Annual Report 2009

For The Year Ended March 31, 2009

60N

ALASKA

Pogo Mine

50N

160W

CANADA
150W

40N

140W

UNITED STATES

130W

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

SMM Group Corporate Philosophy
s 3UMITOMO -ETAL -INING #O ,TD 3-- IN ACCORDANCE WITH THE 3UMITOMO "USINESS 3PIRIT SHALL THROUGH THE PERFORmance of sound corporate activities and the promotion of sustainable co-existence with the global environment, seek tomake positive contributions to society and to fulfill its responsibilities to its stakeholders, in order to win ever greater trust.
s 3-- SHALL BASED ON RESPECT FOR ALL INDIVIDUALS AND RECOGNIZING EACH PERSONgS DIGNITY AND VALUE SEEK TO BE A FORWARD
minded and vibrant company.

Unless specifically stated otherwise, information in this annual report is as of August 1, 2009.
Forward-looking Statements: Statements made in this annual report with respect to plans, strategies and future performance that are not historical facts
ARE FORWARD LOOKING STATEMENTS 3-- CAUTIONS THAT A NUMBER OF FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE
forward-looking statements.

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

2EVIEW OF +EY 0ERFORMANCE )NDICATORS.OTE 0LEASE REFER TO P n h&INANCIAL 3ECTION %LEVEN 9EAR &INANCIAL 3UMMARY v FOR DETAILS OF 3--S FINANCIAL PERFORMANCE IN PREVIOUS YEARSOperating income

Net sales



-29.9









billionyenbillionyen.ET SALES IN THE YEAR ENDED -ARCH  &9 FELL  COMPAREDWITH THE PREVIOUS YEAR TO c BILLION 4HIS LARGELY REFLECTED A SUBSTANTIAL
impact due to the major deterioration in business conditions during thesecond half of the year.

/PERATING INCOME FELL  IN YEAR ON YEAR TERMS TO c BILLION 4HISWAS THE RESULT OF LOWER SALES VOLUMES AT BOTH THE -INERAL 2ESOURCES AND-ETALS DIVISIONS ACCOMPANIED BY LOWER REFINING MARGINS AND INVENTORYWRITE DOWNS AS WELL AS A STEEP FALL IN SALES VOLUMES AT THE %LECTRONICS AND!DVANCED -ATERIALS DIVISION AMONG OTHER FACTORSRecurring profit

Net income









billion yen (cost reductions in second half)

22.0

billionyenbillionyen

Recurring profit was significantly worse than the figure of ¥217.9 billion
THAT WAS POSTED IN &9 &IRST HALF RECURRING PROFIT WAS IN LINE WITH PROJECTIONS AT c BILLION BUT A RECURRING LOSS OF c BILLION WAS RECORDED
IN THE SECOND HALF 4HIS LOSS REFLECTED THE IMPACT OF STEEP FALLS IN METALS
prices coupled with the appreciation of the yen, together with a range of
exceptional factors such as inventory write-downs.

Reflecting the sharp deterioration in recurring profit, net income was much
LOWER IN &9 THAN THE FIGURE OF c BILLION POSTED IN THE PREVIOUS
year. However, with a series of emergency measures cutting expenditures
BY ABOUT c BILLION 3-- WAS STILL ABLE TO ACHIEVE POSITIVE NET INCOME
despite the slump in operating conditions.

Equity ratio

Debt-to-equity (D/E) ratio

points (year on year)

about





4HE EQUITY RATIO ROSE FROM  TO  AN IMPROVEMENT OF  PERcentage points compared with the previous year-end, although shareHOLDERS EQUITY DECLINED DUE TO SHARE BUYBACKS AND OTHER FACTORS 3-continued to maintain a healthy balance sheet, keeping this ratio above IN LINE WITH THE GOALS OUTLINED IN THE &9n 0LAN

0.8(average figure for listed Japanese firms)


4HE $% RATIO IMPROVED FURTHER IN &9 DECLINING TO  TIMES 4HIS WAS
MAINLY DUE TO A c BILLION REDUCTION IN INTEREST BEARING DEBT TO cBILLION THAT MORE THAN OFFSET THE DECLINE IN SHAREHOLDERS EQUITY 3--S $%ratio is significantly better than the average figure for listed Japanese firms,
REFLECTING THE COMPANYS MAINTENANCE OF STRONG FINANCES

1

+EY -ESSAGE!S FOR SO MANY OTHER COMPANIES WORLDWIDE THE FISCAL YEAR ENDED -ARCH  WAS AN EXTREMELYTOUGH YEAR FOR 3UMITOMO -ETAL -INING 3--  /N TOP OF A SLUMP IN DEMAND WE SAW MARKET
prices plunge, putting a lot of pressure on our bottom line. Prospects at the time of publication
remain uncertain.
However, we have not lost sight of the long-term strategic growth objectives that we set
OUT IN THE &9n -EDIUM TERM "USINESS 0LAN WHICH WE BEGAN IMPLEMENTING IN !PRIL 
We have continued to make progress in executing this growth strategy. We remain focused on
ACHIEVING THIS GOAL BECAUSE WE ARE CONFIDENT THAT ITS REALIZATION WILL ENSURE THE LONG TERM PROSPERITY OF 3--h!NNUAL 2EPORT v INTRODUCES OUR STRATEGIC GROWTH OBJECTIVES HOW WE PLAN TO ACHIEVE
THEM AND THE UNIQUE STRENGTHS POSSESSED BY 3-- THAT WILL HELP US DO THAT 7E HOPE THAT THISREPORT WILL HELP YOU GAIN A BETTER UNDERSTANDING OF 3--S GROWTH POTENTIAL
3-- BOASTS A LONG HISTORY OF OVER FOUR CENTURIES IN MINING AND METAL SMELTING 7E WILL
overcome the challenges posed by a volatile operating environment and continue to make sureand steady progress toward achieving the goals that we have set.

#ONTENTS

Foundations of Growth

page 3Business resources: the strengths underpinning our growth strategy

Growth Strategy

page 13

Getting to where we want to be: initiatives targeting long-term corporate growth-ESSAGE TO 3TAKEHOLDERS

page 21#ONTINUED PURSUIT OF GROWTH STRATEGY WHILE MAKING CERTAIN WE ACHIEVE PERFORMANCE TARGETS

2EVIEW OF /PERATIONS

page 29%ARLY PRODUCTION COST REDUCTIONS AND OPERATING EFFICIENCY GAINS IN RESPONSE TO SHARP DETERIORATION IN MARKET CONDITIONS&EATURE  4HE 2EALIZATION OF )NITIAL !MBITION

page 39

Sole operator of overseas mine

"USINESS .ETWORK

page 44-INES REFINERIES PRODUCTION FACILITIES FOR ELECTRONICSADVANCED MATERIALS&EATURE  4ARGETING 3USTAINED 'ROWTH

page 49

Pursuing a steady, forward-looking strategy to grow with the expanding non-ferrous metals industry$IRECTORS AND #ORPORATE !UDITORS
Financial Section
Glossary#ORPORATE $ATA AND )NVESTOR )NFORMATION

2

page 60

page 61

page 96page 98

SUMITOMO METAL MINING CO., LTD.
Annual Report 2009

Foundations of GrowthBusiness resources:
the strengths underpinning
our growth strategy

The business resources underpinning SMM’s strategy are the key factors that will enable us to attain our
strategic growth objectives and the source of our highly competitive market position. Handed downover more than 400 years of Sumitomo corporate history, the Sumitomo Business Spirit forms an intangible but robust foundation. The other key factors are our human resources and our technology, which
support excellence in our exploration, production and R&D activities. Going forward, we will continue
to hone our competitive advantage by investing in these resources as we target further growth.

3

A long history in mining

Niihama, Ehime Prefecture: Kanki-ko (literally “pit of exultation”) was the first shaft dug at the Besshi copper mine in 1691.
The name echoed the joy at its discovery. Today it slumbers amid woodland.

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

Sumitomo had already been in the copper smelting businessfor around 100 years when it began working the Besshi copper mine.
It operated continuously for 283 years,
during which time the managers faced crises due to fireand flood as well as smoke-related damage to the smelter.
They overcame all of these problems with intelligence,courage and resolve, adding to Sumitomo’s skills in mine management.
Over many decades of operation, the Besshi mine helped
Sumitomo to develop a strong business ethos based on integrity and trust.
Today, the same spirit and resolve infuses the managers of SMM.



An inherited base ofmining expertiseIsa, Kagoshima Prefecture: A mining engineer sketches a rock formation at the Hishikari mine.
Over time, careful surveying leads to the discovery of new ore deposits.

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

The job of mining engineers is classified into different aspects,
from discovery, analysis and evaluation of new deposits basedon geological surveys to ore extraction and the applicationof grade-enhancing techniques.
At the Hishikari Gold Mine, our mining engineers spend three years
learning basic techniques, along with associated expertise in safety
management, process management, operational supervision and budgeting.
Next they transfer to a mine outside Japan to gain more technical andoperational expertise.
The training process takes around 10 years to produce
a full-fledged mining engineer.
The results of this training are evident in the success that we have achievedin overseas exploration projects and mining operations.

7Passion-driven global
competitiveness

Saijo, Ehime Prefecture: At the Toyo smelter, molten copper is poured into casting molds to make anode copper for electrorefining.
At this stage the purity is about 99%.

835-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

Based on in-house technology, we have developed the proprietary
Sumitomo method burner for use in the flash furnaces
at the Toyo Smelter & Refinery, where we apply pyrometallurgicalprocesses to smelt copper.
This technology realizes world-class performance in termsof the amount of ore concentrate that can be melted
within a certain time. We work round the clock to continue
improving this technology.
The passion we have inherited from Sumitomo’s long traditionin manufacturing helps us make products of world-class quality
and remain highly competitive in the marketplace.

9

#REATIVITY DRIVING
future innovation

Niihama, Ehime Prefecture: A material is tested inside a fume cupboard at our research facility in Niihama.
We have been conducting metallurgical research to create new materials for over 300 years.

1035-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

SMM subsidiary Coral Bay Nickel Corporation (CBNC) pioneered
commercial nickel recovery from low-grade ore basedon HPAL (High Pressure Acid Leach) technology.
Our nickel refining operations in Niihama use an advanced technique called
MCLE (Matte Chlorine Leach Electrowinning).
These technical strengths are the result of our constant focus on R&D.
We remain committed to developing effective new metallurgical techniques
to improve our copper smelting and other refining processes further.
We are also applying expertise with metals in our ongoingR&D into electronic and other advanced materials.
Our nickel-related technologies are enabling us to develop
battery materials and materials with environmental applications.

114HE HUMAN RESOURCES AND TECHNOLOGY THAT CREATE THE FOUNDATION FOR OUR FUTURE GROWTH HAVE BEEN CULTIVATEDOVER A  YEAR 3UMITOMO CORPORATE HISTORY !T 3-- WE ARE NOT JUST THE DIRECT HEIRS OF THAT TRADITION 7E ALSO
RECOGNIZE THAT WE HAVE AN IMPORTANT MISSION TO BUILD ON THE FOUNDATIONS WE HAVE INHERITED TO CREATE A STRONGER
business with sustained growth potential.
Reflecting this heritage, we follow a training-oriented management approach. We are striving to cultivate
a corps of dedicated and highly skilled engineers: the mining engineers who will support the future of ourresources operations; the production engineers who will build and maintain a world-class production set-up;
and the new product development engineers focused on making new, ground-breaking technical discoveries.
We have also set up and continue to upgrade company-wide HR development programs aimed at cultivating
THE NEXT GENERATION OF LEADERS /UR TRAINING PROGRAMS ARE TAILORED TO THE VARYING NEEDS OF RECENT RECRUITS
middle managers and executive management.
4HROUGH SUCH ACTIVITIES WE ARE WORKING TO CREATE AN EVEN STRONGER FOUNDATION TO FACILITATE THE STEADYEXECUTION OF OUR GROWTH STRATEGY FOR 3-- /UR FERVENT AIM REMAINS TO EXCEL ON THE WORLD STAGE

12

SUMITOMO METAL MINING CO., LTD.
Annual Report 2009

Growth Strategy

Getting to where we want to be:initiatives targeting long-term
corporate growth

In 2003, we defined the long-term strategic growth objective for SMM as that of “becoming a major
non-ferrous metals player in the next decade.” This goal is not merely about pursuing increased scale.
Besides undertaking our own mining exploration and development activities to secure stable suppliesof resources, we aim to demonstrate to the world the present value of SMM by developing our operations based on original world-class refining technology. Alongside the metal and mineral resource
businesses that can fulfill this role, we also aim to establish the electronic and advanced materials
business as a second core source of earnings. Our overall aim is to make the business more stable andprofitable, while developing a new growth model for non-ferrous metals operations that is based on
our technical prowess.

13

Overview of FY2007–9 Plan and long-term business strategy

09

3-year Plan

12

3-year Plan onward

Join ranks of non-ferrous majors

Completion

UpgradeCopperMineral resourcesbusiness
Metalsbusiness

Steady growth

NickelOn stream

Sole
operatorshipGold

Creating new
eco-related
products

Profitability

Build upearnings baseCreate competitive
major products tobuild 2nd core business
Marketcompetition

FY2007

Rebuild growth strategy

Electronics andadvanced material
business

Technology
development

FY2008 FY2009

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

Strategic
Projects

Copper: Secure supply of smelting ores (proprietary ore ratio to two-thirds)
Nickel: Create building blocks for 100ktpa set-up
Pogo Gold Mine: Ongoing production ramp-up to 12tpa

(increased competitiveness)

06

3-year Plan

Preparing for the next stage

03

3-year Plan35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

Strategic growth direction under current conditions(AVING SET THE STRATEGIC GROWTH OBJECTIVES FOR 3-- WE HAVE PURSUED THIS GROWTH STRATEGY BY FORMULATING
AND EXECUTING THREE MEDIUM TERM BUSINESS PLANS COVERING THE SUCCESSIVE THREE YEAR PERIODS OF &9n&9n AND &9n/UR OPERATING ENVIRONMENT WAS HUGELY VOLATILE IN &9 DUE TO THE IMPACT OF THE SUDDEN GLOBALECONOMIC DOWNTURN ,OOKING AHEAD CONDITIONS WITHIN THE NON FERROUS METALS AND ELECTRONICS INDUSTRIES
our key markets, remain difficult to predict.
$URING FISCAL  THE FINAL YEAR OF THE &9n 0LAN OUR MAIN FOCUS UNDER THE CURRENT CONDITIONS IS
to maintain and expand earnings across our core businesses in mineral resources and metals and in elecTRONIC AND ADVANCED MATERIALS 4HIS WILL INVOLVE CONTINUING TO OPERATE OUR BUSINESSES BASED ON STRICT COSTMINIMIZATION 3PECIFICALLY WE ARE TRYING TO LOWER PRODUCTION COSTS BOOST OPERATING EFFICIENCY CONCENTRATE
capital and exploration expenditures on key strategic projects; and adopt a selectively focused stance toward unprofitable operations and products.
!T THE SAME TIME WE WILL BE FORMULATING THE &9n 0LAN 4HIS WILL INVOLVE RE EVALUATING THE COMpetitiveness of all our businesses and products, notably the electronics and advanced materials business,
SO THAT WE CAN BETTER PURSUE 3--S GROWTH STRATEGY IN A NEW ENVIRONMENT CHARACTERIZED BY SLOWER ECOnomic growth.
)N OUR MINERAL RESOURCES AND METALS BUSINESS WE REMAIN ON TARGET TO ACHIEVE THE VARIOUS GOALS FOR EACH
OF THE STRATEGIC PROJECTS WHOSE REALIZATION STANDS TO ELEVATE 3-- TO THE RANKS OF THE NON FERROUS MAJORS'OING FORWARD WE WILL CONTINUE TO FOCUS ON DEVELOPING A DIFFERENTIATED hMINERAL RESOURCESREFININGv

BUSINESS MODEL FOR OUR SECTOR OPERATIONS 4HIS MEANS AGGRESSIVE EXPLORATION AND DEVELOPMENT OF HIGHQUALITY OVERSEAS MINING ASSETS TO SECURE STABLE SUPPLIES OF MATERIALS WHILE AT THE SAME TIME INCREASING OURPROPRIETARY ORE RATIO )N ADDITION WE WILL CONTINUE TO SEEK TO AUGMENT OUR REFINING CAPACITY BY LEVERAGING
in-house technical expertise.

Total electrolytic Cu output

Proprietary ore ratio for Toyo

(Thousands of tonnes)

(%)

600

60

500

50
Overseas

400

40

300

30



2009

2008

2007

2006

2005

2009

2008

0
2007

0
2006

10

2005

100

2004

20

2004

Toyo

200

（FY）

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

-INERAL 2ESOURCES AND -ETALS #OPPER)N OUR COPPER BUSINESS WE HAVE ESTABLISHED A WORLD CLASS PRODUCTION FACILITY AT THE 4OYO 3MELTER  2EFINERY IN %HIME 0REFECTURE WITH A SMELTING CAPACITY OF KTPA FOR ELECTROLYTIC COPPER 7E ORIGINALLY EXPECTEDTHE FACILITY TO OPERATE IN &9 AT ROUGHLY THE SAME LEVEL AS THE PREVIOUS YEAR TAKING INTO ACCOUNT LOWER
GRADES OF COPPER CONCENTRATE AND A SCHEDULED MAINTENANCE SHUTDOWN )N THE EVENT TOTAL PRODUCTION
VOLUMES CAME IN LOWER THAN THE &9 FIGURE DUE TO A SLIDE IN DEMAND CAUSED BY THE ECONOMIC DOWNturn, which resulted in lower-than-expected output during the second half of the year. Going forward,
IN THE EXPECTATION THAT DEMAND WILL REMAIN SOMEWHAT DEPRESSED WE WILL FOCUS ON MINIMIZING OPERATING
expenses to bolster our cost competitiveness.
/UR STRATEGY IS TO SECURE INCREASED SUPPLIES OF COPPER ORES IN LINE WITH HIGHER SMELTING CAPACITY !S PARTOF THIS STRATEGY WE INVESTED IN AN EQUITY STAKE IN A SULFIDE ORE DEVELOPMENT PROJECT AT THE #ERRO 6ERDEMINE IN 0ERU 4HE START OF OPERATIONS AT THIS PROJECT IN .OVEMBER  HAS HELPED RAISE OUR PROPRIETARY ORERATIO FOR COPPER TO OVER  AND CONTRIBUTED TO GREATER SUPPLY STABILITY FOR SMELTING ORES 7E OWN OFF
TAKE RIGHTS TO HALF OF THE COPPER CONCENTRATES THAT ARE PRODUCED AT #ERRO 6ERDE EQUIVALENT TO KTPA OF
copper) for an initial 10-year period. While continuing an aggressive exploration program to develop new
COPPER MINES WE ARE ALSO CONSIDERING FURTHER ACQUISITION OF PRODUCTION INTERESTS IN ORDER TO BOOST THE
PROPRIETARY ORE RATIO TO TWO THIRDS IN THE FUTURE #URRENT CONDITIONS PROVIDE A POTENTIALLY OPPORTUNE TIMETO ACQUIRE OVERSEAS MINING INTERESTS DUE TO THE DECLINE IN COMMODITY PRICES WHICH HAS LOWERED CARRYING
values for mine assets, coupled with a stronger yen.

17

Develop 100ktpa capacity for Ni

Mineral resources and metals strategy:
Progress overview(Thousands of tonnes)

Nickel :Copper :Thousands of tonnes(Coral Bay)

Thousands of tonnes(Toyo)

100

500

25

Toyo
Taganito

80

400

20

300

15

Goro

60
Coral Bay

OthersCoral Bay

40

200

10

100

5

0

0

P.T.INCO

20

18

2009

2008

2007

2006

2005

2013

2012

2011

2010

2009

2008

2007

2006

0

2004

Hyuga

（FY）

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

-INERAL 2ESOURCES AND -ETALS .ICKEL%STABLISHING A KTPA PRODUCTION SET UP FOR NICKEL BY &9 IS THE AIM OF OUR NICKEL OPERATIONS )T IS A
core strategic theme and key focus for growth.
!T 0HILIPPINES BASED #ORAL "AY .ICKEL #ORPORATION #".# WHERE WE ALREADY HAVE A FIRST PLANT OPERATING CONSTRUCTION OF A SECOND PLANT WAS COMPLETED AND PRODUCTION COMMENCED IN !PRIL  4HIS HAS
ENABLED US TO SECURE KTPA OF RAW MATERIALS #".# IS THE FIRST ENTERPRISE IN THE WORLD TO APPLY (0!, (IGH
0RESSURE !CID ,EACH TECHNOLOGY SUCCESSFULLY ON A COMMERCIAL SCALE &OLLOWING ON FROM #".# WE ARE ALSOCONSIDERING THE USE OF (0!, AT THE LARGE SCALE 4AGANITO 0ROJECT ! FEASIBILITY STUDY HAS BEEN COMMISSIONED
TO OPTIMIZE THE INITIAL CAPITAL INVESTMENT AND SET A DATE FOR PLANT CONSTRUCTION
Alongside these efforts to secure more raw materials, we also plan to upgrade our domestic production
CAPACITY FOR ELECTROLYTIC NICKEL 5SING IN HOUSE -#,% -ATTE #HLORINE ,EACH %LECTROWINNING TECHNOLOGY
which combines high rates of recovery with superior energy efficiency, we plan to expand our electrolytic
NICKEL OUTPUT TO KTPA BY 
)N .EW #ALEDONIA WE ARE ALSO JOINTLY DEVELOPING THE 'ORO .ICKEL 0ROJECT IN PARTNERSHIP WITH 6!,% )NCO
4HIS MINE IS ONE OF THE LARGEST SOURCES OF NICKEL RAW MATERIALS IN THE WORLD
4HROUGH THESE VARIOUS INITIATIVES WE AIM TO INCREASE AGGREGATE PRODUCTION CAPACITY FOR NICKEL INCLUDing ferronickel) to 100ktpa.
Another key exploration project to secure nickel resources to increase output beyond the 100ktpa
MARK IS CURRENTLY PROGRESSING IN THE 3OLOMON )SLANDS !N EXPLORATORY DRILLING CAMPAIGN IS ONGOING AHEAD
of a feasibility study.

19

-INERAL 2ESOURCES AND -ETALS 'OLD
)N OUR GOLD OPERATIONS WE ARE WORKING TO EXPAND GOLD PRODUCTION FROM OUR MAIN MINES IN (ISHIKARI LOCATED IN +AGOSHIMA 0REFECTURE *APAN AND 0OGO LOCATED IN !LASKA 53!  $URING  THE 0OGO MINE GENERALLY HIT PRODUCTION TARGETS FOLLOWING AN OPERATIONAL RAMP UP TO FULL CAPACITY OF TPA )N *ULY  WE
INCREASED OUR EQUITY STAKE TO ACQUIRE A  INTEREST IN THE MINE PLEASE REFER TO P  FOR MORE DETAILS (ISHIKARI IS ONE OF THE FEW MINES IN THE WORLD TO PRODUCE HIGH GRADE GOLD ORE )T IS THE ONLY COMMERCIAL
metal mining operation in Japan following the closure of numerous mines over the years. We use Hishikari
AS A hMINING SCHOOLv )T CONTRIBUTES TO THE GROWTH OF 3-- OVER THE LONGER TERM BY HELPING US TO TRAIN OUR
mining engineers.

%LECTRONICS AND !DVANCED -ATERIALS)N THE ELECTRONICS AND ADVANCED MATERIALS BUSINESS THERE IS AN INCREASING MOVE TOWARD INDUSTRY CONSOLIDATION AMID THE CURRENT GLOBAL ECONOMIC CRISIS /UR CORE FOCUS IS ON RESTORING PROFITABILITY WHILE AT THE SAME
time looking to reinforce earnings power by redeveloping our business strategy in the sector.
7E IMPLEMENTED A STRUCTURAL REORGANIZATION OF THE BUSINESS IN /CTOBER  THAT HAS ENABLED MORE
EFFECTIVE DEVELOPMENT OF THE 3-- 'ROUPS INTERNAL SUPPLY CHAIN 'OING FORWARD WE AIM TO MAXIMIZEEARNINGS WHILE SEEKING TO REDUCE COSTS BASED ON AN OPTIMIZED STRUCTURE FOR THE OVERALL BUSINESS !T THE
SAME TIME WE ARE ALSO WORKING TO ACCELERATE DEVELOPMENT OF NEW PRODUCTS 7E ARE ALSO RATIONALIZING OUROVERSEAS PRODUCTION BASES TO BETTER SUPPLY MARKETS IN #HINA AND 4AIWAN WHICH ARE EXPECTED TO GROW IN
THE FUTURE 3UCH MOVES WILL PROVIDE 3-- WITH A STRONGER BUSINESS PLATFORM IN THE SECTOR)N TAPE BONDING MATERIALS WE ARE WORKING TO OPTIMIZE OUR PRODUCTION SET UP FOR COPPER CLAD POLYIMIDEFILM ##0& IN LINE WITH THE SIZE OF THE MARKET 7E AIM TO REINFORCE OUR POSITION AS THE DE FACTO GLOBAL STANDARD WHILE PROMOTING LOWER COSTS HIGHER PRODUCTIVITY AND ENHANCED QUALITY )N THICK FILM PASTES WE ARE
continuing to target increased sales of nickel pastes for use in making multi-layer ceramic capacitors. We
are also looking to reinforce our position by expanding sales of products for environment-related applicaTIONS SINCE THESE AREAS HAVE FIRM GROWTH EXPECTATIONS )N BATTERY MATERIALS WE SUPPLY ANODE MATERIALS FORSECONDARY BATTERIES THAT ARE USED IN VARIOUS AUTOMOTIVE AND CONSUMER RELATED APPLICATIONS )N THIN FILM
materials, we supply sputtering targets that are used to produce transparent conductive films for use in
THE MANUFACTURE OF PHOTOVOLTAIC PANELS /VERALL OUR AIM REMAINS TO EXPAND THESE OPERATIONS TO CREATE
another core pillar of earnings.

20

SUMITOMO METAL MINING CO., LTD.
Annual Report 2009-ESSAGE TO 3TAKEHOLDERS#ONTINUED PURSUIT OF GROWTH STRATEGY
while making certain we achieve
performance targets

The Sumitomo copper business dates back to the 16th century. The business has survived and prospered
over the decades by virtue of the successful efforts of numerous highly skilled Sumitomo managers to
overcome many difficulties. Now in his third year as president of the company, Mr. Nobumasa Kemoriis carrying on the Sumitomo tradition of iron will and strong leadership. He has committed SMM firstand foremost to achieving the designated performance targets. His mission is to lead the entire company in a united effort to continue moving forward while overcoming any obstacles in the way.

21

-ESSAGE TO 3TAKEHOLDERS

2EMAINING PROFITABLE THROUGHOUT &9 AND &9
7HILE WE POSTED RECORD PROFITS IN THE YEAR ENDED -ARCH  &9 THE MARKET PRICES OF THE MAIN METALSTHAT WE PRODUCE HAD ALREADY ENTERED A DOWNWARD TREND DURING THAT YEAR ) PREDICTED THAT FISCAL  WOULD BE
a much tougher year for performance as the operating environment deteriorated. We recorded profits in linewith forecast during the first half of the year, but the impact in the second half of the global economic downTURN ON OUR BUSINESS WAS ESPECIALLY SEVERE -ARKET PRICES AND DEMAND BOTH FELL SHARPLY CREATING EXCEPTIONALLY
harsh operating conditions.
!GAINST THIS BACKDROP ) REALIZED THAT MAINTAINING FINANCIAL STRENGTH WOULD BE CRITICAL IF WE WERE TO CONTINUE
MAKING PROGRESS EXECUTING OUR GROWTH STRATEGY #ONVINCED THAT WE MUST ACHIEVE A POSITIVE NET INCOME FIGURE
WE INSTITUTED A PROGRAM OF EMERGENCY MEASURES IN THE SECOND HALF OF &9 7E CURTAILED OPERATING EXPENditures and postponed all non-essential investment.
As a result, we were able to remain profitable at all levels in fiscal 2008. We also put together a strict budget
TO ENSURE THAT WE WOULD REMAIN PROFITABLE IN &9 AS WELL DESPITE THE FACT THAT MOST INSTITUTIONAL INVESTORSAND ANALYSTS WERE EXPECTING THAT WE WOULD PROBABLY SLIP INTO LOSS ) ATTRIBUTE OUR SUCCESS ON BOTH THESE SCORES
to our emergency cost-cutting program implemented in the final six months of the year. We will extend these
INITIATIVES INTO &9 AND FOCUS INTENSELY ON ACHIEVING OUR PERFORMANCE FORECASTS

2235-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

株主の皆さまへ-ESSAGE TO 3TAKEHOLDERS#AUTION WARRANTED ON OUTLOOK FOR OPERATING CONDITIONS/PINION IS DIVIDED AMONG THE MACROECONOMIC EXPERTS REGARDING THE PROSPECTS FOR RECOVERY BUT IN GENERALTERMS ) BELIEVE THAT ECONOMIC REVIVAL IS LIKELY TO TAKE SLIGHTLY LONGER THAN MANY COMMENTATORS PREDICT !S THE
LEADING EMERGING ECONOMY WE CAN REASONABLY EXPECT #HINA TO REMAIN THE PRIMARY ENGINE OF GLOBAL GROWTH
However, it is now even more dependent on trade than Japan. Hence, my belief is that an economic recovery
in the United States and other major consuming nations is still one of the keys to an overall improvement inbusiness conditions.
4HE EFFECTS OF THE GENERAL ECONOMIC STIMULUS MEASURES IMPLEMENTED IN #HINA HAVE NOW BEGUN TO MANIFEST)N TERMS OF THE IMPLICATIONS FOR OUR BUSINESS THE SIGNS OF RECOVERY HAVE ALREADY BOLSTERED THE PRICE OF COPPER
%XPORTS TO #HINA ARE HELPING TO OFFSET AN ONGOING DECLINE IN *APANESE DEMAND FOR THIS METAL AND WE ARE CERTAINLY BENEFITING FROM THIS TREND (OWEVER AS ) ARGUED ABOVE WE CANNOT EXPECT ECONOMIC GROWTH IN #HINA TO
SUPPORT THE ENTIRE RECOVERY ) THINK THAT CAUTION IS WARRANTED ON THE OUTLOOK FOR GENERAL OPERATING CONDITIONS
the critical thing is that the global economy keeps a good balance. We should certainly not entertain bullish
expectations of significant increases in prices or demand in non-ferrous metals markets during 2009 and 2010.
) BELIEVE THAT IT IS PRUDENT TO EXPECT HARSH CONDITIONS TO CONTINUE FOR AT LEAST THESE TWO YEARS35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

Rebuilding our growth strategy within a narrower, short-term focus
4O DATE WE HAVE PURSUED A GROWTH STRATEGY WITHIN THE ELECTRONICS AND ADVANCED MATERIALS SECTOR n ONE OFOUR CORE BUSINESSES n OF TARGETING LEADING GLOBAL MARKET SHARES IN INDIVIDUAL PRODUCT CATEGORIES )N &9this resulted in substantial losses because the combination of a global slump in demand with a sudden excess
of manufacturing capacity had a more negative impact on our performance in those market segments where
3-- HAS A LEADING SHARE (EEDING THIS LESSON WE ARE DOWNGRADING THE IMPORTANCE ATTACHED TO THE GOAL OF
COMMANDING TOP GLOBAL MARKET SHARES )N OTHER WORDS GIVEN THAT THESE PRODUCTS CAN SUFFER IMMEDIATELY WHEN
the market enters a downturn, from the point of view of maintaining and improving profit margins we needto differentiate between those products within our portfolio where it would be better to try to retain market
dominance and those where this is not the case. Going forward, we plan to rebuild our business model in theelectronics and advanced materials sector based on this revised policy.

-ESSAGE TO 3TAKEHOLDERS)NVESTMENT IN HUMAN CAPITAL KEY TO ACHIEVING TARGETS)N OUR OTHER CORE MINERAL RESOURCES AND METALS BUSINESS THE GROWTH STRATEGY OF TARGETING ENTRY INTO THE RANKSOF THE NON FERROUS MAJORS REMAINS UNCHANGED ) BELIEVE THAT INVESTMENT IN HUMAN RESOURCES WILL HOLD THE KEY
to attaining our future objectives in this sector.
!T #ORAL "AY THE ESTABLISHMENT OF A SECOND PRODUCTION LINE HAS RAISED OUTPUT TO KTPA FROM THE INITIAL
FIRST PHASE DESIGN CAPACITY OF KTPA 4HIS PROJECT ILLUSTRATES MY STRONG CONVICTION THAT IT IS THE STEADY EFFORTS OF
THE EMPLOYEES OF THE 3-- 'ROUP THAT WILL CREATE SUCCESS FOR THE COMPANY %VERY MILESTONE WE HIT ENABLES US
TO LOOK AHEAD TO REACHING THE NEXT ONE 4HE IMPORTANT THING IS TO INVEST IN THE PROPER TRAINING OF OUR LOYAL AND
DEDICATED EMPLOYEES SO THAT WE CAN SEIZE OPPORTUNITIES TO GROW THE BUSINESS AND BUILD ON THE EXPERIENCE OF
THAT SUCCESS 7E CANNOT AFFORD TO GIVE UP QUICKLY IF OUR COLLECTIVE EFFORTS DO NOT MEET WITH INITIAL SUCCESS SINCE
THERE WILL ALWAYS BE SETBACKS )NSTEAD WE MUST BELIEVE IN OUR ABILITY TO SUCCEED AND KEEP ON WORKING TO REALIZE
projects in line with our plans, irrespective of conditions. Striving for ultimate success in this way is a common
THEME OF MINE WHEN ) TALK INTERNALLY OF THE NECESSITY OF ACHIEVING TARGETS -Y ATTITUDE IS THAT WE MUST NOT ACcept failure to attain the goals that we have set. At the same time, it is also critical to invest in human resources
so that we can upgrade our ability to reach these objectives.

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

)NVESTMENTS FOR FUTURE GROWTH CONTINUING IN &9
7E FORMULATED AN AUSTERITY BUDGET FOR &9 BUT WE DID NOT CUT SPENDING ON 2$ (OWEVER ) HAVE GIVENSTRICT ORDERS TO THE 2$ DIVISION THAT WE NEED TO BOOST OUR OVERALL RETURN FROM 2$ BY  BASED ON A 
INCREASE IN THE SPEED OF DEVELOPMENT AND A  GAIN IN RESEARCH PRODUCTIVITY /UR AIM IS TO IMPROVE COMMUNICATIONS BETWEEN 2$ AND FRONTLINE OPERATIONS TO ACCELERATE OUR EXISTING PROCESSES 7E ARE ALSO PREPARED TOTERMINATE RESEARCH PROJECTS THAT ARE SURPLUS TO REQUIREMENTS
)N THE MINERAL RESOURCES AND METALS SECTOR WE ARE NOW LOOKING TO FULFILL ONE OF OUR LONG CHERISHED DESIRES OFACQUIRING COPPER MINING PRODUCTION INTERESTS )N FACT OUR AIM IS TO ACQUIRE MAJORITY INTERESTS IN COPPER MINING
PROJECTS SO THAT 3-- IS AN OPERATOR RATHER THAN JUST A PASSIVE INVESTOR TRADITIONALLY WE HAVE TAKEN PRODUCTION
INTERESTS AVERAGING ABOUT   !LTHOUGH WE HAVE TRIMMED THE EXPLORATION BUDGET FOR FISCAL  WE REMAIN
COMMITTED TO MAINTAINING OUR BASIC EXPLORATION AND DEVELOPMENT PROGRAM %VEN IN ITS REDUCED FORM THE EXploration budget is still significantly bigger than it was just a few years ago.

27

-ESSAGE TO 3TAKEHOLDERS

Firmly focused on accomplishing our goals
4HE SLOGAN FOR THE &9n 0LAN THAT BEGINS IN !PRIL  WILL BE hENTERING THE RANKS OF THE NON FERROUS
MAJORSv 7E HAVE NOW MADE SUBSTANTIAL PROGRESS TOWARD COMPLETING THE VARIOUS PROJECTS IDENTIFIED IN THE&9n 0LAN THAT WILL CONTRIBUTE TO 3-- BECOMING A MAJOR PLAYER IN NON FERROUS METALS !S WELL AS #ERRO
6ERDE WE HAVE COMPLETED THE PRODUCTION CAPACITY UPGRADES AT THE 4OYO FACILITY AND WE NOW HAVE BOTH PRODUCTION LINES OPERATIONAL AT #ORAL "AY 7E HAVE RESOLVED THE ISSUES THAT HAD BEEN AFFECTING PRODUCTION AT
Pogo, with output having risen in 2009 to date toward full capacity of 12tpa. We are thus virtually on track to
COMPLETE ALL OF THE PROJECTS TARGETED IN THE &9n 0LAN PRIOR TO THE COMMENCEMENT OF THE NEXT MEDIUMTERM BUSINESS PLAN 4HE ONE OUTSTANDING MAJOR THEME THAT WE MUST REALIZE TO MAKE 3-- A MAJOR PLAYER IN
non-ferrous metals is the establishment of a 100ktpa set-up for nickel.
An important related issue for us is that our copper smelting margins remain under pressure due to ongoing
DETERIORATION IN THE TERMS FOR PURCHASING ORE 4HIS BUSINESS IS NOT AS MASSIVELY PROFITABLE FOR US AS IT WAS IN THE
PAST 7E ARE LOOKING TO ADDRESS THIS ISSUE BY FOCUSING ON DEVELOPING NEW TECHNIQUES FOR ORE DRESSING AS WELL AS
ORIGINAL HYDROMETALLURGICAL TECHNOLOGIES FOR COPPER SMELTING /UR AIM IS TO BUILD A BUSINESS MODEL THAT ENABLES
us to boost our earnings from both mining and refining operations.
)N CLOSING ) WANT TO EMPHASIZE TO SHAREHOLDERS THAT WE REMAIN COMMITTED TO EXECUTING OUR GROWTH STRATEGYFOR 3-- 7E HAVE IMPLEMENTED THE MEASURES THAT ARE REQUIRED TO DEAL WITH THE CURRENT CHALLENGING ECONOMIC
circumstances. We do what we say we will do. We will achieve the goals that we have set, and we will continue
DOING OUR COLLECTIVE UTMOST TO INCREASE THE VALUE OF THIS COMPANY IN A SURE AND STEADY FASHION -Y MISSIONIS TO BUILD AN ENTERPRISE THAT IS WORTHY OF THE TRUST OF ALL STAKEHOLDERS INCLUDING OUR SHAREHOLDERS 4HAT IS THE
MEASURE OF MY PASSION FOR 3UMITOMO -ETAL -INING

August 2009

.OBUMASA +EMORI
President and Representative Director

28

SUMITOMO METAL MINING CO., LTD.
Annual Report 2009

2EVIEW OF /PERATIONS%ARLY PRODUCTION COST REDUCTIONS AND
operating efficiency gains
in response to sharp deterioration inmarket conditions

Consolidated net sales declined around 30% in year-on-year terms in fiscal 2008 due to a drop inrevenues caused by lower sales volumes and prices for copper and nickel. Squeezed refining margins,inventory write-downs caused by a combination of sharply lower prices and yen appreciation, together with declines in sales volumes across all operating divisions, resulted in a 93% fall in operating
income. SMM reacted swiftly, implementing a set of emergency cost-reduction measures during thesecond half of the year. Further efforts will be directed toward maintaining earnings in fiscal 2009.

29

2EVIEW OF /PERATIONS
Operations

Year-on-year performance comparison
2007

2008

(For the year ended March 31, 2008)(For the year ended March 31, 2009)

Net sales


17.7

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



It is also engaged in geological consulting utilizing mineral re-billion yen

source development techniques.

Operating incomebillion yen

billion yen

billion yen

MetalsThis segment refines non-ferrous raw materials procured from

Net sales

overseas mining companies and the mineral resources segment
into metals such as gold, copper, nickel and zinc, which it then sells.
Having achieved the world’s first commercially viable method ofrecovering nickel from low-grade ore, which had been consideredbillion yen

billion yen

difficult with conventional technology, we possess world-class refining technology and are the industry leader.

Operating income

108.8
billion yen

billion yen

Electronics and Advanced Materials
In the semiconductor materials business, we apply the materials

Net sales

and fabrication technologies that we have developed as a fullspectrum non-ferrous metals producer to supply high-quality
materials that are critical to the manufacture of semiconductors

and electronic equipment. In the advanced materials business, webillion yen

187.9

billion yen

apply metals-related technologies to create a range of high-valueadded materials with specific functions. These include thick-film
pastes, battery materials, single-crystal materials, thin-film materi-

Operating income

als and rare metals.

8.2
billion yen-10.2

billion yen

OthersThis division includes plant engineering services as well as differ-

Net salesent products that leverage the various technologies developed in
non-ferrous metal refining operations, including catalysts, construction materials and lubricants. In the catalysts business, SMM

Group affiliate N.E. Chemcat Corporation produces catalysts tobillion yen

billion yen

purify vehicle exhaust gases or for use in the chemical industry,
while Nippon Ketjen Co., Ltd. makes catalysts used in oil refining.
Subsidiary Nippon Catalyst Cycle Co., Ltd. recovers molybdenum,

Operating income

vanadium and other precious metals from spent oil-refining catalysts; the company has created a recycling system for such catalysts
in partnership with Nippon Ketjen.

30.OTE /PERATING INCOME AND NET SALES FIGURES INCLUDE INTER SEGMENT TRANSACTIONS


billion yen

billion yen

SUMITOMO METAL MINING CO., LTD.
Annual Report 2009

Sales composition

Main productsGold and silver ores
Copper concentrates
CopperGold
Geological research

8.0
%

Gold
SilverCopperNickelFerro-nickel



Zinc
Chemical products
Copper and brass%

Semiconductor materials(lead frames, tape materials (CCPF, COF), bonding wire)
Electronic component materials (alloy preform)
Thick-film materials (pastes, powder materials)
Thin-film materials(ITO, sputtering target materials)
Single-crystal materials

Printed wiring boards
Battery materials
Magnetic materials%

Auto exhaust and petroleum refining catalysts
ALC products (Siporex)
Environmental protection equipment


%

31

-INERAL 2ESOURCES
Copper price ,-%($/tonne)

10,000
8,000
6,000
4,000
2,000
0
01/1

02 /1

03 /1

04 /1

05 /1

06 /1

07 /1

08 /1

09 /1 09 /7

03 /1

04 /1

05 /1

06 /1

07 /1

08 /1

09 /1 09 /7

04 /1

05 /1

06 /1

07 /1

08 /1

09 /1 09 /7

Nickel price ,-%($ /lb)

25
20
15
10
5
0
01/1

02 /1

Gold price ,ONDON &IXING($ /TOZ)

1,000
800
600
400

200
01/1



02 /1

03 /1

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

Fiscal 2008 review

Exploration activities

Reflecting lower copper prices, divisional

SHARPLY DURING THE YEAR #OMBINED WITH

With the aim of becoming a major player

NET SALES FELL BY c  MILLION 

higher input prices for materials, thisIN NON FERROUS METALS 3-- IS IN THE PRO-

compared with the previous year to

LOWERED DIVISIONAL SALES AND PROFITS )Ncess of shifting from purchasing mostc  MILLION WHILE OPERATING INCOME

ADDITION EQUITY IN EARNINGS OF AFFILIATED

refining ores from external sources to a

DECREASED BY c  MILLION  TO

companies was significantly lower thanhMINERAL RESOURCESc  MILLION

in fiscal 2007 due to declines in profit at

MODEL BY ACTIVELY ACQUIRING MORE SOURCES
for refining ores.

-INING OPERATIONS GENERALLY PRO-OVERSEAS MINES IN WHICH 3-- HAS AN EQ-

ceeded well. Production of gold and sil-uity interest (this cut the recurring profit

ver ores at the Hishikari mine was in line

earned by the division).

REFININGv BUSINESS

3-- IS CONDUCTING EXPLORATION ACTIVIties in more than 20 locations, and is also
ACTIVELY SEEKING TO ACQUIRE NEW PERMITS

with plan. At the Pogo mine in Alaska,
USA, output of gold ore continued to%XPLORATION IS MAINLY FOCUSED ON THE !SIA

increase steadily despite the effect ofPacific region in light of the need to ship

PROLONGED RAINS !T THE -ORENCI MINE IN

ORES TO *APAN FOR PROCESSING #OPPER PROS-!RIZONA 53! OUTPUT WAS VIRTUALLY ON A

pecting is underway at sites across Southpar with plan, but the average grade of!MERICA !USTRALIA AND OTHER REGIONS )N

copper ore slipped.

the nickel business, an exploration project/UTPUT OF GOLD AND SILVER ORES FROM

IS ONGOING IN THE 3OLOMON )SLANDS IN A BID

THE (ISHIKARI MINE AMOUNTED TO  T

to discover potential future sources of ore

CONTAINING  KG OF GOLDA FALL OF

TO SUPPORT GROWTH BEYOND THE 4AGANITO T OR KG OF GOLD IN YEAR ON YEARPROJECT %LSEWHERE 3-- IS PROSPECTING

terms. Although gold prices remained

FOR GOLD IN !LASKA 53! AND IN #ANADA
3--S POLICY IS TO SUPPLEMENT IN

relatively high, prices for silver dropped

house resource development activities
with joint exploration projects if suitable
HIGH QUALITY PROJECT OPPORTUNITIES ARISE

Financial highlights, by segment&9

&9

&9.ET SALES   /PERATING INCOME   

-ILLIONS OF YEN/PERATING MARGIN 







$EPRECIATION EXPENSE

 

 

 

#APITAL EXPENDITURES

7,890

 

9,288

&9

&9

&9

(Budget)(Actual)(Actual)&9
(Actual)

Exploration costs (Billions of yen)

2.1





1.9



-ETALS
Global and BRICs demand for copper (forecast)(Thousands of tonnes)
BRICs

20,000Global

15,00010,000
5,000
0
2004

2005

2006

2007

2008

2009

(CY)

2008

2009

(CY)

Global nickel production volume (forecast)(Thousands of tonnes)

1,500
1,200
900
600
300
0
2004

2005

2006

2007

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

Global8,000

30,0006,000

22,5004,000

15,000

2,000

7,500

0

0
2004



2005

2006

2007

2008

2009

(CY)

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

Fiscal 2008 review

Capital investment plans

Reflecting lower sales volumes and prices

2008, the price of copper fell sharply af-!S PART OF THE MOVE TO A hRESOURCES

for non-ferrous metals, net sales recorded

ter the onset of the global financial crisis.

REFININGv BUSINESS MODEL IN THE MINERAL

BY THE DIVISION DECLINED BY c  MIL-

4HE AVERAGE PRICE DURING FISCAL  WAS

RESOURCES AND METALS SECTOR 3-- PLANS

LION  COMPARED WITH THE PREVI- T COMPARED WITH  T IN THE

to make cost-effective investments in

OUS YEAR TO c  MILLION /PERATINGPREVIOUS YEAR 4HE PRICE OF NICKEL ALSO DE-&9 WITH THE PRIMARY AIM OF EXPAND-

INCOME FELL BY c  MILLION 

clined during the year, with the average

ING NICKEL OPERATIONS ,ARGE CAPITAL SPEND-

TO c  MILLION 4HIS WAS DUE TO THE IM-

PRICE IN FISCAL  DROPPING TO LB

ing projects include further construction

pact of lower prices for copper and nickel

FROM LB IN THE PREVIOUS YEARWORK ON THE SECOND PLANT AT THE #ORAL

and related inventory write-downs, as wellas the effect of reduced sales volumes.

3-- RESPONDED TO THE SHARP DETE-"AY .ICKEL 0ROJECT EXPECTED TO COST crioration in business conditions by trying

BILLION #APITAL SPENDING IS ALSO PLANNED$OMESTIC DEMAND FOR COPPER USED

to reduce operating costs where possible

for regular maintenance and repairs toin the manufacture of electric wires andand reviewing capital spending plans in another facilities.

rolled copper products decelerated sharply

attempt to bolster earnings.

during fiscal 2008. Sales of nickel declined#OPPER PRODUCTION TOTALED  T

due to the impact of a drop in stainless

A FALL OF  T IN YEAR ON YEAR TERMS

steel-related demand, with demand for

WHILE GOLD PRODUCTION DROPPED BY  KG

nickel used in specialty steels and alloys

TO  KG 0RODUCTION OF NICKEL INCLUD-

for energy-related applications falling as

ing ferronickel) was on a par with the pre-

WELL 4HE SLUMP WITHIN THE ELECTRONICS

VIOUS YEAR AT  T

sector also resulted in lower demand fornickel used in electronic materials. After
POSTING AN ALL TIME HIGH OF  T IN *ULYFinancial highlights, by segment
-ILLIONS OF YEN&9

&9

&9.ET SALES      /PERATING INCOME/PERATING MARGIN 







$EPRECIATION EXPENSE 

10,071

 #APITAL EXPENDITURES   

Capital expenditures(Billions of yen)&9

&9

&9

&9

(Plan)(Actual)(Actual)(Actual)-INERAL 2ESOURCES

1.7

7.9





-ETALS







18.8

/VERSEAS $EVELOPMENTAL )NVESTMENTS



8.8



10.9

4OTAL











%LECTRONICS AND !DVANCED -ATERIALS
Semiconductor monthly shipment value(Millions of U.S. dollars)
WW Dollars

Asia PacificJapan

EuropeAmerica

60,00050,00040,00030,00020,00010,0000
2002/1

2003/1

2004/1

2005/1

2006/1

2008/1

2009/1

Source: WSTS (World semiconductor trade statistics)

Large-area TFT-LCD panel demand (forecast)(m2)
OthersLCD TVLCD Monitor

Note PC

25,00020,00015,00010,0005,000
02008 Q.1 2008 Q.2 2008 Q.3 2008 Q.4 2009 Q.1 2009 Q.2 2009 Q.3 2009 Q.4
Source: Display bank (March 2009)

Global electronics parts shipment value(Billions of yen)Japan

Others

6,000
5,000
4,000
3,000
2,000
1,000
0
2004

2005

2006

2007

2008

Source: Japan Electronics and Information Technology Industries Association



(FY)

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

Fiscal 2008 review

Capital investment plans$IVISIONAL NET SALES DECLINED BY c 

paste used in multi-layer ceramic capaci-)N THE BATTERY MATERIALS SECTOR CAPITAL IN-

MILLION 

tors, and battery materials for consumer-

vestments of ¥2.0 billion are planned inrelated applications.

FISCAL  TO DEVELOP 3--S OPERATIONSCOMPARED WITH THE

PREVIOUS YEAR TO c  MILLION 4HE
division recorded an operating loss of3-- INTRODUCED STRICT COST REDUCTION

relating to lithium nickel oxide, a mate-c  MILLION WHICH WAS EQUIVALENT TO

measures within this division, including

rial used in secondary lithium-ion batteries.

a year-on-year earnings deterioration of

temporary shutdowns of some produc-

4HE MARKET FOR SUCH PRODUCTS IS EXPECTED TOc  MILLION

tion lines.

GROW GOING FORWARD /THER PLANNED CAPITAL'ROWTH WITHIN THE ELECTRONIC EQUIP-

investments in this segment total ¥1.8 bil-ment market during the first half of the

LION 4OTAL CAPITAL SPENDING BY THIS DIVISION

year was supported mainly by steady sales

IS PROJECTED TO BE c BILLION IN &9of low-end and low-priced products to

A YEAR ON YEAR REDUCTION OF c BILLION )N

EMERGING MARKETS 4HESE MARKETS COOLED

light of general economic circumstances,rapidly after the onset of the global finan-

3-- PLANS TO KEEP CAPITAL SPENDING IN THIS

cial crisis, however. Reflecting significant

sector to a minimum.

contractions in the respective markets formobile phones, flat-screen televisions andpersonal computers, which are the leading
sources of demand for electronic compoNENTS 3-- SAW SALES VOLUMES DECLINE FOR
many products, notably copper-clad polyIMIDE FILM ##0&

BONDING WIRE NICKEL

Financial highlights, by segment
-ILLIONS OF YEN&9

&9

&9.ET SALES   /PERATING INCOME   /PERATING MARGIN 







$EPRECIATION EXPENSE 

11,709 

#APITAL EXPENDITURES   

Capital expenditures(Billions of yen)

%LECTRONICS AND !DVANCED -ATERIALS&9

&9

&9

&9

(Plan)(Actual)(Actual)(Actual)





11.8





/THERSFiscal 2008 review

Operational overview of$IVISIONAL NET SALES INCREASED BY c 

SMM Group affiliates

MILLION  COMPARED WITH THE PREVIOUS)N THE CATALYST BUSINESS 3-- 'ROUP AF-+ETJEN #O ,TD MANUFACTURES CATALYSTSYEAR TO c  MILLION /PERATING INCOME

FILIATE .% #HEMCAT #ORPORATION IS ONE OF

USED IN OIL REFINING 4HE FIRM DEVELOPSDECLINED BY c  MILLION  TO c*APANS LARGEST MANUFACTURERS OF PRECIOUS

produces and sells hydroprocessing cata-

MILLION 4HIS MAINLY REFLECTED THE KNOCK ON

metal catalysts and coating chemicals.

lysts; offers services for off-site catalyst

effects of lower non-ferrous metals prices,

4HE FIRMS MAIN BUSINESSES ARE IN SUPPLY-

regeneration and presulfuration of regen-

WHICH SQUEEZED THE EARNINGS FROM PRE-ing chemical catalysts for a wide range oferated catalysts; provides other technicalcious metal recovery operations.

applications, including oil refining, petro-services; and conducts related process!NOTHER 3-- 'ROUP AFFILIATE .IPPON

4HE GROWTH IN SALES AT THIS DIVISION

chemicals, medicine, scents and foods,

LICENSING OPERATIONS .IPPON +ETJEN AIMS

was also due in part to the transfer during

and in the development and manufacture

to help corporate clients do more to pro-FISCAL  OF THE 3-- 'ROUP SUBSIDIARY

of automotive catalysts for purifying ve-

tect the global environment by developing

3UMIKO ,UBRICANT #O ,TD FROM THE %LEC-

HICLE EXHAUST GASES .% #HEMCAT IS ALSO

businesses that deliver more technically

TRONICS AND !DVANCED -ATERIALS $IVISION

developing new businesses in fuel-reform-

advanced and economic solutions in oil

ing catalysts for in situ hydrogen genera-

refining.

tion and in electro catalysts for fuel cellapplications. Based on its accumulated
wealth of expertise in catalyst technology,
the company is pushing ahead with thedevelopment of new catalysts that will
CONTRIBUTE TO FUTURE COMMERCIALIZATION OF
fuel cell technology.

Financial highlights, by segment
-ILLIONS OF YEN.ET SALES&9

&9

&9   



 

 

/PERATING INCOME.OTE 4HE HOUSING AND CONSTRUCTION MATERIALS BUSINESS WAS INCLUDED IN THIS SEGMENT FROM &9

Principal affiliates
.AME



6OTING 3HARES /PERATIONS.IPPON #ATALYST #YCLE #O ,TD100

.IPPON +ETJEN #O ,TD

-ANUFACTURE AND SALE OF DESULFURIZATION CATALYST FOR
petroleum processing. % #HEMCAT #ORPORATION-ANUFACTURE OF PRECIOUS METAL CATALYST AND SURFACE TREATMENT CHEMICALS
Recovery and refining of precious metals

3UMITOMO -ETAL -INING 3IPOREX #O ,TD100

-ANUFACTURE AND DISTRIBUTION OF !,# !UTOCLAVED ,IGHTWEIGHT AERATED#ONCRETE AND OTHER CONSTRUCTION MATERIALS

3UMIKO ,UBRICANT #O ,TD100

-ANUFACTURE AND DISTRIBUTION OF VARIOUS FABRICANTS

6ALUABLE METALS RECOVERY BUSINESSSUMITOMO METAL MINING CO., LTD.
Annual Report 2009

Feature 1. 4HE 2EALIZATION OF )NITIAL !MBITION

Sole operator of overseas mine

ALASKA

POGO
Anchorage

CANADA

July 7,2009

VancouverOn this date, SMM finally realized a long-held ambition of serving
as the sole operator of an overseas mine – in the vast territory of Alaska.
UNITED STATES

39

From seam discovery to mine development
3-- FIRST DISCOVERED THE GOLD SEAMS THAT
would later become the Pogo mine in the
VAST TERRITORY OF !LASKA IN $ECEMBER 
4HE SITES LATITUDE BEYOND . MADE IT
a particularly cold and forbidding place.
4HE PATH TOWARD MINE DEVELOPMENT WAS
NOT AN EASY ONE 4HE CHALLENGE WAS TO
develop the mine as fast as possible amid
harsh natural conditions while complying
with strict US environmental regulations.
!FTER AN INTERNAL EVALUATION 3-- DECIDED TO SELL A  INTEREST IN THE PROJECT TO
4ECK 2ESOURCES WHICH HAD EXPERIENCE OF
ZINC MINING OPERATIONS IN !LASKA 4ECK WAS
invited to be the project operator as partof a joint development deal based on anearn-in agreement.

View of surface operations at Pogo mine
We discovered gold deposits in a part of Alaska’s vast untouched wilderness%VEN WITH 4ECKS PARTICIPATION THE
project faced numerous difficulties before

however, the effect of global warming

ment in such a location demands the

ANY OPERATIONS COULD START 4RANSPORTING

has been to significantly reduce ice for-strictest

all the heavy machinery to the mine site

MATION IN !LASKA /FTEN THIS RESULTED IN

GUARDS /NE BY ONE THE PROJECT HAD TO

at Pogo, which was not serviced by any)NSUFFICIENTLY THICK ICE FOR TRANSPORTATIONACQUIRE ENVIRONMENTAL PERMITS FOR 

ROAD INVOLVED USING FROZEN RIVERS AS ROADS

purposes, forcing teams to spray the roadseparate items, covering issues such as

IN THE WINTER MONTHS )N RECENT YEARS

surface with water to maintain ice cover-

PROTECTING WATER QUALITY AND BIODIVERSITY

age while waiting for the next cold front

Additional environmental measures wereto arrive. Fortunately, daytime tempera-

taken as well after consultation with the

TURES PLUNGED BELOW MINUS & MANYLOCAL COMMUNITY AND .'/S /PERATIONSTIMES IN THE WINTER OF  AND SPRING

at the mine could only begin once all of

ARRIVED LATE IN  4HIS ALLOWED TEAMS

these safeguards were in place and ap-

TO TRANSPORT A GREATER QUANTITY OF EQUIP

PROVED )N &EBRUARY  AFTER CONSIDER

ment and materials to the mine site than

ABLE EFFORTS BY THE 4ECK PROJECT TEAM THAT

originally expected.

included several members assigned from

Winter road construction
Water must be sprayed to thicken the ice if
temperatures risesafe-

Alaska is also a natural treasure. Al-

3-- THE 0OGO MINE PRODUCED ITS FIRSTPRECIOUS METAL OUTPUT 4HIS WAS IN THE

for society in other ways, mine develop-

form of ingots of doré, an amalgam conTAINING  GOLD AND  SILVER

Delta Junctionenvironmental

though developing a mine creates value

Fairbanks

Heavy machinery transport via winter road
Cold temperatures were needed to ensuresufficiently thick ice to enable transportationof the heaviest equipment

possible

Alaska

1st base camp (Angel Creek)

2nd base camp (Pogo)35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009-OVE TO SOLE OPERATOR STATUS
At that time, operation of the Pogo mine
WAS THE RESPONSIBILITY OF 4ECK 7ITH A 
INTEREST IN THE MINE 3-- HAD ABOUT FIVE
full-time managers assigned to the project
FROM *APAN 4HEIR ROLE WAS TO PARTICIPATEin the management of the mine, since thisprovided an excellent opportunity to gain
real experience of mining development andoperations in Alaska.
)N !PRIL  THREE YEARS AFTER THE
START OF OPERATIONS 4ECK COMMUNICATEDTO 3-- THAT IT WANTED TO SELL ITS  IN-

Blast charge operations at Hishikari mine
SMM mining engineers trained at Hishikari
work at mines around the world, including
development of PogoFirst doré output (gold/silver amalgam)
For economic reasons, the Pogo mine
produces doré that is 94% gold and 6% silver;a Canada-based refining company converts
these ingots into gold of 99.99% purity

terest in Pogo, based on a new financial
policy to dispose of gold mining assets.
3-- IMMEDIATELY BEGAN AN INTERNAL FEA-

expectations of discovering further veins

TION  4HE DECISION ALSO MEANT THAT 3--

sibility study to check that there were no

OF ORE /N THE BASIS OF THIS ANALYSIS 3--

would finally achieve a long-held ambition

MANAGEMENT ISSUES AT THE 4ECK SUBSIDIARYDECIDED TO ACQUIRE ALL OF 4ECKS SHARES IN

of becoming the sole operator of a minein Alaska; that the multimillion dollar cost

the Pogo gold mine operating company.

outside Japan.

OF BUYING 4ECKS INTEREST IN 0OGO WOULD BE!S A RESULT 3-- GAINED AN 

justified by the projected additional reve-interest in the Pogo mine (the remaining

nue flows; and that there were reasonable IS OWNED BY 3UMITOMO #ORPORA-$EVELOPMENT OF SECOND AND THIRD OVERSEAS MINES
Since the decision was taken to assume
SOLE OPERATORSHIP OF 0OGO 3-- HAS INcreased the number of Japanese staff
working at the site from five to ten.
3-- CURRENTLY OWNS INTERESTS IN
six overseas copper mines, three overseas nickel mines, and the gold mines at(ISHIKARI AND 0OGO /F THESE  MINESHOWEVER 3-- IS ONLY THE OPERATOR AT THE
Open-pit copper mining at Cerro Verde (Peru)
Against the face of the 1km-diameter pit, eventhe giant loaders look as small as grains ofrice; SMM’s next ambition is to operate mineson this huge scale

Solomon Islands exploration
Exploration is ongoing in the Solomon Islands;
SMM will decide whether or not to undertakea feasibility study once geological survey work
is complete

when Western explorers first discovered it

EXPORT PRODUCTS AROUND THE WORLD n TODAY

becoming a major player in non-ferrous

SEVERAL CENTURIES AGO n AND WAS FAMOUS

it dominates in areas such as automobiles,

METALS BY ACQUIRING PRODUCTION INTERESTSTWO GOLD MINES 3-- IS ALSO THE SOLE OPERATOR AT A THIRD OVERSEAS SITE AT #ORAL "AY
in the Philippines, which is a nickel refining project.
Japan was home to many gold mines

FOR IT 9ET SINCE THE S THE ONLY LARGE

electrical machinery, electronics and thein copper, nickel and gold mines; and by

scale gold mining operation in the coun-

ENVIRONMENT 3--S CORE METALS OF NICKEL

expanding the three mining and refining

try has been the Hishikari mine owned bycopper and gold are essential to all these

operations where it is the sole operator.

3-- *APAN HAS ALWAYS BEEN AN INDUSTRIAL

INDUSTRIES 3--S AIM REMAINS TO SECURE

nation that uses its technical strengths toresources for its home country of Japan byThe Stone Boy Project
Whilst the Pogo mine produced its first gold in February 2006, the exploration activities in
the region started in 1991. Based on an initial study by geological consulting firm Watts,
Griffis and McOuat (WGM), SMM joined Noranda, Conroy Petroleum and Stone Boy (a WGM
subsidiary) in a joint exploration consortium to prospect for gold, lead and zinc within a
16,000km2 area to which Stone Boy owned the exploration rights.
After the initial zinc prospecting did not yield any satisfactory results, Noranda and Conroy
Petroleum left the consortium in 1993. More promising results were obtained when the remaining two partners started prospecting for gold. In 1995, WGM offered to sell its interestin the venture to SMM (as a specialist exploration firm, WGM was not interested in minedevelopment). Deciding that the region held promise, SMM acquired the rights to the entire
Stone Boy area in August 1995. Exploration activities continued, leading to the discovery of
the Liese Zone ore deposit within the Pogo area. In December 1995, SMM announced that it
had made a potentially valuable gold discovery in Alaska.
Within the Pogo area, the Liese veins are just one part of a larger geological formation withmineral potential known as the Pogo Trend. In addition, there are several sites outside the
Pogo area but within the Stone Boy property that show indications of gold deposits. SMM
plans to continue prospecting for gold within this region.

Pogo mine gold reserves
Reserve estimation dateAmount of reserves

December 31, 2008

108.8 tonWith annual output at the Pogo mine having increased from 11t to 12t, current reserves are
expected to last another 9–10 years.

42

SUMITOMO METAL MINING CO., LTD.
Annual Report 2009

SMM’s overseas mining operations have graduated to the next level.

.OW WE STAND READY TO BECOMEa major non-ferrous metals player.
43

"USINESS .ETWORK
SMM's Mines and Refineries -Overseas-

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

NickelCopperPogo (85.0%)

Morenci (12.0%)
Jinlong Copper Co., Ltd. (27.1%)
copper 400,000 tonnes

Coral Bay (54.0%)
Soroako (20.1%)

nickel/cobalt mixed sulfide
Nickel 22,000 tonnes, cobalt 1,500 tonnes

Cerro Verde (16.8%)
Ojos del Salado (16.0%)
Figesbal (25.5%)
Candelaria (16.0%)
Goro (11.0%)

Batu Hijau (5.0%)
Northparkes (13.3%)

Principal affiliates.AME-INERAL
Resources

3UMITOMO -ETAL -INING !MERICA )NC

100

0ROSPECTING -ANAGEMENT OF MINING SUBSIDIARIES IN 53!

80-INING AND RELATED OPERATIONS

3--! #ANDELARIA )NC

80

Subsidiary engaged in investment in local corporation located in#HILE OPERATING #ANDELARIA -INE

3UMITOMO -ETAL -INING #ANADA ,TD100

0ROSPECTING #ONSULTING

3UMITOMO -ETAL -INING /CEANIA 0TY ,TD

100

Resource surveys, mine development and related operations in/CEANIA

3UMITOMO -ETAL -INING 0OGO ,,#100)NVESTMENT IN 0OGO -INE PROJECT80)NVESTMENTS IN LOCAL 0ERUVIAN COMPANIES ENGAGED IN THE #ERRO 6ERDE-INE OPERATION

3-- 3OLOMON ,)-)4%$

100

0ROSPECTING IN THE 3OLOMONS )SLANDS

3UMITOMO -ETAL -INING 0ERU 3!100

Prospecting in South America

3UMITOMO -ETAL -INING #HILE ,4$!

100

Prospecting in South America

04 )NTERNATIONAL .ICKEL )NDONESIA

20.ICKEL ORE MINING .ICKEL SMELTING&)'%3"!,.ICKEL ORE MINING (ARBOR TRANSPORTATION*INLONG #OPPER #O ,TD27

-ANUFACTURE AND SALE OF ELECTROLYTIC COPPER AND SULFURIC ACID#ORAL "AY .ICKEL #ORPORATION)NTERMEDIATE PRODUCTS MANUFACTURE OF NICKEL AND COBALT)NVESTMENTS IN NICKEL AND COBALT DEVELOPMENT BUSINESSES $ISTRIBU
tion of nickel and cobalt

3UMIC .ICKEL .ETHERLANDS BV/PERATIONS

3UMITOMO -ETAL -INING !RIZONA )NC

3-- #ERRO 6ERDE .ETHERLANDS "6

-ETALS

6OTING 3HARES35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

0OGO 'OLD -INE 53!

#ERRO 6ERDE #OPPER -INE 0ERU-ORENCI #OPPER -INE 53!

#ANDELARIA #OPPER -INE #HILE#ORAL "AY 0HILIPPINES*INLONG #OPPER #O ,TD #HINA"USINESS .ETWORK
SMM’s Mines and Refineries -Domestic-Gold
Metals (SMM's interest)[Annual production capacity]

NickelCopperHarima Smelter

Zinc/leadzinc 90,000 tonnes, lead 30,000 tonnes

Toyo Smelter & Refinery
copper 450,000 tonnes, gold 60 tonnes, silver 360 tonnes

Niihama Nickel Refinery
nickel 41,000 tonnes

Shisaka Plant
zinc oxide 120,000 tonnes processing capacity

Hyuga Smelting Co., Ltd. (60%)
ferro-nickel 23,000 tonnes

Hishikari Mine

Principal affiliates
6OTING 3HARES/PERATIONS

3UMIKO #ONSULTANTS #O ,TD100

'EOLOGICAL SURVEY OF RESOURCES AND CIVIL ENGINEERING 4EST BORING(YUGA 3MELTING #O ,TD

Ferro-nickel smelting

3UMITOMO -ETAL -INING "RASS  #OPPER #O ,TD100

-ANUFACTURE AND SALE OF COPPER AND BRASS PRODUCTS AND PROCESSED
copper and brass products

3UMIKO ,OGISTICS #O ,TD100

-ARITIME TRADING (ARBOR TRANSPORTATION AND SERVICES ,AND TRANS
portation.AME-INERAL
Resources-ETALS-3 :INC #O ,TD

-ANUFACTURE AND SALE OF ZINC AND RELATED OPERATIONS!CIDS #O ,TD

-ANUFACTURE AND DISTRIBUTION OF SULFURIC ACID AND RELATED PRODUCTS

4AIHEI -ETAL )NDUSTRY #O ,TD97

-ANUFACTURE OF HEAT CORROSION AND FRICTION RESISTANT STEEL CASTINGS
and precision castings35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

(ISHIKARI -INE +AGOSHIMA4OYO 3MELTER  2EFINERY %HIME.IIHAMA .ICKEL 2EFINERY %HIME(YUGA 3MELTING #O ,TD -IYAZAKI

3HISAKA 0LANT %HIME

Harima Smelter (Hyogo)

"USINESS .ETWORK
SMM's Production Facilities for Electronics and Advanced Materials■ Semiconductor materials■ Advanced materials■

Sumiko Kunitomi Denshi Co., Ltd.

■SMM Precision Co., Ltd.

■

Shinko Co., Ltd.

■

Sagami Plant■

Nittosha Co., Ltd.

■

Sumiko Tec Co., Ltd.

■Ome District Division■■

Isoura Plant■

Niihama Electronics Co., Ltd.

■

Ajimu Electronics Co., Ltd.

■■

Ohkuchi Electronics Co., Ltd.

■SMM KOREA Co., Ltd.

■

Shanghai Sumiko Electronic Paste Co., Ltd.

■

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

■

Sumiko Electronics Suzhou Co., Ltd.

■

Sumiko Leadframe Chengdu Co., Ltd.

■

Sumiko Precision Chengdu Co., Ltd.

■

Sumiko Electronics Taiwan Co., Ltd.

■

Taiwan Sumiko Materials Co., Ltd.

■

Dongguan Sumiko Electronic Paste Co., Ltd.

■

Sumiko Leadframe (Thailand) Co., Ltd.

■M-SMM Electronics SDN. BHD.

■■

Malaysian Electronics Materials SDN. BHD.

■

Sumitomo Metal Mining Asia Pacific Pte. Ltd.

Principal affiliates.AME$OMESTIC/VERSEAS



6OTING 3HARES/PERATIONS

3UMIKO +UNITOMI $ENSHI #O ,TD100

Production of crystal materials and magnet materials/HKUCHI %LECTRONICS #O ,TD100

Semiconductor packaging materials production; Recovery of precious
MATERIALS -ANUFACTURE OF FUNCTIONAL INKS!JIMU %LECTRONICS #O ,TD100)# PACKAGE PLATING

3HINKO #O ,TD

$ESIGN MANUFACTURE AND DISTRIBUTION OF PRINTED CIRCUIT BOARDS

3-- 0RECISION #O ,TD100

Production of optical communications components'2!./04 ,TD

-ANUFACTURE AND DISTRIBUTION OF RARE EARTH IRON GARNET 2)'

.IIHAMA %LECTRONICS #O ,TD100

,EAD FRAME PRODUCTION #OPPER CLAD POLYIMIDE FILM PRODUCTION.ITTOSHA #O ,TD

100

-ETAL PRODUCT PLATING SURFACE TREATMENT AND SALES

3UMIKO 4EC #O ,TD100

-ANUFACTURE OF ELECTRONIC DEVICE TERMINALS CONNECTORS AND SALES-ALAYSIAN %LECTRONICS -ATERIALS 3$. "($100-ANUFACTURE AND SALE OF BONDING WIRE AND THICK FILM PASTE

4AIWAN 3UMIKO -ATERIALS #O ,TD100

-ANUFACTURE AND DISTRIBUTION OF BONDING WIRE

3UMITOMO -ETAL -INING %LECTRONIC -ATERIALS3HANGHAI #O ,TD100

-ANUFACTURE AND DISTRIBUTION OF BONDING WIRE

3HANGHAI 3UMIKO %LECTRONIC 0ASTE #O ,TD

-ANUFACTURE AND DISTRIBUTION OF THICK FILM PASTE$ONGGUAN 3UMIKO %LECTRONIC 0ASTE #O ,TD

-ANUFACTURE AND DISTRIBUTION OF THICK FILM PASTE

3UMITOMO -ETAL -INING !SIA 0ACIFIC 0TE ,TD100

2EGIONAL HEADQUARTERS 2(1 FOR OVERSEAS LEAD FRAME BUSINESSES

3UMIKO ,EADFRAME #HENGDU #O ,TD70

-ANUFACTURE AND SALE OF LEAD FRAMES

3UMIKO 0RECISION #HENGDU #O ,TD70

-ANUFACTURE AND SALE OF LEAD FRAMES- 3-- %LECTRONICS 3$. "($100

-ANUFACTURE AND SALE OF LEAD FRAMES

3UMIKO %LECTRONICS 4AIWAN #O ,TD70

,EAD FRAME AND TAPE MATERIALS PRODUCTION

3UMIKO ,EADFRAME 4HAILAND #O ,TD100

-ANUFACTURE AND SALE OF LEAD FRAMES

3UMIKO %LECTRONICS 3UZHOU #O ,TD100

-ANUFACTURE AND SALE OF LEAD FRAMES

3-- +/2%! #O ,TD100

-ARKETING SUPPORT FOR SEMICONDUCTOR MATERIALS AND RELATED OPERATIONSSUMITOMO METAL MINING CO., LTD.
Annual Report 2009

Feature 2. 4ARGETING 3USTAINED 'ROWTH

Pursuing a steady, forward-looking
strategy to grow with the expanding
non-ferrous metals industry

Global demand for non-ferrous metals is forecast to continue rising into the future. To realize sustained growth, companies within the sector need to gain sufficient capacity to develop operations
on a global scale. This is why SMM is focusing on moving toward a “mineral resources + refining”
business model. At the same time, establishing the framework and organization to support a strong
management platform is also essential. SMM seeks to grow corporate value by pursuing a management style that combines business strategy with corporate social responsibility (CSR).

49

4ARGETING 3USTAINED 'ROWTH)NTERVIEW WITH THE #HAIRMAN

4HE ABILITY TO DEVELOP BUSINESS
on a global scale is essential
Koichi Fukushima
Chairman and Representative Director35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009



4ARGETING 3USTAINED 'ROWTH

Interview with the Chairman

Q.1

7HAT MUST YOU DO NOW TO ENSURE 3--S BUSINESS
will be growing in, say, 20 years from now?

Global economic conditions may be tough at the moment, but we are bound
TO SEE A RECOVERY AT SOME POINT )N TERMS OF THE GLOBAL DEMAND FOR NON FERROUS
METALS OUR VIEW IS THAT THE "2)#S AND OTHER EMERGING ECONOMIES ARE CERTAIN TO
be driving growth in demand ten or twenty years from now.
4HE CRUCIAL POINT THAT ) BELIEVE WE MUST RECOGNIZE IS THAT THE COMPETITION
for resources will become more intense in the future. Within that environment,
the conditions for any Japanese company that continued to base its business onpurchasing ores for refining would probably become much more difficult.
'IVEN THIS SITUATION ) BELIEVE THAT THE ESSENTIAL THING FOR 3-- IS TO GAIN
greater ownership of resources so that we can continue supply users with highQUALITY NON FERROUS METALS "Y ADOPTING THIS ROLE WE CAN ALSO MAKE A VALUABLE
social contribution as a company. For these reasons, we need to be reinforcing
our business platform now and continue doing so, looking not merely five or ten
years ahead but even further into the future.
)N OUR ELECTRONICS AND ADVANCED MATERIALS BUSINESS ) THINK THE IMPORTANT
THING IS HOW WE COLLECTIVELY TACKLE GLOBAL ENVIRONMENTAL ISSUES .ON FERROUS
metal resources and products will certainly play an effective role in helping tosolve such issues, from reducing carbon dioxide emissions to saving energy andbuilding a low-carbon society. We must develop this business based on that assumption. Although we are in a situation where the electronics and advanced
materials operations must undergo fundamental restructuring, at the same time
WE NEED TO RECOGNIZE THAT THIS IS ONE BUSINESS DOMAIN WHERE WE CAN CONTRIBUTE
to society as a commercial enterprise. We are forecasting a continuation of thecurrent harsh earnings environment for the electronics and advanced materials
BUSINESS 4HE KEY CHALLENGE IS ONE OF OVERCOMING THE CURRENT DIFFICULTIES SO THAT
we can remain in this business and profitable.

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

What is your approach to the future development
OF 3--S REFINING BUSINESS

Q.2

How we approach our refining operations going forward is a key point relating
to our business strategy.
3-- INHERITED THE COPPER MINE AT "ESSHI ONE OF THE ORIGINAL JEWELS IN THE
Sumitomo crown that we began operating in the 17th century. When that mine
CLOSED IN  METAL REFINING BECAME OUR MAIN BUSINESS 4HESE OPERATIONS HAVECHIEFLY RELIED ON BUYING ORES FROM OVERSEAS TO PRODUCE HIGH GRADE METAL n THATis, we have followed a procured-ore refining business model. However, businessconditions have evolved in such a way in recent years that it has become difficult
to support the growth of the overall business based on smelting and refining operations alone. While our production costs are some of the lowest in the world,
the overall competitiveness of these operations is gradually being eroded by the
relatively high cost of processing the various refining by-products in Japan.
/N THE PERIPHERY OF OUR REFINING OPERATIONS WE HAVE THE MINERAL RESOURCES
BUSINESS AND THE ELECTRONICS AND ADVANCED MATERIALS BUSINESS /UR MAIN CHALlenge going forward is to get each of these businesses firmly established and
TO INCREASE EARNINGS )N THE MINERAL RESOURCES BUSINESS IN PARTICULAR WE NEED TOACQUIRE THE CAPABILITIES TO DEVELOP THESE OPERATIONS ON A GLOBAL SCALE 4O DATE
while we have taken stakes in a large number of resources around the world,
we have typically owned minority interests and have not acted as the sole operaTOR &OR THE PAST TEN YEARS ) HAVE BEEN SAYING THAT 3--S GOAL WAS TO ACQUIRE A
MAJORITY STAKE IN A MINE AND ASSUME ITS SOLE OPERATORSHIP 4HAT FINALLY HAPPENEDEARLIER IN  WHEN WE ACQUIRED A  STAKE IN THE 0OGO GOLD MINE 3O WE
HAVE NOW REALIZED OUR AMBITION OF BECOMING THE SOLE OPERATOR OF AN OVERSEAS
mine.



4ARGETING 3USTAINED 'ROWTH

Interview with the Chairman

Q.3(OW DO YOU PLAN TO BUILD UP 3--S BUSINESS PLATform to create the sort of company you are talking
about?

) SEE HUMAN RESOURCES DEVELOPMENT AS A VITAL PART OF IT 4O MANAGE MINING OPERAtions and grow profits, we need to develop and retain talented engineers who
CAN WORK AT THE INTERNATIONAL LEVEL -Y BELIEF IS THAT YOU CANNOT SUBSTITUTE ACTUALHANDS ON EXPERIENCE 9OU NEED TO GET SWEATY INSIDE A REAL MINE TO GET A FEEL FOR
how it operates and understand this part of the production process. Fortunately,
3-- OWNS A GOLD MINE AT (ISHIKARI THAT IS IDEAL AS THIS KIND OF TRAINING GROUND/UTSIDE *APAN WE NOW HAVE THE OTHER GOLD MINE AT 0OGO /UR PLAN IS TO TRAIN
people at Hishikari and then continue their mining education at Pogo. We canthen put these trained engineers into the new mines that we develop in the fuTURE /N SITE TRAINING IS AN IMPORTANT PART OF (2 DEVELOPMENT AND THAT IS ONE OF
THE REASONS WHY WE WANTED TO TAKE ON THE OPERATORSHIP OF 0OGO )N THAT SENSE )am delighted that, after so many years, we have finally been able to take the next
IMPORTANT STEP ON THE PATH OF 3--S DEVELOPMENT
Another conviction of mine is that, first and foremost, managers must conTINUE TO LEARN &OR THIS REASON IN THE PAST YEAR WE HAVE ORGANIZED TRAINING CAMPSAND OPTIONAL CLASSES FOR EXECUTIVE OFFICERS )N ADDITION WE ARE IN THE PROCESS OF
reviewing and upgrading our training systems across the entire company. We
HAVE ALSO ESTABLISHED AN (2 DEVELOPMENT AND TRAINING CENTER IN .IIHAMA NEAR
the original Besshi site) to provide a facility for training courses. Although we arefacing extremely harsh business conditions at the moment, we are not cutting
the training and education budget. As in the past, our aim going forward is toput a lot of effort into training our people as best we can.

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009$O YOU SEE ANY OTHER IMPORTANT MANAGEMENT
related points?

Q.4

2ECENTLY ) HAVE GAINED A FRESH APPRECIATION FOR THE VALUE OF THE 3UMITOMO "USIness Spirit, which is based on the concept that enterprise is essentially a benEFICIARY OF NATURE AND SOCIETY )N THIS SENSE MINING IS A BUSINESS IN WHICH WE
BENEFIT FROM NATURE THROUGH THE EXTRACTION OF UNDERGROUND RESOURCES )N TURN
THIS MEANS THAT WE MUST RECOGNIZE THE NECESSITY OF OUR BUSINESS ALWAYS STRIKING A
HARMONIOUS BALANCE WITH THE ENVIRONMENT 4HE 3UMITOMO "USINESS 3PIRIT TELLS US
we must pursue resource development in an environmentally sustainable manner because our prosperity fundamentally depends on it.
)F WE DO NOT HAVE SUFFICIENT APPRECIATION OF THIS POINT AND DEVELOP OUR MINing business accordingly, the world will not look on us kindly and our business
WILL ULTIMATELY FAIL TO PROSPER )T IS THUS IN OUR INTEREST TO DEVELOP MINING OPERAtions in a way that stays in harmony with the local environment, and to develop
the necessary technologies to make this possible. We must also be committed
to ensuring that the local economy and area truly benefits from our operations.
4HESE ARE THE PRINCIPLES EXPRESSED IN THE 3UMITOMO "USINESS 3PIRIT THAT WE HAVE
inherited from hundreds of years ago.
!T 3-- WE ARE FIRMLY COMMITTED TO FULL AND ONGOING PROGRAMS OF MEASURESIN AREAS SUCH AS #32 COMPLIANCE AND SAFETY MANAGEMENT 4HE 3UMITOMO "USINESS 3PIRIT ALSO LIES AT THE HEART OF THESE ACTIVITIES .O MATTER HOW STRICT ARE THE
rules and systems that you create, the essential thing is training people to respect
THE RULES AND APPLY THE SYSTEMS 3O ) BELIEVE THAT IT IS IMPORTANT FOR THE MANAGEment of our business that we focus on these areas of training to ensure that ouremployees have the awareness and skills to implement the various systems andactivities that we have established.
August 2009

Koichi Fukushima
Chairman and Representative Director4ARGETING 3USTAINED 'ROWTH#ONSTRUCTION AND /PERATION OF -ANAGEMENT 3YSTEMS #ORPORATE 'OVERNANCE
4O GAIN THE TRUST AND SATISFY THE EXPECTATIONS OF SHAREHOLDERS AND OTHER STAKEHOLDERS 3-- IS COMMITTED TO BUILDING AND MAINTAINING AN OPTIMIZED FRAMEWORK FOR BUSINESS MANAGEMENT BASED ON
high levels of transparency and efficiency.

Basic policy stance3-- VIEWS CORPORATE GOVERNANCE AS A DISCIPLINARY FRAMEWORK BOTH FOR MAXIMIZING THE ENTERPRISE VALUE OF THE 3-Group and for ensuring sound management practices. As such, it is an important management issue.
3-- HAS INSTITUTED THE 3-- 'ROUP #ORPORATE 0HILOSOPHY BASED ON THE 3UMITOMO "USINESS 3PIRIT AND HAS ALSO FORMUlated THE 3-- 'ROUP #ODE OF #ONDUCT AS A SET OF BEHAVIORAL STANDARDS TO GUIDE EXECUTIVES AND EMPLOYEES IN REALIZING
3--gS BUSINESS PHILOSOPHY
3-- IS COMMITTED TO STRIVING TO ACHIEVE THE GOALS CONTAINED IN THE BUSINESS PHILOSOPHY TO CONDUCTING EFFICIENT AND
sound business activities; to making a valuable social contribution; and to fulfilling responsibilities to stakeholders.
3-- HAS ADOPTED EXECUTIVE OFFICER AND CORPORATE AUDITOR SYSTEMS TO ENSURE THAT THE EXECUTION MONITORING AND OVERsight of business management each function effectively within governance systems.

#ORPORATE GOVERNANCE FRAMEWORKGeneral Meeting of Shareholders
Decision-making andSupervision[ Auditing ]Board of Directors (Chair : Chairman）

Board of Corporate Auditors

Independent Public Accountant[ Business Execution ]President（Execution of Business）（Social Responsibility）

Management Committee

Executive Officers

CSR Committee(Chair: President)

6 CSR subcommittees

Compliance WG（Headquarters）

Risk Management WG

Auditing Department

Execution of Business

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

1) #HARACTERISTICS
Governance institutions and related personnel
Institution

Members

Composition"OARD OF $IRECTORS#HAIRMAN

8/UTSIDE DIRECTOR  CHAIRMAN PRESIDENT DIRECTORS WITH EXECUTIVE RESPONSIBILITY FOR CORPORATE DIVISIONS  DIRECTORS WITH EXECUtive responsibility for operating divisions (2)"OARD OF #ORPORATE
Auditors

Standing Senior#ORPORATE !UDITOR)NCLUDING  OUTSIDE AUDITORS-ANAGEMENT #OMmittee

President

8

President; president-designated senior managing executive officer (not head of an operating division); executive officers with
DEPARTMENTAL RESPONSIBILITY FOR TECHNOLOGY BUSINESS PLANNING GENERAL AND LEGAL AFFAIRS PUBLIC RELATIONS AND )2 ACCOUNTING
AND HUMAN RESOURCES EXECUTIVE OFFICER FROM PROPOSED DIVISION ." 4HE CHAIRMAN OUTSIDE DIRECTOR AND CORPORATE AUDITORS
can also attend)#32 #OMMITTEE

President

17

0RESIDENT EXECUTIVE OFFICER RESPONSIBLE FOR #32 HEADS OF OPERATING DIVISIONS TECHNOLOGY DIVISION ENGINEERING DIVISION AND
HEAD OFFICE DEPARTMENTS ." #ORPORATE AUDITORS CAN ALSO ATTEND

19

President; managers with senior responsibility for operational execution, head office departments, technology division,engineering division and operating divisions; managers of key operating sites%XECUTIVE OFFICERSChaired by35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 2009

)N ORGANIZATIONAL TERMS 3--gS CORPORATE GOVERNANCE FRAMEWORK HAS

by the executive officers; and audit functions, which involve the Board of

THREE SEPARATE CORE ELEMENTS THE "OARD OF $IRECTORS WHICH HAS A DECI-#ORPORATE !UDITORS AND THE INDEPENDENT AUDITORSsion-making and supervisory role; business execution, which is managed2) Business execution
3-- INTRODUCED AN EXECUTIVE OFFICER SYSTEM IN *UNE  5NDER THE SYS-

following important business matters:

tem, significant operational authority is delegated to executive officers to- Matters requiring Board approval that also need prior deliberation

establish a clear delineation of authority and responsibilities with respect to- Matters deemed to require discussion but not items for the Board

execution functions, while directors focus mainly on decision-making andagendasupervision.

4HROUGH SUCH DELIBERATIONS THE -ANAGEMENT #OMMITTEE FACILITATES RA--- Reporting to the president, the executive officers assume responsibility forbusiness execution, both in terms of divisional operating activities and thetional business discussion and decision-making while helping to promote
efficient management based on appropriate internal controls.

fulfillment of social responsibilities (CSR activities and internal controls).
-- Chaired by the president, the Management Committee deliberates the $IRECTORS
Operation of the Board of Directors
3--gS ARTICLES OF INCORPORATION SET THE MAXIMUM NUMBER OF DIRECTORS TO TEN)N THE YEAR ENDED -ARCH  THE "OARD OF $IRECTORS CONVENED  TIMESAS A WAY OF PROMOTING LIVELY DEBATE AT "OARD MEETINGS $IRECTORS SERVE FOR

 REGULAR MEETINGS AND  EXTRAORDINARY SESSIONS  4HE OUTSIDE DIRECTOR AT-TERMS OF ONE YEAR 4HE "OARD OF $IRECTORS CONVENES REGULARLY ONCE A MONTHTENDED  OF THESE MEETINGS  REGULAR EXTRAORDINARY TO ASK THE PROPER

AND IN EXTRAORDINARY SESSION AS REQUIRED TO ENSURE FLEXIBLE DECISION MAKINGQUESTIONS AND STATE OPINIONS BASED ON HIS SPECIALIST KNOWLEDGE AND EXPERI-

Board minutes are circulated to all executive officers to share information.

ence as a lawyer and tax attorney.

Relationships with outside directors
Name

Tsutomu Ushijima

Profession,AWYER

2ELATIONSHIP WITH 3---R 5SHIJIMA HAS SIGNED A LIMITED LIABILITY AGREEMENT WITH 3-- AND SERVES AS AN OUTSIDE AUDITOR OF OTHER COMPANIES AS WELL

Reason for appointment

Based on his specialist knowledge and wealth of experience as a lawyer, he was appointed an outside director to provide
ADVICE TO 3-- ON BUSINESS MATTERS PARTICULARLY FROM A COMPLIANCE PERSPECTIVE

 #ORPORATE AUDITORS
Operation of the Board of Corporate Auditors
3--gS ARTICLES OF INCORPORATION SET THE MAXIMUM NUMBER OF CORPORATE AUDI-

AND "OARD OF #ORPORATE !UDITORS THAT WERE HELD IN THE YEAR ENDED -ARCHTORS TO FIVE 4HE IN HOUSE CORPORATE AUDITORS WORK IN A FULL TIME CAPACITY AND

2009. Both of the outside auditors performed audit-related functions, suchstate opinions at meetings of the Board and other senior executive meetings

AS ASKING PROPER QUESTIONS AND STATING OPINIONS AT MEETINGS BASED ON SUB-FROM AN INDEPENDENT STANDPOINT BASED ON AUDIT RESULTS 4HE OUTSIDE AUDI-

stantial experience in their respective specialist fields and knowledge of cor-

TORS ALSO ATTEND THESE MEETINGS BASING OPINIONS ON EXPERTISE IN SPECIALIZED

porate business.

FIELDS 4HE "OARD OF #ORPORATE !UDITORS MEETS EACH MONTH ON THE SAME DAY"OTH THE FULL TIME AUDITORS AND THE OUTSIDE AUDITORS VISIT 3-- 'ROUPAS REGULAR "OARD MEETINGS BUT AT AN EARLIER TIME %XTRAORDINARY SESSIONS CANOPERATING SITES AND FACTORIES AS REQUIRED TO CONDUCT SITE AUDITS 4HE FULL

also be convened as necessary.

time auditors compile audit reports relating to any audits of operating sites,!UDITOR +ATSUMI -AEDA ATTENDED ALL MEETINGS OF THE "OARD OF $IRECTORS

subsidiaries or affiliates; these reports are also submitted to the outside au-

HELD IN THE YEAR ENDED -ARCH  IN ADDITION TO ALL  MEETINGS OF THE

DITORS )N ADDITION THE FULL TIME AUDITORS ARE REQUIRED TO REPORT TO THE "OARD"OARD OF #ORPORATE !UDITORS !FTER BEING APPOINTED IN *UNE  AUDITOR

OF #ORPORATE !UDITORS WHAT HAPPENED AT ANY MEETINGS NOT ATTENDED BY THE

4AKAYUKI +URATA ATTENDED ALL SUBSEQUENT MEETINGS OF THE "OARD OF $IRECTORS

outside auditors.

Relationships with outside auditors
Name (profession) of outside
auditor+ATSUMI -AEDA #0!
4AKAYUKI +URATA *APAN "ANK FOR )NTERNATIONAL #OOPERATION ETC

Relationship with SMM"OTH OUTSIDE AUDITORS HAVE SIGNED A LIMITED LIABILITY AGREEMENT WITH 3-- AND NEITHER HAS ANY RELATIONSHIP WITH
3-- 'ROUP COMPANIES

Reason for appointment-R -AEDA WAS APPOINTED DUE TO HIS MANY YEARS OF EXPERIENCE WITH CORPORATE AUDITS AT A PROFESSIONAL AUDITING FIRM
AND HIS WEALTH OF ACCOUNTING KNOWLEDGE -R +URATA WAS APPOINTED DUE TO HIS VAST EXPERIENCE OF FINANCIAL INSTITUtions and his knowledge of company management.

4ARGETING 3USTAINED 'ROWTH

 Remuneration and incentive systems for directors and auditors
Paid to directors

c MILLION

Paid to outside directorc MILLION

Paid to auditors¥88 million

Paid to outside auditorsc MILLION

Remuneration system

4HE SYSTEM OF RETIREMENT AND SEVERANCE BENEFITS FOR DIRECTORS AND AUDITORS WAS ABOLISHED WITH EFFECT FROM THE END
OF THE TH /RDINARY 'ENERAL -EETING OF 3HAREHOLDERS HELD ON *UNE   2EMUNERATION FOR DIRECTORS WITH
the exception of outside directors) is based on corporate financial performance and varies from year to year.

 3OCIAL RESPONSIBILITY #32 ACTIVITIES AND INTERNAL CONTROLSCSR activities#HAIRED BY THE PRESIDENT THE #32 #OMMITTEE COMPRISES THE HEADS OF-- Established following the JCO criticality accident in 1999 to promote

3--gS VARIOUS OPERATING AND CENTRAL DIVISIONS 3-- RE LAUNCHED ITS PRO-better risk management, based on a corporate revitalization plan that

GRAM OF #32 ACTIVITIES IN A SYSTEMATIZED FORMAT AT THE START OF /CTOBER

SMM created in April 2000, the Risk Management Working Group2008.

oversees development of an original program of activities designed-- For about 400 years, SMM has been involved in the extraction of

to prevent major incidents as well as minimize the damage caused

resources to produce metal ores for further refining. SMM recognizes

by any accidents that do occur. This working group has generated

that such business activities damage the planet, and that this requires

significant results over the past ten years.

striking a balance between minimizing such damage and using these-- The Compliance Working Group focuses on ensuring that the com-

finite resources for the greater good of society. In this context, SMM

pany's compliance-related systems are functioning well. This working

views CSR as a way of earning the trust of society by promoting sus-

group oversees the distribution by managers of educational and train-tainable, eco-friendly operations and undertaking sound corporate

ing materials to all SMM Group employees on the SMM Group Codeactivities. Based on this thinking, SMM published a newly formulatedof Conduct and the importance of compliance, among other topics. It"CSR Vision for 2020" in October 2008 that had been deliberated

also works to promote compliance across the SMM Group by investi-

in-house at management level for 18 months. The program of CSR

gating the causes of compliance breaches so that strict measures canactivities was re-launched in a systematized format. The CSR Commit-

be implemented to prevent any recurrence.

tee is one of the bodies with input into SMM's business strategy. CSR

0LEASE REFER TO 3--gS #32 2EPORT  SCHEDULED FOR PUBLICATION IN

subcommittees focus on each of the six key CSR areas as defined in/CTOBER  FOR FURTHER DETAILS ON #32 ACTIVITIES )T HAS BEEN COMPILED

the 2020 vision. Annual targets have been set to help in realizing thisIN ACCORDANCE WITH THE  EDITION OF THE '2) 3USTAINABILITY 2EPORTING

vision.

'UIDELINES ' Internal controls#HAIRED BY THE PRESIDENT THE )NTERNAL #ONTROLS #OMMITTEE HAS OVERSEEN

system to the relevant authorities in June 2009.

THE INSTITUTION OF A SYSTEM OF INTERNAL CONTROLS BASED ON THE &INANCIAL )NSTRU-

4HE DIRECTORS EXECUTIVE OFFICERS AND EMPLOYEES EACH HAVE CLEARLY DE-

MENTS AND %XCHANGE ,AW THAT WAS ENACTED IN *UNE  2EVIEWING THE

LINEATED ROLES AND RESPONSIBILITIES IN DEVELOPING THE 3-- 'ROUPgS INTERNALFIRST YEAR OF THE APPLICATION OF THESE CONTROLS !PRIL  -ARCH  3--

CONTROLS IN A SYSTEM THAT INVOLVES THE PARTICIPATION OF ALL EMPLOYEES 4HE

submitted the prescribed progress and audit reports on the internal controls

system has been designed to undergo regular review to facilitate constantimprovement.

7) )NSTITUTION AND PURPOSE OF TAKEOVER DEFENSES
4HE "OARD OF $IRECTORS APPROVED THE ADOPTION OF TAKEOVER DEFENSES AT A

TO REMAIN IN EFFECT UNTIL THE /RDINARY 'ENERAL -EETING OF 3HAREHOLDERS DUEMEETING HELD ON &EBRUARY   4HESE MEASURES RECEIVED THE NECESSARY

to be convened in June 2010.

APPROVAL OF AT LEAST TWO THIRDS OF SHAREHOLDERS AT THE ND /RDINARY 'ENERAL)N THE INTERESTS OF BOTH THE COMPANY AND ITS SHAREHOLDERS THESE TAKEOVER-EETING OF 3HAREHOLDERS HELD IN *UNE  4HESE TAKEOVER DEFENSES ARE SET

defenses aim to prevent any moves that would be detrimental to the creation of enterprise value.

35-)4/-/ -%4!, -).).' #/ ,4$Annual Report 20098) /THER GOVERNANCE RELATED MATTERS
A 1UORUM FOR DIRECTOR APPOINTMENTS

C )NTERIM AND FINAL DIVIDENDS

2ESOLUTIONS TO APPOINT DIRECTORS REQUIRE APPROVAL BY MAJORITY SHAREHOLDER

4HE ARTICLES OF INCORPORATION PERMIT THE DISTRIBUTION OF AN INTERIM DIVI-VOTE AT A 'ENERAL -EETING OF 3HAREHOLDERS WHERE THE VOTING RIGHTS OF AT

dend each year to those shareholders registered on the record date ofleast one third of all shareholders are represented.

3EPTEMBER  BY RESOLUTION OF THE "OARD OF $IRECTORS IN LINE WITH THE

B !CQUISITION OF TREASURY STOCKPROVISIONS OF !RTICLE  3ECTION  OF THE #OMPANY ,AW 0AYMENT OF A

4HE ARTICLES OF INCORPORATION PERMIT ACQUISITIONS OF TREASURY STOCK BYFINAL DIVIDEND BASED ON THE DISTRIBUTION OF RETAINED EARNINGS REQUIRES THE

MEANS OF OPEN MARKET PURCHASES BY RESOLUTION OF THE "OARD OF $IRECTORSAPPROVAL OF SHAREHOLDERS IN LINE WITH THE PROVISIONS OF THE #OMPANY

IN LINE WITH THE PROVISIONS OF !RTICLE  3ECTION  OF THE #OMPANY ,AW,AW 4HE RECORD DATE FOR THE FINAL DIVIDEND IS -ARCH 

Purchases of treasury stock in FY2008
August 11, 2008 - August 22, 2008

3TOCK ACQUIRED4OTAL COST   SHARESc   .OVEMBER   $ECEMBER  3TOCK ACQUIRED4OTAL COST   SHARESc   #ONSTRUCTION AND /PERATION OF /PERATING 3YSTEMS 2ISK -ANAGEMENT
Risk management: establishment of HR development facility
3-- STARTED OPERATING A NEW RISK MANAGEMENT SYSTEM DEVELOPED IN

ING COURSES ON HAZARD AWARENESS DRILLS AND FACILITY ENGINEERINGHOUSE IN  4HE SYSTEM INVOLVES INPUTTING INTO A CENTRALIZED DA-

4HE HAZARD AWARENESS DRILLS GIVE THE EMPLOYEES OF 3-- 'ROUPTABASE THE INDIVIDUAL RISKS RELEVANT TO OPERATING SITES ACROSS ALL 3--

COMPANIES AND PARTNER FIRMS AN OPPORTUNITY TO UNDERGO QUASI HAZARD-'ROUP DIVISIONS 4HESE DATA ARE USED TO FORMULATE AND IMPLEMENT AN-

ous experiences as a way of increasing sensitivity to possible workplace

NUAL RISK MANAGEMENT PLANS 4HE PRESIDENT ASSUMES SENIOR MANAGE-

DANGERS 4HE AIM OF THIS IS TO PREVENT SAFETY RELATED INCIDENTS FROM

ment responsibility for the operation of the risk management system.

occurring in the first place.

)N LINE WITH RELEVANT )3/ STANDARDS THE SYSTEM ALSO INCORPORATES AN IN-"ASED ON THE SLOGAN h#REATING MORE SKILLED OPERATORS v THE COURSETERNAL AUDIT FRAMEWORK 4HE EFFECTIVENESS OF THE SYSTEM IS TESTED BASED

on facility engineering is designed to help production sites achieve

ON MULTIPLE AUDITS AND THE IMPLEMENTATION OF 0$#! CYCLEShigher safety levels autonomously by enabling workers to gain a

3-- AND AFFILIATED COMPANIES ALSO EMPLOY ENVIRONMENTAL MANAGE-

BROADER KNOWLEDGE OF MACHINERY AND EQUIPMENT USED ON SITE

MENT AND QUALITY CONTROL SYSTEMS BASED ON )3/ STANDARDS "ASED ON

Accidents were a common occurrence in mining operations many

THE CHARACTERISTICS OF EACH BUSINESS THESE ARE DESIGNED TO HARMONIZE

years ago, but today the incidence of problems has fallen drastically.

WITH OTHER ASPECTS OF THE BUSINESS MANAGEMENT TO MAXIMIZE EFFECTIVE-.ONETHELESS HUMAN ERROR CANNOT BE ELIMINATED COMPLETELY 4HESE

ness. At the level of individual risks, the systems focus on occupational

training courses aim to make workers more aware of the dangers that

health and safety management in particular due to the nature of the

LURK IF OPERATING PROCEDURES ARE NOT FOLLOWED CORRECTLY 3-- PLANS TO

BUSINESS ,OCATED NEAR .IIHAMA %HIME 0REFECTURE 3--S NEW (2 $E-

continue using such initiatives to try to lower accident rates further.

VELOPMENT CENTER WHICH OPENED IN /CTOBER  PROVIDES TWO TRAIN-

Safety (Training aims to build hazard awareness relating to:)Heights

Hot objects/PERATIONS USING A CRANE OR HOIST#UTTING TOOLS

4IGHT SPACES OR OTHER ENTRAPMENT HAZARDS(EAVY OBJECTSSHARP OBJECTS UNDERFOOT%LECTRICITY(EAVY EQUIPMENT FORKLIFTS#HEMICALS/THER WORKPLACE HAZARDS

HygieneWorkplace environment

Basic hygiene (protective gear)First aid



$IRECTORS AND #ORPORATE !UDITORS

From left : .AOKI 4AJIRI Director), Koichi Fukushima (Representative Director -ASASHI +OIKE Representative Director .OBUMASA +EMORI Representative Director),)CHIRO !BE DirectoR +OUZOU "ABA Director 9OSHIAKI .AKAZATO Director 4SUTOMU 5SHIJIMA Director)

Representative Directors:+OICHI &UKUSHIMA #HAIRMAN.OBUMASA +EMORI 0RESIDENT-ASASHI +OIKE

Directors:)CHIRO !BE.AOKI 4AJIRI+OUZOU "ABA
9OSHIAKI .AKAZATO
4SUTOMU 5SHIJIMAStanding Senior Corporate Auditor:-OTOKI +ITAMURA

Standing Corporate Auditor:

4OSHIKAZU 9AKUSHIJI

Corporate Auditors:+ATSUMI -AEDA
4AKAYUKI +URATA/UTSIDE $IRECTOR UNDER THE #OMPANIES !CT/UTSIDE #ORPORATE !UDITOR UNDER THE #OMPANIES !CTFinancial Section
Eleven-Year Financial Summary

62

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

64

Consolidated Balance Sheets

68

Consolidated Statements of Income

70

Consolidated Statements of Changes in Net Assets

71

Consolidated Statements of Cash Flows73

Notes to Consolidated Financial Statements

74

Independent Auditors’ Report95

SUMITOMO METAL MINING CO., LTD. Annual Report 200961

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

Years ended March 31

Results for the year:
Net sales

2009

2008

2007

2006

¥793,797¥1,132,372¥966,764¥625,579

Gross profit

56,887

198,147

203,180

120,137

Operating income

10,534

155,394

162,632

82,756

Other income (expenses)

12,408

61,11042,985

10,218

Income (loss) before income taxes
and minority interest

22,942

216,504

205,617

92,974

Net income (loss)

21,974

137,808

126,054

62,800Equity in earnings of affiliated companies

31,53673,956

46,70821,915

Capital expenditures

47,72365,14551,56750,568Depreciation

34,26830,50525,693

22,951

Net interest expenses(271)(2,209)(2,606)(1,281)

Net cash flows from operating activities

128,000

157,383

95,98570,772

Net cash flows from investing activities(28,386)(126,413)(77,429)(102,384)

Net cash flows from financing activities(74,086)

55,727(10,073)

28,723

Free cash flows

99,61430,97018,556(31,612)

Total assets

880,001

1,091,716

929,208

772,562

Net assets

547,251

640,345528,921394,899

—

—

—

—

Long-term debt due after one year

141,716

169,394

93,800114,405

Interest-bearing debt

218,534

258,054

189,910

190,891

Working capital

206,123

266,250

103,791

72,228— Basic

38.87

238.13220.49109.96— Diluted

36.18

231.50213.67108.87913.92

1,017.96

859.82654.15

13.0

30.0

27.0

14.0

2.23

13.64

14.81

9.33

4.02

25.39

28.99

19.10

57.3

54.0

53.4

48.4

Financial position at Year-end:

Shareholders’ equity*1

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

Shareholders’ equity
Cash dividends
Key ratios:
ROA (%)*1

ROE (%)*1

Equity ratio (%)*1

Interest-bearing debt to total asset ratio (%)

24.8

23.6

20.4

24.7

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

0.43
2.17

0.44
2.04

0.38
1.39

0.51
1.33

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

62

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

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

2005

2004

2003

2002

2001

2000

1999

¥484,585¥402,131¥355,242¥330,194¥375,352¥360,299¥350,288

82,87853,714

51,764

38,152

63,37245,061

41,19047,893

22,778

16,593

1,147

26,930

8,990

858

6,024

8,416

(24,098)(13,735)(11,359)(4,342)(12,932)

53,91731,194(7,505)(12,588)

15,571

4,648(12,074)

37,017

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

15,103

4,740(12,495)

13,513

7,112

3,400

1,535

4,078

2,406

326

36,48846,54018,92725,37928,07820,49032,49920,57817,824

18,283

17,822

16,774

16,611

23,095(893)(1,098)(1,459)(1,775)(2,129)(2,492)(1,907)40,15032,324

26,10533,37023,339(800)

22,912(31,725)(17,448)(21,246)(16,246)(4,248)4,143(23,287)

6,097(9,293)(14,163)(14,267)(26,089)(9,086)

4,047

8,425

14,876

4,859

17,12419,091

3,343

(375)

573,925

517,930

470,774

518,756

530,080

544,121544,519

—

—

—

—

—

—

—

283,897

253,071

223,341

236,313

237,470

235,231226,795

109,777

86,43776,47073,972

83,839107,266

124,535

160,533

148,351

154,799

167,077

176,998

197,624

207,82186,382

52,79535,94523,371

33,25938,91050,518

64.77

34.76

(2.05)(11.56)

26.41

8.29

(21.85)

—

—

—

—

—

—

—

497.57443.29391.14413.28415.25411.34396.59

8.0

6.0

5.0

4.0

6.0

5.0

3.0

6.78

4.02

—

—

2.81

0.87

—

13.79

8.35

—

—

6.39

2.05

—

49.5

48.9

47.4

45.6

44.8

43.2

41.7

28.0

28.6

32.9

32.2

33.4

36.3

38.2

0.57
1.61

0.59
1.38

0.69
1.26

0.71
1.14

0.75
1.20

0.84
1.23

0.92
1.31

SUMITOMO METAL MINING CO., LTD. Annual Report 200963

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

One of the core themes of the FY2007–9 Medium-term Business Plan that SMM unveiled in fiscal 2006 was the maintenance ofsound finances. As an indicator of this, management set a target of achieving an equity ratio of at least 50%. This ratio stood at
57.3% at the end of fiscal 2008, a significant improvement from the figure of 48.4% recorded two years earlier.
SMM is executing a medium-to-long-term growth strategy, but could not avoid the severe impact on short-term results caused by
the changes in non-ferrous metals prices and conditions in markets for metals and electronic materials that occurred in the second
half of fiscal 2008. In addition, the development of metal resources is an area where lengthy periods of time are required before therelated investments start generating returns.
In this type of operating environment, management believes that maintaining current levels of financial strength is critical toensuring SMM can undertake large-scale investments with optimal timing. By maintaining sound finances and pushing forward withthe execution of the medium-to-long-term growth strategy, SMM aims to generate further growth in enterprise value.
This section provides an overview of SMM’s financial position and business results for fiscal 2008.

Overview of Consolidated Operationsin accrued income taxes; and a decline in short-term borrowings

The SMM Group comprised the parent company (Sumitomo

due to the repayment of external loans by consolidated subsidiar-

Metal Mining Co., Ltd.), 60 subsidiaries and 17 affiliated compa-

ies. Reflecting declines in corporate bonds and long-term debt,

nies as of March 31, 2009. The SMM Group’s operations aretotal long-term liabilities decreased by ¥37,885 million.

organized into four business divisions: Mineral Resources, Metals,
Electronics and Advanced Materials, and Others.

Net Assets

The figures in this Annual Report refer to the results of the

As of the fiscal 2008 year-end, net assets amounted to ¥547,251

parent company, 50 consolidated subsidiaries and 12 equity-

million, a decline of ¥93,094 million, or 14.5%, compared with amethod affiliates (both domestic and overseas).

year earlier. This was the result of share buybacks and lower valuation and translation adjustments, which mainly reflected foreign
currency translation adjustments.

Financial Position and Liquidity
AssetsEquity Ratio

As of the fiscal 2008 year-end (March 31, 2009), total assets

The equity ratio rose to 57.3% at March 31, 2009, from 54.0% at

amounted to ¥880,001 million, a decrease of ¥211,715 million,

the previous fiscal year-end. The acquisition of an additional inter-or 19.4%, compared with a year earlier.

est in the Pogo gold mine in July 2009 was financed from retained

Current assets fell by ¥140,863 million. This was mainly theearnings, rather than by raising fresh capital. Going forward,

result of lower inventories and notes and accounts receivable

management remains committed to maintaining an equity ratio

associated with significant falls in non-ferrous metals prices.
Total fixed assets declined by ¥70,852 million compared withthe previous year-end. This reflected lower market values for equities held in the Group’s portfolio of investment securities due toshare price falls. The carrying values of Group shareholdings inShareholders’ Equity and Equity Ratio(Billions of yen)

(%)

600

60
53.4
49.5

500

48.4

affiliated companies also declined as the result of translation
adjustments.

589.6

57.3

50

54.0

504.6

495.8

400

40
373.8

Liabilities
Total liabilities amounted to ¥332,750 million as of the fiscal 2008

300

30
283.9

200

20

100

10

year-end, a decrease of ¥118,621 million, or 26.3%, comparedwith a year earlier.
Current liabilities decreased by ¥80,736 million. This was due
to a fall in trade notes and accounts payable associated withlower non-ferrous metals prices, among other factors; a reduction

64

SUMITOMO METAL MINING CO., LTD. Annual Report 200900March 31

2005

2006

Equity Ratio (RH scale)

2007

2008

2009

of at least 50%, in line with the medium-term business plan

Mainly reflecting lower sales volumes and prices for both cop-goals. This will facilitate internal financing of any acquisitions of

per and nickel, which severely affected the sales revenue gener-

equity interests in the Taganito project or in overseas copper

ated by the Metals Division, consolidated net sales totaled

mines.

¥793,797 million in fiscal 2008, a decline of ¥338,575 million, or
29.9%, compared with the previous year.

Debt-to-equity (D/E) Ratio
The D/E ratio declined from 0.44 to 0.43 times. A substantial

Cost of Sales and SG&A Expenses

reduction in interest-bearing debt offset the decline in net assets,

Reflecting lower raw material costs associated with the substantial

resulting in an overall slight improvement in the D/E ratio. Man-

falls in non-ferrous metals prices, together with a reduction inagement believes that the healthy state of the SMM Group’s

production volumes across all operating divisions, the cost of sales

finances should preclude any problems in raising funds at a later

declined by ¥197,315 million, or 21.1%, in year-on-year terms todate if required.

¥736,910 million.

Debt-to-Equity Ratio and Long-Term Debtby ¥3,600 million, or 8.4%, to ¥46,353 million.

Selling, general and administrative (SG&A) expenses increased(Billions of yen)(Times)300

1.0Operating Income
Consolidated operating income declined by ¥144,860 million, or

240

0.8

258.1

result of reduced sales volumes for non-ferrous metal products;

218.5

0.57

180

0.6

189.9

190.9
0.51

160.5

0.44

0.43

120

0.4
0.38

60

0.2

0

0

March 31

2005

2006

2007

2008

93.2%, in year-on-year terms to ¥10,534 million. This was the2009

Debt-to-Equity Ratio (RH scale)slimmer refining margins due to a combination of lower sales
prices and a stronger yen; inventory writedowns caused by rapid
falls in prices; and sharply lower sales volumes recorded by theElectronics and Advanced Materials Division.

Capital Expenditures and Depreciation
Total capital expenditures during fiscal 2008 amounted to ¥47,723
million, a decrease of ¥17,422 million, or 26.7%, compared withthe previous year. Of this figure, the mineral resources and metals
business segments accounted for ¥32,668 million (68.5% of the

Operating Performance

total) and the electronics and advanced materials segment

Net Sales

accounted for ¥12,534 million (26.3% of the total).

Demand dropped off within the non-ferrous metals industry due

The major capital spending programs within the metals andto a general industrial slump associated with deterioration in themineral resources segment in fiscal 2008 were the construction ofreal economy. The lower demand was exacerbated by steep falls

a second production facility at the Coral Bay nickel project in thein prices, in part reflecting outflows of speculative investment

Philippines and the expansion of electrolytic nickel production

capital from commodity markets in the wake of the global finan-capacity to 41ktpa. In the electronics and advanced materials seg-cial crisis. In foreign exchange markets, the yen gained popularity

ment, major items of capital expenditure in fiscal 2008 included

as a safe haven currency amid a global credit crunch. The yen

investments to expand production capacity for tape bonding

appreciated rapidly against most currencies before starting tomaterials (such as chip-on-film substrates).

weaken again as the result of the fragile state of the Japanese
economy.

Depreciation increased by ¥3,763 million, or 11.0%, in yearon-year terms to ¥34,268 million.

In the electronics sector, demand for electronic equipment
continued to grow during the first half of the year due to favor-

Research and Development (R&D) Expenses

able economic conditions. In the second half, however, the emerg-

Total R&D expenses in fiscal 2008 amounted to ¥5,896 million. An

ing impact of the global financial crisis from October 2008 onward

overview of the spending breakdown by business segment is pro-combined with a rapid and substantial correction in production

vided below.

levels to result in an unprecedented cooling of demand.

SUMITOMO METAL MINING CO., LTD. Annual Report 200965

R&D expenses in the mineral resources segment totaled ¥143
million. Major projects focused on ore-dressing processes to(1) Fluctuations in non-ferrous metals prices and exchange
rates

improve non-ferrous metal ore grades; the development of differ-

1. Sustained downturn in non-ferrous metals prices

ent types of leaching technologies for metal refining; and devel-

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

opment of processing technologies for water discharged frominfluenced by a number of factors, including international supply

mines.

and demand, political and economic circumstances, speculative

R&D expenses in the metals segment totaled ¥2,935 million.

trading and competition from alternative materials. A sharp andMajor project themes included the development of non-ferrous

sustained downturn in non-ferrous metals prices could have ametal refining, electrolytic technologies and new metal-refining

significant negative impact on the Group’s business performance

processes; development of technologies for actively separating,and financial position.

refining and purifying trace amounts of other metals contained inores; development of original in-house hydrometallurgical tech-

2. Appreciation of the yenniques for copper smelting; development of alloys and related

The refining margins earned by SMM are effectively denominatedcasting technologies; development of surface-treatment technolo-

in U.S. dollars. Returns on investments in overseas mining devel-

gies; and the development of manufacturing technologies for

opments, income earned from investments in the electronics

rolled copper foil products.

materials business and revenues from exports of products in the

R&D expenses in the electronics and advanced materials seg-

electronics materials and other segments are also denominated inment totaled ¥2,756 million. Major project themes included

foreign currencies. A substantial appreciation of the yen against

development of more intricate, advanced and high-value-added

these currencies over a sustained period could exert a significant

performance materials, and the development of technologies andnegative impact on the Group’s business performance and finan-

processes for electronics materials, especially in the area of semi-cial position.

conductor packaging.

To mitigate these external risks, the SMM Group continues tomake progress in implementing a variety of measures aimed at

Cash Flows

boosting competitiveness, both in materials procurement andNet cash provided by operating activities totaled ¥128,000 mil-manufacturing.

lion, a decrease of ¥29,383 million compared with the previous
year. This primarily reflected a substantial fall in income before
income taxes and minority interests.

(2) Deterioration in terms of non-ferrous metal ore purchasing contracts and supply disruptions

Net cash used in investing activities in fiscal 2008 equaled

Currently the SMM Group procures the majority of copper ores,¥28,386 million, which marked a year-on-year decrease in cash

nickel matte and other raw materials for non-ferrous metal refin-

outflow of ¥98,027 million. This result reflected the withdrawal ofing operations based on long-term ore-purchasing contracts withnegotiable certificates of deposit, along with a reduction in large-

third-party producers. This exposes the Group to the risk thatscale capital investments.

shifts in supply and demand or various other factors affecting

Net cash used in financing activities amounted to ¥74,086

markets could prevent the purchase of required volumes of ore at

million. This was mainly due to corporate bond redemptions,reasonable prices. Supplies of ore are also subject to unpredictablerepayments of long-term debt and share buybacks.

disruptive events such as natural disasters and operational stop-

The year-end balance of cash and cash equivalents amounted

pages due to accidents or industrial disputes. Such factors couldto ¥150,287 million at March 31, 2009, an increase of ¥17,812

impose various constraints on Group production volumes, which

million compared with the previous year-end.

as a result could exert a negative impact on the Group’s businessperformance and financial position.
To mitigate such risks, the Group continues to seek to invest

Risk Informationin high-grade overseas mines to secure reliable (in-house) supplies

The following section provides an overview of the risk factors thatof ore.

could exert a significant effect on the business performance andfinancial position of the SMM Group. All forward-looking state-(3) Uncertainty inherent in mining investments

ments in the text refer to management decisions based on the

As described above, the raw materials procurement policy of thebest information available at the end of fiscal 2008.

SMM Group is to develop in-house mining resources to boost the66

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

proprietary ore ratio. Amounts of extractable ore and extraction

The SMM Group recognizes the importance and value of

costs can only be estimated based on the results of exploratory

acquiring intellectual property rights and managing such rights

surveys prior to mine development. In addition, the development

properly in accordance with related laws and regulations. Althoughcosts of a mining project can rise as the result of a variety of situa-

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

tions such as compliance with environmental or regulatory actions.

such as failure to acquire certain rights or damage done to the

Any additional investment or increase in the burden of extraction

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

costs arising from the inherent uncertainty associated with mining

parties.

developments could have a negative impact on the Group’s business performance and financial position.

To mitigate such risks, the Group strives to minimize related
problems by structuring R&D activities to realize commercial

To mitigate such risks, the SMM Group employs a selective

opportunities as quickly as possible. The Group has also created

investment policy and undertakes strict assessments of the poten-

dedicated in-house teams to manage issues related to intellectual

tial profitability of individual mining developments based on

property rights to ensure that such rights are acquired and pro-extensive experience in mining extraction and mine valuation

tected properly.

accumulated over many years.
(6) Overseas investments(4) Environmental protection and regulatory compliancerisks

Overseas operations are subject to political and economic risks
that vary by country. The emergence of various developments

SMM Group businesses, notably the mining and non-ferrous

could prevent the Group from earning a suitable return on over-metal smelting and refining operations, are subject to a broadseas investments. Such risks include the development of mineral

range of laws and regulations in areas such as occupational safety

resource projects by organizations funded by national or regionaland health, environmental protection, pollution prevention, indus-

governments against the backdrop of high non-ferrous metals

trial waste disposal and management of potentially toxic sub-prices, or the levying of higher taxes on such operations. Increased

stances. Ongoing regulatory compliance costs are substantial andenvironmental demands from various quarters constitute a further

subject to unexpected increases as the result of the sudden emer-risk.

gence of previously unknown risks. The costs of ensuring regula-

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

tory compliance could therefore exert a negative impact on thement decisions based on careful consideration of all relevantGroup’s business performance and financial position.

country risks.

To mitigate such risks, the Group seeks to ensure that operations are in full compliance with environmental protection and(7) Disaster-related risks

other laws and regulations through the operation of environmen-

The SMM Group locates manufacturing operations based on con-tal and risk management systems based on strict standards. The

siderations such as customer relationships, raw material procure-Group also endeavors to manage operations so that related com-ment, the links to other Group operations and effective use ofpliance costs are kept within reasonable limits.

management resources. Unexpected large-scale natural disasters
such as earthquakes or typhoons that affect the regions where(5) Risks associated with market shifts, new product development and intellectual property rights
Demand changes rapidly in markets targeted by the SMM Group’s

such facilities are located could result in major financial losses
arising from factors such as on-site damage and loss of
production.

electronics and advanced materials operations, even as productTo mitigate such risks, the Group insures such facilities wheredevelopment programs in these areas require the investment of

this is possible at reasonable cost and has made plans containing

increasingly large amounts of time and resources. Expected returns

suitable countermeasures to minimize any secondary effects due

on investment from related new product development programs

to such disasters.

may not materialize due to obsolescence caused by technologicalprogress, delays caused by responding to customer requests or
the launch of competitor products, among other factors. Customer demand for products may also decline in the future. All
these various factors could have a negative impact on the Group’sbusiness performance and financial position.

SUMITOMO METAL MINING CO., LTD. Annual Report 200967

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

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

As of March 31, 2009 and 2008

2009

2008

Current assets:
Cash and cash equivalents

2009

2008
¥ 150,287¥

132,475$ 1,529,950

Time deposits

190

295

1,934

Negotiable certification of deposits—

43,000—Trade47,401

113,023

482,551

Non-consolidated subsidiaries and affiliated companies

2,069

5,886

21,063

Non-consolidated subsidiaries and affiliated companies

3,258

3,150

33,167

Other

28,277

16,698287,865

(247)

(329)

(2,515)106,248

169,556

1,081,625

Receivables:
Notes and accounts receivable:

Loans and others:

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

8,052

3,112

81,971Other current assets

36,30135,833

369,552

381,836

522,699

3,887,163

Non-consolidated subsidiaries and affiliated companies

171,707

199,504

1,748,010

Other

48,71373,816495,908

(16)

(16)

(163)

Total current assets

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

Allowance for loss on investments
Loans:
Non-consolidated subsidiaries and affiliated companies

2,516

2,340

25,613

Other

1,658

1,300

16,879Other long-term receivables

6,669

5,374

67,891

Allowance for doubtful accounts

(251)

(273)

(2,555)230,996

282,045

2,351,583

Total investments and other assets

Property, plant and equipment (Notes 6 and 7):Land28,17029,194

286,776

Buildings and structures

156,319

157,488

1,591,357

Machinery and equipment

353,452

357,764

3,598,208

Construction in progress

36,31733,463369,714574,258

577,909

5,846,055(314,092)(299,760)(3,197,516)

260,166

278,149

2,648,539

2,282

1,880

23,231

Accumulated depreciation
Net property, plant and equipment

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

68

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

4,721

6,943

48,061¥ 880,001¥ 1,091,716$ 8,958,577

LIABILITIES AND NET ASSETS
As of March 31, 2009 and 2008

2009

2008

¥ 58,001

2008¥ 67,806

18,817

20,855191,561

29,91853,133

304,571

Current liabilities:
Bank loans (Note 7)Long-term debt due within one year (Note 7)

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

2009$

590,461

Notes and accounts payable:
Trade
Non-consolidated subsidiaries and affiliated companies

3,435

14,611

34,969Other

14,658

16,763

149,221977

18,795

9,946

Accrued expenses

Accrued income taxes (Note 8)

5,212

5,932

53,059Advances received

1,168

1,104

11,890Accrued restructuring charges

62

360

631

Accrued bonus to directors and corporate auditors

30

100

305

Deferred tax liabilities (Note 8)
Other current liabilities

22
43,4132,580
54,410224
441,953

Total current liabilities

175,713

256,449

1,788,791

141,716

169,394

1,442,696

923

11,672

9,396

8,438

8,157

85,900Accrued environmental measures

643

643

6,546

Accrued restructuring charges

357

27

3,634

2

225

0

2,261
2,697

2,568
2,236

23,01727,477

157,037

194,922

1,598,666

949,221Long-term liabilities:
Long-term debt (Note 7)
Deferred tax liabilities (Note 8)
Accrued retirement benefits (Note 9)

Accrued indemnification loss on damages caused by a consolidated subsidiary
Other accruals
Other long-term liabilities
Total long-term liabilities
Commitments and contingent liabilities (Note 13)

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

93,242

Capital surplus

Issued — 581,628,031 shares

86,091

86,104876,423

Retained earnings (Note 11)
Treasury stock, at cost

405,946(32,678)

403,459(2,529)4,132,607(332,668)

552,601

580,276

5,625,583

Total shareholders’ equity
Valuation and translation adjustments:
Net unrealized holding gains (losses) on securities
Deferred gains (losses) on hedges
Foreign currency translation adjustments

Total valuation and translation adjustments:
Minority interests
Total net assets
Total liabilities and net assets(752)

12,027(7,655)(2,432)(44,821)790(3,453)(24,758)(456,286)(48,005)
42,6559,364
50,705(488,699)
434,236547,251¥ 880,001

640,345¥1,091,716

5,571,120$ 8,958,577

SUMITOMO METAL MINING CO., LTD. Annual Report 200969

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

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

2009

2008

2007

2009

¥ 793,797¥ 1,132,372¥ 966,764$ 8,081,004

736,910
46,353

934,225
42,753

763,584
40,5487,501,883
471,882

783,263

976,978

804,132

7,973,765

10,534

155,394

162,632

107,238

For the years ended March 31, 2009, 2008 and 2007

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

Operating income (Note 14)
Other income (expenses):
Interest and dividend income

4,052

4,088

2,829

41,250Interest expense(4,323)(6,297)(5,435)(44,009)

—

81

76

—

Write-down of investment securities
Gain (Loss) on sale and disposal of property, plant and equipment(4,607)
(624)

(458)
23

(6)
(1,026)(46,900)(6,352)

Loss on impairment of fixed assets (Note 6)

Gain on sale of investment securities(3,514)(941)—(35,773)

Reversal of doubtful accounts

22

54

355

224

Loss from valuation of gold loans—(2,351)(1,803)—

Exchange gain (loss)(9,489)(2,142)

1,207(96,600)

Provision for restructuring charges

(697)

(274)

—

(7,096)

Maintenance cost for ceased projects

(701)

(666)

(605)

(7,136)

Casualty loss

(21)

(41)

(103)

(214)

Gain (Loss) from valuation of derivative instruments—(2,449)380—

31,53673,956

46,708—774(36)(1,437)408

321,042—7,880

Equity in earnings of affiliated companies
Loss from renunciation of receivable
Other, net

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

Minority interests in net income of consolidated subsidiaries
Net income—

12,408

61,11042,985

126,316

22,942

216,504

205,617233,554

4,052(8,818)57,938
3,812

68,1491,203

41,250(89,769)(4,766)61,75069,352(48,519)

27,708(5,734)¥ 21,974

154,754(16,946)
137,808

136,265(10,211)¥ 126,054

282,073(58,373)
223,700¥$

U.S. dollars(Note 1)

Yen

2009

For the years ended March 31, 2009, 2008 and 2007

2008

2009

2007

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

70

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

¥

38.87
36.18
13.00

¥

238.13¥ 220.49

231.5030.00

213.67
27.00

$

0.40
0.37
0.13

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

Shareholders’ Equity
FFor the years ended March 31, 2009, 2008 and 2007

Numberof shares
issuedCommonstock

CapitalsurplusRetainedearnings¥88,906¥81,750 ¥171,946
126,054
2,910(thousands)

Balance at March 31, 2006
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Decrease due to change in consolidation of subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains or losses on hedges
Executive bonuses
Minority interests
Cash dividends paid
Balance at March 31, 2007
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains or losses on hedges
Minority interests
Cash dividends paid
Balance at March 31, 2008
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains or losses on hedges
Decrease in resulting from unification of an accounting
policy of overseas subsidiaries
Minority interests
Cash dividends paid
Balance at March 31, 2009

572,972

Treasury
stock

Total
shareholders’equityMillions of yen

2,915¥(1,127)

(75)
(657)
7

8

¥341,475
126,054
5,825

(75)
(657)
15

(73)

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

(73)

¥(1,777)

(770)
18

(770)
35

¥(2,529)(17,917)¥580,276
21,974(30,238)89(30,238)76

17581,628¥93,242(17,917)¥86,104 ¥403,459
21,974(13)

581,628¥93,242(14,284)¥458,280
137,808
2,840(3,459)(3,459)(16,028)¥86,091 ¥405,946 ¥(32,678)(16,028)¥552,601

Shareholders’ Equity
For the year ended March 31, 2009

Commonstock

CapitalsurplusRetainedearnings$949,221$876,555 $4,107,289
223,699

Treasury
stock

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

Balance at March 31, 2008
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains or losses on hedges
Decrease in resulting from unification of an accounting
policy of overseas subsidiaries
Minority interests
Cash dividends paid
Balance at March 31, 2009

(307,829)
906

(132)
(35,213)$949,221$(25,746) $5,907,319
223,699(307,829)
774(35,213)(163,168)(163,168)$876,423 $4,132,607 $(332,669) $5,625,582

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

SUMITOMO METAL MINING CO., LTD. Annual Report 200971

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

Valuation and translation adjustments

For the years ended March 31, 2009, 2008 and 2007

Foreign
Net unrealized
Total
Deferredcurrency
holding gains
valuation andgains (losses)(losses) on
translationtranslation
on hedges
securities
adjustments adjustments

Minority
interests

Total
net assets

Millions of yen

Balance at March 31, 2006
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Decrease due to change in consolidation of subsidiaries
Acquisition of treasury stock
Sale of treasury stock
Deferred gains or losses on hedges
Executive bonuses
Minority interests
Cash dividends paid
Balance at March 31, 2007
Net income
Conversion of convertible bonds
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains or losses on hedges
Minority interests
Cash dividends paid
Balance at March 31, 2008
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains or losses on hedges
Decrease in resulting from unification of an accounting
policy of overseas subsidiaries
Minority interests
Cash dividends paid
Balance at March 31, 2009

¥ 34,897—¥ (2,620) ¥ 32,277¥

For the year ended March 31, 2009

Valuation and translation adjustments
Foreign
Total
Net unrealized
Deferredcurrency
valuation andholding gains
gains (losses)(losses) on
translationtranslation
on hedges
securities
adjustments adjustments

4,456
(339)

1,170

¥ 34,558¥ 1,170

1,170¥ 1,836¥ 37,564(5,289)(5,289)(22,531)(22,531)¥ 12,027

¥

4,456
(339)

(380)

(380)

790

¥ (3,453) ¥ 9,364(41,368)(12,779)(3,222)(41,368)(12,779)(3,222)¥ 21,147 ¥ 394,899
126,054
5,825
4,456
(339)
(75)
(657)
15
1,170
(73)
11,93011,930(14,284)¥33,077 ¥ 528,921
137,808
2,840(5,289)(22,531)
(770)
35
(380)
17,628
17,628(17,917)¥50,705 ¥ 640,345
21,974(41,368)(12,779)(30,238)76(3,222)(3,459)(8,050)(752)¥(2,432) ¥ (44,821) ¥ (48,005)(8,050)(16,028)¥42,655 ¥ 547,251

Minority
interests

Total
net assets

Thousands of U.S. dollars (Note 1)

Balance at March 31, 2008
Net income
Foreign currency translation adjustments
Adjustments for unrealized gains on securities
Acquisition of treasury stock
Sale of treasury stock
Deferred gains or losses on hedges
Decrease in resulting from unification of an accounting
policy of overseas subsidiaries
Minority interests
Cash dividends paid
Balance at March 31, 2009
The accompanying notes are an integral part of these financial statements.

72

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

$ 122,437$ 8,042$ (35,152) $ 95,327(421,134)(229,369)(32,801)(421,134)(130,093)(32,801)$516,187 $6,518,833
223,699(421,134)(130,093)(307,829)
774(32,801)(35,213)(81,951)$(106,932)$(24,759) $(456,286) $(488,701)(81,951)(163,168)$434,236 $5,571,117

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

Thousands of
U.S. dollars(Note 1)Millions of yen
For the years ended March 31, 2009, 2008 and 2007

2009

2008

2007

2009

¥ 22,942¥ 216,504¥ 205,617

34,268
3,514
—
624
—
4,607
—
—
(1,568)(104)
148—(4,052)
4,323(31,536)304
21
701
73,93060,698(31,622)(10,925)
126,273
42,988(4,515)(701)(21)(36,024)
128,000

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

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

348,855
35,773—
6,352—
46,900——(15,963)(1,059)1,507—(41,250)
44,009(321,042)
3,095
214
7,136
752,621617,917(321,918)(111,219)
1,285,482
437,626(45,964)(7,136)(214)(366,731)
1,303,063(46,898)
2,238(25,000)
68,000(640)(19,936)42—(5,834)
4,032(4,390)(28,386)(64,883)
1,852(43,000)—(3,216)(13,804)
106—(7,955)
4,992(505)(126,413)(48,314)
4,033——(14,118)(21,564)263
1,195(2,500)2,015
1,561(77,429)(477,431)
22,783(254,505)
692,253(6,515)(202,952)
428—(59,391)
41,047(44,691)(288,974)

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

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

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

20,574(157,834)(21,633)(101,802)—
2,667(307,055)(163,168)(25,959)(754,210)(78,550)
181,329
1,348,621——$ 1,529,947

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

233,554

Cash flows from investing activities:
Payments for acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for purchases of negotiable certificates of deposits
Proceeds from sales of negotiable certificates of deposits
Payments for purchases of investment securities
Payments for purchase of securities of subsidiaries and affiliated companies
Proceeds from sale of investment securities
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 in cash and cash equivalents
Cash and cash equivalents at beginning of fiscal year
Increase in cash due to newly consolidated subsidiaries
Other decrease in cash and cash equivalents due to exclusion from consolidation
Cash and cash equivalents at end of fiscal year
The accompanying notes are an integral part of these financial statements.
SUMITOMO METAL MINING CO., LTD. Annual Report 200973

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

1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act, and in conformity
with accounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to applicationand disclosure requirements of International Financial ReportingStandards (“IFRSs”).
The accounts of consolidated overseas subsidiaries are basedon their accounting records maintained in conformity with generally accepted accounting principles prevailing in the respective
countries of domicile. However, as described in Note 2, necessary
adjustments such as the influence of applying Practical Issues Task
Force (PITF) No.18 are made upon consolidation. The accompanying consolidated financial statements have been restructured andtranslated into English with some expanded descriptions from theconsolidated financial statements of Sumitomo Metal Mining Co.,
Ltd. (the “Company”) prepared in accordance with Japanese
GAAP and filed with the appropriate Local Finance Bureau of the
Ministry of Finance as required by the Japanese Financial Instruments and Exchange Act. Some supplementary in formation
included in the statutory Japanese language consolidated financial
statements, but not required for fair presentation, is not presented
in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2009, which was¥98.23 to U.S. $1.00. The convenience translations should not be
construed as representations that the Japanese yen amounts havebeen, could have been, or could in the future be, converted into
U.S. dollars at this or any other rate of exchange.

the time the Company acquired control of the respective
subsidiaries.
The goodwill (consolidation difference between the investment cost and the underlying equity in its net assets at the date ofacquisition) is amortized within five-years on a straight-line basis.
Regarding subsidiaries in the United States of America, under the
influence of applying PITF No.18, the goodwill is amortized withintwenty years on a straight-line basis.
(Change for unification of accounting policies applied to overseas
subsidiaries for consolidated financial statements)
The Company adopted “Practical solution on unification of
accounting policies applied to overseas subsidiaries for consolidated financial statements” PITF No.18, issued by the AccountingStandard Board of Japan (ASBJ) on May 17, 2006). PITF No.18
prescribes: (i) the accounting policies and procedures applied to aparent company and its subsidiaries for similar transactions andevents under similar circumstances should in principle be unified
for the preparation of the consolidated financial statements, (ii)financial statements prepared by overseas subsidiaries in accordance with either International Financial Reporting Standards(IFRSs) or the generally accepted accounting principles in the U.S.
(U.S.-GAAP) tentatively may be used for the consolidation process,(iii) however, the following items should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP unless they are not material;(1) Amortization of goodwill(2) Actuarial gain and loss of defined benefit plans recognizedoutside profits and loss
(3) Capitalization of intangible assets arising from development
phases(4) Fair value measurement of investment properties, and therevaluation model for property, plant and equipment, and

2. Summary of significant accounting policies
Consolidation — The consolidated financial statements include
the accounts of the Company and its significant subsidiaries (50subsidiaries in 2009, 50 in 2008 and 48 in 2007). All significant
inter-company balances and transactions have been eliminated.
Investments in affiliates over which the Company has the ability to
exercise significant influence over operating and financial policiesof the investees, are accounted for by the equity method (12 affiliated companies in 2009, 12 in 2008 and 13 in 2007). Investmentsin the remaining unconsolidated subsidiaries and affiliates arecarried at cost because of their immaterial effect on the consolidated financial statements.
In the elimination of investments in subsidiaries, the assets
and liabilities of the subsidiaries, including the portion attributable
to minority shareholders, are recorded based on the fair value at

74

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

intangible assets(5) Retrospective application when accounting policies arechanged(6) Accounting for net income attributable to minority interest
As a result of this change, the operating income decreased by¥86 million ($875 thousand) and income before income taxes andminority interests decreased by ¥689 million ($7,014 thousand).
Cash and cash equivalents and cash flow statements — Cashon hand, readily-available bank deposits, negotiable certificates ofdeposits and short-term highly liquid investments with maturities
of not exceeding three months at the time of purchase are considered to be cash and cash equivalents. Negotiable certificates ofdeposits with maturities of exceeding three months are presented
as negotiable certificates of deposits.

Allowance for doubtful accounts — The allowance for doubt-(2) If a forward foreign exchange contract is executed to hedge a

ful receivables is provided at an amount determined based on the

future transaction denominated in a foreign currency, thehistorical experience of bad debt with respect to ordinary receiv-

future transaction will be recorded using the contracted for-ables, plus an estimate of uncollectible amount determined byward rate, and no gains or losses on the forward foreignreference to specific doubtful receivables from customers who areexchange contract are recognized.

experiencing financial difficulties.
Also, if interest rate swap contracts are used as hedge and meet
Investment securities — Securities are classified into two catego-certain hedging criteria, the net amount to be paid or received

ries based on the intent of holding; available-for-sale securities

under the interest rate swap contract is added to or deducted

and securities issued by non-consolidated subsidiaries and affili-

from the interest on the assets or liabilities for which the swap

ated companies.

contract was executed.

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

The Company evaluates hedge effectiveness monthly by com-able securities) are stated at the fair value. Unrealized gains andparing the cumulative changes in cash flows from or the changes

losses on these securities are reported, net of applicable income

in fair value of hedged items and the corresponding changes intaxes, presented as separate component of net assets. Other

the hedging derivative instruments.

available-for-sale securities with no available fair values (non-marketable securities) are stated at moving-average method. Securi-

Foreign currency translation — Receivables and payables

ties issued by non-consolidated subsidiaries and affiliated compa-

denominated in foreign currencies are translated into Japanesenies are carried at cost. The cost of securities sold is determined by

yen at the year-end rates.

the moving-average method.

Balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at the year-end rates except for account

Derivatives and hedge accounting — Derivative instrumentscomponents of net assets, which are translated at the historicalare stated at fair value. Changes in the fair values are recognized

rates. Income statements of consolidated overseas subsidiaries are

as gains and losses unless derivative transactions are used fortranslated at average rates except for transactions with the Com-

hedging purposes.

pany, which are translated at the rates used by the Company.

If derivative transactions are used as hedges and meet certain
hedging criteria, the Company and its domestic consolidated sub-Inventories —sidiaries defer recognition of gains or losses resulting from changes(1) Merchandise, finished products, semi-finished products, workin fair value of derivative transactions until the related losses orin process and raw materials – Prior to April 1, 2008, merchan-gains on the hedged items are recognized.

dise, finished products, semi-finished products, work in process

However, in cases where forward foreign exchange contracts

and raw materials are stated at cost determined by the first-in

are used as hedges and meet certain hedging criteria, forward

first-out (FIFO) method. Effective April 1,2008, the Company

foreign exchange contracts and hedged items are accounted forand consolidated domestic subsidiaries adopted a newin the following manner:

accounting standard for measurement of inventories and they
are stated at the lower of cost or net selling value of invento-(1) If a forward foreign exchange contract is executed to hedge
an existing foreign currency receivable or payable,ries regarded as the decreased profitability of assets, whose
write-downs are included in cost of sales.

(a) the difference, if any, between the Japanese yen amountof the hedged foreign currency receivable or payable trans-(2) Supplies — Prior to April 1, 2008, supplies are stated at cost

lated using the spot rate at the inception date of the con-based on the moving average method. Effective April 1,2008,

tract and the book value of the receivable or payable is

the Company and consolidated domestic subsidiaries adopted

recognized in the income statement in the period whicha new accounting standard for measurement of inventories

includes the inception date, andand they are stated at the lower of cost or net selling value of(b) the discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract

inventories regarded as the decreased profitability of assets,
whose write-downs are included in cost of sales.

translated using the contracted forward rate and thattranslated using the spot rate at the inception date of thecontract) is recognized over the term of the contract.

SUMITOMO METAL MINING CO., LTD. Annual Report 200975

(Change for the accounting policy for measurement of inventories)

year of 2008 for tangible fixed assets acquired on or after April 1,

The Company and its domestic consolidated subsidiaries have2007.

adopted “Accounting Standard for Measurement of Inventories”

The effect of adoption of the new depreciation method on(Accounting Standards Board of Japan (ASBJ) Statement No.9

income before income taxes and minority interests is notissued on July 5,2006) effective April 1, 2008. The new standard

material.

requires that in the ordinary course of business be measured at
the lower of cost or net selling value, which is defined as selling(Additional Information)

price less additional estimated manufacturing costs and estimatedIn accordance with the revised Japanese Corporate Tax Law anddirect selling expenses. The replacement cost may be used in

its regulation, the Company and its domestic subsidiaries haveplace of net selling value, if appropriate. The standard also requires

adopted a new depreciation method for tangible fixed assetsthat inventories held for trading purpose be measured at market

acquired on or before March 31, 2007 from the consolidated fis-

price. As a result of the adoption of this accounting standard, incal year of 2008. By the new method, the residual book value ofthe consolidated fiscal year of 2009, the operating income andthose assets which had been fully depreciated to the limit pre-income before income taxes and minority interests decreased by

scribed in the previous corporate tax code is depreciated in equal¥7,477 million ($76,117 thousand) respectively.

amount over five-year period.
As a result, depreciation increase by ¥1,024 million and oper-

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

ating income and income before income taxes and minority inter-ment are stated at cost.

ests decreased by ¥942 million, respectively.

Depreciation of property, plant and equipment is computedby the straight-line method, based on the estimated useful lives of

The effects on Segment information are described in the relevant notes.

respective assets. The depreciation period generally ranges from 3
years to 50 years for buildings and structures and 5 years to 17(Additional Information)

years for machinery and equipment.

In accordance with the revised Japanese Corporate Tax Law and

The Company and consolidated domestic subsidiaries haveits regulation, the Company and its domestic subsidiaries haveadopted an accounting standard for impairment of fixed assets.

adopted a new useful life for tangible fixed assets from the con-This standard requires that tangible and intangible fixed assets besolidated fiscal year of 2009.

carried at costs less depreciation, and be reviewed for impairment

The effect of adoption of the new useful life on the operating

whenever events or changes in circumstance indicate that theincome and income before income taxes and minority interests

carrying amount of an asset may not be recoverable.

was ¥2,959 million ($30,123 thousand) respectively.

In addition, the Company and consolidated domestic subsidiaries are required to recognize an impairment loss in their consoli-

Accrued restructuring charges — Accrued restructuring charges

dated statements of income if certain indicators of asset impair-are provided by the Company and its consolidated subsidiaries toment exist and if the book value of an asset exceeds thecover the costs of business reconstruction.

undiscounted sum of its future cash flows. This standard statesthat impairment losses should be measured as the excess of the

Accrued bonuses to directors and corporate auditors — Pro-book value over the higher of (i) the fair market value of the asset,

vision for directors’ bonuses are provided by the Company and its

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

consolidated domestic subsidiaries to be accounted for as anflows arising from the ongoing utilization of the asset and its dis-

expense of accounting period in which such bonuses wereposition after use. This standard covers land, factories, buildings,

incurred.

and other forms of property, plant and equipment as well as
intangible assets. Fixed assets are to be grouped at the lowest(Adopting the new accounting standard for bonuses to directors

levels for which there are identifiable cash flows which are inde-and corporate auditors)

pendent from the cash flows of other groups of assets.

The Company and its consolidated domestic subsidiaries adopted
from April 1, 2006, the new accounting standard for directors’(Change for the accounting policy)

bonus (the Financial Accounting Standard for Directors’ Bonus

In accordance with the revised Japanese Corporate Tax Law andissued by the Accounting Standards Board of Japan on November

its regulation, the Company and its domestic subsidiaries have29, 2005).

changed the depreciation method from the consolidated fiscal

76

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

As the result of adopting the accounting policy, in the year

presentation of net assets in the balance sheet (the Financial

ending March 31, 2007, both operating income and income

Accounting Standard Implementation Guidance No.8 issued bybefore taxes and minority interests decreased by ¥115 million.

the Accounting Standards Board of Japan on December 9, 2005).
Under the New Accounting Standards, the balance sheet

Accrued retirement benefits — Under the terms of the Com-

comprises the assets, liabilities and net assets sections. Previously,

pany’s retirement plan, substantially all employees are entitled to a

the balance sheet comprises the assets, liabilities, minority interests

lump-sum payment at the time of retirement. The amount ofand shareholders’ equity sections. The net assets section includes

retirement benefits is, in general, determined by reference to theirdeferred gain and loss on hedges and minority interests, whichcurrent basic rate of pay, the length of service, and the cause

were not included in the previous shareholders’ equity section.

thereof.

The adoption of the New Accounting Standards had no
impacts on the consolidated statement of income for the year

The Company and certain consolidated domestic subsidiaries

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

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

had not been adopted at March 31, 2007, the shareholders’substantially all employees.

equity amounting to ¥494,674 million would have been

The Company may make payments for additional retirement

presented.

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

Accounting standard for statement of changes in net assets

The Company and its consolidated domestic subsidiaries pro-

— Effective from the year ended March 31, 2007, the Company

vided accrued retirement benefits based on the estimated amounts

and its consolidated subsidiaries adopted the new accountingof projected benefit obligation and the fair value of the plan

standard, “Accounting Standard for Statement of Changes in Net

assets at those dates.

Assets” (Statement No. 6 issued by the Accounting Standards

Actuarial gains and losses are recognized in expenses using

Board of Japan on December 27, 2005) and the implementation

the straight-line method over the average of the estimatedguidance for the accounting standard for statement of changes inremaining service lives of ten years commencing with the follow-

net assets (the Financial Accounting Standard Implementation

ing period. Prior service costs are recognized in expenses using the

Guidance No. 9 issued by the Accounting Standards Board ofstraight-line method over the average of the estimated remaining

Japan on December 27, 2005), (collectively, “the Additional New

service lives of ten years.

Accounting Standards”).

Accrued retirement benefits in the consolidated balance
sheets also include estimated liabilities for the unfunded lump-

Research and development — Research and development costs

sum benefit plan covering directors and corporate auditors.

are charged to income as incurred.

Accrued environmental measures — The provision for environ-

Bond issue expense — Bond issue expense is charged to income

mental measures is estimated and recorded to provide for future

as incurred.

potential costs, such as costs related to disposal of polychlorinatedbiphenyl (PCB).

Accounting for certain lease transactions — Finance leases,
except for certain immaterial leases, are capitalized and depreci-

Accrued indemnification loss on damages caused by a con-ated over the estimated useful lives or lease term, as applicable.

solidated subsidiary — Accrued indemnification loss on dam-Finance leases commencing prior to April 1, 2008, which do notages caused by a consolidated subsidiary is provided to cover thetransfer ownership of the leased property to lessees are accounted

indemnification loss of the accident incurred by the subsidiary.

for in the same manner as operating leases.

Accounting standard for presentation of net assets in the(Change for the accounting policy)

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

The Company and its domestic subsidiaries adopted the ASBJ

the Company and its consolidated subsidiaries adopted the new

Statement No.13, Accounting Standard for Lease Transaction, andaccounting standard, “Accounting Standard for Presenting of Net

ASBJ Guideline No.16, Guidance on Accounting Standard for

Assets in the Balance Sheet” (Statement No.5 issued by the

Lease Transaction, originally issued by the Business Accounting

Accounting Standards Board of Japan on December 9, 2005), andDeliberation Counsel on June 17, 1993 and by the Japanese Insti-

the implementation guidance for the accounting standard fortute of Certified Public Accountants on January 18, 1994, respec-

SUMITOMO METAL MINING CO., LTD. Annual Report 200977

Amount per share of common stock — Basic net income pertively, and both revised by the ASBJ on March 30, 2007.
In the consolidated fiscal year of 2009, finance lease are recognized on balance sheet. Depreciation or amortization expenseshare is computed based on the weighted-average number ofshares of common stock in issue during each fiscal year.
Diluted net income per share assumes that outstanding con-is recognized on a straight-line basis over the lease period.
The effect of adopting the new standards on the income

vertible bonds were converted into common stock at the begin-

before income taxes and minority interests was none.

ning of the period at the current conversion price.

Income taxes — Deferred tax assets and liabilities are determinedcable to the respective fiscal year.

Cash dividends per share represent the actual amount applibased on the differences between financial reporting and the tax
bases of assets and liabilities, and measured using the statutory

Reclassifications — Certain reclassifications have been made intax rates which will be in effect when the differences are expected

the 2008 and 2007 financial statements to conform to the pre-to be realized.

sentation of 2009.

Sales — Sales of merchandise and finished products are recognized when the products are shipped to customers.

3. Securities(1) The following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available fair values
as of March 31, 2009 and 2008:
Securities with book values exceeding acquisition costs
Millions of yen

2009
Equity securities

2008

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥20,598¥28,448¥7,850¥36,069¥58,439¥22,370

Thousands of U.S. dollars

2009
Equity securities

Acquisition cost

Book value

Difference$209,692$289,606$79,914

Securities with book values not exceeding acquisition costs
Millions of yen

2009
Equity securities

2008

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥26,047¥17,102¥(8,945)¥13,007¥10,165¥(2,842)

Thousands of U.S. dollars

2009
Equity securities

78

Acquisition cost

Book value

Difference$265,163$174,102$(91,061)

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

(2) The following tables summarize book values of the securities with no available fair values as of March 31, 2009 and 2008:
Available-for-sale securities
Millions of yen

2009
Unlisted equity securities¥3,822Thousands of U.S. dollars

2008

2009

¥4,229$38,909(3) As of March 31, 2009 and 2008, there was no available-for-sale security with maturities.
(4) Total sales of available-for-sale securities sold amounted to ¥44

2009, 2008 and 2007, respectively. No losses were recognized

million ($448 thousand), ¥106 million and ¥263 million, andin the years ended March 31, 2009 and 2007 but losses

the related gains amounted to ¥42 million ($428 thousand),amounted to ¥2 million were recognized in the years ended¥83 million and ¥76 million in the years ended March 31,

March 31, 2008.

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

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

using derivatives, standards for choosing transaction counterpar-

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

metals, forward foreign exchange contracts and currency swaps

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

General Manager of the department in charge after consulting

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

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

Derivative transactions of the Company and its consolidated

Directors monthly.

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

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

transaction counterparties. Also, the internal audit department of

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

the Company regularly examines derivative transactions.

and its consolidated subsidiaries’ exposure to market risk are

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

exposed to market risk arising from commodity derivative transac-

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

potential loss the Company and its consolidated subsidiaries could

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

products, is hedged by the corresponding future contracts. The

derivative transactions are solely made with highly rated financial

Company and its consolidated subsidiaries also utilize currency

institutions, their subsidiaries or LME (London Metal Exchange)

derivative transactions to hedge market risk of exchange rates or

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

foreign currencies into account, the Company and its consolidated

obligation.

subsidiaries are not exposed to market risk.

SUMITOMO METAL MINING CO., LTD. Annual Report 200979

The following tables summarize market value information as of March 31, 2009 and 2008 of derivative transactions for which hedge
accounting has not been applied:
Millions of yen

2009

2008

Contracted amountContracted amount

Total

Over oneyear

Marketvalue¥5,082—¥5,082¥——¥—¥5,106
—
¥ —

¥

¥—
—
¥—

¥

Recognized
gains (losses)

Total

Over oneyear

Marketvalue

Recognized
gains (losses)

¥ 24
—
¥ 24

¥11,30765¥11,372¥——¥—¥11,192
80¥—¥(115)
15¥(100)

¥ —
126
¥126

¥14,416
5,071¥19,487¥——¥—¥13,787
5,071
¥
—

¥ 629
—
¥ 629

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

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

81
458
¥ 539

81
584
¥ —

Thousands of U.S. dollars

2009
Contracted amount
Total

Over oneyear

Marketvalue

Recognized
gains (losses)$51,736—$51,736$——$—$51,980
—
$
—

$ 244
—
$ 244

$

$—
—
$—

$

$
—
1,283
$1,283Currency:
Forward contracts:
Buy position—U.S. dollars
Buy position—A.U. dollars

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

825
4,663
$ 5,488

825
5,945
$
—

5. Inventories
Inventories at March 31, 2009 and 2008 consists of the following:
Millions of yen

Merchandise

Thousands of U.S. dollars

2009

2008

¥

¥

1,472

1,378

2009
$

14,985

Finished products

26,977

34,709274,631

Semi-finished products and work in process

50,30387,320512,094

Raw materials and supplies

80

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

27,496

46,149279,914¥106,248¥169,556$1,081,624

6. Loss on impairment of fixed assets
Loss on impairment of fixed assets for the year ended March 31, 2009 consisted of the following:

Millions of yen
Location

Major use

Asset category

Thousands of
U.S. dollars

Loss

Kamiina District, Nagano Prefecture, Japan

Manufacturing facilities for printed circuit boards

Machinery and equipment and other assets¥1,183$12,043

Usa City, Oita Prefecture, Japan

Facilities for IC package plating

Land, building and structures, machinery andequipment, and other assets

640

6,515

Niihama City, Ehime Prefecture, Japan

Manufacturing facilities for copper-clad polyimide film Building and structures and machinery and equipment

550

5,599

Isa City, Kagoshima Prefecture, Japan

Manufacturing facilities for lead frames

Machinery and equipment

476

4,846

Niihama City, Ehime Prefecture, Japan

Manufacturing facilities for battery materials

Machinery and equipment and other assets

275

2,800

Iwanai District, Hokkaido, Japan

Manufacturing facilities for single-crystal materials

Building and structures and machinery and equipment

247

2,515

Yokohama City, Kanagawa Prefecture, Japan Manufacturing facilities for electronic terminals andconnectors

Machinery and equipment

141

1,435

Miscellaneous

Machinery and equipment

2

20¥3,514$35,773

Miscellaneous

Total
The Company categorized operating assets by business unit suchas a plant and manufacturing process, based on the division of

based on the sales volume for domestic customers because theCompany has decided to focus on the domestic market.
(5) The book value of manufacturing facilities for battery materials

managerial accounting.

in Ehime Prefecture was reduced to the recoverable amountThe breakdown of major use is as follows.
(1) The book value of manufacturing facilities for printed circuitboards in Nagano Prefecture was reduced to the recoverable

because they were expected to be in use no more.
(6) The book value of manufacturing facilities for single-crystal
materials was reduced to the recoverable amount due to aamount because the products were not profitable.
(2) The book value of facilities for IC package plating in Oita Prefecture was reduced to the recoverable amount due to a

decline in demand, a strong yen, and unfavorable mix ofproducts.
(7) The book value of manufacturing facilities for electronic termi-

decline in the sales volume.
(3) The book value of manufacturing facilities for copper-cladnals and connectors in Kanagawa Prefecture was reduced topolyimide film in Ehime Prefecture scheduled for diversion to

the recoverable amount because the products were not profit-

another use was reduced to the recoverable amount because

able due to a decline in the market price.

the Company has found an alternative method more effective
and efficient and because the Company has decided not to

The Company used the value in use or net selling prices for calcu-

divert them.

lating the recoverable amount. The discounted rate used for cal-(4) The book value of manufacturing facilities for lead frames inculating the value in use was 11%.

Kagoshima Prefecture was reduced to the recoverable amount
Loss on impairment of fixed assets for the year ended March 31, 2008 consisted of the following:
Millions of yen
Location

Major use

Asset category

LossNiihama City, Ehime Prefecture, Japan

Manufacturing facilities for copper-clad polyimide film Buildings and Structures¥218

Niihama City, Ehime Prefecture, Japan

Manufacturing facilities for copper-clad polyimide film Machinery and equipment489

Ichihara City, Chiba Prefecture, Japan

Manufacturing facilities for decontamination for soil

Buildings and Structures

22

Ichihara City, Chiba Prefecture, Japan

Manufacturing facilities for decontamination for soil

Machinery and equipment

181

Okuchi City, Kagoshima Prefecture, Japan

Manufacturing facilities for packaging materials

Machinery and equipment

29

Nasu District, Tochigi Prefecture, Japan

Idle Land

Land

Total

2
¥941

Loss on impairment of fixed assets is not recorded for the year ended March 31, 2007.

SUMITOMO METAL MINING CO., LTD. Annual Report 200981

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

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

rials in Kagoshima Prefecture was reduced to the recoverable

managerial accounting.

amount because its products were not profitable and the

The breakdown of major use is as follows.

Company has decided not to continue its operation.

(1) The book value of existing manufacturing facilities for copperclad polyimide film in Ehime Prefecture was reduced to the

As for the idle land which was acquired for future factory sites,

recoverable amount because the facilities were completely idle

the book value of the assets was reduced to the recoverable

due to the installation of the latest manufacturing facilities

amount due to a decline in the market price. Net sales prices ofwhich were suitable for the current market size.

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

Chiba Prefecture was reduced to the recoverable amount due

obtained on the basis of values provided by real estate appraisers

to withdrawal from its business.

and other specialists.

7. Bank loans and long-term debt
Bank loans are generally represented by short-term notes (most of

On January 31, 2008, the Company has passed a resolution towhich are unsecured) and bank overdrafts, and bore interest atissue stock acquisition rights by way of third-party allotment andannual rates of 0.89% to 5.31% and 1.04% to 5.87% at March

to execute a loan agreement for the purpose of procuring funds

31, 2009 and 2008, respectively.

through a loan with stock acquisition rights. By executing this

The Zero-coupon convertible bonds due in 2009 are currently

loan agreement, the Company procures ¥100 billion ($1,018 mil-convertible at ¥1,001 ($10.19) per share until June 15, 2009. Aslion) from February 15, 2008 to February 13, 2015. The exerciseof March 31, 2008, 10,225 thousand additional shares of com-price of the stock acquisition rights will be revised in accordance

mon stock in aggregate could be issued upon full conversion atwith market price. The stock acquisition rights have a structure

the current conversion price.

that prevents dilution of the share price to a price lower than
¥1,749 ($18) as of March 31, 2009.

Long-term debt at March 31, 2009 and 2008 consists of the following:
Millions of yen

2009

Thousands of U.S. dollars

2008

2009

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

116,107—¥

122,999

10$

1,181,991—

Secured

8,106

10,61982,521

Unsecured

16,085

26,386

163,748

Government owned banks and government agencies, maturing
through 2020 at interest rates of 0.95% to 4.65%:

0.51% domestic bonds due in 2009*—

10,000

—1.42% domestic bonds due in 2012

10,00010,000101,802

Zero coupon convertible bonds due in 2010

10,235

10,235

104,194

160,533

190,249

1,634,256(18,817)(20,855)(191,561)¥141,716¥169,394$1,442,695

Amount due within one year*

: The 0.51% domestic bonds was redeemed during the year ended March 31, 2009.

82

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

The aggregate annual maturities of long-term debt at March 31, 2009 are as follows:
Years ending March 31,

Millions of yen

2010¥ 18,817

Thousands of U.S. dollars$ 191,561

2011

8,013

81,574

2012

22,972233,859

2013

4,508

45,892

2014

3,006

30,602103,217

1,050,769

Thereafter

Assets pledged as collateral for bank loans and long-term debt at March 31, 2009 and 2008 are as follows:
Millions of yen

2009

Thousands of U.S. dollars

2008

2009

Investment securities
Subsidiaries

¥

Other
Property, plant and equipment, at net book value

—

¥

131

$

—

5,034

10,186

51,24757,19958,704582,297¥62,233¥69,021$633,544

8. Income taxes
Income taxes in the accompanying consolidated statements ofenterprise taxes. Consolidated overseas subsidiaries are subject toincome comprise corporation taxes, inhabitants taxes andincome taxes of the countries in which they domicile.

The following table summarizes the significant differences between the statutory tax rate and the Company’s and its consolidated subsidiaries’ effective tax rate for financial statement purposes for the years ended March 31, 2009, 2008 and 2007:
2009

2008

2007

Statutory tax rate
Equity in earnings of unconsolidated subsidiaries and affiliated companies

40.7%(43.1)

40.7%
(9.1)

40.7%
(5.6)

Effect of elimination of intercompany dividends received

46.4

12.1

8.4

Difference in tax rates among the Company and its consolidated subsidiaries

(6.6)

(4.3)

(2.3)

Permanently nondeductible expenses

4.2

0.4

0.1

Permanently nontaxable dividends received(25.8)

(5.6)

(5.0)

Tax credit(14.1)

(3.9)

(1.1)

Undistributed earnings of foreign subsidiaries(24.6)

(4.3)

(0.3)

Increase (decrease) in valuation allowance
Others
Effective tax rate

7.3
(5.2)
(20.8)%

1.2
1.3
28.5%

0.7
(1.9)
33.7%

SUMITOMO METAL MINING CO., LTD. Annual Report 200983

Significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities as of March 31, 2009 and2008 are as follows:
Millions of yen

Deferred tax assets:
Retirement benefits

Thousands of U.S. dollars

2009

2008

2009
$ 57,579¥ 5,656¥ 5,511

Net operating loss carry forwards

8,246

4,885

83,946

Loss from write-down of investment securities

2,198

324

22,376

Allowance for bonus payable

1,582

1,707

16,105

Loss from valuation of gold loans

1,184

1,602

12,053

Loss on impairment or fixed assets

2,253

863

22,936

572

736

5,823

Deferred losses on hedges

1,683

229

17,133

Loss from devaluation of inventories
Contribution gains on securities to employee retirement benefits trust
Others

988
795
4,854

615
674
7,608

10,058
8,093
49,41530,011

24,754

305,518(11,384)
18,627(7,787)
16,967(115,892)
189,626

Unrealized profits

Gross deferred tax assets
Less valuation allowance
Deferred tax assets-less valuation allowance
Deferred tax liabilities:—(7,532)—

Depreciation

Net unrealized holding gain on available-for-sale securities(2,019)(2,509)(20,554)

Deferred gains on properties for tax purpose(3,093)(3,364)(31,487)—(2,837)—(550)(7,253)(5,599)(1,856)
(594)

(924)
(594)

(18,894)(6,047)

(768)
(358)

—
(1,214)(7,818)(3,645)(9,238)(26,227)(94,044)¥ 9,389¥ (9,260)$ 95,582

Reserve for losses on overseas investment
Accumulated earnings of overseas subsidiaries
Reserve for explorations
Gain on securities contributed to employee retirement benefits trustEnterprise taxes to be refunded
OthersDeferred tax liabilities
Net deferred tax assets (liabilities)

9. Retirement benefits and pension costs
Accrued retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2009 and 2008 consists ofthe following:
Millions of yen

Thousands of U.S. dollars

2009

2008

2009

Projected benefit obligation
Fair value of pension assets¥(51,899)
33,435¥(51,546)
44,476$(528,342)
340,375

Excess of projected benefit obligation over pension assets
Unrecognized actuarial differences
Unrecognized prior services costs¥(18,464)
13,442(1,173)¥ (7,070)
2,509(1,491)$(187,967)
136,842(11,941)

Net retirement benefits
Prepaid pension costs
Accrued retirement benefits¥ (6,195)(2,048)¥ (8,243)¥ (6,052)(1,890)¥ (7,942)$ (63,066)(20,849)$ (83,915)

84

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

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

efit trust, which are included in the pension assets.

auditors of ¥195 million ($1,985 thousand) and ¥184 million,

Retirement benefits in the consolidated balance sheets as ofrespectively.

March 31, 2009 and 2008 also include estimated liabilities for the
Included in the consolidated statements of income for the years ended March 31, 2009, 2008 and 2007 are severance and retirement
benefit expenses comprised of the following:Thousands of
U.S. dollars

Millions of yen

2009Service cost-benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial differences
Amortization of prior services costs
Severance and retirement benefit expenses¥3,165
907
(824)
402
(296)
¥3,354

2008

2007

2009

¥2,323
856
(574)
(836)
(271)
¥1,498¥ 2,003884(1,161)
(557)
(214)
¥ 955

$32,220
9,233(8,388)
4,092(3,013)$34,144

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

the year ended March 31, 2009, 2008 and 2007.

and losses are recognized in income statement using the straight-

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

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

Prior service costs are recognized in expenses using the straight-

31, 2009, 2008 and 2007.

line method over the average of the estimated remaining service

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

the future retirement date is allocated equally to each service year

10. Research and development expense
Research and development expense included in selling, general and administrative expenses for the years ended March 31, 2009, 2008
and 2007 are ¥5,896 million ($60,022 thousand), ¥6,111 million and ¥5,392 million, respectively.

11. Special reserves
For the purpose of obtaining tax benefits, the Company and some

Such reserves, which are included in retained earnings, areconsolidated subsidiaries have set up special reserves mainly for¥218,458 million ($2,223,994 thousand) and ¥91,978 million atlosses on overseas investments and explorations in accordance

March 31, 2009 and 2008, respectively.

with the Special Taxation Measures Law of Japan.

SUMITOMO METAL MINING CO., LTD. Annual Report 200985

12. Net assets
As described in Note 2, net assets comprises three subsections,dividends and other cash appropriations as legal earnings reserve

which are shareholders’ equity, accumulated gain (losses) fromuntil the total of legal earnings reserve and additional paid-in capi-

valuation and translation adjustments, and minority interests.

tal equaled 25% of common stock.

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

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

May 1, 2006, replacing the Japanese Commercial Code (“thecapital could be used to eliminate or reduce a deficit by a resolu-

Code”). The Law is generally applicable to events and transactions

tion of the shareholders’ meeting or could be capitalized by a res-occurring after April 30, 2006 and for fiscal years ending after

olution of the Board of Directors. Under the Law, both of thesethat date.

appropriations generally require a resolution of the shareholders’

Under the Japanese laws and regulations, the entire amountmeeting.

paid for new shares is required to be designated as common

Additional paid-in capital and legal earnings reserve may notstock. However, a company may, by resolution of the Board of

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

Directors, designate an amount not exceeding one-half of thetion that the total amount of legal earnings reserve and additional

price of the new shares as additional paid-in capital, which ispaid-in capital remained equal to or exceeded 25% of common

included in capital surplus.

stock, they were available for distribution by resolution of share-

Under the Law, in cases where a dividend distribution of sur-holders’ meeting. Under the Law, all additional paid-in-capital andplus is made, the smaller of an amount equal to 10% of dividend

all legal earning reserve may be transferred to other capital sur-or excess, if any, of 25% of common stock over the total of addi-

plus and retained earnings, respectively, which are potentiallytional paid-in capital and legal earnings reserve must be set asideavailable for dividends.

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

The maximum amount that the Company can distribute as

ings reserve is included in retained earnings in the accompanying

dividends is calculated based on the non-consolidated financial

consolidated balance sheets.

statements of the Company in accordance with Japanese laws

Under the Code, companies were required to set aside an

and regulations.

amount equal to at least 10% of the aggregate amount of cash

13.Commitments and contingent liabilities
Contingent liabilities at March 31, 2009 are as follows:

Notes and accounts receivable sold to factoring companies with recourse

Millions of yen

Thousands of U.S. dollars¥4,097$41,708

4,515

45,964

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

192

1,955

¥8,804$89,627

Besides the above, as to providing electric power to Pogo gold mine, there are ¥942 million ($9,590 thousand) to guarantee construction
costs of electric facilities.

86

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

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

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

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

Business segment information for the years ended March 31, 2009, 2008 and 2007 are as follows:
2009

Millions of yen
Mineralresources

MetalsElectronics& advanced
materials¥ 52,844¥534,587¥175,945

OthersEliminations
or corporate¥30,421¥

Consolidated

Net sales:
Outside customers
Inter segment
Total
Costs and expenses—¥793,797

20,77977,828

11,981

13,785(124,373)—

73,623

612,415

187,926

44,206(124,373)

793,797

55,967609,982

198,076

43,638(124,400)

783,263¥27¥ 10,534

Operating income (loss)¥ 17,656¥

2,433¥ (10,150)¥

Identifiable assets¥159,203¥416,338¥106,147¥63,615¥ 134,698¥880,001

6,432

13,475

11,064

2,608

689

34,268Depreciation
Loss on impairment of fixed assets
Capital expenditures

568

—

—

3,512

2

—

3,514

7,890

24,77812,5342,213

308

47,7232008

Millions of yen
Mineralresources

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

23,535

112,660

17,299

11,778(165,272)—

91,360910,574

255,00240,708(165,272)

1,132,372

OthersEliminations
or corporate

Consolidated

Net sales:
Outside customers
Inter segment
Total

53,233

801,732

Operating income (loss)

Costs and expenses¥ 38,127¥108,842¥

Identifiable assets¥176,234
5,537

Depreciation
Loss on impairment of fixed assets
Capital expenditures

246,787

37,046

8,215¥ 3,662¥(161,820)

976,978(3,452)¥ 155,394¥521,362¥154,075

10,071

11,709¥62,133¥ 177,912¥1,091,716

2,132

1,056

30,505

—

—

736

205

—

941

9,427

42,08911,862

1,779

(12)

65,145

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

87

2007

Millions of yen
Mineralresources

MetalsElectronics& advanced
materials

Construction
materials

OthersEliminations
or corporate

Consolidated¥ 55,482¥671,471¥209,515¥17,029¥13,267¥—¥966,764

26,76687,365

14,065632

16,687(145,515)—

82,248758,836

223,580

17,661

29,954(145,515)

966,764

Net sales:
Outside customers
Inter segment
Total

48,716649,272

209,996

15,50825,917

Operating income (loss)

Costs and expenses¥ 33,532¥109,564¥ 13,584¥ 2,153¥ 4,037¥(145,277)

804,132(238)¥162,632

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

Depreciation

4,539

8,433

10,073

659

1,373

616

25,693

Reversal of loss on impairmentof fixed assets

(939)

—

—

—

—

—

(939)

Capital expenditures

9,288

18,83322,563

240

1,314

(671)

51,567

Eliminations
or corporate

Consolidated$309,692$—$8,081,005

2009

Thousands of U.S. dollars
Mineralresources

Electronics& advanced
materials

MetalsOthers

Net sales:
Outside customers
Inter segment
Total
Costs and expenses$ 537,962 $5,442,198 $1,791,153
211,534

792,303

121,969

140,334(1,266,141)—

749,496

6,234,501

1,913,122

450,026(1,266,141)

8,081,004

569,755

6,209,732

2,016,451

Operating income (loss)$ 179,741 $Identifiable assets$1,620,717 $4,238,400 $1,080,597

Depreciation
Loss on impairment of fixed assets
Capital expenditures

65,47924,768 $ (103,329)
137,178

112,634

444,243(1,266,416)

7,973,765$

275$ 107,238$647,613$ 1,371,251$8,958,578

26,5507,014

348,855

$

5,783

—

—

35,75320—

35,77380,322

252,245

127,598

22,5293,135

485,829(The effects of changes in segregation on segment information)(The effects of changes in depreciation method)

The Company has embarked the Mid-Term Business Plan by

In accordance with the revised Japanese Corporate Tax Law, for

expanding and strengthening its core business. Clarifying thistangible fixed assets acquired on or before March 31,2007, theidea, the business segment of “Construction materials” is included

Company and its domestic consolidated subsidiaries have started

in the business segment of “Others” since the year ended March

to depreciate the remaining balance of assets over a five year

31, 2008. In the year ended March 31, 2008, compared with theperiod using straight-line method from the following fiscal year

previous segregation, ¥14,748 million in sales, ¥690 million inafter the book value of the assets decreases to 5% of the acquisi-

operating income, ¥13,206 million in identifiable assets, ¥676

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

million in depreciation, ¥2 million in loss on impairment of fixed

rate Tax Law before revision. As a result of the change of deprecia-

assets and ¥380 million in capital expenditure are included in thetion method, in the year ended March 31, 2008, depreciation

business segment of “Others” as a result of business of former

increases by ¥42 million in Mineral resources, ¥669 million in“Construction materials”.

Metals, ¥287 million in Electronics & advanced materials and ¥26
million in Others. And operating income decreases by ¥39 million
in Mineral resources, ¥591 million in Metals, ¥286 million in Electronics & advanced materials and ¥26 million in Others.

88

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

(The effects of changes of accounting method for measurement(The effects of changes of the depreciation period for property,of inventories)

plant and equipment)

For product inventories, the Company used the first-in, first-out

In accordance with the revised Japanese Corporate Tax Law, the(FIFO) method principally. Beginning this consolidated fiscal year,

Company and its domestic consolidated subsidiaries changed thethe Company adopted the “Accounting Standard for Measure-depreciation period for property, plant and equipment beginningment of Inventories” (ASBJ Statement No. 9, announced on Julythis fiscal year. As a result of the change, operating income

5, 2006)” and calculated inventory values using the first-in, first-

decreased by ¥47 million in Mineral resources, ¥1,629 million inout method (For figures shown on balance sheet, the book value

Metals, ¥916 million in Electronics & advanced materials andwrite-down method based on decreased profitability). As a result¥367 million in Others.

of the change of the accounting method, operating income
decreases by ¥3,203 million in Metals, ¥2,895 million in Electron-(The effects of changes of unification of accounting policies

ics & advanced materials and ¥1,379 million in Others.

applied to foreign subsidiaries for consolidated financial
statements)(The effects of changes of accounting policy for Non-ownership

Accounting methods applicable to overseas subsidiaries and usedtransfer finance lease agreement)

for the consolidated financial statement. Beginning this fiscal year,

Non-ownership transfer finance lease agreements which were

the Company adopted the “Practical Solution on Unification of

based on the accounting method for ordinary lease transactions

Accounting Policies Applied to Foreign Subsidiaries for Consoli-

are now based on the accounting method for sales transactions

dated Financial Statements” (PITF No. 18, May 17, 2006). As a

beginning this fiscal year as per “Accounting Standard for Lease

result of the change, operating income decreases by ¥115 million

Transactions” (ASBJ Statement No. 13 [Business Accountingin Mineral resources, increases by ¥29 million in Electronics &Council Committee No. 1, June 17, 1993; revised March 30,

advanced materials.

2007]) and the “Guidance on Accounting Standard for Lease
Transactions” (ASBJ Guidance No. 16 [The Japanese Institute ofCertified Public Accountants (JICPA) Accounting Standard Committee, January 18, 1994; revised March 30, 2007]). There is no
impact from this change on operating income.

Geographic segment information
Geographic segment information for the years ended March 31, 2009, 2008 and 2007 are summarized as follows:
2009

Millions of yen
Domestic

North
AmericaSoutheast
Asia

Others¥678,737¥47,293¥38,552¥ 29,215

Eliminations
or corporate

Consolidated

Net sales:
Outside customers
Inter segment¥—¥793,797

40,764—

15,964

3,565(60,293)—

719,501

47,29354,51632,780(60,293)793,797

Costs and expenses

719,437

39,72652,98536,676(65,561)

783,263

Operating income (loss)¥

64¥ 7,567¥ 1,531¥ (3,896)¥ 5,268¥ 10,534

Identifiable assets¥546,360¥77,261¥68,383¥152,967¥ 35,030¥880,001

Total

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

89

2008

Millions of yen
Domestic

North
AmericaSoutheast
Asia

Others¥ 986,469¥57,649¥53,405¥ 34,849

Eliminations
or corporate

Consolidated

Net sales:
Outside customers
Inter segment¥—¥1,132,372

53,986

123

34,462

6,447(95,018)—

1,040,455

57,772

87,867

41,296(95,018)

1,132,372

929,789

35,687

66,90937,874(93,281)

976,978

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

3,422¥ (1,737)¥ 155,394

Identifiable assets¥ 647,305¥95,265¥81,667¥169,290¥ 98,189¥1,091,716

Eliminations
or corporate

Consolidated

Total
Costs and expenses

2007

Millions of yen
Domestic

North
AmericaSoutheast
Asia

Others¥846,581¥46,682¥47,349¥ 26,152

42,159—20,61812,319(75,096)—888,740

46,682

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

Net sales:
Outside customers
Inter segment
Total
Costs and expenses

758,171

29,13355,052

Operating income (loss)¥130,569¥17,549¥12,915¥

Identifiable assets¥608,940¥75,629¥66,275

Domestic

North
AmericaSoutheast
Asia$6,909,671$481,452$392,467

414,985—

162,517

7,324,656

481,452

554,984

2009

¥

—

¥966,764

33,672(71,896)804,132

4,799¥ (3,200)¥162,632¥119,053¥ 59,311¥929,208

OthersEliminations
or corporate

Consolidated

297,414$—$8,081,004

36,292(613,794)—

333,706(613,794)

8,081,004

Thousaands of U.S. dollars

Net sales:
Outside customers
Inter segment
Total

$

Costs and expenses

7,324,005

404,418

539,397

Operating income (loss)$

651$ 77,034$ 15,587$

373,369(667,423)

7,973,766(39,663)$ 53,629$ 107,238

Identifiable assets$5,562,048$786,532$696,152$1,557,233$ 356,612$8,958,577(The effects of changes in depreciation method)(The effects of changes of accounting method for Measurement

In accordance with the revised Japanese Corporate Tax Law, forof Inventories)

tangible fixed assets acquired on or before March 31,2007, theFor product inventories, the Company used the first-in, first-out

Company and its domestic consolidated subsidiaries have started

method principally. Beginning this consolidated fiscal year, theto depreciate the remaining balance of assets over a five year

Company adopted the “Accounting Standard for Measurement

period using straight-line method from the following fiscal yearof Inventories” (ASBJ Statement No. 9, announced on July 5,

after the book value of the assets decreases to 5% of the acquisi-2006)” and calculated inventory values using the first-in, first-out

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

method (For figures shown on balance sheet, the book value

rate Tax Law before revision. As a result of the change of deprecia-

write-down method based on decreased profitability) . As a resulttion method, in the year ended March 31, 2008, operating incomeof the change of the accounting method, operating income

decreases by ¥942 million in Japan.

decreases by ¥7,477 million in Japan.

90

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

(The effects of changes of accounting policy for Non-ownership

Company and its domestic consolidated subsidiaries changed thetransfer finance lease agreement)

depreciation period for property, plant and equipment beginning

Non-ownership transfer finance lease agreements which were

this fiscal year. As a result of the change, operating income

based on the accounting method for ordinary lease transactions

decreases by ¥2,959 million in Japan.

are now based on the accounting method for sales transactions
beginning this fiscal year as per “Accounting Standard for Lease(The effects of changes of unification of accounting policies

Transactions” (ASBJ Statement No. 13 [Business Accounting

applied to foreign subsidiaries for consolidated financial

Council Committee No. 1, June 17, 1993; revised March 30,

statements)

2007]) and the “Guidance on Accounting Standard for Lease

Accounting methods applicable to overseas subsidiaries and used

Transactions” (ASBJ Guidance No. 16 [The Japanese Institute offor the consolidated financial statement. Beginning this fiscal year,

Certified Public Accountants (JICPA) Accounting Standard Com-

the Company adopted the “Practical Solution on Unification ofmittee, January 18, 1994; revised March 30, 2007]). There is no

Accounting Policies Applied to Foreign Subsidiaries for Consoli-

impact from this change on operating income.

dated Financial Statements” (PITF No. 18, May 17, 2006). As aresult of the change, operating income decreases by ¥115 million(The effects of changes of the depreciation period for property,

in North America, increases by ¥29 million in Southeast Asia.

plant and equipment)
In accordance with the revised Japanese Corporate Tax Law, theInformation for overseas sales
2009

Overseas net sales
Consolidated net sales
Share of overseas net sales

Millions of yen
North
AmericaSoutheast
Asia

East
Asia

¥48,249¥56,417

—

—

6.1%

7.1%

2008

Overseas net sales
Consolidated net sales
Share of overseas net sales

Consolidated net sales
Share of overseas net sales

Consolidated net sales
Share of overseas net sales¥159,585¥17,903¥ 282,154——¥ 793,797

20.1%

2.2%

35.5%

North
AmericaSoutheast
Asia

East
Asia

¥58,265¥85,721

—

—

5.1%

7.6%

OthersTotal¥242,835¥7,908¥ 394,729——¥1,132,372

21.4%

0.7%

34.9%

Millions of yen
North
AmericaSoutheast
Asia

East
Asia

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

—

—

—

—

¥966,764

4.8%

7.7%

19.1%

1.2%

32.9%

2009

Overseas net sales

Total

Millions of yen

2007

Overseas net sales

OthersThousands of U.S. dollars
North
AmericaSoutheast
Asia

East
Asia

$491,184$574,336

—

—

6.1%

7.1%

OthersTotal$1,624,606$182,256$2,872,381——$8,081,004

20.1%

2.2%

35.5%

SUMITOMO METAL MINING CO., LTD. Annual Report 200991

15. Information for certain leases
Lease assets
Lease assets related to non-ownership transfer finance leases. Leases can depreciate assets over the lease period using the straight-line
method with no residual value. For finance lease transactions other than those involving a transfer of title that began prior to the application of the new accounting standards, the previous operating lease method will continue to be applied.
As a lessee
A summary of assumed amounts inclusive of interest of acquisition cost, accumulated depreciation and net book value of finance leases
accounted for in the same manner as operating leases at March 31, 2009 and 2008 are as follows:
Millions of yen

2009
Acquisition
cost

Machinery and equipment

2008

Accumulated
depreciation

¥140

¥95

Net bookvalue

Acquisition
cost

Accumulated
depreciation

¥45

¥225

¥143

Net book
value

¥82

Thousands of U.S. dollars

2009

Machinery and equipment

Acquisition
cost

Accumulated
depreciation

Net book
value$1,425$967$458

Future lease payment, inclusive of interest at March 31, 2009 and 2008 under such leases are as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of U.S. dollars

2009

2008

2009

¥22

¥ 38

$224

22

44

225

¥44

¥ 82

$449

Total lease expenses and assumed depreciation charges for the years ended March 31, 2009, 2008 and 2007 are as follows:
Millions of yen

Thousands of U.S. dollars

2009

2008

2007

Total lease expenses

¥38

¥83

¥160

2009
$387

Assumed depreciation charge

38

83

160

387

As a lessor
At March 31, 2009 and 2008, there was no lease asset related to non-ownership transfer the Company leased as a lessor.
Total revenue and depreciation charges for the years ended March 31, 2009, 2008 and 2007 were as follows:
Millions of yen

Thousands of U.S. dollars

2009

2008

2007

2009

Total revenues

¥—

¥15

¥20

$—

Depreciation charge

—

7

19

—

92

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

16. Business Combination
Sumitomo Metal Mining Package Materials Co., Ltd. was merged with the Company.
The summary of this merger is as follows:
1. Names of the Companies in the relevant business combination and contents of its businessCompany name

Description of business

Sumitomo Metal Mining Co., Ltd.
(The “Company”)

Exploration and developing the mine; smelting/refining and sales of copper, gold , nickel andother non-ferrous metals; manufacturing and distribution of the high-quality semiconductormaterials and high-value-added advance materials.

Sumitomo Metal Mining Package
Materials Co., Ltd

Manufacturing and distribution of semiconductor package materials such as lead frames andtape materials.

2. Legal structure of the business combination
This is the short form merger that is prescribed Company Act 796-3 with the Company as a surviving company and Sumitomo Metal
Mining Package Materials Co., Ltd. as a company that ceases to exist.
3. Name of company after business combination
Sumitomo Metal Mining Co., Ltd.
4. The purpose of this merger
In a quest to further strengthen and expand its core business operations in electronics & advanced materials, the Company reorganize
those area of operation into two new divisions: the Semiconductor Materials Division and Advanced Materials Division through merging
Sumitomo Metal Mining Package Materials Co., Ltd which manufacturing and distribution of semiconductor package materials such aslead frames and chip-on-film (COF) tape. In addition to targeting maximum synergy effects through comprehensive optimization withinthese two core business areas, the organizational revampment, by enabling even faster development of new products, is expected tofurther build up the company’s strength in sophisticated material technologies as foundation for sustained corporate growth.
5. Summary of accounting procedure
The Company adopted the accounting procedures for a commonly-controlled business combination based on the accounting standards, “Accounting Standards for Business Combination” issued by Business Accounting Council on October 31, 2003, “Guidance on
Accounting Standard for Business Combination and Accounting Standard for Business Divestitures” (Guidance No.10 issued by the
Accounting Standards Board of Japan on December 27, 2005).

17. Condensed financial information of a major affiliated company
ASBJ Statement No.11, “Accounting Standard for Related Party Disclosures” and ASBJ Guidance No.13, “Guidance on Accounting Standard for Related Party Disclosures” issued by the Accounting Standards Boards of Japan on October 17, 2006, require certain additional
related party disclosures effective for years beginning on or after April 1, 2008. Pursuant to the new accounting standards, condensed
financial information of Cerro Verde Mine is disclosed for the year ended December 31, 2008 is as follow.
Total current assets

77,752 millions of yen

Total long-term assets

102,832 millions of yen

Total current liabilities

54,566 millions of yen

Total long-term liabilities

5,465 millions of yen

Total shareholders’ equity

54,566 millions of yen

Net sales

189,980 millions of yen

Net income before tax

115,027 millions of yen

Net income

74,343 millions of yen
SUMITOMO METAL MINING CO., LTD. Annual Report 200993

18. Earnings per share
Reconciliation of the difference between basic and diluted net income per share (“EPS”) for the years ended March 31, 2009, 2008 and2007 were as follows:
Thousands of
U.S. dollars

Millions of yen

2009

2008

2007

2009

¥ 21,974¥137,808¥126,054$223,699

21,974

137,808

126,054

223,699

Basic net income per share calculation
Numerator:
Net income
Net income available to common shareholders
Denominator (thousands of shares) :Weighted average number of shares
Basic EPS (yen and U.S. dollars)

565,338

578,707

571,708¥38.87¥ 238.13¥ 220.49$—¥ 21,974¥137,808¥126,054$223,699

0.40

Diluted net income per share calculation
Numerator:
Net income
Interest in respect of convertible borrowings

864

109

—

8,796

22,838137,917

126,054

232,495

Weighted average number of shares

565,338

578,707

571,708—

Assumed conversion of convertible borrowings

65,842

17,053

18,249—Adjusted net income
Denominator (thousands of shares):

Adjusted weighted average number of shares
Diluted EPS (yen and U.S. dollars)

631,180595,760

589,957¥¥ 231.50¥ 213.67

36.18

—
$

0.37

19. Subsequent Events
Basic Agreement Reached on Acquisition of Teck’s Pogo Gold Mine Interest
On April 30, 2009, the Company has reached a basic agreement (memorandum of understanding) with Teck Resources Ltd. on acquisitionof latter’s total interest in the Pogo Gold Mine in Alaska.
Summary of the acquisition of the Pogo Gold Mine
1. Seller
Teck Resources Ltd.
2. Reason of Acquisition
The Pogo Gold Mine will be the first mine overseas for which the Company will serve as operator. The Company looks for this experience to become an important step toward securing other overseas mining operations in the future.
3. Percentage of shares to be acquired
The Company has reached a basic agreement with Teck Resources Ltd. on acquisition of the latter’s total interest (40%) in Pogo Gold
Mine in Alaska. Following the acquisition, the Company and other Japanese partner will share full ownership of the mine. The Company will take charge of mine management and operations.
4. Acquisition price
US$245million plus working capital
5. Timing of Acquisition
The end of June (expected)

94

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

Independent Auditors’ Report

SUMITOMO METAL MINING CO., LTD. Annual Report 200995

Glossary

Mineral resources and metals
1) Metal trading
London Metal Exchange (LME)The LME specializes in trading of non-ferrous metals such ascopper, nickel, aluminum, lead and zinc. The LME trading prices for metals are used as the international pricing benchmarks
for sales of reﬁned metal and purchases of reﬁning ores.
TC/RC
Treatment Charge (TC) and Reﬁning Charge (RC) are commonly used in the terms of purchase for copper concentrate or
nickel ore for reﬁning. They are amounts designed to coverreﬁning costs. For example, copper concentrate contracts may
deﬁne a purchase price based on the LME price at a certain
date, minus the TC or RC being used at the time.
London ﬁxing
Gold is not traded on the LME. Its price is determined for eachtransaction between market participants. The ﬁnancial institutions in the London Bullion Market Association (LBMA) agree astandard price for gold based on these transactions and publish it on the morning and afternoon of each trading day. This
“London ﬁxing” price is the benchmark for trading in gold.
Pound (lb)Part of the imperial system of measures, the pound is the standard unit of weight used in measuring and pricing base metals
such as copper and nickel, and in TC/RC calculations. One
pound is equal to 453.59 grams; an imperial ton equals
2,204.62lb.
Troy ounce (toz)The troy ounce is the standard unit of weight for precious metals such as gold and silver. It equals approximately 31.1 grams.
It is named after Troyes, a city in the Champagne region ofcentral France that was the site of a major market in Europe inmedieval times. Originally used as a unit of exchange for valuing goods in terms of gold or silver weights, the troy ounce isstill used today in gold trading.

2) Metal reﬁning
Smelting and reﬁning
Reﬁning processes extract valuable metals from ores or otherraw materials. They fall into two basic types: hydrometallurgical (wet) and pyrometallurgical (dry). At SMM’s Toyo facilities in
Ehime Prefecture, the copper concentrate pre-processing undertaken at Saijo uses pyrometallurgical processes and thenickel reﬁning at the Niihama site uses hydrometallurgical processes entirely. The term ‘smelting’ is used for the extraction of96

SUMITOMO METAL MINING CO., LTD. Annual Report 2009

metal from ores using melting and heating (pyrometallurgy).
The term ‘reﬁning’ refers to any process that increases thegrade or purity of a metal.
Pyrometallurgical reﬁning
The precursor ore is melted at high temperature in a furnace,
and reﬁning techniques are applied to separate the metal in a
molten state. Although large amounts of ore can be processedat one time, the equipment needs periodic maintenance forheat prooﬁng.
Hydrometallurgical reﬁning
The ore and impurities are dissolved in a solution, and chemical
reactions are used to separate out the metal. This approachallows continuous and stable reﬁning, but incurs additionalcosts due to the reﬁning chemicals consumed.

3) Metal ores
Sulﬁde ores
These ores contain copper, nickel or other metals chemicallybonded to sulfur. Since the application of heat breaks thesebonds, releasing the sulfur, such ores are generally reﬁned using pyrometallurgical techniques.
Oxide ores
These ores contain metals in oxidized forms. Unlike sulﬁdeores, oxides need much more energy to achieve melting. For
this reason, the hydrometallurgical approach is generally used
to reﬁne these ores.
Copper concentrates
Used as raw materials in copper smelting, copper concentrates
have a copper content of about 30% by weight. The remainder consists mostly of sulfur and iron. Copper concentrates are
made mostly from sulﬁde ores. Ores extracted from overseas
mines have a typical grade of about 1%. The ores are then“dressed” at the mine to increase the purity and produce concentrate. Most of the copper ores imported by SMM for smelting in Japan are concentrates.
Nickel oxide ores
Whilst the higher-grade sulﬁde ores are used predominantly innickel reﬁning, nickel oxide ores are more prevalent than nickel
sulﬁdes. The sulﬁde-oxide ratio in current nickel reserves is believed to be about 3:7. High reﬁning costs and technical issues
have limited use of oxide ores in nickel reﬁning to date, but
SMM has succeeded in reﬁning nickel from low-grade oxide
ores based on HPAL technology.

Mixed sulﬁde (MS) ores
CBNC produces a mixed nickel-cobalt sulﬁde intermediatecontaining about 55–56% nickel by weight. This is used as araw material in electrolytic nickel production.
Matte
A matte is another term for metal sulﬁdes. For raw material,
electrolytic nickel production at SMM also uses a nickel matte(of about 77–78% purity) sourced from PT Inco.
Proprietary ore ratio
This ratio is the proportion by volume of ore procured fromoverseas mining interests relative to the overall volume ofsmelting ores used as raw materials. Typically, off-take rights
are proportional to the equity interest in a mine. In the case of
Cerro Verde, SMM has secured 50% off-take rights for the ﬁrst
ten years of production from 2006, based on a 21% equity
interest.

Electrolytic nickel
This form of nickel, which has a purity of at least 99.99%, isused in specialty steels, electronics materials and electroplating, among other applications. SMM is the only producer ofelectrolytic nickel in Japan.
Ferronickel
Ferronickel is an alloy containing nickel (about 20%) and iron.
Its main use is in the manufacture of stainless steel, which isabout 10% nickel by weight. Based in Hyuga, Miyazaki Prefecture, SMM Group ﬁrm Hyuga Smelting produces ferronickel.
GoldGold is in demand worldwide for investment and decorative
purposes. Gold is widely used in Japanese industry within theelectronics sector because of its high malleability and ductility.
Part of SMM’s gold production goes to SMM Group companies
engaged in fabricating and selling bonding wire.

4) Nickel production process
Coral Bay Nickel Corporation (CBNC)
Based in the Philippines, this SMM subsidiary produces mixed
nickel-cobalt sulﬁdes using HPAL technology and exports theraw materials to the SMM Group’s nickel reﬁning facilities in
Niihama, Ehime Prefecture.
High Pressure Acid Leaching (HPAL)
HPAL technology enables the recovery of nickel from nickel oxide ores that traditionally were difﬁcult to process. SMM wasthe ﬁrst company in the world to apply it successfully on a commercial scale. The oxide ores are subjected to high temperatureand pressure and reacted under stable conditions with sulfuric
acid to produce a nickel-rich reﬁning intermediate.
Matte Chlorine Leach Electrowinning (MCLE)
MCLE is the technology used in the manufacturing process at
SMM’s nickel reﬁnery. The matte and mixed sulﬁde ores are
dissolved in chlorine at high pressure to produce high-grade
nickel using electrolysis. MCLE is competitive in cost terms, butposes signiﬁcant operational challenges. Other than SMM,
only two companies are producing nickel based on this kind oftechnology.

5) Main applications for metals
CopperCopper is fabricated into wires, pipes and other forms. Besides
power cables, copper is used widely in consumer applications
such as wiring in vehicles or houses, and in air conditioning
systems.

Semiconductor and advanced materials
Copper-clad polyimide ﬁlm (CCPF)
CCPF is a polyimide ﬁlm that is coated using a copper base. It
is used as a material for making COF substrates. SMM commands a global market share of over 70% of the CCPF supplied for use in large liquid crystal displays.
Chip-on-ﬁlm (COF) substrates
COF substrates are electronic packaging materials used tomake integrated circuits for LCD drivers. They connect thesecircuits to the LCD panel.
Lead frames (L/F)
Lead frames are electronic packaging materials used to form
connections in semiconductor chips and printed circuit boards.
They contain thin strips of a metal alloy containing mostly nickel or copper.
Bonding wire
Composed of gold wire that is just a few micrometers thick,bonding wire is used to make electrical connections between
lead frames and the electrodes on semiconductor chips.
Secondary batteries
Secondary batteries are ones that can be recharged and usedagain. SMM supplies battery materials that are used in the anodes of nickel metal hydride batteries and lithium-ion rechargeable batteries, which supply power for hybrid vehicles or notebook computers, among other consumer applications.

SUMITOMO METAL MINING CO., LTD. Annual Report 200997

#ORPORATE $ATA AND )NVESTOR )NFORMATION

Corporate Data

#ONTACT )NFORMATIONFounded:

Incorporated:Paid-In Capital:c BILLION !S OF -ARCH  Public Relations & Investor Relations Department:  3HIMBASHI  CHOME -INATO KU
4OKYO   *APAN

Number of Employees:   !S OF -ARCH    3HIMBASHI  CHOME -INATO KU
4OKYO   *APAN

Head Office:Phone:

   Facsimile:   Homepage:

HTTPWWWSMMCOJP%

Investor Information !S OF -ARCH  Closing Date:

Registrar of Shareholders:

4HE #OMPANYgS BOOKS ARE CLOSED ON -ARCH  EACH YEAR
4HE REGULAR GENERAL MEETING OF SHAREHOLDERS IS HELD IN *UNE EACH YEAR

4HE 3UMITOMO 4RUST AND "ANKING #OMPANY ,IMITED
(EAD OFFICE   +ITAHAMA  CHOME #HUO KU /SAKA
3TOCK 4RANSFER !GENCY $EPARTMENT   9AESU  CHOME #HUO KU 4OKYO

Common Stock:

Method of Public Notice:.UMBER OF AUTHORIZED SHARES    SHARES.UMBER OF ISSUED AND OUTSTANDING SHARES    SHARES.UMBER OF SHAREHOLDERS 

%LECTRONIC NOTIFICATION (OWEVER IF ELECTRONIC NOTIFICATION IS NOT possible due to an
ACCIDENT OR OTHER UNAVOIDABLE CIRCUMSTANCES NOTICE WILL BE PUBLISHED IN THE .IHON+EIZAI 3HIMBUN NEWSPAPER 4HE #OMPANYS WEBSITE HTTPWWWSMMCOJP%

Regular General Meeting:

Listing of Shares:

4OKYO /SAKA

Independent Public Accountant:

Stock Transaction Unit:

1,000 shares+0-' !:3!  #O  4SUKUDO CHO 3HINJUKU KU 4OKYO!S OF *UNE  Major Shareholders !S OF -ARCH  Number ofshares held
(thousands)*APAN 4RUSTEE 3ERVICES "ANK ,TD 4RUST ACCOUNTS
4HE -ASTER 4RUST "ANK OF *APAN ,TD 4RUST ACCOUNTS*APAN 4RUSTEE 3ERVICES "ANK ,TD 4RUST !CCOUNT '
3UMITOMO -ETAL )NDUSTRIES ,TD
*APAN 4RUSTEE 3ERVICES "ANK ,TD 4RUST !CCOUNT 
3UMITOMO -ITSUI "ANKING #ORPORATION
3UMITOMO ,IFE )NSURANCE #OMPANY
3UMITOMO #ORPORATION
4HE .OMURA 4RUST AND "ANKING #O ,TD )NVESTMENT ACCOUNTS
33"4 /$ /-.)"53 !##/5.4 #().! 42%!49 #,)%.43

TreasuryStock

Shareholding
ratio (%)

5.07%
29,507

Individuals
and
Other

 

 

8.0

23.62%

 



137,383

 



 



 



 



7,000



 

1.0

 

1.0

Financial
Institutions

39.38%
229,088

Breakdownof
Shareholders(Thousands of shares)
ForeignInvestors

21.11%
122,754

Securities
Companies
Other
Corporations

8.07%

2.75%
15,966

46,930.OTE 3HAREHOLDING RATIO IS CALCULATED EXCLUDING TREASURY STOCKStock Price and Trading Volume
SMM stock price (Yen)
TOPIX (Point)(Millions of shares)
50

3,500
SMM (left)

3,000

TOPIX (left)

Trading volume (right)
40

2,500
30
2,000
20
1,500
10

1,000

0

500
07/4

07/6

07/8

07/10

07/12

08/2

.OTE 4/0)8 BEGAN ON  *ANUARY  WITH A BASE LEVEL OF 

98

08/4

08/6

08/8

08/10

08/12

09/2

09/4

09/6

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

Printed in Japan