness performance and financial position.

resources. Unexpected large-scale natural disasters such as earth-

In addition, sales volumes of the Company’s mainstay materials

quakes or typhoons that affect the regions where such facilities areoperations products are dependent upon customer production levels

located could result in major financial losses arising from such factorsof such items as mobile terminals, personal computers (PCs) and elec-

as onsite damage and loss of production.

trical household appliances. Accordingly, performance is subject to a

To mitigate such risks, the Group insures such facilities where this isvariety of factors including cyclical demand for the products manufac-

possible at reasonable cost and has made plans containing suitable coun-

tured by customers, advances in technological innovation and generaltermeasures to minimize any secondary effects due to such disasters.

economic trends.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 43

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

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012

2011

2012

¥ 185,708¥ 128,311$ 2,261,147

37

213

451

Trade

96,591

100,195

1,176,075

Unconsolidated subsidiaries and affiliated companies

2,908

4,129

35,407

(242)

(242)

(2,947)151,068

170,246

1,839,377

ASSETSAs of March 31, 2012 and 2011

Current assets:
Cash and cash equivalents
Time deposits
Notes and accounts receivable:

Allowance for doubtful accounts
Inventories (Note 6)
Deferred tax assets (Note 9)

2,165

2,658

26,361Other current assets

61,26067,048745,890

499,495

472,558

6,081,761

Unconsolidated subsidiaries and affiliated companies

255,763

201,740

3,114,124

Other76,81386,682935,261

(6)

(6)

(73)

11,901

11,704

144,904

Total current assets

Investments and long-term receivables:
Investment securities (Note 4):

Allowance for loss on investments
Other long-term receivables
Allowance for doubtful accounts
Total investments and long-term receivables

(224)

(222)

(2,727)344,247

299,898

4,191,489

Property, plant and equipment (Notes 7 and 8):Land28,07028,129341,775

Buildings and structures

171,285

168,634

2,085,535

Machinery and equipment

361,025

374,554

4,395,775
1,097,760

Construction in progress
Accumulated depreciation
Net property, plant and equipment

90,15944,942

650,539616,259

7,920,845(360,082)(351,170)(4,384,293)

290,457

265,089

3,536,552

Deferred tax assets (Note 9)

1,384

2,528

16,851Other assets

10,411

12,280126,762¥1,145,994¥1,052,353$13,953,415

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

44 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

LIABILITIES AND NET ASSETS

Millions of yen

Thousands of
U.S. dollars(Note 1)

2011

2012

2012

As of March 31, 2012 and 2011

Current liabilities:
Bank loans (Note 8)Long-term debt due within one year (Note 8)¥

56,253¥55,428$684,926

2,579

20,41331,401
437,209

Notes and accounts payable:Trade35,90833,660Unconsolidated subsidiaries and affiliated companies

7,608

8,933

92,634Other

17,167

16,024

209,022

Accrued income taxes (Note 9)

4,132

15,52050,310Accrued expenses

3,784

4,224

46,073

Advances received

1,007

930

12,261

Accrued restructuring charges

1,764

189

21,478

Accrued environmental measures

109

106

1,327

Deferred tax liabilities (Note 9)

—

765

—

Other current liabilities

56,642

49,294

689,665

186,953

205,486

2,276,306

207,119

135,128

2,521,843

Deferred tax liabilities (Note 9)

6,376

4,200

77,633

Accrued retirement benefits (Note 10)

7,027

7,216

85,559Accrued environmental measures

39

26

475

Accrued restructuring charges

21

1,032

256

Other accruals

214

204

2,606

Total current liabilities
Long-term liabilities :Long-term debt (Note 8)

Asset retirement obligations (Note 17)

4,317

4,268

52,563

Other long-term liabilities

8,363

10,690101,826

233,476

162,764

2,842,761

93,242

93,242

1,135,298

Total long-term liabilities
Contingent liabilities (Note 14)
Net assets (Note 13):
Shareholders' equity:
Common stock
Authorized—1,000,000,000 shares
Issued—581,628,031 shares
Capital surplus

86,06386,063

1,047,887

Retained earnings (Note 12)572,102524,978

6,965,811

Treasury stock, at cost

(21,845)(21,788)(265,981)

729,562

682,495

8,883,015

133,764

Total shareholders' equity
Accumulated other comprehensive income:Net unrealized holding gains (losses) on securities

10,986

17,738Deferred gains (losses) on hedges(4,854)(4,636)(59,102)

Foreign currency translation adjustments(76,448)(65,481)(930,817)(70,316)(52,379)(856,155)

Total accumulated other comprehensive income:Minority interests

66,31953,987

807,488

Total net assets

725,565

684,1038,834,348¥1,145,994¥1,052,353$13,953,415

Total liabilities and net assets

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 45

Consolidated Statements of Income
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2012, 2011 and 2010

Net sales (Note 16)
Costs and expenses:
Cost of sales
Selling, general and administrative expenses (Note 11)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Write-down of investment securities
Gain (loss) on sale and disposal of property, plant and equipment
Loss on impairment of fixed assets (Note 7)
Loss from valuation of gold loans
Exchange gain (loss)
Provision for restructuring charges
Maintenance cost for ceased projects
Casualty loss
Equity in earnings of affiliated companies
Gain (loss) from valuation of derivative instruments
Amortization of goodwill
Other, net
Income before income taxes and minority interests
Income taxes (Note 9):
Current
DeferredIncome before minority interests
Minority interests in net income of consolidated subsidiaries
Net income

Amounts per share of common stock:
Net income (Note 21)—Basic—Diluted
Cash dividends applicable to the year

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012
¥847,897

2011¥864,0772010¥725,827

2012$10,323,840

715,555
43,844759,399
88,498725,267
42,772
768,039
96,038619,871
39,691
659,562
66,265

8,712,468
533,836
9,246,304
1,077,536

4,073(3,410)(6,167)(264)(11,102)
(548)
(934)
(1,743)(573)(1,608)23,217(1,588)—32(615)
87,8832,741(2,484)(1,500)(378)(63)(1,049)(4,863)
(61)
(519)
(456)
34,832
(862)
2
2,016
27,356
123,394

2,334(2,988)—(557)(2,087)(1,384)(2,004)(2,303)(476)(67)
26,090(1,286)992
247
16,511
82,77649,592(41,520)(75,088)(3,214)(135,176)(6,672)(11,372)(21,222)(6,977)(19,579)
282,686(19,335)—
388(7,489)1,070,047

15,091
4,379
19,47068,413(3,194)¥ 65,219

29,671987
30,65892,736(8,774)¥ 83,962

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

183,745
53,318237,063
832,984(38,890)794,094$

Yen

U.S. dollars(Note 1)

2012

2011

2010

2012

¥116.05
106.7428.00¥149.38
136.9832.00¥96.26
88.75
20.00

$1.41
1.30
0.34

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

Consolidated Statements of Comprehensive Income
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2012, 2011 and 2010

Income before minority interests
Other comprehensive income
Net unrealized holding gains (losses) on securities
Deferred gains (losses) on hedges
Foreign currency translation adjustments
Share of other comprehensive income of affliated companies
accounted for using equity method
Total other comprehensive Income
Comprehensive Income (Note 15)
Comprehensive income attribute to:
Owners of the parent
Minority interests
The accompanying notes are an integral part of these financial statements.

46 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012
¥68,4132011¥92,7362010¥59,6092012$832,984(6,740)(250)(4,634)

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

16,836
12
4,376(82,065)(3,044)(56,423)(9,595)(20,418)

1,880(116,827)(21,219)
47,194(31,870)
60,866

23,10482,713(258,359)
574,626

47,282(88)

57,574
3,292

75,966
6,747

575,697(1,071)

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

Shareholders’ Equity
Number ofshares issued
For the years ended March 31, 2012, 2011 and 2010

Thousands

Balance at April 1, 2009

581,628

Commonstock

CapitalsurplusRetainedearnings

Treasurystock¥93,242¥86,091¥405,946¥(32,678)

Total
shareholders’equityMillions of yen

Net income

53,952¥552,601
53,952Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Decrease resulting from change in consolidationof subsidiaries(18)

Acquisition of treasury stock
Sale of treasury stock(29)(1,049)¥86,062¥454,896

(18)
(175)

(175)

11,22010,142¥(21,633)¥612,567

Deferred gains (losses) on hedges
Minority interest
Cash dividends paid
Balance at April 1, 2010

(3,935)
581,628¥93,242

Net income(3,935)83,962

83,962Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Increase resulting from change in consolidationof subsidiaries

67

67

Acquisition of treasury stock
Sale of treasury stock

1

(160)

(160)

5

6

Deferred gains (losses) on hedges
Increase resulting from unification of
accounting policy of affiliated companies

106

106

Minority interest
Cash dividends paid
Balance at April 1, 2011

(14,053)
581,628¥93,242¥86,063

Net income¥524,978(14,053)¥(21,788)

65,219¥682,495
65,219Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock

0

(66)

(66)

9

9

Deferred gains (losses) on hedges
Increase resulting from change inaccounting policy of affiliated companies

2,137

2,137

Minority interest
Cash dividends paid
Balance at March 31, 2012

(20,232)
581,628¥93,242¥86,063¥572,102(20,232)¥(21,845)¥729,562

Shareholders’ Equity
Commonstock

CapitalsurplusRetainedearnings$1,135,298$1,047,887$6,392,037

For the years ended March 31, 2012, 2011 and 2010

Balance at April 1, 2011

Treasury
stock

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

Net income$(265,287)

794,094$8,309,935
794,095

Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock

(804)

(804)

Sale of treasury stock

110

110

Deferred gains (losses) on hedges
Increase resulting from change inaccounting policy of affiliated companies

26,021

26,020Minority interest
Cash dividends paid
Balance at March 31, 2012

(246,341)$1,135,298$1,047,887$6,965,811(246,341)$(265,981)$8,883,015

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

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 47

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

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

Deferred gains(losses) onhedgesForeign Total accumucurrency
lated othertranslation comprehensive
adjustments
incomeMinority
interests

For the years ended March 31, 2012, 2011 and 2010

Balance at April 1, 2009
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Decrease resulting from change in consolidationof subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Minority interest
Cash dividends paid
Balance at April 1, 2010
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Increase resulting from change in consolidationof subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Increase resulting from unification of
accounting policy of affiliated companies
Minority interest
Cash dividends paid
Balance at April 1, 2011
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Increase resulting from change inaccounting policy of affiliated companies
Minority interest
Cash dividends paid
Balance at March 31, 2012

Total net
assetsMillions of yen

¥

(752)

¥(2,432)¥(44,821)¥(48,005)

5,226

5,226
16,795

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

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

(7)

(7)
453

¥16,043¥(2,439)¥547,251
53,952
5,226
16,795

1,695(2,197)¥43,108106
10,879¥17,738¥(4,636)¥(65,481)¥(52,379)(10,967)(10,967)(6,752)(6,752)(218)¥10,986¥(4,854)¥53,987(218)¥(76,448)¥(70,316)

10,879(14,053)¥684,103
65,219(10,967)(6,752)
(66)
9
(218)

534

2,671

11,798¥66,319

11,798(20,232)¥725,565

Minority
interests

Total net
assets

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

Deferred gains(losses) onhedges$215,975$(56,447)

Foreign Total accumucurrency
lated othertranslation comprehensive
adjustments
incomeFor the years ended March 31, 2012, 2011 and 2010

Balance at April 1, 2011
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains (losses) on hedges
Increase resulting from change inaccounting policy of affiliated companies
Minority interest
Cash dividends paid
Balance at March 31, 2012

Thousands of U.S. dollars (Note 1)$(797,285)$(637,757)(133,532)(133,532)(82,211)(82,211)(2,655)$133,764

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

48 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012$(59,102)$657,336(2,655)$(930,817)$(856,155)$8,329,514
794,095(133,532)(82,211)(804)
110(2,655)

6,502

32,522

143,650

143,650(246,341)$8,834,348$807,488

Consolidated Statements of Cash Flows
SUMITOMO METAL MINING CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2012, 2011 and 2010

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation
Loss on impairment of fixed assets
Loss (Gain) on sale and disposal of property, plant and equipment
Write-down of investment securities
Loss (Gain) from valuation of derivative instruments
Interest and dividend income
Interest expense
Equity in earnings of affiliated companies
Restructuring charges
Casualty loss
Decrease (Increase) in trade receivables
Decrease (Increase) in inventories
Increase (Decrease) in trade payables
Others
Sub totalInterest and dividend received
Interest paid
Payments for maintenance costs for ceased projects
Payments for recovery costs
Payments for/Refund of income taxes
Net cash provided by operating activities
Cash flows from investing activities:
Payments for acquisition of property, plant and equipment
Payments for acquisition of intangible assets
Proceeds from sale of property, plant and equipment
Payments for purchases of investment securities
Payments for purchase of securities of subsidiaries andaffiliated companies
Proceeds from sales of securities of subsidiaries and affiliated companies
Payments for loans lended
Collection of loans repaid
Other
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Repayments of long-term debt
Net increase (decrease) in bank loans
Payments for redemption of bonds
Proceeds from issuance of bonds
Contribution from minority in consolidated subsidiaries
Increase in treasury stocks
Cash dividends paid
Cash dividends paid to minority in consolidated subsidiaries
Net cash provided by (used in) financing activities
Effect of changes in exchange rate on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash due to newly consolidated subsidiaries
Cash and cash equivalents at end of year

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012

2011

2010

2012

¥ 87,883¥123,394¥ 82,776$1,070,047

31,113
11,102
264
6,167
1,588
(4,073)
3,410(23,217)
480
1,608
4,523
18,566
7,791
4,792
151,997
23,252(3,390)(573)(488)(25,897)
144,901

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

34,746
2,087
557
—
1,286
(2,334)
2,988(26,090)519
67(54,706)(43,113)
6,899
9,157
14,83921,569(3,038)(476)(67)
11,32644,153378,826
135,176
3,214
75,08819,335(49,592)
41,520(282,686)
5,844
19,57955,071226,056
94,862
58,3481,850,688
283,112(41,276)(6,977)(5,942)(315,317)
1,764,288(74,915)
(498)
1,125
(3,009)(53,966)(614)
550(11,480)(40,416)(12,071)
1,182(5,886)(912,151)(6,064)
13,698(36,637)(58,902)(9,361)(18,285)(717,180)

—
(725)
292
798
(135,834)—(2,887)2,206(183)(75,735)308(5,476)
5,064
137(75,443)—(8,827)3,555
9,716(1,653,890)

26,620(10,305)
2,668(10,000)
49,736
17,687(59)(20,232)(5,801)50,314(1,984)57,397
128,311—¥185,708

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

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

324,120(125,472)
32,485(121,758)
605,577
215,354(718)(246,341)(70,632)
612,615(24,157)
698,856
1,562,291—$2,261,147

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

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 49

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

1. Basis of presenting consolidated financial statements

In the elimination of investments in subsidiaries, the assets and

The accompanying consolidated financial statements have been

liabilities of the subsidiaries, including the portion attributable toprepared in accordance with the provisions set forth in theminority shareholders, are recorded based on the fair value at theJapanese Financial Instruments and Exchange Act, and in confor-

time the Company acquired control of the respective subsidiaries.

mity with accounting principles generally accepted in Japan

Goodwill (consolidation difference between the investment(“Japanese GAAP”), which are different in certain respects as tocost and the underlying equity in its net assets at the date of

the application and disclosure requirements of International

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

Financial Reporting Standards (“IFRSs”).

With respect to subsidiaries in the United States, goodwill is

The accounts of consolidated overseas subsidiaries are basedon their accounting records maintained in conformity with gener-

amortized over twenty years on a straight-line basis in accordancewith PITF No.18.

ally accepted accounting principles prevailing in the respective
countries of domicile. However, as described in Note 2, necessary(Change for unification of accounting policies applied to affiliatedadjustments such as the influence of applying Practical Issues Task

companies accounted for using the equity method)

Force (PITF) No.18 are made upon consolidation. The accompany-

Effective for the year ended March 31 2011, the Company

ing consolidated financial statements have been restructured andadopted the “Accounting Standard for Equity Method oftranslated into English with some expanded descriptions from the

Accounting for Investment” (ASBJ Statement No.16 issued on

consolidated financial statements of Sumitomo Metal Mining

March 10, 2008) and the “Practical Solution on Unification ofCo., Ltd. (“the Company”) prepared in accordance with Japanese

Accounting Policies Applied to Associates Accounted for Using

GAAP and filed with the appropriate Local Finance Bureau of thethe Equity Method” (ASBJ PITF No.24 of March 10, 2008) and

Ministry of Finance as required by the Japanese Financial

made necessary adjustment in consolidation process.

Instruments and Exchange Act. Some supplementary information

As a result of this change, income before income taxes andincluded in the statutory Japanese language consolidated finan-

minority interests decreased by ¥161 million for the year ended

cial statements, but not required for fair presentation, is not pre-March 31, 2011.

sented in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars

Cash and cash equivalents and cash flow statements —are included solely for the convenience of readers outside Japan,

Cash on hand, readily available bank deposits, negotiable certifi-

using the prevailing exchange rate at March 31, 2012, which wascates of deposits and short-term highly liquid investments with¥82.13 to US$1.00. The convenience translations should not bematurities not exceeding three months at the time of purchase

construed as representations that the Japanese yen amounts haveare considered to be cash and cash equivalents.

been, could have been, or could in the future be, converted into
U.S. dollars at this or any other rate of exchange.

Allowance for doubtful accounts — The allowance for doubtful accounts is provided at an amount determined based on the

2. Summary of significant accounting policies

historical experience of bad debt with respect to ordinary

Consolidation — The consolidated financial statements include

accounts, plus an estimate of uncollectible amount determined

the accounts of the Company and its significant subsidiaries (61by reference to specific doubtful accounts from customers who

subsidiaries in 2012, 60 in 2011 and 54 in 2010). All significant

are experiencing financial difficulties.

inter-company balances and transactions have been eliminated.
Investments in affiliated companies of which the Company has

Investment securities — Securities are classified into two cate-

the ability to exercise significant influence over financial andgories based on the intent of holding: available-for-sale securities;

operating policies, are accounted for by the equity method (16and securities issued by unconsolidated subsidiaries and affiliatedaffiliated companies in 2012, 14 in 2011 and 13 in 2010). Investments

companies.

in the remaining unconsolidated subsidiaries and affiliated com-

Available-for-sale securities with available fair values (market-

panies are carried at cost because of their immaterial effect on theable securities) are stated at the fair value. Unrealized gains andconsolidated financial statements.

losses on these securities are reported, net of applicable income

50 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

taxes, as a separate component of net assets. The cost of securi-(Change in accounting policy)

ties sold is determined by the moving-average method. Other

Effective for the year ended March 31, 2011, the Company andavailable-for-sale securities with no available fair values (non-its consolidated domestic subsidiaries adopted the “Accounting

marketable securities) are stated at moving-average method.

Standard for Measurement of Inventories” (ASBJ Statement No. 9

Securities issued by unconsolidated subsidiaries and affiliatedissued on September 26, 2008), and the method of accounting

companies are carried at cost.

for the inventories of certain consolidated subsidiaries waschanged from the last-in, first-out method (LIFO) to the first-in,

Derivatives and hedge accounting — Derivative instruments
are stated at fair value. Changes in the fair values are recognized

first-out method (FIFO).
As a result of this change, operating income and income

as gains and losses unless derivative transactions are used for

before taxes and minority interests increased by ¥444 million forhedging purposes.

the year ended March 31, 2011.

If derivative transactions are used as hedges and meet certain
hedging criteria, the Company and its consolidated domestic sub-

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

sidiaries defer recognition of gains or losses resulting from chang-ment are stated at cost.

es in fair value of derivative transactions until the related losses or

Depreciation of property, plant and equipment is computed bygains on the hedged items are recognized.

the straight-line method, based on the estimated useful lives ofrespective assets. The depreciation period generally ranges from 2

If interest rate swap contracts are used as hedges and meetyears to 60 years for buildings and structures and 2 years to 20

certain hedging criteria, the net amount to be paid or received

years for machinery and equipment.

under the interest rate swap contract is added to or deductedfrom the interest on the assets or liabilities for which the swap

Accrued retirement benefits — Under the terms of thecontract was executed.

Company’s retirement plan, substantially all employees are enti-

The Company evaluates hedge effectiveness monthly by com-tled to a lump-sum payment at the time of retirement. The

paring the cumulative changes in cash flows from or the changes

amount of retirement benefits is, in general, determined by refer-in fair value of hedged items and the corresponding changes inence to their current basic rate of pay, the length of service andthe hedging derivative instruments.

the cause thereof.
The Company and certain consolidated domestic subsidiaries

Foreign currency translation — Receivables and payables

also have a non-contributory funded pension plan, which covers

denominated in foreign currencies are translated into Japanese

substantially all employees.

yen at the fiscal year-end rates.
Balance sheets of consolidated overseas subsidiaries are trans-

The Company and its consolidated domestic subsidiaries provided accrued retirement benefits based on the estimatedlated into Japanese yen at the fiscal year-end rates except for

amounts of projected benefit obligation and the fair value of theaccount components of net assets, which are translated at histor-

plan assets at those dates.

ical rates. Income statements of consolidated overseas subsidiar-

Actuarial gains and losses are recognized in expenses using theies are translated at average rates except for transactions withstraight-line method over the average of the estimated remaining

the Company, which are translated at the rates used by theservice lives of ten years commencing with the following period.

Company.

Prior service costs are recognized in expenses using the straightline method over the average of the estimated remaining service

Inventories — Inventories are mainly stated at the lower of cost

lives of ten years.

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

Accrued retirement benefits in the consolidated balance sheets

value of inventories regarded as the decreased profitability ofalso include estimated liabilities for the unfunded lumpsum bene-

assets, whose write-downs are included in cost of sales.

fit plan covering directors and corporate auditors.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 51

(Change in accounting policy)

Accounting standard for recognizing revenues and costs of con-

Effective for the year ended March 2010, the Company and con-struction contracts

solidated domestic subsidiaries adopted Partial Amendments to(Change in accounting policy)

Accounting Standard for Retirement Benefits (Part 3) (ASBJ

Previously, revenues and costs of construction work had been rec-Statement No. 19 issued on July 31, 2008).

ognized under the percentage-of-completion method for con-There was no effect on income before income taxes andminority interests as a result of adopting the new standard.

tract amounts of ¥5,000 million or more with construction
periods of more than two years. For other construction work, thecompleted-contract method was applied. Effective for the year

Accrued restructuring charges — Accrued restructuring charg-

ended March 31, 2010, the Company and its consolidated

es are provided by the Company and its consolidated subsidiaries

domestic subsidiaries have adopted the “Accounting Standard

to cover the costs of business reconstruction.

for Construction Contracts” (ASBJ Statement No. 15, released on
December 27, 2007) and the “Guidance on Accounting Standard

Accrued environmental measures — The provision for environ-for Construction Contracts” (ASBJ Guidance No. 18, released on

mental measures is estimated and recorded to provide for future

December 27, 2007). Accordingly, with respect to construction

potential costs, such as costs related to the disposal of polychlori-

contracts under which construction work commenced during thenated biphenyl (PCB).

year ended March 31, 2010, when the outcome of individual contract can be estimated reliably, the percentage-of-completion

Research and development — Research and development

method (the percentage of completion at the end of the year iscosts are charged to income as incurred.

measured based on the percentage of the cost incurred to theestimated total cost) has been adopted for that portion in prog-

Bond issue expense — Bond issue expense is charged to income

ress through to the end of the year ended March 31, 2010.

as incurred.

For other construction work, the completed-contract method has
been adopted. As a result of this change, net sales increased by

Accounting for certain lease transactions — Finance leases,¥678 million operating income and income before income taxes

except for certain immaterial leases, are capitalized and depreci-and minority interests increased by ¥154 million, respectively, forated over their estimated useful lives or lease term, as applicable.

the year ended March 31, 2010.

Finance leases commencing prior to April 1, 2008, which do nottransfer ownership of the leased property to lessees are account-

Asset retirement obligations —ed for in the same manner as operating leases.

(Change in accounting policy)
Effective for the year ended March 31, 2011, the Company

Income taxes — Deferred tax assets and liabilities are deter-

adopted “Accounting Standard for Asset Retirement Obligations”

mined based on the differences between financial reporting and(ASBJ Statement No.18 issued on March 31, 2008) andthe tax bases of assets and liabilities, and measured using the“Guidance on Accounting Standard for Asset Retirement

statutory tax rates which will be in effect when the differences

Obligations” (ASBJ Guidance No.21 issued on March 31, 2008).

are expected to be realized.

As a result of adopting these standards, operating income
decreased by ¥20 million, and income before income taxes andSales — Sales of merchandise and finished products are recog-

minority interests decreased by ¥344 million for the year ended

nized when the products are shipped to customers.

March 31, 2011.

52 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

(Additional information)

Accounting Standards for Accounting Changes andPreviously, asset retirement obligations for overseas mines, etc.,

Error Corrections —were presented in “other accruals” under “long-term liabilities.”

The Company and its consolidated domestic subsidiaries adopted

However, accompanying the adoption from the year ended“Accounting Standard for Accounting Changes and Error

March 31, 2011 of “Accounting Standard for Asset Retirement

Corrections” (ASBJ Statement No.24 issued on December 4,

Obligations” (ASBJ Statement No. 18 issued on March 31, 2008)2009) and “Guidance on Accounting Standard for Accounting

and “Guidance on Accounting Standard for Asset Retirement

Changes and Error Corrections” (ASBJ Guidance No. 24, issued

Obligations” (ASBJ Guidance No. 21 issued on March 31, 2008),

on December 4, 2009) for accounting changes and corrections of

they were reclassified to “asset retirement obligations.”

prior period errors which are made from the year beginning on
April 1, 2011.

Business combinations and others —(Change in accounting policies)

Amount per share of common stock — Basic net income per

Effective from the year ended March 31, 2011, the Company has

share is computed based on the weighted-average number of

adopted “Accounting Standard for Business Combinations”

shares of common stock issued during each year.

(ASBJ Statement No. 21 of December 26, 2008), “Accounting

Diluted net income per share assumes that outstanding con-Standard for Consolidated Financial Statements” (ASBJ Statement

vertible bonds were converted into common stock at the begin-

No. 22 of December 26, 2008), “Partial Amendments toning of the period at the current conversion price.

Accounting Standard for Research and Development Costs”(ASBJ Statement No. 23 of December 26, 2008), “Revised

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

Accounting Standard for Business Divestitures” (ASBJ Statement
No. 7 of December 26, 2008), Revised Accounting Standard for

Reclassifications — Certain reclassifications have been made in

Equity Method of Accounting for Investments (ASBJ Statement

the 2011 and 2010 financial statements to conform to the pre-No. 16 of December 26, 2008), and “Revised Guidance onsentation of 2012.

Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (ASBJ Guidance No. 10 of

3. Notes to financial instruments

December 26, 2008).

1. Status of financial instruments(1) Policies on the handling of financial instruments

Comprehensive income —The Sumitomo Metal Mining Group (“the Group”) procures(Additional information)

the funds necessary for its capital expenditure, investment andEffective March 31, 2011, the Company adopted “Accounting

loan plans mainly through bank loans and the issuance ofStandard for Presentation of Comprehensive Income” (ASBJ

bonds. Short-term operating funds are funded through bank

Statement No.25 issued on June 30, 2010) and “Revisedloans as required. In the event of a need for new funds, the

Accounting Standard for Consolidated Financial Statements”

Group, in principle, looks to the issuance of short-term bonds(ASBJ Statement No.22, revised on June 20, 2010).

(commercial paper). This is supplemented by bank loans andAs a result of the adoption of these standards, the Company

the use of liquidation schemes applicable to notes andhas presented the consolidated statement of comprehensive

accounts receivable. The Group takes great care to monitor

income in the consolidated financial statements for the year

the status of its funding needs and financial position. This is toended March 31, 2011.

ensure that the Group does not overly rely on specific procure-

In addition, the Company has presented the consolidated

ment methods and financial instruments. Accordingly, steps

statement of comprehensive income for the year ended Marchare taken to ensure a balanced funding portfolio from both

31, 2010 as well as that for the year ended March 31, 2011.

the short and long term as well as direct and indirect financing

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 53

perspectives. Temporary surplus funds are utilized only forthe foreign currency exchange rates of trade receivables andhighly safe financial assets for which there is a low probability

trade obligations; the prices of non-ferrous metals applicableof a loss of principal.

to non-ferrous metal trade receivables and trade obligations;

Derivative transactions are only used to avoid the risks

and interest rates applicable to loans and bonds payable,

attributable to fluctuations in the prices of non-ferrous metals

respectively. For hedging instruments and hedged items,

as well as foreign currency exchange and interest rates. The

hedging policy, the method of assessing the effectiveness ofGroup does not engage in derivative translations for specula-hedges and other details in connection with hedge account-tive purposes.

ing, refer to the “Derivative and hedge accounting” describedin the note 2 Summary of significant accounting policies.

(2) Details of and risks associated with financial instruments
Notes and accounts receivable, which are trade receivables,(3) Risk management systems relating to financial instruments

are exposed to the credit risk of customers. In addition,(i) Management of credit risk (risk relating to nonperformance

foreign currency-denominated trade receivables, which areof a contract obligation by a counterparty, etc.)

generated by global business operations, are also exposed toWith respect to trade receivables, each operating department

fluctuations in foreign currency exchange rates. Turning to theand division within the Sumitomo Metal Mining Group ismetals business, trade receivables are also exposed to the risk

guided by its own set of management rules and regulations.

of movements in the prices of non-ferrous metals. Investment

Sales and marketing departments and divisions regularly mon-securities, which largely represent shares of companies withitor the status of customers, managing due dates and balanc-

whom the Group trades or has formed an equity alliance, arees on an individual customer basis. In this manner, every effort

exposed to the risk of changes in their market prices.

is made to ensure early detection and the mitigation of con-Notes and accounts payable, which are trade obligations,cerns regarding collection due to deterioration in financial

generally have maturity dates of one year or less. In similar

standing or other factors. With respect to the use of derivative

fashion to trade receivables, trade obligations in the metals

transactions, steps are taken to engage in transactions withbusiness are subject to the risk of movements in the prices ofhighly rated financial institutions only. These steps are taken

non-ferrous metals. A certain portion of trade obligations arewith the aim of mitigating counterparty risk.

related to the import of raw and other materials and as such

The maximum amount of the credit risk is shown in theare denominated in foreign currencies. On this basis, they too

value of financial assets on the balance sheet which are sub-are open to the risk of fluctuations in the foreign currency

ject to credit risk.

exchange rates. Within loans and bonds payable, bank loans(ii) Management of market risks (risks associated with fluctua-

payable primarily represent funding applicable to operatingtions in the price of non-ferrous metals, foreign currencytransactions while long-term debt (with a maximum maturity

exchange as well as interest rates, etc.)

up to March 21, 2025) and bonds mainly concern funding

The Group employs commodity forward transaction andrelating to capital expenditures. A certain portion of loans andcommodity option transaction agreements, which seek to pro-bonds payable is provided on a floating rate of interest basis.

vide hedges for the risks of fluctuations in the prices ofAccordingly, this portion is exposed to the risk of fluctuation

imported raw materials with respect to non-ferrous metals as

in interest rates.

well as the sales prices of commodity metals and copper con-

Derivative transactions employed in an effort to offset thecentrate on international commodities markets. At the same

aforementioned risks include forward foreign currency

time, the Group utilizes forward foreign currency exchange

exchange rate contracts; forward and option transaction

rate contracts in an effort to offset the risks of movements inagreement; and interest rate swap transaction agreements,

foreign currency exchange rates in connection with trade

which seek to provide hedges for the risks of fluctuations inreceivables and obligations denominated in foreign currencies,

54 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

and interest rate swap transaction agreements aimed at con-

2. Fair values, etc. of financial instruments

verting floating rates of interest applicable to loans and bonds

Amounts on the consolidated balance sheets, fair values and thepayable to fixed rates of interest.

differences between the two as of March 31, 2012 and 2011 areWith respect to investment securities, the Group regularly

shown as follows. Certain financial instruments were excluded

monitors fair values as well as the financial status of issuers

from the following table as the fair values were not available(counterparties), and reviews it holdings on a continuous basis(Refer to the table shown in *2 below).
Millions of yen

taking into consideration its relationships with counterparties.
As for derivative transactions, in accordance with derivativetransaction management rules and regulations that outline

2012

Cash and cash equivalents

Book values ofConsolidated
Balance Sheets

Fair Values

Difference¥185,708¥185,708

¥

37

37

—

the purpose and objectives of derivative transactions while

Time deposits

providing authority and setting limits and scope, individualNotes and accounts
receivable (trade &unconsolidated)

99,49999,499—Investment securities

127,786

343,474

215,688¥413,030¥628,718¥215,688

Consolidated subsidiaries also adhere to the Company’s deriv-

Notes and accounts
payable (trade &unconsolidated)

43,51643,516—

ative transaction management rules and regulations while

Bank loans

58,832

58,832—working to build the aforementioned management structureLong-term debt due after
one year

207,119

207,579460

309,467

309,927460¥ (8,780)*¥ (10,045)*

departments and divisions are responsible for formulating
operating rules with respect to the implementation of deriva-

Total Assets—

tive transactions, executing and booking transactions and reconciling balances with counterparties on a regular basis.

under which derivative transactions are managed.
(iii) Management of liquidity risks associated with the procure-

Total Liabilities
Derivative transactions¥ (1,265)

ment of funds (the risk of being unable to make payments on
Millions of yen

due dates)
The Group manages liquidity risk by preparing and updating

2011

Book values ofConsolidated
Balance Sheets

Fair Values¥128,311¥128,311

213

213

Differencea cash management plan six months in advance based on

Cash and cash equivalents

reports from each department and division. Certain domestic

Time deposits

consolidated subsidiaries have adopted a cash management

Notes and accounts
receivable (trade &unconsolidated)

104,324

104,324—

Investment securities

119,785366,757

246,972¥352,633¥599,605¥246,972

system and are efficiently maintaining appropriate levels of
liquidity and cash on hand.

(4) Supplementary explanation for Fair values, etc. of financial
instruments
Fair values of financial instruments are determined by market
prices. If no market price is available, the fair value is based on
the value that is calculated in a reasonable manner. The determination of such values contains variable factors and as such

Total Assets¥——

Notes and accounts
payable (trade &unconsolidated)

42,59342,593—

Bank loans

65,841

65,841—Long-term debt due after
one year

145,128

145,257

129

253,562

253,691129¥ (7,462)*¥ (7,778)*

Total Liabilities
Derivative transactions

¥

(316)

Annual Report 2012| 55

the adoption of wide ranging and differing assumptions may
cause values to change. In addition, with respect to contract
and other amounts applicable to derivative transactions outlined as follows in “2. Fair values, etc. of financial instruments” such amounts themselves do not indicate the size ofmarket risks associated with derivative transactions.

SUMITOMO METAL MINING CO., LTD.

Assets

Thousands of U.S. dollars

2012Book values ofConsolidated
Balance Sheets

Fair Values

Cash and cash equivalents$2,261,147$2,261,147

451

451

Time deposits
Notes and accounts
receivable (trade &unconsolidated)
Investment securities
Total Assets

1. Cash and cash equivalents, 2. Time deposits
Difference$

3. Notes and accounts receivable
1,211,482

1,211,482

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

1,555,899

4,182,077

2,626,178$5,028,979$7,655,157$2,626,178

term maturities of these instruments.
4. Investment securities
The fair values of investment securities are based on the mar-529,843

529,843—

Bank loans

716,328

716,328—

2,521,843

2,527,444

5,601

3,768,014

3,773,615

5,601

Total Liabilities

high liquidity.

—

Notes and accounts
payable (trade &unconsolidated)
Long-term debt due after
one year

The book values approximate to the fair values due to their—

ket prices of securities exchanges on which shares are listed.
For details regarding securities on an individual holding
purpose basis refer to the Note 4. Securities.

Liabilities
Derivative transactions$ (106,904)* $ (122,306)* $ (15,402)

1. Notes and accounts payable, 2. Bank loans
The book values approximate to the fair values due to short-* Net receivables and obligations arising from derivative transac-

term settlement of these instruments.

tions are shown as a net amount and items for which aggre-

3. Bonds

gated results lead to net obligations are shown in asterisk.

The fair values are based on market prices.
4. Long-term debt

*1
Fair values of financial instruments, and matters pertaining to

The discounted cash flow method was used to estimate the fairsecurities and derivative transactions.

values, based on marginal borrowing rates as discount rate.

Derivative transactions
Refer to the Note 5. Derivative transactions.

*2
The financial instruments excluded from the above table as of March 31, 2012 and 2011 are as follows:
Millions of yen

Thousands of U.S. dollars

2012

2011

2012

Book values ofConsolidated Balance Sheets

Book values ofConsolidated Balance Sheets

Book values ofConsolidated Balance Sheets¥198,161¥162,532$2,412,772

Unlisted equity securities

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

56 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

*3
The aggregate maturities subsequent to March 31, 2012 and 2011 for financial assets are as follows:
Millions of yen

Thousands of U.S. dollars

2012

Due within
one year

Due after
one year andwithin 5 year

Cash and cash equivalents¥185,708

¥—

¥—

¥—

$2,261,147

$—

$—

$—

37

—

—

—

451

—

—

—

99,499———1,211,482———¥285,244

¥—

¥—

¥—

$3,473,080

$—

$—

$—

2011

Due within
one year

Due after
one year andwithin 5 year

Due after
5 year andwithin 10 year

Due over10 yearCash and cash equivalents¥128,311

¥—

¥—

¥—

213

—

—

—

Notes and accounts receivable

104,324

—

—

—

Total

¥232,848

¥—

¥—

¥—

Time deposits
Notes and accounts receivable
Total

Due after
5 year andwithin 10 year

Due over10 yearDue within
one year

Due after
one year andwithin 5 year

Due after
5 year andwithin 10 year

Due over10 yearMillions of yen

Time deposits*4
The amount scheduled to be repaid after the consolidated account settlement date of bonds, long-term debt, lease obligations andother interest-bearing liabilities

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

4. Securities(1) The following tables summarize acquisition costs and book values (available fair values) as of March 31, 2012 and 2011:

Available-for-sale securities

Securities with book values (available fair values) exceeding acquisition costs
Millions of yen
2012

Equity securities

2011

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥29,855¥49,780¥19,925¥27,330¥56,163¥28,833

Thousands of U.S. dollars
2012

Equity securities

Acquisition cost

Book value

Difference$363,509$606,112$242,603

Securities with book values (available fair values) not exceeding acquisition costs
Millions of yen
2012

Equity securities

2011

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥23,657¥18,064¥(5,593)¥29,937¥21,544¥(8,393)

Thousands of U.S. dollars
2012

Equity securities

Acquisition cost

Book value

Difference$288,043$219,944$(68,099)

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 57

(2) The following table summarizes book values of the securities with no available fair values as of March 31, 2012 and 2011:

Available-for-sale securities
Millions of yen

Unlisted equity securities

Thousands of U.S. dollars

2012

2011

2012

¥8,786¥8,786$106,977(3) As of March 31, 2012 and 2011, there were no available-for-sale securities with maturities.

(4) Total sales of available-for-sale securities sold during the year

market prices, exchange rates and interest rates. Credit risk is theended March 31, 2012 amounted to ¥628 million (US$7,646

potential loss the Company and its consolidated subsidiaries

thousand) and the related gains amounted to ¥240 million

could incur if counterparties default on their obligations.

(US$2,922 thousand). No losses on sales of available-for-sale

Derivative transactions are entered into solely with highly rated

securities were recognized for the period.

financial institutions, their subsidiaries or London Metal Exchange

Total sales of available-for-sale securities sold during the(LME) brokers guaranteed by banks, so that the Company and its

year ended March 31, 2011 amounted to ¥215 million andconsolidated subsidiaries might reduce the risk of default on an

the related losses amounted to ¥96 million and the related

obligation.

gains amounted to ¥96 million.

Each department of the Company and its consolidated subsid-

Total sales of available-for-sale securities sold during theiaries involving derivative transactions have their own rules foryear ended March 31, 2010 amounted to ¥27 million and thederivative transactions which stipulate the purposes and scope of

related losses amounted to ¥2 million. No gains on sales ofusing derivatives, standards for choosing transaction counterpar-

available-for-sale securities were recognized for the period.

ties and procedures with respect to reporting and administration.
Derivative transactions are subject to approval by the General

5. Derivative transactions

Manager of the department in charge after consulting with relat-

Status of derivative transactions — The Company and its con-ed departments. Based on these rules, the person in charge setssolidated subsidiaries utilize derivative transactions in order toup a position. Then, the results are reported to directors monthly.

hedge various risks, such as fluctuations in the price of metals,

Derivative positions are confirmed semi-annually with theexchange rates and interest rates, in the normal course of busi-transaction counterparties. Also, the internal audit department of

ness. Derivative instruments include futures contracts for hedging

the Company regularly examines derivative transactions.

against fluctuations in the international price of metals, forward

The Company and its consolidated subsidiaries are not exposed

foreign exchange contracts and currency swaps for hedging

to market risks arising from commodity derivative transactions,against fluctuations in exchange rates and interest swaps forbecause the risk of a fluctuation in market prices that is caused

hedging against fluctuations in the interest rates of floating-rateby the time lag between the purchase and sale of materials andbonds and term loans payable.

products is hedged by corresponding future contracts. The

Derivative transactions of the Company and its consolidated

Company and its consolidated subsidiaries also utilize currency

subsidiaries are subject to market and credit risks. Market risk isderivative transactions to hedge against the market risk ofthe potential loss the Company and its consolidated subsidiaries

exchange rate or interest rate fluctuation. Taking receivables andmay incur as a result of changes in market values. The Company’s

payables denominated in foreign currencies into account, theand its consolidated subsidiaries’ exposure to market risk areCompany and its consolidated subsidiaries are not exposed todetermined by a number of factors, including fluctuations inmarket risk.

58 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

The following tables summarize the market value information as of March 31, 2012 and 2011 of derivative transactions for which hedge
accounting has not been applied:
Millions of yen
2012

2011

Contracted amountContracted amount

Total

Over
one yearMarket value

Recognized
gains (losses)

Total

Over
one yearMarket value

Recognized
gains (losses)

Sell position—U.S. dollars¥10,613¥—¥(637)¥(637)

Buy position—U.S. dollars

8,232

—

(22)

(22)

—

¥—

¥ —

¥ —

11,760—202¥18,845¥—¥(659)¥(659)

202¥11,760

¥—

¥202

¥202

Sell position—Metal¥ 1,409¥—¥ 89

Buy position—Metal

8,468

—

—

¥ 89

¥ 3,199

¥—

¥383

¥383

—

8,976

—

—

—

(144)

(144)

590

¥—

¥ (55)¥ (55)¥12,765

(395)

(395)

¥—

¥ (12)¥ (12)

Annual Report 2012

| 59

Currency:
Forward contracts:¥

Commodity:
Forward contracts:

Option contracts:
Buy position
Put option—Metal

514¥10,391

Thousands of U.S. dollars
2012
Contracted amount
Total

Over
one yearMarket value

Recognized
gains (losses)

Sell position—U.S. dollars$129,222$—$(7,756)$(7,756)

Buy position—U.S. dollars

100,231

—

(268)

(268)

$229,453$—$(8,024)$(8,024)

Sell position—Metal$ 17,156$—$ 1,084$ 1,084

Buy position—Metal

103,105———(1,754)(1,754)$—$ (670)$ (670)Currency:
Forward contracts:

Commodity:
Forward contracts:

Option contracts:
Buy position
Put option—Metal

6,258$126,519

SUMITOMO METAL MINING CO., LTD.

Derivative transactions for which hedge accounting has been applied for the year, ended March 31, 2012 and 2011 consist of
the following:
Millions of yen
Contracted
amount and other2012
Type of transaction

Type of derivative transaction

Currency

Forward contracts:
Buy position

Foreign currency forecast transactions

Total

¥

137

¥

—

¥

5

¥

137

¥

—

¥

5

¥100,000¥—¥ (748)¥100,000¥—¥ (748)

¥

¥

—

¥

Interest rate swap contracts:
Paid fixed/received floating

Long-term loans

Total
Commodity

Fair Value

Major hedged items

EUR
Interest

Contracted
amount andover one year

Forward contracts:
Sell position—Metal

Accounts receivable

Buy position—Metal

Accounts payable

8,986
19,832

(75)

435

420

Option contracts*:
Sell position
Call option—Metal

Accounts receivable

Total
Interest

105,673

88,550(7,668)¥134,491¥88,985¥(7,323)¥ 22,446¥22,446¥(1,265)¥ 22,446¥22,446¥(1,265)Interest rate swap contracts**:
Paid fixed/received floating

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 under these interest rate swap
contracts is added to or deducted from the interests on the assets or liabilities for which these interest rate swap contracts were executed. Main items hedged arelong term loans.
Millions of yen
Contracted
amount and other2011
Type of transaction

Type of derivative transaction

Currency

Forward contracts:
Buy position

Foreign currency forecast transactions
¥

35

¥

—

¥

6

EUR

284

—

14

U.S.dollars

51

—

0

Canadian dollars

73

—

Total

¥

443

¥

—

3
¥

23

Interest rate swap contracts:
Paid fixed/received floating

Long-term loans

Total
Commodity

Fair Value

Major hedged items

Australian dollars

Interest

Contracted
amount andover one year

¥100,000¥100,000¥(1,270)¥100,000¥100,000¥(1,270)¥ 18,006¥¥

Forward contracts:
Sell position—Metal

Accounts receivable

Buy position—Metal

Accounts payable

9,958

—
827

291
1,141

Option contracts*:
Sell position
Call option—Metal

Accounts receivable

Total
Interest

147,796

131,436(7,837)¥175,760¥132,263¥(6,405)

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

Long-term loans

Total

60 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

¥ 26,025¥ 22,725¥ (316)¥ 26,025¥ 22,725¥ (316)

Thousands of U.S. dollars
Contracted
amount and other2012
Type of transaction

Type of derivative transaction

Currency

Forward contracts:
Buy position

Foreign currency forecast transactions

Total

$

1,668

$

—

$

61

$

1,668

$

—

$

61

$1,217,582$—$ (9,108)$1,217,582$—$ (9,108)$—$Interest rate swap contracts:
Paid fixed/received floating

Long-term loans

Total
Commodity

Fair Value

Major hedged items

EUR
Interest

Contracted
amount andover one year

Forward contracts:
Sell position—Metal

Accounts receivable$ 109,412

Buy position—Metal

Accounts payable

241,471

(913)

5,296

5,113

Option contracts*:
Sell position
Call option—Metal

Accounts receivable

Total
Interest

1,286,655

1,078,169(93,364)$1,637,538$1,083,465$(89,164)$ 273,298$ 273,298$(15,402)$ 273,298$ 273,298$(15,402)

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

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 under these interest rate swap
contracts is added to or deducted from the interests on the assets or liabilities for which these interest rate swap contracts were executed. Main items hedged arelong term loans.

6. Inventories
Inventories as of March 31, 2012 and 2011 consist of the following:
Millions of yen
2012

Merchandise

¥

1,845

Thousands of U.S. dollars

2011

¥

2,098

2012

$

22,464

Finished products

37,87948,892

461,208

Semi-finished products and work in process

76,20079,807927,798

Raw materials and supplies

35,14439,449427,907¥151,068¥170,246$1,839,377

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 61

7. Loss on impairment of fixed assets
Loss on impairment of fixed assets for the year ended March 31, 2012 consists of the following:

2012

Millions of yen

Thousands of
U.S. dollars

Location

Major use

Asset category

Loss

Loss

Kako-gun, Hyogo Prefecture, Japan

Manufacturing facilities for prime western
grade zinc

Building and structures andmachinery and other assets¥ 5,477$ 66,687

Niihama City, Ehime Prefecture, Japan

Manufacturing facilities for powder materials

Building and structures andmachinery and other assets

442

5,382

Kaohsiung City, Taiwan

Manufacturing facilities for certain
chip on film (COF)

Building and machinery andequipment

2,439

29,697

Ayutthaya Province, Thailand

Manufacturing facilities for lead frames

Building and equipment

562

6,843

Niihama City, Ehime Prefecture, Japan

Manufacturing facilities for certain
copper-clad polyimide film substrates

Machinery and equipment

50

609

Isa City, Kagoshima Prefecture, Japan

Manufacturing facilities for bonding wire

Building and machinery andother assets

203

2,471

Shanghai, China

Manufacturing facilities for bonding wire

Building and machinery andother assets

426

5,187

Kaohsiung City, Taiwan

Manufacturing facilities for bonding wire

Building and machinery andequipment

372

4,529

Selangor, Malaysia

Manufacturing facilities for bonding wire

Building and machinery andequipment

97

1,181

Naka-gun, Ibaraki Prefecture, Japan

Electron beam irradiation facilities

Building and structures andmachinery and other assets

Total

The Company categorized operating assets by such business units

1,034

12,590¥11,102$135,176(4) The book value of manufacturing facilities for lead frames

as plants and manufacturing processes based on the division ofwere reduced to their recoverable amounts due to withdrawal

managerial accounting.

from the business in production of lead frame in Thailand.

A breakdown of major use is as follows.

(5) The book value of manufacturing facilities for certain copper-(1) The book values of manufacturing facilities for prime westernclad polyimide film substrates were reduced to their recover-grade zinc were reduced to their recoverable amounts due toable amounts due to expectations that these facilities would

the deterioration of business environment.

cease to operate due to their aging.

(2) The book values of manufacturing facilities for powder mate-(6) The book value of manufacturing facilities for bonding wirerials were reduced to their recoverable amounts due to awere reduced to their recoverable amounts due to withdrawal

decline in sales volume of nickel powder.

from the business in production of bonding wire.

(3) The book value of manufacturing facilities for certain chip on(7) The book value of electron beam irradiation facilities were

film (COF) were reduced to their recoverable amounts due toreduced to their recoverable amounts due to a significant

withdrawal from the business in production of subtractive COF.

decline in orders from main customers.

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

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

Millions of yen

Location

Major use

Isa City, Kagoshima Prefecture, Japan

Idle land

Total

62 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Asset category

Land

Loss

¥63
¥63

The Company categorized operating assets by such business units

with the drop in land prices were reduced to their recoverable

as plants and manufacturing processes based on the division ofamounts because of the considerable decline in their market pric-managerial accounting.

es along with the drop in land prices.

A breakdown of major use is as follows.
The book values of several idle land lots in the Hishikari
Mine for which market prices have considerably declined along

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

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

Millions of yen

Location

Major use

Asset category

Niihama City, Ehime Prefecture, Japan

Manufacturing facilities for the recovery andrecycling of valuable metals

Building and structures and machineryand other assets

Loss

Niihama City, Ehime Prefecture, Japan

Facilities for milling

Machinery and equipment

75

Niihama City, Ehime Prefecture, Japan

Manufacturing facilities for chemical products

Machinery and equipment

25

Usa City, Oita Prefecture, Japan

Facilities for IC package plating

Building and structures and machineryand equipment

24¥1,918

Kamiina District, Nagano Prefecture, Japan Manufacturing facilities for printed circuit boards Building and structures

21

Matsudo City, Chiba Prefecture, Japan

Facilities for soil contamination survey andasbestos analysis

Building and structures and machineryand equipment

Kaohsiung, Taiwan

Manufacturing facilities for certain chip on
film (COF)

Machinery and equipment

13
11

Total

¥2,087The Company categorized operating assets by such business units

decision to withdraw from these operations. This decision was

as plants and manufacturing processes based on the division of

based on the ongoing shift of production by domestic semi-

managerial accounting.

conductor assembly manufacturers to overseas locations andA breakdown of major use is as follows.
(1) The book values of manufacturing facilities for the recovery

the changeover to semiconductors packages that no longer
require solder plating.

and recycling of non-ferrous metals were reduced to their(5) The book value of manufacturing facilities for printed circuit

recoverable amounts due to the Company’s decision to with-boards were reduced to their recoverable amounts due todraw from these operations. This decision was based on the

expectations that these facilities would cease to operate fol-

forecast of the shrinkage in the domestic petroleum market

lowing withdrawal from the chip scale package (CSP) business.

leading to a decrease in the waste and raw material catalysts(6) The book value of facilities for soil contamination survey andproduced by the petroleum refining process; as well as theasbestos analysis were reduced to their recoverable amounts

existing levels of excess processing capacity in Japan.

due to expectations that these facilities would cease to oper-(2) The book values of existing facilities for milling were reduced

ate following the decision to withdraw from these operations.

to their recoverable amounts due to expectations that theseThis decision was based on the sharp increase in competition

facilities would cease to operate following the installation of

in line with the growing number of survey institutions andnew facilities.

generalization of know-how.

(3) The book value of manufacturing facilities for chemical prod-(7) The book value of manufacturing facilities for certain chip onucts were reduced to their recoverable amounts due to expec-

film (COF) were reduced to their recoverable amounts due totations that these facilities would cease to operate following

expectations that these facilities would cease to operate due

the termination of production of certain products during theto their aging.

year ended March 31, 2010.
(4) The book value of facilities for IC package plating werereduced to their recoverable amounts due to the Company’s

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 63

The net sales prices (fair value less cost to sell) of assets are used as

On January 31, 2008, the Company passed a resolution totheir recoverable amounts for the measurement of impairment

issue stock acquisition rights by way of third-party allotment andlosses.

to execute a loan agreement for the purpose of procuring funds
through a loan with stock acquisition rights. By executing this

8. Bank loans and long-term debt

loan agreement, the Company procures ¥100 billion fromBank loans are generally represented by short-term notes (mostFebruary 15, 2008 to February 13, 2015. The exercise price of theof which are unsecured) and bank overdrafts, and bore interest at

stock acquisition rights will be revised in accordance with market

annual rates of 0.40% to 6.10% and 0.64% to 5.60% as ofprices. The stock acquisition rights have a structure that prevents

March 31, 2012 and 2011 respectively.

dilution of the share price to a price lower than ¥1,749 (US$21)
as of March 31, 2012.

Long-term debt as of March 31, 2012 and 2011 consists of the following:
Millions of yen

Thousands of U.S. dollars

2011

2012

2012

Long-term loans from:
Banks, insurance companies and other financial institutions,maturing through 2022 at interest rates of 0.76% to 3.50%:
Secured¥Unsecured

133,023

—

¥

—

$

131,145—
1,619,664

Government owned banks and government agencies, maturing through2025 at interest rates of 0.40% to 2.50%:
Secured

3,000

3,110

36,527

Unsecured

23,675

11,286288,262

1.42% domestic bonds due in 2012—

10,000—

0.48% domestic bonds due in 2016

10,000—121,758

0.77% domestic bonds due in 2018

30,000—365,275

1.26% domestic bonds due in 2021

10,000—121,758

209,698

155,541

2,553,244(2,579)(20,413)(31,401)¥207,119¥135,128$2,521,843

Millions of yen

Thousands of U.S. dollars

Amount due within one year

The aggregate annual maturities of long-term debt as of March 31, 2012 are as follows:
Years ending March 31,

2013

¥

2,579

$

31,401

2014

5,340

65,0192015

110,562

1,346,183

2016

9,584

116,6932017

27,081

329,733

Thereafter

54,552

664,215

Assets pledged as collateral for bank loans and long-term debt as of March 31, 2012 and 2011 are as follows:
Millions of yen

Property, plant and equipment, at net book value

64 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Thousands of U.S. dollars

2012

2011

2012

¥97,124¥43,713$1,182,564¥97,124¥43,713$1,182,564

9. Income taxes

The following table summarizes the significant differences

Income taxes in the accompanying consolidated statements of

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

income comprise corporation taxes, inhabitants’ taxes and enter-

idated subsidiaries’ effective tax rate for financial statement pur-prise taxes. Consolidated overseas subsidiaries are subject toposes for the years ended March 31, 2012, 2011 and 2010:

income taxes of the countries in which they are domiciled.

Statutory tax rate

2012

2011

2010

40.7%

40.7%

40.7%

Equity in earnings of unconsolidated subsidiaries and affiliated companies

(8.8)

(8.1)

(9.8)

Effect of eliminating intercompany dividends received

24.0

16.2

17.4

Difference in tax rates among the Company and its consolidated subsidiaries

(1.0)

(5.0)

(6.7)

Permanently nontaxable dividends received(26.1)(15.0)(11.4)Tax credit

(0.8)

(0.9)

(1.1)

Effect of Mining Tax

(2.0)

(1.5)

(2.9)

Undistributed earnings of foreign subsidiaries

(1.2)

1.4

—

Effect of consolidated taxation

0.7

0.3

2.1

Difference in local tax system

(3.1)

(2.9)

(0.3)

Others

(0.2)

(0.3)

(0.0)

Effective tax rate

22.2%

24.9%

28.0%

Significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities as of March 31, 2012 and2011 are as follows:
Millions of yen

Thousands of U.S. dollars

2012

2011

2012

$ 78,132

Deferred tax assets:
Net operating loss carry forwards¥ 6,417¥ 5,455

Retirement benefits

5,021

5,404

61,135

Deferred losses on hedges

3,650

3,221

44,441

Loss on impairment of fixed assets

3,361

2,034

40,923

Unrealized profits

1,560

829

18,994

Allowance for bonus payable

1,352

1,278

16,462
11,908Overseas exploration cost

978

754

Contribution gains on securities to employee retirement benefits trust

955

967

11,628Depreciation

915

406

11,141

Accrued business taxes
OthersGross deferred tax assets
Less valuation allowance
Deferred tax assets-less valuation allowance

412

1,069

5,016

3,689

5,798

44,91628,31027,215

344,696(11,447)(10,483)(139,376)

16,863

16,732

205,320

Deferred tax liabilities:
Depreciation(4,723)(4,900)(57,506)

Reserve for losses on overseas investment(4,216)(36)(51,333)

Accumulated earnings of overseas subsidiaries(2,905)(4,403)(35,371)

Net unrealized holding gain on available-for-sale securities(2,525)(1,114)(30,744)

Deferred gains on properties for tax purpose(2,163)(2,709)(26,336)

Reserve for explorations(1,446)(1,741)(17,606)

Gain on securities contributed to employee retirement benefits trust

(520)

(594)

(6,331)(1,192)(1,014)(14,514)

Deferred tax liabilities(19,690)(16,511)(239,741)

Net deferred tax assets (liabilities)¥ (2,827)¥$ (34,421)

OthersSUMITOMO METAL MINING CO., LTD.

221

Annual Report 2012

| 65

(Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates)
On December 2, 2011, amendments to the Japanese tax regulations were enacted into law. As a result of these amendments, the statutory income tax rate for the Company will be reduced to 38.0% for years beginning on or after April 1, 2012 and 35.6% for years
beginning on or after April 1, 2015. Based on the amendments, the statutory income tax rates utilized for the measurement of deferred
tax assets and liabilities expected to be settled or realized from April 1, 2012 to March 31, 2015 and on or after April 1, 2015 are 38.0%
and 35.6%, respectively, as of March 31, 2012. Due to these changes in statutory income tax rates, net deferred tax liabilities decreasedby ¥485 million (US$5,905 thousand) as of March 31, 2012 and deferred income tax expense recognized for the year ended March 31,
2012 decreased by ¥192 million (US$2,338 thousand). And deferred losses on hedges decreased by ¥25 million (US$304 thousand) andnet unrealized holding gains (losses) on securities increased by ¥318 million (US$3,872 thousand) as of March 31, 2012.

10. Retirement benefits and pension costs
Accrued retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2012 and 2011 consist of
the following:
Millions of yen

Projected benefit obligation
Fair value of pension assets

Thousands of U.S. dollars

2012

2011

2012

¥(53,241)¥(52,441)$(648,253)

41,86141,056509,692¥(11,380)¥(11,385)$(138,561)

Unrecognized actuarial differences

5,359

5,986

65,250

Unrecognized prior services costs

(303)

(621)

(3,689)Net retirement benefits¥ (6,324)¥ (6,020)$ (77,000)

Prepaid pension costs(649)(1,138)(7,902)¥ (6,973)¥ (7,158)$ (84,902)

Excess of projected benefit obligation over pension assets

Accrued retirement benefits

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

Accrued retirement benefits in the consolidated balance sheets as of March 31, 2012 and 2011 also include estimated liabilities for theunfunded lump-sum benefit plan covering directors and corporate auditors of ¥54 million (US$657 thousand) and ¥58 million, respectively.

Included in the consolidated statements of income for the years ended March 31, 2012, 2011 and 2010 are severance and retirement
benefit expenses comprised of the following:
Millions of yen

Service cost-benefits earned during the year

Thousands of U.S. dollars

2012

2011

2010

2012

¥2,234¥2,237¥1,984$27,201

Interest cost on projected benefit obligation

941

949

923

11,458

Expected return on plan assets

(862)

(800)

(664)

(10,496)

Amortization of actuarial differences

761

1,018

1,573

9,266

Amortization of prior services costs

(318)

(318)

(319)

(3,872)¥2,756¥3,086¥3,497$33,557

Severance and retirement benefit expense

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

the years ended March 31, 2012, 2011 and 2010. The rates ofand losses are recognized in the income statement using the

expected return on plan assets used by the Company are primari-straight-line method over ten years commencing with the follow-

ly 3.5%, respectively for the years ended March 31, 2012, 2011

ing period. Prior service costs are recognized in expenses using

and 2010.

the straight-line method over the average of the estimated

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

66 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

remaining service lives of ten years.

11. Research and development expense
Research and development expense included in selling, general

2012, 2011 and 2010 are ¥5,103 million (US$62,133 thousand),and administrative expenses for the years ended March 31,¥5,271 million and ¥4,746 million, respectively.

12. Special reserves
For the purpose of obtaining tax benefits, the Company andSuch reserves, which are included in retained earnings, aresome consolidated subsidiaries have set up special reserves mainly¥280,232 million (US$3,412,054 thousand) and ¥262,762 million

for losses on overseas investments and explorations in accordance

as of March 31, 2012 and 2011, respectively.

with the Special Taxation Measures Law of Japan.

13. Net assets

legal earnings reserve. Legal earnings reserve is included in retained

Net assets comprise three subsections, which are shareholders’earnings in the accompanying consolidated balance sheets.

equity, accumulated other comprehensive income, and minority
interests.
Under Japanese laws and regulations, the entire amount paid
for new shares is required to be designated as common stock.

Under the Law, legal earnings reserve and additional paid-in
capital could be used to eliminate or reduce a deficit, or could
capitalize by a resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not

However, a company may, by resolution of the Board of Directors,

be distributed as dividends. Under the Law, however, all addition-

designate an amount not exceeding one-half of the price of theal paid-in-capital and all of the legal earning reserve may be

new shares as additional paid-in capital, which is included in capi-transferred to other capital surplus and retained earnings, respec-

tal surplus.

tively, however which are potentially available for dividends.

Under the Japanese Corporate Law (“the Law”), in cases where

The maximum amount that the Company can distribute as divi-a dividend distribution of surplus is made, the smaller of andends is calculated based on the unconsolidated financial state-amount equal to 10% of dividend or excess, if any, of 25% ofments of the Company in accordance with Japanese laws andcommon stock over the total of additional paid-in capital and legal

regulations.

earnings reserve must be set aside as additional paid-in-capital or

14. Contingent liabilities
Contingent liabilities as of March 31, 2012 are as follows:
Millions of yen

Notes and accounts receivable sold to factoring companies with recourse¥

416

Thousands of U.S. dollars

$

5,065

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

13,299161,926¥13,715$166,991

Besides the above, as to providing electric power to Pogo Gold Mine, there are ¥820 million (US$9,984 thousand) to guarantee construction costs of electric facilities.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 67

15. Comprehensive Income
Amounts reclassified to net income (loss) in the current period that were recognized in other comprehensive income in the current or
previous periods and tax effects for each component of other comprehensive income are as follows:
Millions of yen

Thousands of U.S. dollars

2012

2012

¥(12,039)$(146,585)

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

5,927

72,166Sub-total, before tax(6,112)(74,419)

Tax effect(628)(7,646)¥ (6,740)$ (82,065)

Increase (Decrease) during the year

(2,967)(36,126)

Reclassification adjustments

2,599

31,645

Cost adjustments of assets

(9)

(109)

(377)

(4,590)Sub-total, net of tax
Deferred gains (losses) on hedges

Sub-total, before tax
Tax effect127

Sub-total, net of tax

¥

(250)

1,546
$

(3,044)Foreign currency translation adjustments
Increase (Decrease) during the year

(4,937)

Reclassification adjustments
Sub-total, before tax
Tax effectSub-total, net of tax(60,112)

303

3,689

(4,634)(56,423)——¥ (4,634)$ (56,423)

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

16. Segment information(9,595)(116,827)¥ (9,595)$(116,827)¥(21,219)$(258,359)

The five aforementioned business divisions and the Taganito(1) General information about reported segments

Project—the purpose of which is to construct a second High(a) Basis of decision about reported segments The reported seg-

Pressure Acid Leach (HPAL) plant in the Taganito area ofments of the Group refer to business units, for which separate

Mindanao Island in the Philippines—are classified as “businessfinancial information is available and that are subject to periodic

segments” of the Group.

reviews by the Board of Directors as the supreme, managerial

The Group integrated these six business segments into threedecision-making body to determine the allocation of manage-reported segments: “Mineral Resources” “Smelting & Refining”,

ment resources and assess their respective operating results.

“Materials” and “Others.” In determining these reported seg-

The Company currently has five business divisions— Mineralments, the metal businesses and the Taganito Project were inte-

Resources Div., Non-Ferrous Metals Div., Semiconductor Materials

grated into Smelting & Refining, whereas the semiconductor

Div., Advanced Materials Div. and Energy Catalysts &materials and advanced materials businesses were integrated into

Construction Materials Div.—in the pursuit of effective business

Materials, in accordance with the integration criteria and quanti-

operations by products and services. Each of these business divi-

tative standards set forth in the “Accounting Standard forsions plans its own comprehensive strategies to be carried out in

Disclosures about Segments of an Enterprise and Related

Japan and overseas for its own product and service lines andInformation” (ASBJ Statement No. 17 issued on March 27, 2009)

engages in diverse business activities within the Company andand “Guidance on Accounting Standard for Disclosures about

through the consolidated subsidiaries and equity method affiliat-

Segments of an Enterprise and Related Information” (ASBJ

ed companies.

Guidance No.20 issued on March 21, 2008).

68 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

As described above, the Group consists of three segments iden-(2) Basis of measurement about reported segment incometified by products and services based on the business divisions.

(loss), segment assets and other material items
The accounting methods for each reported segment are almost(b) Types of products and services of each reported segment In

the same as those set forth in the “Basis of presenting the con-the Mineral Resources segment, the Group mainly engages in thesolidated financial statements,” excluding the allocation of “costexploration, development and production of nonferrous metalof capital” to each segment.

resources in Japan and overseas, as well as sales of ores andCost of capital refers to an interest rate burden to be borne byother products.

each business segment of the parent company, which does not

In the Smelting & Refining segment, the Group mainly engages

financially assume interest expenses, in proportion to its holding

in smelting and sales of copper, nickel, ferro-nickel, zinc and lead,assets in calculating segment income for internal administration

as well as smelting and sales of precious metals such as gold, sil-purposes. The cost of capital is obtained by multiplying total

ver and platinum.

assets held by each segment of the parent company by an “inter-In the Materials segment, the Group mainly engages in manu-

nal interest rate.” An amount that corresponds to the weighted

facturing, processing and sales of semiconductor materials suchaverage of the parent company’s cost of capital and cost of liabili-

as lead frames, tape materials (copper-clad polyimide film, chip-ty is used as the internal interest rate. The same amount as a

on-film (COF) substrates (electronic packaging materials used tototal of the cost of capital allocated to each segment is reported

make LCD panel integrated circuits) and bonding wires, as well as

as a negative value in “Adjustments.” The cost of capital is offset

of advanced materials such as pastes, powder materials (e.g.,in the total for all segments Companywide. The cost of capital

nickel powder), battery materials (e.g., nickel hydroxide) and crys-therefore has no effect on the consolidated financial statements.

talline materials.

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

(3) Information about reported segment income (loss), segment assets and other material items
Segment information as of and for the years ended March 31, 2012 and 2011 are as follows.
Millions of yen

2012

Mineralresources

Smelting &Refining

Materials

Total ofreportedsegment

Others*Adjustment**

Consolidated

Net sales:
Outside customers¥ 63,208¥601,459¥160,754¥825,421¥22,476¥

Inter segment

42,535

87,121

21,289150,945

10,709(161,654)—¥ 847,897—

Total

105,743

688,580

182,043976,366

33,185(161,654)

847,897

Segment income (loss)¥ 80,540¥ 25,644¥(294)¥105,890¥ 3,393¥(533)¥ 108,750

Segment assets¥248,351¥564,171¥109,583¥922,105¥52,550¥171,339¥1,145,994
31,113

Depreciation

7,104

13,611

7,663

28,378

1,110

1,625

Amortization of goodwill

89

—

4

93

—

—

93

Interest income

367

129

17

513

6

508

1,027

Interest expense

47

466

313

826

59

2,525

3,410

Equity in earnings of affiliated companies

28,311(9,377)93

19,027

2,770

1,420

23,217

Investment in equity-method
affiliated companies

152,104

143,136469

295,709

21,494(61,516)

255,687

4,065

59,193

6,563

69,821

1,394

1,928

73,143

Capital expenditures

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 69

Millions of yen

2011

Mineralresources

Smelting &Refining

Materials

Total ofreportedsegment

Others*Adjustment**

Consolidated

Net sales:
Outside customers¥ 61,474¥590,646¥188,630¥840,750¥23,327

Inter segment

26,514

94,39918,528

139,441

7,101(146,542)

—

Total

87,988685,045

207,158

980,191

30,428(146,542)

864,077

Segment income (loss)¥ 70,410¥ 49,518¥

5,386¥125,314¥ 2,336¥ (3,949)¥ 123,701

Segment assets¥176,250¥583,193¥113,879¥873,322¥53,485¥125,546¥1,052,353

Depreciation¥—¥ 864,077

8,337

14,296

8,897

31,530

1,483

1,612

34,625

Amortization of goodwill

99

—

11

110

—

—

110

Interest income

115

52

16

183

7

548

738

Interest expense

79

216

332

627

67

1,790

2,484

Equity in earnings of affiliated companies

29,8494,180

104

34,133

2,372(1,673)

34,832

Investment in equity-method
affiliated companies

72,816

158,175

414

231,405

24,802(54,554)

201,653

Capital expenditures

3,816

41,373

5,829

51,018624

1,463

53,105Materials

Total ofreportedsegment

Others*$1,957,312 $10,050,177

Thousands of U.S. dollars

2012

Mineralresources

Smelting &Refining

Adjustment**

Consolidated

Net sales:
Outside customers$ 769,609$7,323,256$273,663$

Inter segment

517,898

1,060,770

259,211

1,837,879

130,391(1,968,270)— $10,323,840
—

Total

1,287,507

8,384,026

2,216,523

11,888,056

404,054(1,968,270)

10,323,840

Segment income (loss)$ 980,640$ 312,237$(3,580) $ 1,289,297$ 41,313$

Segment assets$3,023,877$6,869,244$1,334,263 $11,227,384$639,839$2,086,192 $13,953,415

Depreciation

86,497

165,725

93,303

345,525

13,515

19,786

Amortization of goodwill

1,084

—

48

1,132

—

—

1,132

Interest income

4,469

1,571

207

6,247

73

6,185

12,505Interest expense
Equity in earnings of affiliated companies
Investment in equity-method
affiliated companies
Capital expenditures(6,490) $ 1,324,120
378,826

572

5,674

3,811

10,057718

30,745

41,520344,710(114,173)

1,132

231,669

33,727

17,290282,686

1,851,991

1,742,798

5,710

3,600,499

261,707(749,007)

3,113,199

49,495

720,723

79,910850,128

16,973

23,475890,576* The “Others” segment refers to businesses other than thoseexhaust processing catalysts, chemical catalysts, petroleum refin-

included in the reported segments and other profitseeking busi-

ery and desulfurization catalysts, and autoclaved lightweight con-ness directly operated by Head Office divisions/ departments.

crete (ALC) products, as well as technical engineering and real

Other businesses include manufacturing and sales of automotive

estate businesses.

70 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

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

Head Office expenses not allocated to each reported segment*a

Thousands of U.S. dollars

2012

2011

2012

¥(10,261)¥(10,281)$(124,936)

Cost of capital to be borne by each reported segment

15,22415,084

185,365

Eliminations of inter-segmental transactikons among
the reported segments(2,716)(3,816)(33,070)

Non-operating income/expenses not allocatedto each reported segment*b(3,287)(5,422)(40,022)

507

486

(533)

¥ (3,949)

Other adjustments
Total

¥

6,173
$

(6,490)*a Head Office expenses not allocated to each reported segment*b Non-operating income/expenses not allocated to each report-

mainly consist of general administrative expenses and R&D

ed segment mainly consist of foreign exchange gains/losses

expenses (hereinafter “Head Office expenses”), which are notand interest expenses, which are not attributable to the report-

attributable to the reported segments.

ed segments.

2. Adjustments for segment assets are as follows:
Millions of yen

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

Thousands of U.S. dollars

2012

2011

2012

¥266,726¥205,301$3,247,607(95,387)(79,755)(1,161,415)¥171,339¥125,546$2,086,192* Corporate assets not allocated to each reported segment mainly refer to the assets under the control of the Administration Dept. at
the Head Office, which are not allocated to the reported segments.

3. Adjustments on depreciation refer to depreciation at the Head

6. Adjustments on equity in earnings (losses) of affiliated compa-

Office divisions/departments, which are not allocated to thenies refer to the deduction of unrealized income relating to thereported business segments.

inter-segmental transactions among the reported segments.

4. Adjustments on interest income consist of interest income at

7. Adjustments on investment in equity method affiliated compa-

the Head Office divisions/departments, which is not allocatednies represent the amount corresponding to “Foreign currency

to the reported segments, and eliminations of transactionstranslation adjustments.”

among the reported segments.
8. Adjustments on increase in property, plant and equipment and5. Adjustments on interest expenses consist of interest expenses

intangible assets refer to increases thereof at the Head Officeat the Head Office divisions/departments, which are not allo-

divisions/departments, which are not allocated to the reported

cated to the reported segments, and eliminations of transac-

segments.

tions among the reported segments.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 71

Related information(1) Information about geographic areas(a) Sales
2012

Millions of yen
Japan

China

TaiwanEast Asia

Southeast Asia

North America

OthersTotal¥514,539¥88,316¥85,310¥14,552¥74,850¥60,549¥9,781¥847,897

Japan

China

TaiwanEast Asia

Southeast Asia

North America

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

Japan

China

TaiwanEast Asia

Southeast Asia

North America

OthersTotal$6,264,934$1,075,320$1,038,719$177,183$911,360$737,234$119,090$10,323,840

2011

Millions of yen

2012

Thousands of U.S. dollars*1*3

Net sales are segmented by country or region according to cus-

Major countries or regions that belong to the segments are as

tomers’ location data.

follows:*2

1. East Asia: South Korea and Hong Kong

Regions are segmented based on their geographical proximity,

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

and only those countries for which the net sales amount

3. North America: United States, Canada and Mexico

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

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

Consolidated Statements of Income are separately listed.

(b) Property, plant and equipment
Millions of yen

2012
Japan

East Asia

Philippines

Southeast Asia

North America

OthersTotal¥132,076¥8,074¥120,975¥1,022¥22,852¥5,458¥290,457

Japan

East Asia

Philippines

Southeast Asia

North America

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

Japan

East Asia

Philippines

Southeast Asia

North America

OthersTotal$1,608,133$98,308$1,472,970$12,444$278,242$66,455$3,536,552

Millions of yen

2011

Thousands of U.S. dollars

2012

*1

*2

Regions are segmented based on their geographical proximity,

Major countries or regions that belong to the segments are as

and only those countries for which the property, plant and equip-

follows:

ment amount accounts for more than 10% of the property, plant

1. East Asia: China and Taiwan

and equipment stated in the Consolidated Balance Sheets are

2. Southeast Asia: Thailand, Malaysia and Singapore

separately listed.

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

Thousands of
U.S. dollars

2012

2011

2012

Sales

Sales

Sales

Sumitomo Corporation¥138,685¥113,063$1,688,603

Smelting & Refining, Materials

MITSUI&CO.,LTD.

¥ 79,333¥ 80,619$ 965,944

Smelting & Refining

Customer’s designation or name72 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Related reported segments

(3) Information about impairment loss of fixed assets by reported segment
Millions of yen
2012

Loss on impairment of fixed assets

MineralResources

Smelting &Refining

Materials

OthersAdjustment

Consolidated

¥—

5,477

4,591

1,034

—

¥11,102

MineralResources

Smelting &Refining

Materials

OthersAdjustment

Consolidated

¥63

—

—

—

—

¥63

MineralResources

Smelting &Refining

Materials

OthersAdjustment

Consolidated$—

66,68755,89912,590—$135,176

Millions of yen
2011

Loss on impairment of fixed assets

Thousands of U.S. dollars
2012

Loss on impairment of fixed assets(4) Information about unamortized balance of goodwill by reported segment
Millions of yen
MineralResources

Smelting &Refining

Materials

OthersAdjustment

Consolidated

¥519

—

1

—

—

¥520

MineralResources

Smelting &Refining

Materials

OthersAdjustment

Consolidated

¥635

—

5

—

—

¥640

2012

MineralResources

Smelting &Refining

Materials

OthersAdjustment

Consolidated

Balance at end of year

$6,319

—

12

—

—

$6,331

2012

Balance at end of year

Millions of yen
2011

Balance at end of year

Thousands of U.S. dollars

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

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 73

17. Asset retirement obligations

tions of dioxin-related regulations, and posts these amounts as(1) Asset retirement obligations that are recorded in

asset retirement obligations.

the consolidated balance sheets

Sumitomo Metal Mining Pogo LLC, Sumitomo Metal Mining

With regard to mines and quarries in operation in Japan, theArizona Inc., Sumitomo Metal Mining Oceania Pty. Ltd. and Coral

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

Bay Nickel Corporation are subject to the U.S. GAAP orSpecial Measures for Mine Damages Caused by the Metal Mining

International Financial Reporting Standards, as well as the mining

Industry, etc., the Quarrying Act and leasing agreements tolaws and regulations of the United States, Australia and theundertake mine pollution prevention activities for post-use speci-

Republic of the Philippines, respectively. Based on its business

fied facilities and to restore such facilities to their original condi-

plans, the Company determines asset retirement obligations bytion. Based on these requirements, the Company records as asset

making rational estimates of its obligations under such regula-retirement obligations a rational estimate of the expenses

tions of restoring operating mines and smelters to their original

required for mine pollution prevention activities and any removal

condition and the expenses of fulfilling these obligations.

expenses.

Furthermore, during the year ended March 31, 2011, theFor the domestic facilities of the Group in Japan, the Company

Company revised its estimates in accordance with changes in the

makes rational estimates of the costs of demolishing and con-discount rates and the mine life. Asset retirement obligations are

ducting surveys in accordance with requirements regarding spe-

calculated based on determining the estimated period untilcial removal methods and obligations to conduct environmental

expenditure, the remaining useful life of facilities and the minesurveys under asbestos damage prevention regulations of asbestos-life (7 to 31) and discounted by the rates of 1.656% to 11.0%.

related regulations and occupational health and safety regula-

The asset retirement obligations as of March 31, 2012 and 2011 are as follows:
Millions of yen

Balance at the beginning of the year*
Newly recorded obligations
Adjustment due to passage of timeThousands of U.S. dollars

2012

2011

2012

¥4,268¥3,484$51,966

2

701

24

205

148

2,496

Decrease due to fulfillment of obligations

(1)

(17)

(12)

Increase due to change in estimates

20

214

244

Foreign exchange adjustment
Year-end balance

(177)

(262)

(2,155)¥4,317¥4,268$52,563* The balance of the asset retirement obligation at beginning oflease assets is unclear or for which no relocation plans are in exis-

the year ended March 31, 2011 was determined based upon

tence, asset retirement obligations cannot be rationally estimat-

the guidance set forth in “Accounting Standards for Asseted. Furthermore, certain sites at our facilities employ hazardous

Retirement Obligations” (ASBJ Statement No.18 issued on

substances specified under the Water Pollution Control Act, andMarch 31, 2008) and “Guidance on Accounting Standards forat the time of removing its facilities the Company is required toAsset Retirement Obligations” (ASBJ Guidance No.21, issued

conduct soil remediation surveys in accordance with the Soilon March 31, 2008).

Contamination Countermeasures Law. However, as the responsi-(2) Asset retirement obligations other than those recorded in thebalance sheets

bility for fulfilling this obligation is estimated to be deferred, thetiming for performing such surveys is unclear. Therefore,

The Group is required under leasing agreements to restore certain

asset retirement obligations cannot be rationally estimated.

facilities on borrowed buildings and sites to their original condi-

Consequently, no corresponding asset retirement obligations aretion at the time of removal. In cases where the period of use forincluded in these obligations.

74 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

18. Information for certain leases

straight-line method with no residual value. For finance lease(1) Finance leases

transactions other than those involving a transfer of title that

Lease assets

began prior to the application of the new accounting standards,

Lease assets related to non-ownership transfer finance leases.

the previous operating lease method has been applied.

Leases can depreciate assets over the lease period using the

As a lessee
A summary of assumed amounts inclusive of interest of acquisition cost, accumulated depreciation and net book value of finance leases
accounted for in the same manner as operating leases as of March 31, 2012 and 2011 are as follows:
Millions of yen
2012

Machinery and equipment

Acquisition cost

Accumulated
depreciation

Net book value

¥53

¥49

¥4

2011
Acquisition cost

Accumulated
depreciation

Net book value

¥91

¥79

¥12

Thousands of U.S. dollars
2012

Machinery and equipment

Acquisition cost

Accumulated
depreciation

Net book value

$645

$596

$49

Future lease payment, inclusive of interest as of March 31, 2012 and 2011 under such leases are as follows:
Millions of yen

Thousands of U.S. dollars

2012

2011

2012

Due within one year

¥3

¥ 8

$37

Due after one year

1

4

12

¥4

¥12

$49

Total

Total lease expenses and assumed depreciation charges for the years ended March 31, 2012, 2011 and 2010 are as follows:
Millions of yen

Thousands of U.S. dollars

2012

2011

2010

2012

Total lease expenses

¥8

¥14

¥22

$97

Assumed depreciation charge

8

14

22

97

As a lessor
As of March 31, 2012 and 2011, there was no lease asset related to non-ownership transfer the Company leased as a lessor.

(2) Operating leases
Future minimum lease payments as of March 31, 2012 and 2011 are as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of U.S. dollars

2012

2011

2012

¥ 139

¥ 138

$ 1,692

896

1,035

10,910¥1,035¥1,173$12,602

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012| 75

19. Business Combination

Standard for Business Divestitures” (Revised guidance No.10,

The year ended March 31, 2011

issued on the ASBJ on December 26, 2008).

Establishment of Shisaka Smelting Co., Ltd(1) Outline of the transactions by the transaction undercommon control(a) The name of the subject business and the content of its business

Formation of a jointly controlled company(1) Outline of the transactions(a) The name of the subject business and the content of its businessType of business: Manufacture of crude zinc oxide

Type of business: Copper and copper alloy fabricated business

Description of business activities: Primarily manufacture ofof consolidated subsidiary Sumitomo Metal Mining Brass &crude zinc oxide at the Company’s Shisaka Plant

Copper Co., Ltd.

(b) Outline and details of the purpose of the transaction
The Company previously performed operations in the manufacture of crude zinc oxide at its Shisaka Plant by recovering

Description of business activities: Primarily manufacture andsales of brass strips, sheets, and rolled products(b) Outline and details of the purpose of the transaction

zinc from steelmaking dust produced by electric furnace man-Previously, the Company’s copper and copper alloy fabricatedufacturers. However, sluggish growth in the volume of steel-business achieved its high profitability through constructing an

making dust collected was resulting in reduced production

integrated supply system handled by consolidated subsidiaryratios and a severe operating environment for Shisaka Plant.

Sumitomo Metal Mining Brass & Copper Co., Ltd., while plac-

In order to address this situation, the Company established a

ing a particular focus on the utilization of rolling, plating, andnew company dedicated to the manufacture of crude zincother treatment technologies. Meanwhile, Mitsui Mining &oxide in the form of a spin-off. This company was established

Smelting Co., Ltd. had established a leading position in brass

to strengthen production systems by separating the mainte-

production in Japan through the integrated supply system ofnance and management of assets relating to past operations

its Rolled Copper & Zinc Division, which covered all aspects forat Shisaka Plant from the manufacture of crude zinc oxide.

production from raw materials to fabrication.

Another goal of this establishment was fortifying raw mate-

However, demand for copper and copper alloy fabricatedrial procurement capabilities through direct collaboration for

products has rapidly declined since around 2000, and compe-

the collection of steelmaking dust with the consignee, MS

tition within the industry has been intensifying every year. To

Zinc Co., Ltd., an equity-method affiliate of the Company.

prosper in this environment, Mitsui and Sumitomo have decid-(c) Effective date of establishment
October 1, 2010(d) The name of the company after business combination

ed to integrate their copper and copper alloy businesses toestablish a system to develop synergies through more effective
utilization of production facilities, improved operational andShisaka Smelting Co., Ltd. (a consolidated subsidiary of the

managerial efficiency, and the supplementation and augmen-

Company)tation of each companies’ manufacturing technologies.

(e) The legal structure of the business combination

This integration will enable the companies to create a stable

The business combination was accomplished utilizing an incor-

supply system for high-quality rolled copper and copper alloy

poration-type corporate split method (short form merger) withproducts that responds quickly to demand, establish over-

the Company as the corporate split company and Shisaka

whelming supremacy in the brass business in the Japanese

Smelting Co., Ltd., a company engaged in the manufacture ofmarket, and aggressively develop operations in other Asiancrude zinc oxide, as the newly established company.

markets to further increase the scale of operations.
(c) Effective date of business combination(2) Outline of the accounting procedure implemented
The Company implemented the accounting procedures fora business combination under common control based on the“Accounting Standard for Business Combinations” (ASBJ

July 1, 2010(d) The name of the company after business combination
Mitsui Sumitomo Metal Mining Brass & Copper Co., Ltd.
(e) The legal structure of the business combination

Statement No.21, of December 26, 2008) and “Guidance on

The business combination was accomplished utilizing an

Accounting Standard for Business Combination and Accounting

absorption-type split with Mitsui Mining & Smelting Co., Ltd.

76 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

as the splitting company and Sumitomo Metal Mining Brass &(2) Outline of the accounting procedure implemented

Copper Co., Ltd. (consolidated subsidiary of the company) as

The Company implemented the accounting procedures forthe succeeding company.
(f) Reason for definition as a jointly controlled company

the formation of a jointly controlled company based on the

In regard to Mitsui Sumitomo Metal Mining Brass & Copper

accounting standards “Accounting Standard for BusinessCo., Ltd.’s definition as a jointly controlled company, theCombinations” (ASBJ Statement No.21, issued by the ASBJ on

Company and Mitsui Mining & Smelting Co., Ltd. have con-

December 26, 2008) and “Guidance on Accounting Standard

cluded a shareholders’ agreement defining the company as afor Business Combination and Accounting Standard forjointly controlled company. Further, consideration for the busi-

Business Divestitures” (Guidance No.10, revised by the ASBJ

ness combination was paid entirely in the form of stock withon December 26, 2008).

voting rights. Moreover, there is nothing that suggests a differ-

Further, Mitsui Sumitomo Metal Mining Brass & Copper

ent type of control. Therefore, the company after the businessCo., Ltd. is an equity-method affiliate of the Company withcombination is defined as a jointly controlled company.

the Company and Mitsui Mining & Smelting Co., Ltd. eachpossessing 50% of its voting rights.

20. Related party transaction(1) Related party transaction
Related party transaction for the years ended March 31, 2012 is as follows.
Capitalinvestment

Location

Name of related party

Segment

Votinginterest

Description of thebusiness relationshipTransaction detail

Mineralresources

Indirectly
45.0%

Pledge as security for the loan
from the financial institution

Pledge of sharesas security*

Thousands of
U.S. dollars

Sierra Gorda S.C.M.

Santiago,
Chile$800,142

Amounts

Millions of yen¥11,498* The Company pledges its owned shares in Sierra Gorda S.C.M. as security for the loan from the financial institution to finance developments of the Sierra Gorda
copper project.
The Amounts of security is the balance as of March 31, 2012.

(2) Condensed financial information of a major affiliatedcompany
Pursuant to the relevant accounting standards, condensed

2010

Millions of yen

Total current assets¥ 93,590

Total long-term assets

92,697

Total current liabilities

39,832

financial information of Sociedad Minera Cerro Verde S.A.A.,

Total long-term liabilities

20,056Compania Contractual Minera Candelaria,Vale New Caledonia

Total net assets

126,399

Net sales

207,997

Net income before tax

146,335

Net income

92,578S.A.S which is disclosed for the year ended December 31, 2011
and 2010 are as follows:

Sociedad Minera Cerro Verde S.A.A.
2011

Millions of yen

2011

Thousands of
U.S. dollars

Total current assets¥153,107

Total current assets$1,864,203

Total long-term assets

95,396

Total long-term assets

1,161,524

Total current liabilities

26,115

Total current liabilities

317,972

Total long-term liabilities

14,229Total long-term liabilities

Total net assets

208,159

Total net assets

2,534,505

Net sales

201,100

Net sales

2,448,557

Net income before tax

124,657

Net income before tax

1,517,801

Net income

86,056

Net income

1,047,802

SUMITOMO METAL MINING CO., LTD.

173,250

Annual Report 2012

| 77

Compania Contractual Minera Candelaria
2011

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

2011

Millions of yen

Total current assets¥ 52,043

Total current assets¥ 21,860

Total long-term assets

78,687

Total long-term assets

281,318

Total current liabilities

18,974

Total current liabilities

42,958

Total long-term liabilities

9,955

Total long-term liabilities

137,565
122,655

Total net assets

101,801

Total net assets

Net sales

122,489

Net sales

Net income before tax

66,404

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

Net income

49,713

Net income (loss)(76,582)

8,358

2011

Thousands of
U.S. dollars

2011

Thousands of
U.S. dollars

Total current assets$ 633,666

Total current assets$ 266,163

Total long-term assets

958,079

Total long-term assets

3,425,277

Total current liabilities

231,024

Total current liabilities

523,049

Total long-term liabilities

121,210

Total long-term liabilities

1,674,967
1,493,424

Total net assets

1,239,511

Total net assets

Net sales

1,491,404

Net sales

101,765

Net income before tax

808,523

Net income (loss) before tax(932,449)

Net income

605,296

Net income (loss)(932,449)

21. Earnings per share
Reconciliation of the difference between basic and diluted net income per share (“EPS”) for the years ended March 31, 2012, 2011 and2010 are as follows:
Millions of yen

Thousands of U.S. dollars

2012

2011

2010

2012

¥ 65,219¥ 83,962¥ 53,952$794,095

Basic net income per share calculation
Numerator :Net income
Denominator (thousands of shares) :Weighted average number of shares

561,981562,067¥ 116.05¥ 149.38¥¥ 65,219¥ 83,962¥ 53,952$794,095

66,08684,82654,816804,651

Weighted average number of shares

561,981562,067

560,485—

Assumed conversion of convertible bonds

57,17657,17657,176—

Basic EPS (yen and U.S. dollars)

560,485

—

96.26

$

1.41

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

619,157

619,243¥ 106.74¥ 136.98

617,661
¥

—

88.75

$

1.30

22. Subsequent event
The following appropriation of retained earnings of the Company, which has not been reflected in the accompanying consolidated
financial statements for the year ended March 31, 2012, was approved at a shareholders’ meeting held on June 25, 2012:
Year-end dividends of ¥12.00 per share

78 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Millions of yen

Thousands of U.S. dollars¥6,743$82,102Independent Auditors’ Report

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 79

Glossary
Mineral resources segment andSmelting & refining segment

Troy ounce (toz)other metals chemically bonded to

The troy ounce is the standard unit ofsulfur. Since the application of heat

Metal trading

weight for precious metals such as gold

breaks these bonds, releasing theLondon Metal Exchange (LME)and silver. It equals approximately 31.1

sulfur, such ores are generally refined

The LME specializes in trading of non-grams. It is named after Troyes, a city inusing pyrometallurgical techniques.

ferrous metals such as copper, nickel,

the Champagne region of central France

aluminum, lead and zinc. The LME

that was the site of a major market in

Oxide ores

trading prices for metals are used as theEurope in medieval times. Originally used

These ores contain metals in oxidized

international pricing benchmarks for

as a unit of exchange for valuing goods

forms. Unlike sulfide ores, oxides needsales of refined metal and purchases ofin terms of gold or silver weights, the troy

much more energy to achieve melting.

refining ores.

ounce is still used today in gold trading.

For this reason, the hydrometallurgicalapproach is generally used to refine

TC/RC

Metal refining

Treatment Charge (TC) and Refining

Smelting and refining

Charge (RC) are commonly used in the

Refining processes extract valuable

Copper concentrates

terms of purchase for copper concen-

metals from ores or other raw materials.

Used as raw materials in copper smelting,trate or nickel ore for refining. They are

They fall into two basic types: pyromet-

copper concentrates have a copper

amounts designed to cover refining

allurgical (dry) and hydrometallurgicalcontent of about 30% by weight. The

costs. For example, copper concentrate(wet). At SMM’s Toyo facilities in Ehime

remainder consists mostly of sulfur andcontracts may define a purchase pricePrefecture, the copper concentrateiron. Copper concentrates are madebased on the LME price at a certain

preprocessing undertaken at Saijo uses

mostly from sulfide ores. Ores extracted

date, minus the TC or RC being used atpyrometallurgical processes and thefrom overseas mines have a typical

the time.

nickel refining at the Niihama site uses

grade of about 1%. The ores are thenthese ores.

hydrometallurgical processes entirely. The“dressed” at the mine to increase theLondon fixing

term ‘smelting’ is used for the extraction

purity and produce concentrate. Most

Gold is not traded on the LME. Its priceof metal from ores using melting andof the copper ores imported by SMM

is determined for each transaction

heating (pyrometallurgy). The term

for smelting in Japan are concentrates.

between market participants. The‘refining’ refers to any process that

financial institutions in the London

increases the grade or purity of a metal.

Bullion Market Association (LBMA)

Nickel oxide ores
Whilst the higher-grade sulfide ores areagree on a standard price for gold based

Pyrometallurgical refining

used predominantly in nickel refining,on these transactions and publish it on

The precursor ore is melted at highnickel oxide ores are more prevalent

the morning and afternoon of eachtemperature in a furnace, and refining

than nickel sulfides. The sulfide-oxide

trading day. This “London fixing” pricetechniques are applied to separate theratio in current nickel reserves is believed

is the benchmark for trading in gold.

metal in a molten state.

to be about 3:7. High refining costs andtechnical issues have limited use of oxide

Pound (lb)

Hydrometallurgical refiningores in nickel refining to date, but SMM

Part of the imperial system of measures,

The ore and impurities are dissolved inhas succeeded in refining nickel fromthe pound is the standard unit of weighta solution, and chemical reactions are

low-grade oxide ores based on HPAL

used in measuring and pricing baseused to separate out the metal.

technology.

in TC/RC calculations. One pound is

Metal ores

Mixed sulfide (MS) ores

equal to 453.59 grams; an imperial ton

Sulfide ores

CBNC produces a mixed nickel-cobalt

equals 2,204.62lb.

These ores contain copper, nickel orsulfide intermediate containing about

metals such as copper and nickel, and

80 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

60% nickel by weight. This is used as

Matte Chlorine Leach Electrowinning

Materials segmenta raw material in electrolytic nickel(MCLE)

Copper-clad polyimide film (CCPF)

production.

MCLE is the technology used in the

CCPF is a polyimide film that is coatedmanufacturing process at SMM’s nickel

using a copper base. It is used as a

Matterefinery. The matte and mixed sulfide

material for making COF substrates.

A matte is another term for metalores are dissolved in chlorine at highsulfides. For raw material, electrolyticpressure to produce high-grade nickel

Chip-on-film (COF) substrates

nickel production at SMM also uses ausing electrolysis. MCLE is competitive

COF substrates are electronic packaging

nickel matte (of about 75–80% purity)

in cost terms, but poses significant

materials used to make integrated

sourced from P.T. Vale Indonesia.

operational challenges.

circuits for LCD drivers. They connect
these circuits to the LCD panel.

Proprietary ore ratio

Main applications for metals

This ratio is the proportion by volume

CopperLeadframes (L/F)

of ore procured from overseas mining

Copper is fabricated into wires, pipes

Leadframes are electronic packaging

interests relative to the overall volume

and other forms. Besides power cables,

materials used to form connections inof smelting ores used as raw materials.

copper is used widely in consumer

semiconductor chips and printed circuit

Typically, off-take rights are proportional

applications such as wiring in vehicles orboards. They contain thin strips of ato the equity interest in a mine. In thehouses, and in air conditioning systems.

metal alloy containing mostly nickel

case of Cerro Verde, SMM has secured

or copper.

50% off-take rights for the first ten

Electrolytic nickel

years of production from 2006, based

This form of nickel, which has a purity

Secondary batteries

on a 21% equity interest.

of at least 99.99%, is used in specialty

Secondary batteries are ones that cansteels, electronics materials and electro-

be recharged and used again. SMM

Nickel production process

plating, among other applications. SMM

supplies battery materials that are used

Coral Bay Nickel Corporation (CBNC)

is the only producer of electrolytic nickelin the anodes of nickel metal hydride

Based in the Philippines, this SMM

in Japan.

batteries and lithium-ion rechargeable

subsidiary produces mixed nickel-cobalt

batteries, which supply power for

sulfides using HPAL technology andFerronickel

hybrid vehicles or notebook computers,

exports the raw materials to the SMM

Ferronickel is an alloy containing nickel

among other consumer applications.

Group’s nickel refining facilities in(about 20%) and iron. Its main use is

Niihama, Ehime Prefecture.

in the manufacture of stainless steel,which is about 10% nickel by weight.

High Pressure Acid Leach (HPAL)

Based in Hyuga, Miyazaki Prefecture,

HPAL technology enables the recovery

SMM Group firm Hyuga Smeltingof nickel from low grade nickel oxide

produces ferronickel.

ores that traditionally were difficult toprocess. SMM was the first company inGold

the world to apply it successfully on aGold is in demand worldwide forcommercial scale. The oxide ores areinvestment and decorative purposes.

subjected to high temperature andGold is widely used in industry withinpressure and reacted under stablethe electronics sector because of itsconditions with sulfuric acid to produce

high malleability and ductility.

a nickel-rich refining intermediate.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 81

Consolidated Subsidiaries and Equity-Method Affiliates
As of March 31, 2012

Percentage of
Voting Shares(%)

Location

Sumiko Resources Exploration & Development
Co., Ltd

100

Tokyo

Geological survey of resources, Test boring

Sumitomo Metal Mining America

100

USA

Exploration; Management of mining subsidiaries in North America

Sumitomo Metal Mining Arizona

80

USA

Mining and related operations

SMMA Candelaria Inc.

100

USA

Investment in the local company in Chile operating the Candelaria Mine

Sumitomo Metal Mining Canada Ltd.

100

CanadaExploration, Consulting

Sumitomo Metal Mining Oceania

100

Australia

Resource surveys, mine development and related operations in Oceania

Sumitomo Metal Mining Pogo LLC

100

USA

SMM Resources

100

CanadaMineral Resources

Principal Operations

Consolidated companies

Investment in the Pogo Mine
Mineral resources business
Investments in local Peruvian companies engaged in Cerro Verde Mine
operations

SMM Cerro Verde Netherlands B.V.

80

Netherlands

SMM Exploration Corporation

100

USA

SMM Solomon Limited

70

SolomonIslands

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

Tokyo

Exploration in the Solomon Islands

SUMAC MINES LTD.

100

CanadaExploration

Stone Boy Inc.

80

USA

Exploration

SMM Sierra Gorda Inversiones Ltda.

70

Chile

Investment in the Sierra Gorda Project

Sumitomo Metal Mining do Brasil LTDA.

100

BrazilExploration

Sociedad Minera Cerro Verde S.A.A.

21

Peru

Cerro Verde Mine

Compania Contractual Minera Candelaria

20

Chile

Candelaria Mine

Compania Contractual Minera Ojos Del Salado

20

Chile

Ojos del Salado Mine

Sierra Gorda SCM

45

Chile

Sierra Gorda Mine

Cordillera Exploration Co., Inc.

25

Philippines

Percentage of
Voting Shares(%)

Location

Hyuga Smelting Co., Ltd.

60

MiyazakiPrefecture

Ferronickel smelting

Shisaka Smelting Co., Ltd.

100

Ehime
Prefecture

Manufacture of crude zinc oxide

Sumiko Logistics Co., Ltd.

100

Ehime
Prefecture

Maritime trading, Harbor transportation and services,
Land transportation

SUMIC Nickel Netherlands b.v.

52

Netherlands

Investment in nickel and cobalt development businesses,
Sale of nickel and cobalt

Coral Bay Nickel Corporation

54

Philippines

Manufacture of nickel and cobalt intermediates

Taganito HPAL Nickel Corporation

62.5

Philippines

Taganito Project

Sumitomo Metal Mining Philippine Holdings
Corporation

100

Philippines

Regional headquarters for the nickel business

Sumiko Business Consulting (Shanghai) Co., Ltd.

100

China

97

Kanagawa
Prefecture

Mineral resources business
Exploration in the Solomon Islands

Equity-method affiliates

Smelting & Refining

Exploration in the Philippines

Principal Operations

Consolidated companies

Taihei Metal Industry Co., Ltd.

82 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Business consulting
Manufacture of heat-, corrosion- and friction-resistant steel castingsand precision castings

Equity-method affiliates
Jinlong Copper Co., Ltd.

27

China

Manufacture and sale of electrolytic copper and sulfuric acid

Acids Co., Ltd.

50

Tokyo

Manufacture and sale of sulfuric acid and related products

P.T. Vale Indonesia Tbk

20

Indonesia

Nickel ore mining, Nickel smelting

Nickel Asia Corporation

25

Philippines

Nickel ore mining

26

New
Caledonia

Nickel ore mining, Harbor transportation

Vale New-Caledonia S.A.S.

21

FranceGoro MineMS Zinc Co., Ltd.

50

Tokyo

Manufacture and sale of zinc and related operations

Mitsui Sumitomo Metal Mining Brass &Copper Co., Ltd.

50

SaitamaPrefecture

Percentage of
Voting Shares(%)

Location

Okuchi Electronics Co., Ltd.

100

Kagoshima
Prefecture

Leadframe etching and plating, Manufacture of bonding wire andfunctional inks, Recovery and recycling of non-ferrous metals

Niihama Electronics Co., Ltd.

100

Ehime
Prefecture

Manufacture of semiconductor leadframes and flexible circuit materials

Shinko Co., Ltd.

94

NaganoPrefecture

Design, manufacture and sale of printed circuit boards

Sumitomo Metal Mining Asia Pacific Pte. Ltd.

100

Singapore

Regional headquarters for international leadframe operations

M-SMM Electronics SDN.BHD

100

Malaysia

Manufacture and sale of leadframes

Sumiko Electronics Taiwan Co., Ltd.

70

TaiwanManufacture and sale of leadframes and tape materials

Sumiko Leadframe Chengdu Co., Ltd.

85

China

Manufacture and sale of leadframes

Sumiko Precision Chengdu Co., Ltd.

70

China

Manufacture of leadframes

Sumiko Electronics Suzhou Co., Ltd.

100

China

Manufacture and sale of semiconductor package materials

Sumiko Tec Co., Ltd.

100

Kanagawa
Prefecture

Terminals and connectors for electronic and electric equipment; Related
components, electric wire, power cords and pressure bonding machines
and their maintenance; Manufacture and sale of formed products for
optical equipment

Nittosha Co., Ltd.

100

Kanagawa
Prefecture

Plating of metal products, surface treatment processing and distribution;
Electromagnetic shielding processing to electronics resin products
through a dry plating method

Sumiko Kunitomi Denshi Co., Ltd.

100

Hokkaido

Manufacture of crystal products and magnetic materials

Dongguan Sumiko Electronic Paste Co., Ltd.

69

China

FIGESBAL

Materials

Manufacture and sale of copper and brass products and processed
copper and brass products

Principal Operations

Consolidated companies

Manufacture and sale of thick-film paste

Dongguan Sumiko Electronic Paste Co., Ltd.

85

China

SMM KOREA Co., Ltd.

100

South Korea

Sales support for advanced materials and business operations

Manufacture and sale of thick-film paste

SMM Precision Co., Ltd.

100

Akita
Prefecture

Manufacture and sale of optical communications components

50

Akita
Prefecture

Manufacture and sale of rare earth iron garnet (RIG)

Equity-method affiliates
Granopt Ltd.

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 83

Percentage of
Voting Shares(%)

Location• Sumico Lubricant Co., Ltd.

100

Tokyo

Manufacture and sale of various lubricants• Sumico Lubricant Trading (Shanghai) Co., Ltd.

100

China

Sale of various lubricants• Sumitomo Metal Mining Siporex Co., Ltd.

100

Tokyo

Manufacture and sale of ALC (Autoclaved Lightweight aerated
Concrete) and other construction materials• JCO Co., Ltd.

100

Tokyo

Management of facilities using uranium and related wastes• Igeta Heim Co., Ltd.

100

Tokyo

Construction of steel frame and reinforced concrete apartments andcondominiums

Sumiko Techno-Research Co., Ltd.

100

Ehime
Prefecture

Environmental measurement verification operations such as water
quality, air, soil, noise and vibration; Data collection, adjustment andproduct evolution as well as technological development

Sumiko Technical Service Co., Ltd.

100

Ehime
Prefecture

Commission-based work in area of nonferrous smelting, Personnel
agency business

Sumitomo Metal Mining Engineering Co., Ltd.

100

Ehime
Prefecture

Survey, design, manufacturing, repair and maintenance of various typesof machinery, equipment and plants in wide ranging fields including
non-ferrous metal smelting, chemicals, and the environment

Sumiko Plantech Co., Ltd.

100

Ehime
Prefecture

Manufacture of machinery & equipment and repair work for nonferrous
metal smelting and chemical plants; Installation of machinery &equipment and piping work; Steel structure work

• Japan Irradiation Service Co., Ltd.

100

Tokyo

SMM Holland B.V.

100

Netherlands• N. E. Chemcat Corporation

50

Tokyo

Manufacture of precious metal catalysts and surface treatment
chemicals; Recovery and refining of precious metals• Nippon Ketjen Co., Ltd.

50

Tokyo

Manufacture and sale of desulfurization catalysts for petroleum
processing

OthersPrincipal Operations

Consolidated companies

Irradiation sterilization service for pharmaceutical products, medical
instruments and pharmaceutical containers; Modification of various
industrial materials
Investment in nickel and cobalt development businesses

Equity-method affiliates

Note: Companies identified with a • symbol have been reclassified as part of the materials segment for reporting purposes effective from the first quarter of fiscal 2012.

84 | SUMITOMO METAL MINING CO., LTD. Annual Report 2012

Corporate Data and Investor Information
As of March 31, 2012

Contact Information

Corporate Data
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

8,658 (Consolidated)

Facsimile: +81-3-3434-2215

Head Office11-3, Shimbashi 5-chome,

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

FoundedMinato-ku, Tokyo 105-8716, Japan
Registrar of Shareholders
Investor Information

The Sumitomo Trust and Banking Company, Limited

Closing Date

4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo

The Company’s books are closed on March 31 each year.

Stock Transfer Agency Department: 4-1, Marunouchi 1-chome,

Regular General Meeting

Chiyoda-ku, Tokyo

The regular general meeting of shareholders is held in Juneeach year.

Method of Public NoticeElectronic notification (However, if electronic notification is not

Common Stock
Number of authorized shares:

possible due to an accident or other unavoidable circumstances,

1,000,000,000 shares

notice will be published in the Nihon Keizai Shimbun newspaper.)Number of issued and outstanding shares:
581,628,031 shares
Number of shareholders:

57,023

Independent Public Accountant

Listing of Shares

Tokyo, Osaka

KPMG AZSA LLC

Stock Transaction Unit

1,000 shares

1-2, Tsukudo-cho, Shinjuku-ku, Tokyo

Major Shareholders

Number of shares
held (thousands)

Shareholding
ratio (%)

Japan Trustee Services Bank, Ltd. (Trust accounts)

47,233

8.4

The Master Trust Bank of Japan, Ltd. (Trust accounts)

36,267

6.5

SSBT OD05 OMNIBUS ACCOUNT—TREATY CLIENTS

13,404

2.4

Japan Trustee Services Bank, Ltd. (Trust accounts 9)

10,3801.8

Sumitomo Metal Industries, Ltd.

8,715

1.6

NT RE GOVT OF SPORE INVT CORP P.LTD

8,394

1.5

Sumitomo Mitsui Banking Corporation

7,650

1.4

Sumitomo Life Insurance Company

7,474

1.3

Sumitomo Corporation

7,000

1.2

The National Mutual Insurance Federation ofAgricultural Cooperatives

6,115

1.1

Breakdown of Shareholders(Thousands of shares)
Treasury Stock
19,671
3.38%
Individuals
and Other
113,488
19.51%

Financial
Institutions
213,51236.71%

ForeignInvestors
161,40427.75%

Securities
Companies
17,4783.01%

Other
Corporations
56,071
9.64%

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
04/20100
10/201004/2011

10/201104/2012

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

SUMITOMO METAL MINING CO., LTD.

Annual Report 2012

| 85

SUMITOMO METAL MINING CO., LTD.
11-3, Shimbashi 5-chome, Minato-ku,
Tokyo 105-8716, Japan

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

Printed in Japan