Corporate Philosophy

In this drastically changing global business environment, Sumitomo Metal
Mining Co., Ltd. constantly reflects back on its beginnings as the first
Sumitomo group company and intends to reaffirm Sumitomo Business
Principles, which have been in existence for over 300 years. Backed by
Sumitomo Metal Mining Group’s Mission, we will apply all of our employees’ efforts for elevating and strengthening our business structure.

Sumitomo Business Principles
Article 1. Sumitomo shall conduct its business with integrity andsound management, placing prime importance on trust andreliability as the means toward pursuing the sure flourishing of its business operations.

Article 2. Sumitomo shall manage its business operations with positive
foresight and flexibility to cope effectively with changing
times. At no time shall the company pursue easy gains or
act imprudently.

Sumitomo Metal Mining Group’s Mission
Having Sumitomo Business Principles as its business basics and environmental preservation and safety assurance as its operating basics, SMM
shall aim to maximize its corporate value by establishing a global networkand providing high-quality materials such as non-ferrous metals and electronics materials.

Consolidated Financial Highlights

1

To Our Shareholders

2

Special Feature : Concentration on Core Businesses

7

Mineral Resources/Metallurgy Strategy

8Strategy Details by Metal

10

Strategies for Advanced Materials/Electronics Materials

14

Management’s Discussion and Analysis

19

Eleven-year Summary

24

Consolidated Balance Sheets

26

Consolidated Statements of Operations

28

Consolidated Statements of Shareholders' Equity

29

Consolidated Statements of Cash Flows30

Notes to Consolidated Financial Statements

31

Report of Independent Public Accountants

46

SMM Group

47

Corporate Data/Investor Information48

Corporate Officers

49Consolidated Financial Highlights
SUMITOMO METAL MINING CO., LTD.

Millions of yen

2001

Years ended March 31, 2001, 2000 and 1999

For the Year :Net sales
Mineral resources
Metallurgy
Electronics materials
Construction materials & housing
OthersOperating income
Mineral resources
Metallurgy
Electronics materials
Construction materials & housing
Others
Net income (loss)
Net income (loss) per share (¥/$)
Return on assets (%)
Return on average shareholders’ equity (%)

2000

Thousands of
U.S. dollars(Note1)

1999

2001

¥ 375,352 ¥ 360,299 ¥350,288 $ 3,029,475
23,61333,128
190,580
26,326
220,595
1,780,428
208,975 208,851
133,259
1,075,537
119,255 102,683
24,88031,452200,807
26,987
15,074
13,820121,663
20,399¥ 26,930 ¥ 8,990 ¥858 $ 217,353
2,360
4,083
19,047
1,268
18,244
4,292
147,248
7,153
8,008
64,633(1,603)1,437(2,454)(6,690)(1,144)
(304)
334
1,124
2,696
1,079
15,103
121,897(12,495)
4,740
26.41
0.21
(21.85)
8.29
2.85
0.87
6.39
2.05

At Year End :Total assets
Shareholders’ equity
Equity ratio (%)

530,080
237,47044.8

4,278,289
1,916,626

544,519
226,795
41.7

544,121235,23143.2

Notes: 1. U.S. dollar figures are translated, for convenience only, at the rate of ¥123.9=U.S. $1, the effective rate of exchange prevailing on March 31, 2001.
2. Net sales and operating income figures in each segment (Mineral resources, Metallurgy, Electronics materials, Construction materials & housing, Others) include inter-segment transactions.
3. The computation of net income (loss) per share is based on the weighted average number of shares of common stock issued during each fiscal year.

Net Sales

Oparating Income

Net Income (Loss)

Billions of yen
600

Billions of yen
30

Billions of yen
20
15

500

10
20

400

5
300
0
10

200

-5
100

0

-10

'97

'98

'99

'00

'01

0

'97

'98

'99

'00

'01

-15

'97

'98

'99

'00

'01

1

To Our Shareholders

In April 2000, Sumitomo Metal Mining Co., Ltd. (“SMM”) implemented a
Corporate Reform Plan in order to improve its profit structure and survive
in an era of mega- competition. In the year ended March 31, 2001, SMM
has largely achieved its objectives and has now set its sights on a consolidated ROA of 3% or better, the financial target of the plan for the current fiscal year. In order to acquire strong corporate structure to progressat any business environment, SMM is devoting its entire effort to maximizing corporate value.
During the first half of fiscal year 2000 (from April 2000 through March
2001), the non-ferrous metals industry experienced favorable demand,owing to improved IT-related demand in Japan and the economic recovery
in Asia and Europe driven by a strong U.S. economy. Furthermore,decreased inventories worldwide helped to support the prices of non-ferrous metals such as copper and nickel. After autumn, however, the U.S.
economy experienced a marked slowdown, leading to a decline in non-ferrous metal prices such as nickel. Although there was a worldwide expansion of IT investment in the electronics materials industry and improved
demand in Asia during the first half of the year, the business environment
started to stumble with the coming of the new year.
<Consolidated Results for FY2000>
To improve profitability, SMM has promoted the theme of “Selection andConcentration” combined with aggressive sales activities. The resulting
consolidated net income for FY2000 increased dramatically by ¥10.4 billion to ¥15.1 billion, up 218.6% on a year-over-year basis. In addition tothis, there was considerable improvement of both ROA (Return on
Assets), from 0.9% to 2.8%, and ROE (Return on average shareholders’equity), from 2.1% to 6.4%.
Net sales were ¥375.4 billion, an increase of ¥15.1 billion (+4.2%) fromthe previous year. Net sales in the metallurgy sector, were ¥220.6 billion,
a 5.6% increase on a year-over-year basis. This included sales of advanced
material business, which became an independent division in June 2000.
The main factors for this were a recovery in demand for nickel used instainless steel, improved business conditions in overseas markets, andincreased demand for electronics materials in connection with PCs andsemiconductors. Sales of electronics materials increased 11.7% to ¥133.3
billion on a year-over-year basis. This was attributed to favorable sales ofnickel pastes used for multilayer ceramic capacitors, TAB tape (tape automated bonding) and lead frames together with significantly increased salesof Faraday Rotators and Optical Isolators for optical and telecommunication devices. Sales of housing and construction materials decreased 7.8%
to ¥24.9 billion from the previous year due to restructuring measures such2

President

Koichi Fukushima

To Our Shareholders

as limiting sales activities to metropolitan areas.
Operating income increased significantly by ¥17.9 billion to ¥26.9 billion(+199.6%) relative to the previous year, as well as operating margin from
2.5% to 7.2%. These increases resulted from a rise in earnings in all segments, except for the Others segment.
Net other expenses were ¥11.4 billion, which included the reserve forindemnification of damages attributable to the JCO criticality accident, as
well as the loss posted in accordance with the Corporate Reform Plan, awrite-off of investment securities, amortization of discrepancies in retirement benefits, which is scheduled to be amortized in one year, resulting
from the introduction of new accounting standards, and profit on the saleof investment securities and fixed assets not used for business purposessuch as vacant land.
SMM has been actively promoting effective utilization of assets by reducing fixed assets and investment securities, including cross-held shares.
Consequently, interest-bearing debt, consisting mainly of commercial
paper (CP), was decreased by ¥20.7 billion. Total assets were reduced
from ¥544.1 billion to ¥530.1 billion, while the equity ratio improved to44.8% from 43.2% in the previous year.
<Reconfirmation and Thorough Execution of the Corporate
Philosophy>
In the aftermath of the criticality accident that occurred at Tokai Plant of
JCO Co., Ltd., a subsidiary of SMM, measures have been taken to ensure
the safety of the facility, and most of the relevant compensation issues
have been finalized with the help of the local municipality and parties
concerned. SMM will further continue to lend support to JCO to allow it toeffectively address safety management, compensation, and other issues.
To prevent a recurrence of this kind of accident in the future, SMM isapproaching safety management and legal compliance issues by placing
the Sumitomo Business Principles as epitomized by the concept of“Reconfirmation and Thorough Execution of Corporate Philosophy” within
the Corporate Reform Plan.
Specific measures taken by SMM include promoting the introduction of
the ISO14001 environment management system into the entire group. By
March 2003, SMM aims to acquire certifications for all Group divisions. As
of September 1, 2001, 18 offices (13 domestic offices and 5 overseas
offices) have already acquired certification.
Employees at all levels, from field employees to top management, have

Outline of the Corporate Reform Plan
1. Reconfirmation and ThoroughExecution of the Corporate Philosophy
We at SMM are aware that the Company isdirectly linked to the origin of the Sumitomo
Group and have determined to make every
effort to rebuild trust with the public, in consistence with the business principles of theSumitomo Group, which emphasize “placing
prime importance on integrity and soundmanagement” and “under no circumstances
shall it pursue easy gains or act imprudently.”
Furthermore, SMM has adopted the following
Group Mission as its business precept:<Sumitomo Metal Mining Group’s Mission>
Having Sumitomo Business Principles as its
business basics and environmental preservation and assurance of safety as its operating
basics, SMM shall aim to maximize its corporate value by establishing a global networkand providing high-quality materials such as
non-ferrous metals and electronics materials.

3

To Our Shareholders

received thorough training in matters related to safety. Top management
frequently conducts on-site safety inspections to provide top-down instructions to prevent disasters from occurring and foster a safety-conscious culture. In addition, a Risk Management Committee has been establishedwithin the Company to review business risks such as those associatedwith development, manufacturing and production, division by division.
Through these kinds of measures, SMM is directing all its efforts towardregaining trust from the public.
<Reinforcement of Corporate Organization: Reorganization>
SMM has positioned mineral resources & metallurgy and electronics as its
two core businesses. Among these two businesses, SMM allocates
resources mainly to attractive business fields where profitability andgrowth are expected so as to reinforce corporate structure. SMM is focusing on selected fields to accelerate the speed of development, reducing
overall R&D expenses to approximately ¥4 billion.
SMM has reorganized the conventional system of seven divisions into fivedivisions to optimize group management for each business sector.
Specifically, the Mineral Resources Division, Non-Ferrous Metals Division,
Advanced Materials Division(which was strategically separated from theNon-Ferrous Metals Division), Electronics Division and Energy &Environment Business Division. The Construction Materials & Housing
Division is seeking to increase profitability by changing its status as a division to a business function of a subsidiary. Our other subsidiaries andaffiliates will, under the newly founded Affiliated Business Administration
Department, pursue to realize such results as to justify their existence in
the SMM Group within a defined period of time.
On the other hand, unpromising businesses, those that are weak and businesses not related to the Company’s core business are now aggressively
being sold off or discontinued. Through such restructuring, SMM aims to

Outline of the Corporate Reform Plan
2.Reinforcement of Corporate
Organization
Reorganization
・Concentrate managerial resources on mineral resources & metallurgy and electronics
materials
・Convert the Advanced Materials Division,
where rapid growth is expected, into anindependent division
・Consolidate the current system of 7 divisions into 5 divisions
・Reduce the number of affiliated companies
from 94 to 70 or fewer by the end of March
2002

Business Strategy by Business Sector
Basic Strategy
・Ensure profitability and growth by constructing a global network
・Actively invest resources into growth areas

Mineral Resources and Metallurgy
・Promote efficient production of the various
metals by ensuring the quality of overseas
resources

Advanced Materials
・Promote faster commercialization andgrowth through tie-ups with research institutes

Electronics Materials
New Corporate Organization from June 2000
Mineral Resources Division

Mineral Resources Division
Non-Ferrous Metals Division

Non-Ferrous Metals Division
Advanced Materials Division
Electronics Division

Electronics Division

Metal Fabrication Division
Construction Materials & Housing Division(Dissolution)

Electronics Parts Division
Energy & Environment Business Division

4

Energy & Environment Business Division

・Fully utilize the business strength inSoutheast Asia
・Actively allocate resources to IT-relatedmaterials consisting mainly of telecommunication and optical communications

To Our Shareholders

reduce the number of subsidiaries and affiliated companies from 94 to lessthan 70 by March 2002.
<Reinforcement of Corporate Organization: Strategies in EachBusiness Division>
The mineral resources and metallurgy markets, areas where SMM is highly competent, continue to grow at rates of 3-4% annually mainly inSoutheast Asia. SMM aims to acquire top world class production capacity
and cost competitiveness with four main minerals: gold, nickel, copper,and zinc. As to production capacity, SMM aims to increase annual production of copper from 270,000 tons to 450,000 tons and nickel (including
ferro-nickel) from 55,000 tons to 85,000 tons. To realize this, SMM is
actively promoting partnerships or cooperative tie-ups with major overseas non-ferrous companies, while at the same time reinforcing its domestic and overseas smelting facilities.
A mining project located in the Pogo region of the U.S. state of Alaska, ajoint venture in the Stone Boy prospecting project zone, will commence
operation in mid-summer 2004. Its output is expected to be 12 tons perannum. Nickel development from laterite in the Philippines (the Rio Tuba
Project) is also receiving special attention to ensure a new source of nickel
materials. SMM holds a majority interest in these projects, which is important to the Company. SMM aims to demonstrate its leadership throughthese projects, and eventually, to become one of the major non-ferrous
companies in the world.
Both the Advanced Materials Division and the Electronics Division requirea management that is capable of responding to the rapid changes in themarkets. Reinforcement of operations related to nickel powder for multilayer ceramic capacitors and copper-clad polyimide film for COF boards isbeing timed to respond to expanded demand. In addition, SMM will aggressively allocate resources to rare earth metal bonded magnet, for various
motors, and rechargeable batteries, for electric-powered vehicles, in accordance with the growing demand factors in the future.
The Electronics Division has been successful in worldwide business development, which started in Southeast Asia in 1970s. Drawing on thisstrength, SMM has launched new package materials such as the BGA (Ball
Grid Array), CSP (Chip Size Package), among others, while strategicallyallocating resources on pastes for multilayer ceramic condensers. In addition to this, while optical telecommunications components are expected to
grow over the medium and long terms, SMM will develop and reinforce
high-quality product lines such as Faraday Rotators and Optical Isolators.

5

To Our Shareholders<Reform of Corporate Culture>
SMM is addressing the issue of corporate reform through measuresdesigned to promote quicker decision-making, strategic thinking, and areward system based on performance.
First, SMM introduced an Executive Officer system in June 2001 as ameasure to innovate the management system. By separating the decisionmaking function from the supervisory function, SMM will be able toimprove, reinforce and speeded up both functions.
In addition to this, SMM has adopted a new performance evaluation system and a performance-based reward system based on this evaluation system to clarify the range of responsibility and authority and improve motivation. These systems have been applied to division heads and presidents
of subsidiaries since July 2001, and will be extended further. Furthermore,
the strategic meetings are being reformed to foster in-depth discussions
and quicker managerial decision making.
While devising the Corporate Reform Plan, SMM also established the following numerical targets: To maintain the equity ratio at 40% or better,and to improve ROA to 3% or better in fiscal year 2001 and to 5% or better in fiscal year 2003. In order to achieve these targets, a new Mid-Term
Management Plan will be formulated in autumn of this year.
In today’s rapidly changing business climate, SMM will devote its energy
to carrying out the Corporate Reform Plan throughout the entire company
so as to grow into a strong corporate organization capable of steadily
developing business even under unfavorable business conditions. We verymuch appreciate your understanding and support.

September 2001

Koichi Fukushima
President

6

Outline of the Corporate Reform Plan
3. Reform of Corporate Culture・Implementation of an executive officer
system・Reinforcement of strategic meetings・Remuneration system more linked toperformance

Special Feature
Concentration on Core Businesses
Business Profile
SMM endeavors to improve profitability by focusing on core businesses consistent with theCompany’s Corporate Reform
Plan. Given their attractiveness interms of profitability, potential for
growth, and SMM’s strength,
SMM has defined the Mineral
Resources/Metallurgy andElectronics Materials sectors as
its core businesses.

In the current age of intenseinternational mega-competition,
SMM draws on special expertise
where it commands an advantage to improve profitability whileat the same time aiming to create
the conditions that assure future
growth and allocating earnings
from core businesses to growthareas.

Net Sales Breakdown by Division

Operating Income Breakdown by Division

Mineral resourses

Electronics materials

Metallurgy

Construction materials

3.4%

OthersMillions of yen
20,000

4.5%
15,000

6.6%

10,00034.6%

Total Net Sales: ¥375 billion
5,000
50.9%

0

-5,000Note: Proportion is calculated by net sales of each division
which does not include inter-segment transactions.

Mineral Metallurgy Electronics Construction
Othersresourcesmaterials materials& housing

SMM’s Business Profile
Business Sector

Principal Activities

Main Products

Mineral Resources

・Exploration, development, production, and sales of
non-ferrous metal resources, domestic and overseas.
・Geological consulting utilizing mineral resource
developing techniques.

Gold and silver ore, Copper concentrates

Metallurgy

・Refining and sales of base metals such as copper,
nickel, and precious metals.

Copper, Nickel, Zinc, Lead, Precious
metals such as gold, silver, platinum,and so on

Advanced Materials

・Manufacturing, processing, and sales of metal
powders (nickel, palladium), circuit board materials,
materials for batteries, materials for magnets,
lubricant, and so on.

Nickel powder, Copper-clad polyimide
film, Materials for rechargeable batteries(nickel hydroxide, lithium cobaltate),
Rare earth metal bonded magnets

Electronics Materials ・Manufacturing, processing and sales of IC packaging
materials, electronics materials, crystal materials andso on.
・Manufacturing and sales of optical communicationmaterials and components, devices, connectors,
switches, photo conductive cells, silicon photodiode,TV frames, etc.

Lead frame, TAB tape, Bonding wire,
Nickel paste, Crystal material (GaP:
Gallium Phosphide, LN: Lithium
Niobate, LT: Lithium Tantalate).
Printed Wiring Board (PWB), Opticalcomponents (Faraday Rotator, Optical
Isolator and High frequency device).

7

Mineral Resources/Metallurgy Strategy
Reinforce Partnerships with Major Overseas Non-ferrous Metal Companies andStrengthen Refining Facilities
SMM’s Metal Share and Value by Mine
Thousands of ton
1,200

SMM's Metal Share
Appraised Value

CopperGold

NickelCobaltMillions of U.S. Dollars
3,000

1,000

2.500

800

2,000

600

1,500

400

1,000

200

500

0

Morenci

Northparks
La Candelaria

Figesbal
SoroakoPogo
Batu Hijau

Rio Tuba

0

HishikariNotes : 1. Only the Company’s own mines are covered.
2. SMM's metal share = Ore reserves (ton) x Metal grade x SMM's interest of mine (%)
3. Appraised value = SMM's metal share (ton) x Standard metal price
4. Standard metal price = Gold:270$/toz, Nickel:2.75$/lb, Copper:72.5¢/lb, Cobalt:9.00$/lb
5. SMM's interest of Rio Tuba which is not yet determined is tentatively 50% for calculation.

SMM’s Metal Share and Value by Metal
Thousands of ton
2,000
1,800

SMM’s
’s Metal Share
Appraised Value

Millions of U.S.Dollars
5,000
4,500

1,600

4,000

1,400

3,500

1,200

3,000

1,000

2,500

800

2,000

600

1,500

400

1,000

200
1

500
0

0
Gold

NickelCopperNotes : 1. Only the Company’s own mines are covered.
2. SMM's metal share = Ore reserves (ton)x Metal grade x SMM's interest of mine (%)
3. Appraised value = SMM's metal share (ton)x Standard metal price
4. Standard metal price = Gold:270$/toz, Nickel:2.75$/lb,
Copper:72.5¢/lb, Cobalt:9.00$/lb
5. SMM's interest of Rio Tuba which is not yet
determined is tentatively 50% for calculation.

The Mineral Resources/Metallurgy
sector has traditionally been the pillarof SMM business, accounting for 65%
of sales. The non-ferrous industry is
generally considered to have matured
in Japan. However, demand for nonferrous metals, mainly in Asia, continues to grow at the rate of several
percentage points per year. In orderto ensure dominance in this field,
SMM must procure materials and8fully utilize superior cost competitiveness derived from the economies ofscale. To realize this, SMM aims toinsure a stable supply of ore fromhigh-grade mines by reinforcing its
partnerships with major overseas
companies. In addition, refining facilities located domestically and overseas are also being strengthened.
As to strengthening partnerships withmajor overseas companies, the fourmain minerals of gold, nickel, copperand zinc play a principal role fordeveloping resources and refineries
on a global basis so as to reachworld-class production capacity. In
connection with gold, SMM operates
the Hishikari Mine located in
Hishikari-cho, Isa-gun, Kagoshima
Prefecture. This mine prides itself inbeing a producer of some of the highest grade gold in the world. SMM also
promotes the Liese Deposit of the
Pogo claim group in the Stone Boy
project in Alaska, USA. For nickel,
SMM actively fosters the Rio Tuba
Project on Palawan Island in thePhilippines to process low-grade nickel oxide. For copper, SMM ensuresthat a high percentage of ore comefrom its own mines by entering into
partnerships with major overseas
non-ferrous metals companies, whichallows SMM to secure stable supplies
in accordance with increased output.
As for zinc, SMM aims to establish a
new business system.
To reinforce domestic and overseas
refinery facilities, SMM will improve
cost competitiveness by expanding
the scale of operations and taking
advantage of economies of scale. For
copper, SMM plans to raise the pro-

Mineral Resources/Metallurgy Strategy

SMM’s Worldwide Mines and Refineries
Mine/ SMM's interest (%)
Refinery / Production capacity per year (ton)Pogo (Gold – under exploration)/ 51% (currently 85%)

Morenci (Copper) / 12%

Jinglong Copper Co., Ltd. / Copper:
100,000ｔons (150,000 tons in FY 2002)
Rio Tuba (Nickel/Cobalt mixed sulfide– under development)
Soroako(Nickel) / 20.1%
Batu Hijau (Copper, Gold) / 5.0%
Figesbal (Nickel) / 20.9%
Northparks (Copper) / 13.3%

La Candelaria(Copper) / 16%

Harima Smelter / Zinc: 90,000 tons, Lead : 30,000 tons
Toyo Smelter & Refinery / Copper : 270,000 tons (including Niihama Copper Refinery. 450,000 tons in future)
Niihama Copper Refinery / Gold : 36 tons (60 tons in future), Silver : 300 tons (480 tons in future)
Niihama Nickel Refinery / Nickel : 36,000ｔons (60,000 tons in future)
Shisaka Plant / Zinc oxide : 120,000 tons (processing capacity)
Hyuga Smelting Co., Ltd. / Ferro-nickel : 19,000 tons (25,000 tons in future)
Hishikari (Gold) / 100%

duction capacity at the Toyo Smelter& Refinery located in Saijo City,
Ehime Prefecture from the current
annual level of 270,000 tons to
450,000 tons, depending on future
trends of domestic and overseas
demands. The Jinglong Copper Co.,
Ltd. (China) will increase production
capacity from the current 100,000
tons to 150,000 tons during fiscal

year 2002 to meet the needs of thegrowing Chinese market. With the
Toyo Smelter & Refinery and Jinglong
Copper Co., Ltd. as the two main
plants, SMM aims to achieve the bestlevel of cost competitiveness in theworld. For nickel, SMM plans toincrease the total production capacityof electrolytic nickel and ferro-nickelfrom the current annual level of

55,000 tons to 85,000 tons, in linewith growing demand.

9Strategy Details by MetalGold
The quality of gold mined at theHishikari Mine is among the best in
the world. Currently, it has ore
reserves of approximately 4.6 million
tons with gold reserves of around 161
tons as of end of 2000. SMM aims tostabilize profits by maintaining annual gold production in the range of 7 to
8 tons. SMM holds a majority interestin the Liese Deposit of the Pogo area
project in Alaska, USA. Here, SMM
devotes serious efforts to the construction of a 12-ton gold output system that should be ready to start
operations in 2004.
Furthermore, a new process for therefining of precious metals will be
introduced by 2003 to promote higher
efficiency. By doing this, SMM will beable to collect rare/precious metals
such as iridium, ruthenium, which
are normally difficult to be recoveredby conventional processes, in addition to other precious metals such as
gold, silver, platinum, palladium andrhodium. When this new process isintroduced, its annual refining capacity will increase from 36 tons to 60
tons for gold and from 300 tons to
480 tons for silver.
Pogo Area Gold Mine Project(Joint Venture in the Stone Boy
Exploration Project)
The Pogo Area Gold Mine Project in
Alaska is a joint project involving
Sumitomo Metal Mining America Inc.
(a U.S. subsidiary of SMM), Teck
Cominco of Canada, and SC Minerals(a U.S. subsidiary of Sumitomo
Corporation). Broken down by percentages, SMM owns 51% interest at
the Pogo area, Teck Cominco 40%,
and SC Minerals 9%. As the first stepof the exploration plan, the project
began with the exploration of themain Liese ore vein in April 1999.
The pre-feasibility study was completed at the end of September 1999. The
final feasibility study will be completed in the first half of 2002 and operations will start in 2004. The Liese ore
10body possesses ore reserves of 9.7
million tons, an average grade of 18.0
g/t and expected gold output ofapproximately 12 tons per year.

Gold Price (COMEX)
$/toz
300

250

ISO 14001 Certification Acquired for
the Hishikari MineThe Hishikari Mine acquired ISO
14001 Certification for its environmental system in June 2000.
Following acquisition by theElectronics Division, this was the second such acquisition among the divisions directly managed by SMM.
Since the beginning of ore development, SMM has developed theHishikari Mine and continued tooperate it, while giving careful consideration to preservation of the natural environment. Since April 1999,
SMM has sought to obtain thisCertification to further improve its
environmental management by establishing a management system.

200

150

100

50

0

4
'99

7

10

1
'00

4

7

10

1
'01

4

7

Strategy Details by Metal

NickelAs demand for nickel is expected toshow steady growth, SMM will actively develop businesses that can capitalize on this demand. SMM intends toestablish a structure that will allow
for stable supplies and implement
plans for increasing output consistent
with demand conditions.
The Company has ensured strong
cost competitiveness with the MCLE
refining process (Matte Chlorine
Leach Electro-winning Method),which has proven itself to be excellent
in terms of quality and productivity.
Through a capital participation with
P.T. Inco (Indonesia) and a long-term
matte purchase agreement with WMC(Australia), SMM has been able tocreate a structure for stable suppliesof nickel. Furthermore, the Company
is giving serious consideration to participating in a nickel-mining project toensure a stable supply of materials.
To secure a new procurement
source of nickel materials, SMM has
launched the Rio Tuba Project in the
Rio Tuba Mine in the Philippines inorder to construct a treatment plant
for low-grade nickel oxides. SMM will
establish a local subsidiary of which it
will hold a majority interest to promote this project with the intent tostart operations in the summer of
2004. Through measures such asthese, SMM will increase the current
annual production capacity of electrolytic nickel from 36,000 tons to
60,000 tons in response to the growthof demand.
In addition to this, to increase production of ferro-nickel used for stainless steel, SMM has secured stablesources from New Caledonia andIndonesia.
SMM has a strategic plan to ensuresufficient procurements of overseasmaterials to increase the total annual
production capacity of nickel andferro-nickel from the current 55,000
tons to 85,000 tons, while always paying careful attention on maintaining
cost competitiveness.

Rio Tuba Project
Since early 2000, SMM has been conducting joint technical research with
Rio Tuba Nickel Mining Corporation(RTN) of the Philippines regarding thefeasibility of hydro-metallurgicalprocess of low-grade nickel oxide ore
in the RTN-owned Rio Tuba Mine.
SMM has decided to construct a plant,
as a joint venture, with RTN on land
adjacent to the mine. This plant uses
low-grade nickel oxide ore from themine to manufacture intermediarynickel products utilizing the HPAL
method*.
Since 1977, RTN has been conducting exploration of garnierite, highgrade nickel oxide ore, in the Rio
Tuba Mine located in the Province of
Palawan of the Philippines. In thisproject, SMM will purchase laterite
low-grade nickel oxide ore, whichhave accumulated during the courseof mining over the last 20 years,
under a long-term agreement with
RTN. To process laterite, approximately 16 million tons have been
already stored on land adjacent to theplant’s construction site, whichassures a sufficient volume for processing for the next 20 years. In addition, by utilizing RTN’s existing facilities, SMM will be able to develop
required infrastructure, such as harbors, roads, hospitals and housing, at
low cost.
With the HPAL method, nickel/
cobalt mixed sulfide (MS), an intermediary product of the nickel refining
process, is produced from laterite.
Annual production will be approximately 10,000 tons of nickel andapproximately 700 tons of cobalt.
SMM purchases all of the MS produced and uses them in the process
for producing electrolytic nickel andelectrolytic cobalt in a nickel smelter
and refinery in Niihama City, Ehime
Prefecture. In addition to existingmaterials, this means a stable supply
source, which translates into a stablesource of supplies to customers.

Nickel Price (LME)
$/lb
5

4

3

2

1

0

4
'99

7

10

1
'00

4

7

10

1
'01

4

7

*HPAL Method
Development of nickel resources throughout
the world has concentrated mainly on nickel
sulfide ore or garnierite, which is high-grade
nickel oxide ore. In recent years, the HPAL
method (High Pressure Acid Leach) has beendeveloped and commercialized by whichnickel can be recovered from laterite, lowgrade nickel ore, at low cost.

11Strategy Details by Metal

Furthermore, this project is anticipating new demand for sulfuric acid of
approximately 260,000 tons perannum. SMM believes that this willcontribute to securing a customer
base to whom by-products will besold when the copper business is reinforced.
This is the primary non-ferrous
refinery project in which SMM has

participated abroad as majority ownerof the project. While positioning nickel business as a core business and bybecoming involved in this project,
SMM establishes engineering technology and technology for the processingof nickel oxide, which will allow SMM
to maintain its position as one of theworld leaders in the refining and manufacturing of nickel.

Copper
SMM has promoted joint management of copper mines with major
overseas companies to ensure stablesupplies of copper concentrates. As aresult, among domestic competitors,
SMM maintains the highest percentage (around 50%) of copper ore fromits own mines. The best examples are
the La Candelaria Copper Mine andMorenci Copper Mine, operated inpartnership with Phelps Dodge
Corporation (USA), the Northparks
Copper Mine, which is jointly managed with Rio Tinto(UK), and the
Batu Hijau Copper and Gold Mine,
which is operated with Newmont
Gold (USA).
Smelting operations are carried out
at the Toyo Smelter & Refinery andJinglong Copper Co., Ltd., where costcompetitiveness is excellent. Toyo
Smelter & Refinery is now in theprocess of gradually increasing its
annual production capacity in several
phases from 270,000 tons to 450,000
tons with a new and improved sulfuric acid plant scheduled for completion in fiscal year 2003. Once completed, production will be effectively
increased in response to trends indemand. On the other hand, Jinglong
Copper Co., Ltd. is positioned to raise
its annual production capacity from
100,000 tons to 150,000 tons during
fiscal year 2002. This will enable
SMM to respond appropriately toincreased demand in growing Asianmarkets, including that of China. At
the same time, SMM established the12

Shanghai Office in October 2000 as abeachhead to promote sales of nonferrous base metals to further
strengthen its business foundation in
the Asian region.
Total Conversion to SX/EW Process(Solvent Extraction /Electrowinning) at the Morenci MineAt the Morenci Mine (Arizona, USA),
all processes were converted over to
SX/EW, a low-cost copper refining
method. Phelps Dodge Corporation,
the largest copper production company in the U.S., and Sumitomo Metal
Mining Arizona Inc., an SMM subsidiary jointly established with
Sumitomo Corporation, formed ajoint venture entity to operate theMorenci Mine. 15 years ago,
Sumitomo Metal Mining Arizona Inc.
acquired a 15% interest in the
Morenci Mine.
Before the conversion, the Morenci
Mine has employed two production
methods in equal proportions interms of copper production volumes:
producing concentrates by the Ore
Floatation Method and producing
cathode by the SX/EW Method. To
transform this mine to one capable ofsustaining a given level of profit evenin periods when market prices are
low, it is decided that the Mine will
convert all processes to the SX/EW
Method. In September 1999, the conversion process was commenced at a
total conversion cost of U.S.$220 million with Sumitomo Metal Mining

Copper Price (LME)
¢/lb
100

75

50

25

0

4
'99

7

10

1
'00

4

7

10

1
'01

4

7

Strategy Details by Metal

Arizona contributing U.S.$33 million(approximately ¥3.5 billion).
Conversion work was completed in
March 2001, and this has enabled theMorenci Mine to treat ores of low
grade that have been difficult to handle with conventional milling methods. The volume of treatable ore significantly increased to 4,196 million
tons with total copper reserves ofapproximately 14 million tons. This
has ensured a useful life of the mine
until the year 2023. Production costs
were also reduced; notable among
these was TC/RC (refining cost),
which the mine had been responsible
for paying when selling refined copper ores. The end result has been an
improvement of total profitability.
Total cathode production of Morenci
Mine is planned to peak at 370,000
tons per year.
SX/EW Method
This is a solvent extraction methodthat was developed in the 1960s. In
this method, copper is leached out
from stacked copper ore with dilute
sulfuric acid. Ionized copper is thenselectively collected from the leachedsolution. The process involves purifying and concentrating the solution asa strong electrolyte, which is thenused for electrolytic extraction.
Today, this method is widely used in

the production process for electrolytic
copper. It collects copper from lowgrade copper oxide or copper sulfide
that had not been used due to the difficulties associated with separation.
This method now accounts forapproximately 20% of the world’s
production and is attracting a great
deal of attention.
Demand Growth centered on Asia
Copper is a growing industry in Asianmarkets, and huge demand is expected in China, Taiwan and Korea.
Especially in China, with economic
development and improved living
standards, infrastructure is rapidly
being created, which is increasing theconsumption of materials such as
electric wire and copper ducts for air
conditioners. China currently depends
on copper imports of approximately
500,000 tons. In 10 years time,
demand for copper is expected toreach approximately 2.5 million tons
with around 1.3 million tons of thisexpected to come from the outside.
There are currently about 60 copper
smelters in operation in China.
However, since middle-sized smelters
are disadvantageous in terms of costcompetitiveness, they are expected tobe reshuffled and disappear in the
future.

Zinc

Zinc Price (LME)
$/t
1,250

SMM’s zinc operation involves the
ISP (Imperial Smelting Process, whichallows a simultaneous processing ofzinc and lead) at the Harima plant,
and zinc recovery from electric arc
furnace(EAF)dust at the Shisaka
plant, which supplies one third of the
raw materials used at Harima. SMM
is proud of this method because of its
ability to recycle resources and its
cost competitiveness. EAF dust is
processed at the Shisaka plant for therecovery of raw zinc oxide used in
the manufacture of zinc as productproduced at the Harima plant.
As for zinc, SMM aims to establish
a new business system and reinforce
the operation.

1,000

750

500

250

0

4
'99

7

10

1
'00

4

7

10

1
'01

4

7

13

Strategies for Advanced Materials/Electronics Materials:
Responding to Current and Future Changes
IT-related markets, which had grownthroughout the world, especially inEurope and the USA, are currently
experiencing severe sluggish demand.
However, over the mid/long term, it
is forecasted that the markets willcontinue to grow. For the Advanced
Materials/Electronics Materials sectors, which had expanded in line withthe spread of data communications,demand is expected to expand in the
future, despite they may have toexperience plunging demand in fiscal
year 2001. Also, SMM can draw on its
basic technology in this field.
The main products in the Advanced
Materials sector are metal powders
such as nickel powder for multilayer
ceramic capacitors, copper polyimide
film for flexible wiring board, materials
for rechargeable battery such as nickelhydroxide and lithium cobaltate, rareearth metal bonded magnet and so on.
The main products in theElectronics Materials sector include
lead frame, for which SMM hasaggressively developed businesses inJapan and overseas, IC packaging
materials such as bonding wire and
TAB tape, nickel paste for multilayer
ceramic capacitor and crystal materials such as GaP, GaAs, LiNbO3,
LiTaO3 and so on. In addition to theabove, SMM has optical components
with commanding market share suchas Faraday Rotator and Optical
Isolator. SMM will flexibly respond totrends and intensively allocate
resources to key products.
On the other hand, the IT industry,the end users in this sector, is characterized by rapid change. Overnight,
new products and technologies cancause demand for products to evaporate and enable new markets toemerge. SMM will continue to reinforce its R&D systems to quickly
respond to such changes. The Central
Research Laboratory (Ichikawa City,
Chiba Prefecture) and Niihama
Research Laboratory (Niihama City,
Ehime Prefecture) are our major R&D
bases. Their respective roles arebeing clarified and reorganized to
become more efficient systems. Since
product cycles are relatively short,the first priority is given to shorten
lead time of developing products fortimely supply.

Bussiness Profile of Advanced Materials / Electronics Materials
Advanced Materials

Electronics Materials

14

Main Products

Main Applications

Metal powder (nickel powder, palladium powder, etc.)
Circuit board material (copper polyimide film)

Multilayer ceramic capacitors
Liquid crystal display

Material for rechargeable battery (nickel hydroxide,lithium cobaltate, etc.)

Data communication equipment, electric vehicles

Material for magnet (rare earth metal bonded magnet, etc.)

Various motors (for PC peripheral devices, etc.)

Fire retardant for resin (antimony oxide), various
rare metal

Semiconductor, catalyst, liquid crystals, optical components

Lead frame

IC packages

Bonding wire
TAB tape

IC packages

Alloy preform

IC and other electronics component packages

Lithium Niobate (LN), Lithium Tantalate (LT)
Gallium Phosphide (GaP)
Nickel paste

SAW (Surface Acoustic Wave) filters
LEDs (Light Emitting Diode)
Multilayer ceramic capacitors

Printed Wiring Board (PWB)
Faraday Rotator, Optical Isolator, High frequency device

Electronics equipment, IC packages
Optical telecommunication components (WDM)

ASIC packages, LSI packages for telecommunication,
server and so on

Strategies for Advanced Materials/Electronics Materials

SMM's Worldwide Production Facilities for Advanced Materials / Electronics Materials
Advanced Materials
Electronics Materials

Kunitomi District Div.
Material for magnet,
Crystal materials

SMM Precision Co., Ltd.
Optical components
Ajimu Electronics
Co., Ltd.
Solder plating of IC
Shinko Co., Ltd.
Printed Wiring Board

Sumitomo Metal Mining Electronics Parts Suzhou Co., Ltd.
Electronics component such as switches

Electronics Division(Headquarters of Division)
Bonding wire, Paste,TAB tape,
Crystal materials and so on.
Sumitomo Metal Mining
Electronics Co., Ltd.
Lead frame
Isoura Plant
Metal powder, Circuit board
material, Material for rechargeable
battery and so on.
STF Niihama Plant
TV frame
Niihama Electronics Co., Ltd.
Lead frame

Shanghai Sumiko Electronic Paste Co., Ltd.
Paste
Sumiko Leadframe Chengdu Co.,Ltd.
Lead frame

Ohkuchi Plant
TAB tape
Ohkuchi Electronics Co., Ltd.
Lead frame, Bonding wire,
Recovery and recycling of
precious metals

Sumiko Leadframe (Thailand) Co., Ltd.
Lead frame

Sumiko Taiwan Precision Co., Ltd.
Stamping tool (for lead frame)
Sumiko Electronics Taiwan Co., Ltd.
Lead frame
Taiwan Sumiko Materials Co., Ltd.
Bonding wire

P.T.SUMIKO LEADFRAME BINTAN Lead frame
Sumitomo Metal Mining Asia Pacific Pte. Ltd.
(Regional Headquarters of overseas lead frame operations)
Sumiko Leadframe Singapore Pte. Ltd. Lead frame
Sumitomo Metal Mining Electronics Parts Pte. Ltd. TV frame
M-SMM Electronics SDN. BHD. Lead frame
Malaysian Electronics Materials SDN. BHD. Bonding wire, Paste
Sumitomo Metal Mining U.S.A. Inc.
TV frame

15Advanced Materials

The Advanced Materials sector,
which was separated from theMetallurgy sector in June 2000, handles mainly high value-added materials for metal-based electronics components. Quick and resolute response
is essential in this sector sincedemand is prone to sudden and dramatic changes, similar to the situationin the Electronics Materials sector. To
survive in this business, SMM
endeavors to allocate resources tonecessary fields in the most effective
and timely manner possible. Already,nickel powder for multilayer ceramic
capacitors has grown to become themain pillar for this sector, anddemand for copper-clad polyimide
film is rapidly expanding for mobile
phones and liquid crystals for PC
monitors. SMM also has special
expertise in materials related to rareearth metal bonded magnets, andrechargeable batteries, areas where
demand is expected to flourish in the
future. SMM aims to assure firm
foundations for each of these businesses.
SMM is reorganizing its two main
R&D bases, the Central ResearchLaboratory and Niihama ResearchLaboratory, to realize more efficient
R&D activities, and shifting R&D
work at the Niihama ResearchLaboratory from Metallurgy to
Advanced Material. At the same time,
SMM will clarify the different roles
between these two Laboratories toestablish the optimal organizations
for supplying products in response tocustomer requirements.
Nickel Powder
Nickel powder is a material used forthe internal electrodes of MLCCs(multilayer ceramic capacitors) and is
indispensable for all kinds of electronic equipment. Demand continues
to be robust for electronic equipment
such as PCs, mobile phones, and digital cameras, in pace with improved
performance levels and expanded
market size of such products.
Production capacity has increased to
16

40 tons per month since May 2001,
doubled that of conventional production.
Although conventional MLCCs had
typically used precious metals suchas palladium, demand for nickel as a
substitute material rose when theprices of precious metals soared.
SMM is the first manufacturer to supply nickel powder for MLCCs. The
Company is highly praised for its
integrated production process frommaterials to pastes, and all the major
MLCC manufacturers in the world
adopted its product. In addition, tofurther increase market share, SMM
is reinforcing its product attractiveness by offering new products withhigher performance ratings.
Copper-clad Polyimide Film
Liquid crystal drivers, equipped in
mobile phones and large TFT (ThinFilm Transistors), are switching theirstructure from three-layered substrates TCP (Tape Carrier Package) tothe COF (Chip On Film) method,which involves thinner copper polyimide films and is excellent for bending and supporting fine-pitches. As
SMM copper-clad polyimide film isused as a material for COF-equipped
substrates, demand for it is rapidly
increasing. To meet this demand, bigger production lines are now underconstruction with the ability to produce approximately 0.5 times morecapacity from November 2001. SMM
products dominate the TFT liquid
crystal market, thanks to the advantage the Company has in terms of
quality. SMM aims to obtain the defacto standard for COF substrates
used in liquid crystal drivers.

As with nickel powder, SMM’s
strength lies in its ability to ensurestable procurement of raw materials
combined with an integrated production process. As the market formobile equipment used in data
telecommunication continues toexpand, the demand for rechargeable
batteries is also expected to increase.
Moreover, since the batteries to beinstalled in hybrid cars use nickelhydroxide, the market is certain togrow as electric vehicles become
more prevalent in the future.
Materials for Magnets
Conventionally, MQ powder (neodium ferrous boron), a magnet powder,is pasted into nylon and epoxy resin
to create “compound,” which has
been showing considerable growth
rates. Furthermore, SMM has developed its own new magnet powder
called “SFN (Samarium Ferrous
Nitrogen)” as the next-generation
product. In fiscal year 2000, SMM
entered the market in full scale tofocus on sales for information devices
and various motors for home use. To
expand the market, SMM has also
developed a hybrid type product thatcombines ferrite and SFN.

Net Sales Breakdown of Advanced Materials
Billions of yen
12

OthersMaterial for magnet

10

8

Materials for Batteries
Materials for batteries include lithium
cobaltate and lithium nickel oxide forlithium ion batteries, and nickelhydroxide for nickel hydrogen batteries. Both lithium ion batteries andnickel hydrogen batteries are the socalled rechargeable batteries. SMM
products are used as materials for the
positive electrode of these batteries.

Circuit board material
Fire retardant for resin
Material for rechargeable battery
Metal powder

6

4

2

0

'96

'97

'98

'99

'00

Electronics Materials

TAB tape

In fiscal year 2001, the worldwide
semiconductor market is expected toplunge into double-digits, down fromthe previous year, leaving uncertainty
as to when it will start showing signsof recovery. However, over the medium and long terms, it is forecasted
that the markets will steadily grow.
SMM has promoted worldwide business focusing on IC packaging materials. Overseas, SMM facilitates its success through aggressive sales activities that allow it to penetrate the markets. Moreover, given the future
development of the markets inSoutheast Asia, the 14 overseas production bases will become increasingly more important. Drawing on this,SMM has embarked on supplying
materials compatible with new IC
packaging such as BGA (Ball Grid

Array) and CSP (Chip Scale Package).
It also aims to reform its current business structure and to reinforce its
profitability, taking advantage ofdomestic and foreign networks.
SMM will concentrate investments
on paste for promising multilayer
ceramic capacitors and optical components such as Faraday Rotator andOptical Isolator.
Regarding R&D, SMM aims to create the optimal structure that willallow for the supply of products inquick response to customer demands
by reinforcing two separate and distinct R&D organizations: the Business
Promotion Center, which is under theElectronics Division and focuses ondeveloping commercialized products
within two or three years, and theCentral Research Laboratory, where
research is concentrated primarily on
basic long-term developments.

Net Sales Breakdown of Electronics Materials
Billions of yen
150

OthersElectronics materials
PWB (Printed Wiring Board)
Crystal materials
Packaging materials

100

50

0

'96

'97

'98

'99

'00

Electronics Materials (Bonding wire,
wire Nickel paste etcetc.))PWB (PWB etc.)
Crystal Materials (GaP, Faraday Rotator, Optical Isolator etc.)
Packaging Materials (Lead frame, TAB tape etc.)
Notes 1.Figures are based on the sales of Electronics Division
which include within-segment transactions, not on theelectronic materials segment.
2.Sales of fiscal year 2000 include optical telecommunication
components, TV frame etc. because of the reorganization.

Nickel Paste
Paste is a material mainly used inchip components such as resistors
and multilayer ceramic capacitors.
Chip components are installed in all
kinds of electronic equipment such as
mobile phone, PC, TV, VTR, digital
camera and so on. Nickel paste, inparticular, is in robust demand due toimproved performance and an
expanded electronics equipment market. A new production line is underconstruction that will double current
production capacity in fiscal year
2002 so that SMM will be able tomeet expanded demand. Similarly,

SMM will expand the business further
by fostering manufacturing and sales
cooperation with the Advanced
Materials sector, which deals withnickel powders for multilayer ceramic
capacitors and others.
Optical Telecommunication
Components
While world demand for telecommunication over optical fiber networks isdramatically increasing due to the
expansion of the Internet and E-commerce, WDM (Wavelength Division
Multiplexing) system technology is
rapidly gaining predominance since it
is capable of simultaneously transmitting several tens of signal channels ona single optical fiber. SMM's opticaltelecommunication components suchas the Optical Isolator and its main
component, the Faraday Rotator, areindispensable for this WDM technology. The high quality of SMM's products is recognized all over the world.
These are supplied by SMM to theworld's communication systemproviders that are based mainly in the
USA and Europe.
The Optical Isolator market is predicted to grow annually by more than
10% in the future and SMM will reinforce its production capacity in pacewith expanding demand. (Actual
sales for fiscal year 1999 and 2000
were ¥1.5 billion and ¥4.8 billion,
respectively)
SMM has been developing optical17

Electronics Materials

components since the late 1980's. In
addition to the Faraday Rotator andOptical Isolator, SMM aims to intensively foster and reinforce telecommunication device operations including high frequency components for
optical/electrical conversion used forreceiver parts and developing fiber
arrays for optical connections as acore electronics business. The production bases are located in theElectronics Division in Ome City,
Tokyo and SMM Precision Co., Ltd.,an SMM subsidiary located in
Noshiro City, Akita Prefecture. For
the Optical Isolator, a new base has
been established at the Noshiro
Industrial Park located in Noshiro
City to actively promote and expand
the business.
Principle and Role of the Optical
Isolator
Optical communication offers a hostof advantages. This enables the transmission of a great amount of dataover a fine thread of silica fiber by
converting electric signals to opticalsignals and transmitting these via thefiber. These electric signals are converted to light by a semiconductor
laser diode, collimated by a lens andthen conveyed on the fibers. Whenthe light is reflected by the components situated on the light route orconnecting part of the device andreturned to the original laser diode,the returned light is amplified andoscillated as noise. The Optical

18

Optical Isolator

Isolator is then used to suppress thelight reflected back to the laser diodeso that it passes only in a forward
direction.
An optical isolator consists of a
Faraday Rotator sandwiched by twopolarizers with the optical axes
turned at 45 degree angles to eachother. The Faraday Rotator turns thepolarization plane of the laser light toan angle of 45 degrees by the magneto-optical effect of the crystal. Whenthe light returns, the Faraday Rotator
turns the polarization plane by another 45 degrees. This makes the polarization plane normal relative to theoptical axis of the first polarizer.
The Optical Isolator is especiallynecessary for long haul carriers,
which are large long distance lines
connecting at 10-40 Gbps between
countries. This is also true for backbone lines that connect between cities
at 2.5 to 10 Gbps.

Optical Isolator

Management’s Discussion and Analysis

Introduction
Business enterprises at Sumitomo Metal Mining Co., Ltd. (SMM)
comprise the parent company, 75 subsidiaries and 16 affiliatecompanies. Operations consist of three core segments and two
peripheral segments: Mineral Resources, pertaining to metal
mining for gold, silver and copper. Metallurgy, pertains to thesmelting business centering on gold, copper, nickel and zinc,
and the functional materials business, which manufactures powders from nickel and palladium, and battery and magnetic materials. Electronics Materials, pertaining to the manufacturing of IC
packaging materials, crystal materials, printed circuit boards andelectronic components. Construction Materials & Housing, pertaining to the manufacturing of Siporex (autoclaved lightweight
concrete, or ALC) and the constructing of residential buildings,
and the Others segment, pertaining to nuclear engineering operations. Consolidated results described in this Annual Report are
the consolidated results of the parent company, 39 domestic andoverseas consolidated subsidiaries and 5 affiliates accounted forby the equity method.
Consolidated Statements of Income
Net Sales
Net sales in fiscal year 2000 (the year ended March 31, 2001)rose by ¥15,053 million (4.2%) from the previous fiscal year toreach ¥375,352 million (U.S.$3,029 million). The Metallurgy
segment accounted for 50.8% of net sales. The core enterpriseof this segment is smelting; however, this business is heavily
affected by foreign exchange rates and trends in non-ferrous
metal prices.
In the first half of fiscal year 2000, there were rises in prices of
non-ferrous metals such as copper, nickel and zinc in overseas
markets, but from the second half onwards the U.S. economy
slowed down noticeably, and from early fall, non-ferrous metal
prices, including nickel, declined. Meanwhile, the yen was comparatively strong in the first half, but weakened in the second.
As a result, in the Metallurgy segment, the sales volume
growth and the rise in non-ferrous metal prices such as nickel
and copper led to increased sales. Further, in the Electronic
Materials segment, there were increases in sales over a wide

range of products, including optical materials and communications devices.
Costs and Expenses
Cost of sales in fiscal year 2000 fell by ¥3,258 million (1.0%)
from the previous fiscal year to ¥311,980 million (U.S.$2,518
million). Further, the gross margin rose from 12.5% to 16.9%.
Sales, general and administrative (SGA) expenses rose by¥371 million from the previous fiscal year to ¥36,442 million(U.S.$294 million).
Sales, transportation and overhead expenses, which accountfor 31.7% of SGA expenses, rose by 17.6% over the previous
fiscal year, resulting from increased exports, mainly of the parent company’s metal products, over the previous fiscal year.
Research and development (R&D) expenses, which accounted
for 9.6% of SGA expenses, decreased by 27.9% from the previous fiscal year, mainly due to the reduction in research materials expenses.
Operating Income
Operating income in fiscal year 2000 rose sharply, by 199.6%
over the previous fiscal year, to ¥26,930 million (U.S.$217 million). The Construction Materials & Housing segment had posted
a deficit of ¥1,144 million in the previous fiscal year, but earnings were improved in fiscal year 2000 with the completion of
the restructuring program, and operating income in this segment
picked up to stop slightly short of black figures. Operating
income in the Electronics Materials segment recorded continued
favorable results, along with increases in income for crystals(gallium phosphide, or GaP), nickel and other thick film pastes,bonding wire, and communications devices. In the functional
materials business, nickel powder for use in multilayer ceramic
capacitors is growing into a pillar of earnings. With the exception of the Others segment, the Mineral Resources, Metallurgy,
Electronics Materials and Construction Materials & Housing segments all enjoyed increased earnings.
Other Income (Expense)
In other income(expense) in fiscal year 2000, the amount of

Net Sales

Gross Profit

Billions of yen
600

Billions of yen
80

Gross Margin

%
20

500
60

15

40

10

20

5

400

300

200

100

0

'97

'98

'99

'00

'01

0

'97

'98

'99

'00

'01

0

19

deficit rose from the previous fiscal year by ¥7,017 million(161.6%), and net loss of ¥11,359 million (U.S.$92 million) was
posted. The major factors in this were that:(1) losses related to a nuclear fuel reprocessing accident at subsidiary JCO Co., Ltd. decreased from the ¥13,908 million(U.S.$112 million) of the previous fiscal year to ¥2,328 million (U.S.$19 million) in the fiscal year under review,(2) however, there was no gain on the sale of marketable securities, as opposed to the ¥7,817 million (U.S.$63 million)
from such gain in the previous fiscal year,(3) and, gain on the sale of investment securities fell from the¥12,866 million (U.S.$104 million) of the previous fiscal
year to ¥5,867 million (U.S.$47 million) in the fiscal year
under review,(4) further, valuation losses on investment securities, at ¥3,415
million (U.S.$28 million), were ¥1,788 million more than in
the previous fiscal year, and(5) finally, there was a shortfall of ¥5,858 million (U.S.$47 million) in pension funds, which was written off with a one-timecharge, this liability having arisen when new accounting
standards for calculating retirement benefits were introduced.
Aside from that, in fiscal year 2000, there were indemnity losses of ¥1 billion (U.S.$8 million) related to the accident at JCO
Co., Ltd., and the amount approved in amicable settlement by
March 31, 2001 was net loss equivalent to the revenue of ¥1 billion (U.S.$8 million) in damage insurance claims. Also, a provision for future indemnity losses of ¥1,328 million (U.S.$11 million) was posted to prepare against losses incurred throughpayments in the future.
Tax-effect accounting had been applied since the previous fiscal year, and a negative tax adjustment of ¥694 million (U.S.$6
million) was posted. Net financial expenses decreased from
¥2,492 million of the previous fiscal year by ¥363 million to¥2,129 million.

from the ¥4,740 million of the previous fiscal year. Net income
per share in fiscal year 2000 was ¥26.41 (U.S.$0.21), as
opposed to the ¥8.29 (U.S.$0.07) of the previous fiscal year.
Impact of Exchange Rate Fluctuations
Non-ferrous metals operations are closely linked to foreignexchange rates, from the procurement of ores to the sale of finished products. Although a weak yen brings with it the disadvantage that SMM must pay higher prices for the procurementof ores, the selling prices of finished products rise as well. In
general, a weak yen is a positive factor to SMM’s earnings,
mainly due to the fact that smelting margins, which are calculated in U.S. dollars, rise when translated into yen. The averageexchange rate in fiscal year 2000 was ¥110.58 to the U.S. dollar,
compared to ¥111.59 in the previous fiscal year. In the first half
the yen was comparatively strong, but it weakened in the second half, and on an annualized basis, the yen was somewhat
strong. The parent company has announced that the weakeningof the Japanese currency by 1 yen against the U.S. dollar contributes to an upturn of ¥350 million, in terms of gross income,
operating profit, and recurring profit, on a non-consolidated
basis.
Results by Business Segment
The following results are based on segment information, andnet sales and operating income in each field include inter-segment transactions.

Net Income (Loss)
The SMM Group’s net income in fiscal year 2000 soared by¥10,363 million (U.S.$122 million) (218.6%) to ¥15,103 million

Mineral Resources
Net sales in this segment fell by ¥2,713 million to ¥23,613 million (U.S.$191 million), due to a decline in new orders in public
works projects, particularly civil engineering projects, at
Sumiko Development and Construction Co., Ltd., and thefalling new orders for geological surveys at Sumiko Consultants
Co., Ltd. There was almost no impact, however, on gain andloss. At Sumitomo Metal Mining Arizona Inc. one of two concentrators had to be closed because the Morenci copper mine in
Arizona, a joint venture in which SMM Arizona is participating,switched entirely over to the solvent extraction/electrowinning

Oparating Income

Net Income (Loss)

Billions of yen
30

Operating Margin
O

%
7.5

Billions of yen
20
15
10

20

5
5
0
2.5

10

-5
-10
0

20

'97

'98

'99

'00

'01

0

-15

'97

'98

'99

'00

'01

(SX-EW) process. Because of the rise in copper market prices
overseas, however, operating income in Mineral Resources roseby ¥1,092 million (86.1%) to ¥2,360 million (U.S.$19 million).
Metallurgy(including results of the functional materials business, whichbecame an independent segment in June 2000)
Income increased sharply because demand for nickel destinedfor stainless steel recovered, in addition to which demand fornickel in personal computers- and semiconductor-related electronic materials perked up, and further, nickel prices rose. Not
only nickel, but copper, gold and zinc also generated increases
in income. In the functional materials business, results grew inmetal powders, including nickel powder destined for multilayer
ceramic capacitors thanks to the increase in IT-related demand.
In addition, all consolidated subsidiaries showed increases inincome over the previous fiscal year, notably Sumitomo Metal
Mining Brass & Copper Co., Ltd., which enjoyed increased
income mainly in coils for terminals and connectors.
As a result, net sales stood at ¥220,595 million (U.S.$1,780
million), up by ¥11,620 million (5.6%) over the previous fiscal
year. Operating income rose sharply by ¥11,091 million(155.1%) to ¥18,244 million (U.S.$147 million).
Electronics Materials
Net sales in this segment increased over the previous fiscal yearby ¥14,004 million (11.7%) to ¥133,259 million (U.S.$1,076
million). Operating income also shot up by ¥6,571 million(457.3%) to ¥8,008 million (U.S.$65 million). The dramaticincrease in operating income in the first half was led bydemand for communications machinery & equipment and for
digital consumer electronics, and there were increases in salesof and income from bonding wire, thick film paste for multilayer ceramic capacitors, TAB, and TV frames etc. Furthermore,
net sales also rose dramatically in optical materials and communications devices, such as Faraday Rotators and Optical
Isolators.

Construction Materials & Housing
Net sales decreased by ¥2,107 million (7.8%) to ¥24,880 million(U.S.$201 million), due to the restructuring of the housing business including the transfer of operations at Sperio Homes Co.,
Ltd. to Igeta Heim Co., Ltd. in the previous fiscal year and theconfining of the operations to the Tokyo metropolitan area. The
construction materials business raised its sales volume in western Japan amid intense competition among the three companies
involved in ALC (autoclaved lightweight concrete). Further, in
October 1999 it concentrated its manufacturing to three production bases, and the effects of the integration of production andretailing showed up. As a result, operating income rose by ¥840
million over the previous fiscal year to the deficit of ¥304 million(U.S.$2 million), substantially reducing the deficit.
Financial Position and Liquidity
Financial Position
Total assets as of March 31, 2001 stood at ¥530,080 million(U.S.$4,278 million), down ¥14,041 million (2.6%) from theend of the previous fiscal year. Current assets fell ¥8,209 million (3.9%) to ¥200,324 million (U.S.$1,617 million).
Specifically, trade notes and accounts receivable rose by ¥1,537
million in line with the increase in net sales. On the other hand,marketable securities fell by ¥10,391 million and short-term loans
decreased by ¥1,152 million. The reason for the decrease in marketable securities was that most of the marketable securities weretransferred to the investment securities account due to the reclassification of the holding objectives of marketable securities.
Net property, plant and equipment stood at ¥174,752 million(U.S.$1,410 million), up ¥8,220 million from the end of the previous fiscal year due to the increase in machinery and equipmentby ¥5,156 million, and construction in progress by ¥2,703 million.
Investments and long-term receivables stood at ¥150,710 million (U.S.$1,216 million), up ¥2,283 million. The reason for thiswas that the impact of the increase in investment securities
resulted from the fact that transferring marketable securities
from current assets to investment securities was stronger than
the impact of the sale of investment securities with the aim ofthinning out assets.

Yen-Dollar Exchange Rate (Year-End)Long-Term Debt Due After One Year

Yen
150

Billions of yen
125

Debt toTimes
Equity Ratio
1

100

0.80

75

0.60

50

0.40

25

0.20

100

50

0

'97

'98

'99

'00

'01

0

'97

'98

'99

'00

'01

0

21

Financial Structure
Millions of yen (%)
As of March 31

2001¥ 93,159 (17.6)
83,839 (15.8)
237,470 (44.8)¥530,080 (100.0)

Short-term interest-bearing liabilities
Long-term interest-bearing liabilities
Total shareholders' equity
Liabilities and Shareholders' equity

2000

*

*

¥ 90,358 (16.6)
107,266 (19.7)
235,231 (43.2)¥ 544,121 (100.0)

1999

*

¥ 83,286 (15.3)
124,535 (22.9)
226,795 (41.7)¥ 544,519 (100.0)* Percentage to Liabilities and Shareholders' equity = 100.

Meanwhile, current liabilities decreased by ¥2,558 million(1.5%) from the end of the previous fiscal year to ¥167,065 million (U.S.$1,348 million). The major factors for this decline
were the decrease in the outstanding amount of commercial
paper by ¥7,500 million and in the notes and accounts payableby ¥4,236 million. By contrast, short-term bank loans increasedby ¥2,301 million, and corporate bonds due within one year
increased by ¥8,000 million. As a result, the working capitalratio decreased from 1.23 to 1.20 times.
Long-term debts due after one year decreased by ¥23,427 million from the end of the previous fiscal year to ¥83,839 million(U.S.$677 million). This was mainly the result of efforts to
reduce interest-bearing liabilities by placing limits on the issuing of corporate bonds and long-term borrowing in respect of
the redemption of corporate bonds and repayment of long-termborrowing. As a result, total liabilities excluding minority interests decreased by ¥15,853 million (5.2%) to ¥286,496 million(U.S.$2,312 million).
Total shareholders’ equity increased by ¥2,239 million (1.0%)
from the end of the previous fiscal year to ¥237,470 million(U.S.$1,917 million). This resulted from the increase in retained
earnings by ¥12,244 million, most of which was accounted forby the ¥10,363 million rise in net income in the period underreview. As a result, the equity ratio rose from the 43.2% of theprevious fiscal year to 44.8%.
Consolidated Statement of Cash Flows
Cash and cash equivalents, including the effect of change in theforeign exchange rate, stood at the end of the year at ¥18,806

million (U.S.$152 million), down ¥6,053 million (24.3%) fromthe beginning of the year.
Cash flows from operating activities in fiscal year 2000
showed that income before income taxes staged an upturn fromthe previous fiscal year of ¥10,923 million to reach ¥15,571 million (U.S.$126 million) under the impact of a sharp rise in consolidated operating income. In addition, cash flows improved by¥5,355 million thanks to the rise in reserves accompanying the
introduction of new accounting standards for calculating retirement benefits. Net cash flows improved by ¥24,139 million overthe previous fiscal year reaching ¥23,339 million (U.S.$188 million), partly because of the decrease in indemnity payments
related to the accident at JCO Co., Ltd. from the previous fiscal
year, which resulted in an improvement of ¥8,059 million.
Net cash flows from investing activities experienced outflowsof ¥4,248 million (U.S.$34 million), due to a ¥8,391 million
increase in expenditures over the previous fiscal year. Net cash
outflows stem from a cash use of ¥3,040 million (U.S.$25 million) related to the parent company’s acquisition of a new plant
for TAB and the consolidation of Sumiko Taiwan Precision Co.,
Ltd., and also a decrease of ¥6,430 million (U.S.$52 million) in
dividend income due to the sale of investment securities.
Net cash flows from financing activities declined from theprevious fiscal year by ¥17,003 million to net outflows of¥26,089 million (U.S.$211 million), mainly due to the ¥17,500
million decrease in commercial paper from the previous fiscal
year (a drop from the ¥10,000 million of the previous fiscal year
to outflow of ¥7,500 million in fiscal year 2000).
As a result, cash and cash equivalents at year end, including

Shareholders’ Equity

Net Cash Provided by Operating Activities

Billions of yen
250

Billions of yen
50

40

200

30
150
20
100
10

50

0

22

0

'97

'98

'99

'00

'01

-10

'97

'98

'99

'00

'01

the effect of change in the foreign exchange rate, declined by¥6,053 million from the beginning of the year to a year-end balance of ¥18,806 million (U.S.$152 million).
Capital Expenditures and Depreciation
Capital expenditures for fiscal year 2000 amounted to ¥28,078
million (U.S.$227 million), of which, Electronics Materials
accounted for ¥13,318 million (47.4%), and Metallurgy for¥9,031 million (32.2%).
Depreciation increased by ¥163 million (1.0%) to ¥16,774
million (U.S.$135 million).
Research and Development Expenses
Research and development expenses for fiscal year 2000 were
¥3,484 million (U.S.$28 million). By segment, Mineral
Resources carried out the development of non-ferrous raw
material ores concentration processes and various types ofleaching technology. The Metallurgy segment mainly focusedon the development of non-ferrous smelting and electrolysis
technology. The Electronic Materials segment concentrated on
developing technology in electronic materials, principally new
semiconductor packaging materials. The Construction Materials& Housing segment focused on developing new product processing technologies and new products such as long-lasting
Siporex technology.
Risk Management
The operations of SMM are exposed to various risks such as
fluctuations in metal prices, exchange rates, and interest rates.
To effectively hedge against these risks, SMM engages in financial derivatives transactions. In commodities, forward contracts
are used to hedge against fluctuations in ingot prices; forward
foreign exchange contracts and currency swaps are used tohedge currency fluctuations, and interest rate swaps are used tohedge interest rate fluctuations. Whatever the case, we carryout derivative transactions within limits based on real demandin production and sales activities, and on actual amountpayable or receivable, and do not engage in transactions for the
speculation purposes.

Further, in view of the accident at JCO Co., Ltd., we are
acutely aware of the importance of risk management, and as acentral mechanism for mitigating and managing risk, we set up
a Risk Management Committee in July 2000 to spearhead risk
management. Since then, we have been examining a framework for risk mitigation and management throughout thegroup. We plan to start introducing the Risk Management
System in July 2001.
At the same time, SMM is aiming to go back to the basics ofmanufacturing, addressing the issues of safety and the environment. As part of these initiatives, SMM is carrying out ISO14001
environment management system for the whole group andbuilding an environmental management system, which is
becoming increasingly important.
Accounting for Retirement Benefits
SMM pays retirement benefits to retiring employees under theterms of its retirement plan based on the length of service, basesalary (the amount which forms the basis of an employee’ssalary and bonus) at time of retirement and cause of retirement.
We introduced a Tax Qualified Pension Fund for part of ourretirement benefits plan, and upgraded this plan in 1991 with a
15-year minimum guaranteed annuity period.
In response to the introduction of accounting standards forcalculating retirement benefits in Japan in fiscal 2000, we havebeen applying new accounting standards since the beginning of
the consolidated accounting period under review. Compared tothe hypothetical results under the former accounting system,
retirement benefit costs increased by ¥5,426 million, recurring
profit was up by ¥335 million, and income before income taxes
decreased by ¥5,523 million.

Capital Expenditures

Depreciation

Billions of yen
40

Billions of yen
40

30

30

20

20

10

10

0

'97

'98

'99

'00

'01

0

'97

'98

'99

'00

'01

23

Eleven-Year Summary
SUMITOMO METAL MINING CO., LTD.

For the Year:Net sales
Gross profit
Operating income
Other income (expense)
Net income (loss)
Net income (loss) per share (¥)
Dividends per share (¥)
Return on average shareholders’ equity (%)
Net cash provided by (used in) operating activities
Capital expenditures
Depreciation

2001

2000

1999

1998

¥375,352
63,372
26,930(11,359)
15,103
26.41
6.00
6.39
23,33928,078
16,774¥360,299
45,061
8,990(4,342)
4,740
8.29
5.00
2.05
(800)
20,49016,611¥350,288
41,190858(12,932)(12,495)(21.85)
3.00
22,91232,49923,095¥431,950
62,641
24,622(3,605)
10,157
17.77
6.00
4.22
43,05627,96821,638¥530,080
237,470
44.8
83,839176,998
0.75
33,2591.20¥544,121
235,23143.2
107,266
197,6240.84
38,9101.23¥544,519
226,795
41.7
124,535
207,8210.92
50,5181.31¥566,088
243,43643.0
82,356
201,5150.83
26,5291.13

For the Year:

Total assets
Shareholders’ equity
Equity ratio (%)
Long-term debt due after one year
Total debt
Debt to equity ratio (times)
Working capital
Working capital ratio (times)
Note: “–” indicates that figures have not been disclosed.

24Millions of yen

1997

1996

1995

1994

1993

1992

1991

¥525,076
57,836
21,665(4,294)
12,884
22.65
6.00
5.56
43,13524,73020,702¥511,887
55,904
19,947(7,553)
10,683
19.18
6.00
4.95
6,100
25,722
19,889¥464,843
40,2625,169(2,384)
1,292
2.32
5.00
0.62
721

¥446,712
28,914(3,934)
3,543
1,902
3.49
5.00
0.97
17,780¥507,951
45,018
8,550
2,377
6,197
12.33
7.00
3.45
23,684¥539,122
55,344
20,330(2,635)
10,141
20.22
7.00
5.76
38,155¥571,781
67,39331,175(5,899)13,909
27.81
7.00
8.22

20,917

20,522¥586,948
238,05640.6
117,021
224,736
0.94
62,7261.31¥624,419
225,29636.1
171,596285,871
1.27
104,854
1.53¥591,446
205,940
34.8
197,884
277,289
1.35
101,1101.63¥594,982
210,90235.4
228,255
281,073
1.33
131,6442.02¥616,672
179,926
29.2
221,926
321,131
1.78
105,878
1.58¥670,519
178,91926.7
214,195
371,093
2.07
126,651
1.52¥620,122
173,26927.9
224,804
335,739
1.94
155,8421.80

25

Consolidated Balance Sheets
SUMITOMO METAL MINING CO., LTD.

ASSETSYears ended March 31, 2001 and 2000

Current assets:
Cash and cash equivalents (Note 14)
Time deposits
Marketable securities (Note 4)
Receivables:
Notes and accounts receivable (Notes 7 and 14):
Trade
Unconsolidated subsidiaries and affiliated companies
Loans and others:
Unconsolidated subsidiaries and affiliated companies
Other
Allowance for doubtful accounts
Inventories (Note 6)
Deferred tax assets (Note 8)
Other current assets
Total current assets
Investments and long-term receivables:
Investment securities (Notes 4 and 7):
Unconsolidated subsidiaries and affiliated companies
Other
Loans:
Unconsolidated subsidiaries and affiliated companies
Other
Other long-term receivables
Allowance for doubtful accounts
Property, plant and equipment (Note 7):Land
Buildings and structures
Machinery and equipment
Construction in progress
Accumulated depreciation
Net property, plant and equipment

Millions of yen

2001

2000

2001

¥ 18,8065102¥ 24,859
5
10,493$ 151,784
40
823

81,178
1,007

79,714934

655,190
8,127

3,434
4,306
(1,059)

4,900
4,481
(1,016)

27,71634,754(8,547)73,927
3,363
15,255200,324

67,401
1,099
15,663
208,533

596,667
27,143
123,123
1,616,820

59,656
82,13553,797
83,403

481,485
662,914

3,737
1,205
4,311
(2,451)
148,593

5,552
1,114
3,986
(2,881)
144,971

30,161
9,726
34,794(19,782)
1,199,298

247,740
30,37830,695
1,025,254
125,205
127,029
2,052,317
243,493254,282
48,8543,350
6,053
3,374,165
402,426
418,059(243,307) (235,894) (1,963,737)
1,410,428
166,532
174,752

Deferred tax assets (Note 8)

2,117

Other assets
Foreign currency translation adjustments

4,294¥ 530,080

See accompanying notes.

26

Thousands of
U.S. dollars(Note1)

3,456

17,08634,657
4,420
16,209¥544,121 $ 4,278,289

LIABILITIES AND SHAREHOLDERS’ EQUITY
Years ended March 31, 2001 and 2000

Current liabilities:
Bank loans (Note 7)
Commercial paper
Long-term debt due within one year (Note 7)
Notes and accounts payable (Note 14):
Trade
Unconsolidated subsidiaries and affiliated companies
Other
Accrued income taxes (Note 8)
Accrued expenses
Advances received
Deferred tax liabilities (Note 8)
Other current liabilities
Total current liabilities

Long-term debt due after one year (Note 7)
Deferred tax liabilities (Note 8)
Retirement benefits (Note 9)
Reserve for restructuring charges
Reserve for indemnification of damages caused by a consolidated subsidiary
Reserve for liquidation of subsidiaries
Other long-term liabilities
Minority interest
Consolidation difference

Millions of yen

Thousands of
U.S. dollars(Note1)

2001

2000

2001

¥ 64,333
2,500
26,326¥ 63,802
10,00016,556$ 519,233
20,178212,478

29,936
992
7,071
1,484
5,653
5,522
14
23,234
167,065

32,997
2,141
5,705
1,237
5,914
7,686
27
23,558
169,623

241,614
8,007
57,07011,97745,62644,568
113
187,522
1,348,386

83,8391,435
22,127
2,823
1,771
1,347
5,832
6,114
257

107,266
1,188
15,913

676,667
11,582
178,588
22,784
14,294
10,87247,07049,346
2,074

4,115
4,053
6,541
191

Contingent liabilities (Note 13)
Shareholders’ equity (Note 12):
Common stock, par value ¥50 per share;
Authorized — 1,000,000,000 shares
Issued — 571,872,794 shares
Additional paid-in capital
Retained earnings (Note 11)
Net unrealized holding losses on available-for-sale securities
Foreign currency translation adjustments
Treasury stock , at cost
Total shareholders’ equity

713,115
88,35588,355655,238
81,184
81,184
629,03165,69377,937(48)(387)(9,956)(80,355)
1,916,642
235,232
237,472
(2)
(1)
(16)
1,916,626
235,231
237,470¥ 530,080 ¥544,121 $ 4,278,289

See accompanying notes.

27

Consolidated Statements of Operations
SUMITOMO METAL MINING CO., LTD.

Millions of yen
Years ended March 31, 2001, 2000 and 1999

Net sales (Note 15)
Costs and expenses (Note 15):
Cost of sales
Selling, general and administrative (Note 10)
Operating income (Note 15)
Other income (expenses):
Interest and dividend income
Interest expense
Gain on sale of marketable securities
Gain on sale of investment securities
Write-off of marketable securities
Write-off of investment securities
New shares and bond issue expense
Gain (Loss) on sale and disposal of property, plant and equipment
Gain on insurance
Loss on liquidation of subsidiaries
Provision for doubtful accountRestructuring charges
Loss from indemnification of damages caused by a consolidated subsidiary
Loss from suspension of operating activity of a consolidated subsidiary
Amortization of net transition obligation(Note 9)
Loss on penalty for specific contracts of a consolidated subsidiary
Amortization of consolidation difference
Equity in earnings of unconsolidated subsidiaries and affiliated companies
Other, net
Income (Loss) before income taxes
Income taxes (Note 8):
Current
Deferred

Minority interest in net income of consolidated subsidiaries
Net income (loss)
Amounts per share of common stock:
Net income (loss)
Cash dividends applicable to the year
See accompanying notes.

28

1999

Thousands of
U.S. dollars(Note1)

2001

2000

¥ 375,352¥360,299¥350,288 $ 3,029,475

2001

311,980
36,442
348,422315,238
36,071
351,309309,098
40,332
349,430

2,517,998
294,124
2,812,122

26,9308,990

858

217,353

2,241(4,370)(3,415)(1,627)

5,153
1,000
(1,045)(1,433)(8,195)(2,328)(1,621)(5,858)
(665)
131
4,078
(899)
(11,359)(1,201)

3,595(5,502)
3,468
4,377(8,109)(3,896)
(254)
(897)

18,087(35,270)

5,867

2,383
(4,875)
7,817
12,86647,353(27,563)(163)(3,462)(1,356)(13,908)(1,620)(4,330)98
2,406(1,700)(4,342)98
326(1,808)(12,932)

41,5908,071(8,434)(11,566)(66,142)(18,789)(13,083)(47,280)(5,367)
1,057
32,914(7,257)(91,679)

15,571

4,648(12,074)

125,674

945
(694)
251
15,320

797
(484)
313
4,335

544

7,627
(5,601)
2,026
123,648(217)¥ 15,103¥26.41
6.00

544(12,618)(1,751)
123405¥ 4,740 ¥ (12,495) $ 121,897

¥8.29
5.00

yen

U.S. dollars(Note1)¥(21.85)
3.00

$0.21
0.05

Consolidated Statements of Shareholders' Equity
SUMITOMO METAL MINING CO., LTD.

Thousands

Years ended March 31, 2001, 2000 and 1999

Shares ofcommon stock

Balance at March 31, 1998
Decrease due to change in consolidationof subsidiaries
Net loss
Treasury stock
Cash dividends paid(¥6.00 per share)
Bonuses to directors and corporate auditors
Balance at March 31, 1999
Net income
Cumulative effect of adopting deferred income
tax accounting (Note 8)
Treasury stock
Balance at March 31, 2000
Net income
Adjustments from translationof foreign currency financial statements
Adoption of new accounting standard
for financial instruments
Treasury stock
Cash dividends paid (¥5.00 per share)
Balance at March 31, 2001

Millions of yen
Common Additional
stock
paid-in capital

571,873 ¥ 88,355

Net unrealized Foreign currency
Retained
holding losses translation
earnings
on securities
adjustments¥ 81,184 ¥ 73,898¥¥

Treasury
stock

¥ (1)

(642)
(12,495)(1)

571,873

88,355

81,184(3,431)(72)
57,258
4,740

(2)

3,695
571,873

88,355

81,1841(1)

65,693
15,103(9,956)(48)(1)(2,859)571,873 ¥ 88,355 ¥ 81,184 ¥ 77,937¥ (48)¥ (9,956)¥ (2)Thousands of U.S. dollars
Common Additional
stock
paid-in capital

Balance at March 31, 2000
Net income
Adjustments from translationof foreign currency financial statements
Adoption of new accounting standard
for financial instruments
Treasury stock
Cash dividends paid ($0.04 per share)
Balance at March 31, 2001

Net unrealized Foreign currency
Retained
holding losses translation
earnings
on securities
adjustments$713,115 $655,238 $530,209
121,897$$

Treasury
stock

$ (8)

(80,355)(387)(8)(23,075)$713,115 $655,238 $629,031$(387)$(80,355)$ (16)

Due to the adoption of the Revised Accounting Standard, the Company and its domestic subsidiaries report foreign currency translation adjustments in the shareholders’ equity and minority interests.
The prior year’s amount, which is included in assets, has not been reclassified.
See accompanying notes.

29Consolidated Statements of Cash Flows
SUMITOMO METAL MINING CO., LTD.

Millions of yen
Years ended March 31, 2001, 2000 and 1999

Cash flows from operating activities:
Income (Loss) before income taxes
Adjustments to reconcile net income (loss) to net cash providedby (used in) operating activities:
Depreciation
Gain on sale of marketable securities
Loss (Gain) on sale and disposal of property, plant and equipment
Gain on sale of investment securities
Write-off of marketable securities and investment securities(Reversal of) Provision for doubtful accounts
Increase (Decrease) in reserve for liquidation of subsidiaries
Increase in retirement benefits
Interest and dividend income
Interest expense
Equity in earnings of unconsolidated subsidiaries and affiliated companies
Gain on insurance
Restructuring charges
Loss from indemnification of damages caused by a consolidated subsidiary
Loss from suspension of operating activity of a consolidated subsidiary
Loss on liquidation of subsidiaries
Loss on penalty for specific contracts of a consolidated subsidiary
Decrease (Increase) in trade receivables
Decrease (Increase) in inventories
Increase (Decrease) in trade payables
Other
Sub total
Proceeds from Interest and dividend income
Payments for interest paid
Proceeds of insurance
Payments for suspension of operating activity in a consolidated subsidiary
Payments for restructuring charges
Payments for indemnification of damages caused by a consolidated subsidiary
Payments for penalty for specific contracts of a consolidated subsidiary
Payments for income taxes
Other
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Payments for purchases of marketable securities
Proceeds from sale of marketable securities
Payments for acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for purchases of investment securities
Proceeds from sale of investment securities
Payments for acquisition of newly consolidated subsidiary’s stock
Increase in loans receivableCollection of loans receivable
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt
Payments for retirement of long-term debt
Net increase (decrease) in bank loans
Net increase (decrease) in commercial paper
Proceeds from issuance of bonds
Payments for redemption of bonds
Cash dividends paid
Other
Net cash provided by (used in) financing activities
Effect of changes in exchange rate on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash due to change in consolidated subsidiaries
Cash and cash equivalents at end of year
See accompanying notes.

Thousands of
U.S. dollars(Note1)

2001

2000

1999

2001

¥ 15,571¥ 4,648¥(12,074)$125,674

16,774

16,611(7,817)1,201(12,866)
1,627
3,445
(4,330)923(2,383)
4,875(2,406)23,095(3,468)897(4,377)
12,005
(37)
4,330
827
(3,595)
5,502
(326)

135,383(5,153)(5,867)
3,415
(391)
1,347
6,278
(2,241)
4,370(4,078)(1,000)
8,830
2,328
1,621
1,134
665
(2,738)(5,921)(3,300)(246)
31,3983,559(4,446)1,000(1,525)(975)(4,072)
(665)
(881)
(54)
23,33913,9081,620
4,493(17,883)
5,356
4,468
3,410
18,9003,016(4,408)17,352
4,865(9,995)(240)
34,761
3,568(5,308)(1,156)(4,609)(12,131)

(420)

(412)

(9,689)(800)

22,912(583)
16,812(20,882)
4,339(14,933)
20,038(4,602)
9,956(30,762)
1,183(18,412)
18,694(2,732)
1,878
206
4,143

(12,453)
13,274(165)(23,287)

4,103(9,604)(428)(7,500)5,600(13,873)(517)
10,000(10,000)(2,866)
206(26,089)(10,000)(6)(290)(9,086)

18,899(9,134)(5,668)(4,000)45,000(37,024)(3,772)
(254)
4,047

945
(6,053)24,859(885)(6,628)31,487¥ 18,806¥ 24,859

267(23,922)
9,388(84)
13,608(481)(5,014)3,300(1,310)(4,248)

(822)
2,850
28,60334¥ 31,487(41,590)(47,353)
27,563(3,156)
10,87250,670(18,087)
35,270(32,914)(8,071)
71,267
18,78913,083
9,153
5,367(22,098)(47,789)(26,634)(1,985)
253,41428,725(35,884)
8,071(12,308)(7,869)(32,865)(5,367)(7,111)(436)
188,370

2,155(193,075)
75,771(678)
109,830(3,882)(40,468)
26,634(10,573)(34,286)
33,115(77,514)(3,454)(60,533)(80,710)(23,132)
1,663(210,565)
7,627(48,854)
200,638$ 151,784

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

1. Basis of presenting consolidated financial statements
The Company, a Japanese corporation, and its consolidated
domestic subsidiaries maintain their accounts and records inaccordance with the provisions set forth in the JapaneseCommercial Code and the Securities and Exchange Law and in
conformity with accounting principles and practices generally
accepted in Japan, which are different from the accounting anddisclosure requirements of International Accounting Standards.
The accounts of consolidated overseas subsidiaries are basedon their accounting records maintained in conformity with generally accepted accounting principles and practices prevailing in
the respective countries of domicile.
The accompanying consolidated financial statements are atranslation of the audited consolidated financial statements of
the Company which were prepared in accordance with accounting principles and practices generally accepted in Japan fromthe accounts and records maintained by the Company and its
consolidated subsidiaries and were filed with the appropriate
Local Finance Bureau of the Ministry of Finance as required by
the Securities and Exchange Law.
In preparing the accompanying consolidated financial statements, certain reclassifications have been made in the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside
Japan. The consolidated statements of cash flows for 1999 andshareholders’ equity for 2001, 2000 and 1999 have been prepared for the purpose of inclusion in the accompanying consolidated financial statements, although such statements were notrequired for domestic purposes and were not filed with the regulatory authorities.
The translation of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of readers, using theprevailing exchange rate at March 31, 2001, which was ¥123.90
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.

2. Summary of significant accounting policies
Consolidation—The consolidated financial statements include
the accounts of the Company and its significant subsidiaries (39subsidiaries in 2001, 38 subsidiaries in 2000 and 40 subsidiaries
in 1999). All significant intercompany balances and transactions have been eliminated.
Effective for the year ended March 31, 2000, all companies
are required to consolidate all significant investees which arecontrolled through substantial ownership of majority voting
rights or existence of certain conditions. There was no effect ofapplying this rule to the Company’s consolidated financial
statements.
Investments in significant affiliated companies are accounted
for using the equity method (5 affiliated companies in 2001,
2000 and 1999). Investments in non-consolidated subsidiaries
and affiliates over which the Company has the ability to exer-

cises significant influence over operating and financial policiesof the investees, are accounted for by the equity method.
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 fairvalue at the time the Company acquired control of the respective subsidiaries.
The consolidation difference between the cost of an investment and the underlying equity in its net assets at the date ofacquisition is being amortized over five years with minor
exceptions.
Cash and cash equivalents and cash flow statements—For
the purpose of the consolidated statements of cash flows, theCompany and its consolidated subsidiaries classify cash on
hand, readily-available bank deposits and short-term highly liquid investments with maturities of not exceeding three months
at the time of purchase as cash and cash equivalents.
In accordance with new Japanese standards, effective from theyear ended March 31, 2000, the Company is required to prepare
consolidated cash flow statements in a format different fromthose prepared for readers outside Japan although not required
to be filed with the Ministry of Finance in prior years. The consolidated cash flow statement for 1999 has been restated to conform to the 2000 presentation.
Allowance for doubtful accounts—The Company and its consolidated domestic subsidiaries provide a general allowance for
doubtful accounts. Calculation of this allowance is based on
actual collection losses incurred in the past. Additionally, foraccounts receivable considered at risk (bankruptcy, companies
under rehabilitation plan), an allowance is booked based on an
estimation of the uncollectible amount, on a case by case basis.
Marketable securities and investment securities—
Marketable securities and investment securities are stated atcost based on the moving average method adjusted for any substantial and non-recoverable diminution in value, except thatthose of certain unconsolidated subsidiaries and affiliated companies are accounted for by the equity method.
Derivatives and hedge accounting—The new accounting
standard for financial instruments, effective from the year
ended March 31, 2001, requires companies to state derivativetransactions at fair value and to recognize changes in the fairvalue as gains or losses unless derivative transactions are used
for hedging purposes.
If derivative transactions are used as hedges and meet certain
hedging criteria, the Company and its domestic consolidated
subsidiaries defer recognition of gains or losses resulting fromchanges in fair value of derivative transactions until the related
losses or gains on the hedged items are recognized.
However, in cases where forward foreign exchange contracts
are used as hedges and meet certain hedging criteria, forward
foreign exchange contracts and hedged items are accounted for31

in the following manner:(1) If a forward foreign exchange contract is executed to hedge
an existing foreign currency receivable or payable,(a) the difference, if any, between the Japanese yen amountof the hedged foreign currency receivable or payabletranslated using the spot rate at the inception date of thecontract and the book value of the receivable or payable
is recognized in the income statement in the period
which includes the inception date, and (b) the discountor premium on the contract (that is, the difference
between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract(2) If a forward foreign exchange contract is executed to hedge
a future transaction denominated in a foreign currency, thefuture transaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreignexchange contract are recognized.
Also, if interest rate swap contracts are used as hedge andmeet certain hedging criteria, the net amount to be paid or
received under the interest rate swap contract is added to or
deducted from the interest on the assets or liabilities for which
the swap contract was executed.
The Company evaluates hedge effectiveness monthly by comparing the cumulative changes in cash flows from or thechanges in fair value of hedged items and the corresponding
changes in the hedging derivative instruments.
Foreign currency translation—Short-term receivables andpayables denominated in foreign currencies are translated into
Japanese yen at the year-end rates. Prior to April 1, 2000, longterm receivables and payable denominated in foreign currencies
were translated at historical rates.
Effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the revised accounting standard
for foreign currency translation, “Opinion Concerning Revisionof Accounting Standard for Foreign Currency Translation”,
issued by the Business Accounting Deliberation Council on
October 22, 1999 (the “Revised Accounting Standard”). Under
the Revised Accounting Standard, long-term receivables andpayables denominated in foreign currencies are also translated
into Japanese yen at the year-end rate.
The effect on the consolidated income statement of adopting
the Revised Accounting Standard is a decrease in income before
income taxes by ¥129 million ($1,041 thousand).
Balance sheets of consolidated overseas subsidiaries aretranslated into Japanese yen at the year-end rate except forshareholders’ equity accounts, which are translated at the historical rates. Income statements of consolidated overseas subsidiaries are translated at average rates except for transactions
with the Company, which are translated at the rates used by
the Company.
Due to the adoption of the Revised Accounting Standard, the32

Company and its domestic subsidiaries report foreign currencytranslation adjustments in the shareholders’ equity and minority interests. The prior year’s amount, which is included in
assets, has not been reclassified.
Inventories—(1) Merchandise, finished products, semi-finished products,
work in process and raw materials—Merchandise, finishedproducts, semi-finished products, work in process and raw
materials of precious metals and of electronics materials arestated at cost based on the first-in, first-out (FIFO) method.
Others are stated at cost based on the last-in, first-out (LIFO)
method.
(2) Supplies—Supplies are stated at the weighted average cost.
Property, plant and equipment—Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is computedby the straight-line method, based on the estimated useful livesof the assets.
In accordance with revisions of the Corporation Tax Law,buildings, excluding building fixtures, acquired after April 1,
1998 were depreciated using the straight-line method. The
effect of this change was to increase operating income and to
decrease loss before income taxes in the year ended March 31,
1999 by ¥17 million.
Also effective April 1, 1998 in accordance with revisions
referred to above, the Company and its consolidated domestic
subsidiaries shortened the estimated useful lives of buildings
excluding building fixtures. The effect of this change was todecrease operating income and to increase loss before income
taxes in the year ended March 31, 1999 by ¥260 million.
As explained in Note 3, the Company and its ten consolidated
domestic subsidiaries changed the method of depreciation effective April 1, 1999.
The effects of these changes on segment information are stated in Note 15.
Retirement benefits —Under the terms of the Company's
retirement plan, substantially all employees are entitled to a
lump-sum payment at the time of retirement. The amount of
retirement benefits is, in general, based on the length of service, base salary at the time of retirement or severance and thecause thereof. Prior to April 1, 2000, the Company provided forthe full amount (40% of the amount which was required if alleligible employees voluntarily retired as of the balance sheet
date in case of consolidated domestic subsidiaries) which
would be required to be paid if all eligible employees voluntarily retired as of the balance sheet date less the estimated amountof the Company’s trusted pension assets.
The Company and some consolidated domestic subsidiaries
also have a non-contributory funded pension plan, which covers substantially all employees. Prior to April 1, 2000, annual
contributions, which consisted of normal cost and amortizationof prior service cost, were charged to income when paid.

Effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the new accounting standard,“Opinion on Setting Accounting Standard for Employees’
Severance and Pension Benefits”, issued by the BusinessAccounting Deliberation Council on June 16, 1998 (the “New
Accounting Standard”).
Under the New Accounting Standard, the liabilities andexpenses for severance and retirement benefits are determinedbased on the amounts actuarially calculated using certain
assumptions.
The Company and its consolidated domestic subsidiaries provided allowance for employees’ severance and retirement benefits at March 31, 2001 based on the estimated amounts of projected benefit obligation and the fair value of the plan assets atthat date.
The excess of the projected benefit obligation over the total of
the fair value of pension assets as of April 1, 2000 and the liabilities for severance and retirement benefits recorded as ofApril 1, 2000 (the “net transition obligation”) amounted to¥5,858 million ($47,280 thousand). The entire net transition
obligation was recognized in expenses in the year ended March
31, 2001. Actuarial gains and losses are recognized in expenses
using the straight-line method over the average of the estimatedremaining service lives of ten years commencing with the following period.
As a result of the adoption of the new accounting standard, inthe year ended March 31, 2001, severance and retirement benefit expenses increased by ¥5,426 million ($43,793 thousand)and income before income taxes decreased by ¥5,523 million($44,576 thousand) compared with what would have beenrecorded under the previous accounting standard.
Retirement benefits in the consolidated balance sheets also
include estimated liabilities for the unfunded lump-sum benefit
plan covering directors and corporate auditors.
Research and development—Research and development costs
are charged to income as incurred.
Bond issue expense—Bond issue expense is charged toincome as incurred.
Accounting for certain lease transactions—Finance leases
which do not transfer ownership to lessees are accounted for in
the same manner as operating leases.
Income taxes—The Company and its consolidated domestic
subsidiaries provided income taxes at the amounts currently
payable for the year ended March 31, 1999. Effective April 1,
1999, the Company and its consolidated domestic subsidiaries
adopted the new accounting standard, which recognizes tax
effects of temporary differences between the financial statement
basis and the tax basis of assets and liabilities. Under the new
accounting standard, the provision for income taxes is computed based on the pretax income included in the statement ofoperations. The asset and liability approach is used to recognize

deferred tax assets and liabilities for the expected future tax
consequences of temporary differences.
The amount of deferred income taxes attributable to the net
tax effects of the temporary differences at April 1, 1999 isreflected as an adjustment of ¥3,695 million to the retained
earnings brought forward from the previous year.
The effect for the year ended March 31, 2000 was to increase
net income by ¥484 million and retained earnings by ¥4,179
million.
Sales—Sales of merchandise and finished products are recognized when the products are shipped to customers.
Bonuses to directors and corporate auditors—Bonuses todirectors and corporate auditors, which are subject to shareholders' approval at the annual shareholders' meeting under
the Commercial Code of Japan, are accounted for as an appropriation of retained earnings.
Amounts per share of common stock—Net income per shareis computed based on the weighted average number of sharesof common stock in issue during each fiscal year.
Cash dividends per share represent the actual amount applicable to the respective year
Reclassifications—Certain prior year amounts have been
reclassified to conform to the 2001 presentation. These changes
had no impact on previously reported results of operations orshareholders’ equity.

3. Change in accounting policy
Translation—In the year ended March 31, 1999, the Company
and its consolidated domestic subsidiaries changed the methodof translating both short-term receivables and payables denominated in foreign currencies into Japanese yen from the method
using historical exchange rates to the method using current
exchange rates.
As a result of this change, loss before income taxes for theyear ended March 31, 1999 increased by ¥57 million.
The effect of this change on segment information is stated in
Note 15.
Depreciation—In the year ended March 31, 2000, theCompany and its ten consolidated domestic subsidiaries
changed the method of depreciation from the decline-balancemethod to the straight-line method except certain plant facilities
and buildings, excluding building fixtures, acquired after April
1, 1998 which have been computed by the straight-line method.
The change was made in order to attain a better matching ofcosts with revenues.
As a result of this change, income before income taxes for theyear ended March 31, 2000 increased by ¥6,056 million.
The effect of this change on segment information is stated in
Note 15.

33

4. Securities(1) The following tables summarize book values of securities
with no available fair values as of March 31,2001:

Available-for-sale securities
Non-listed equity securities
Non-listed foreign bonds

Millions of yen

Thousands of
U.S. dollars

Book ValueBook Value¥6,189550$49,9524,439(2) Available-for-sale securities with maturities are as follows:
Millions of yen
Within one year

Bonds
Others
Total

¥
102
¥102

Over one year
but within five
years

Over five years
but within ten
years

¥66

¥

¥66

10
¥ 10

Over one year
but within five
years

Over five years
but within ten
years

Total

¥ 66
112
¥178

Thousands of U.S. dollars
Within one year

Bonds
Others
Total

$
823
$823

$533

$

$533

81
$ 81

Total

$ 533
904
$1,437(3) Total sales of available-for-sale securities sold in the year
ended March 31, 2001 amounted to ¥13,845 million($111,743 thousand ) and the related gains and losses

amounted to ¥5,842 million ($47,151 thousand ) and ¥218
million ($1,759 thousand ), respectively.

(4) At March 31, 2000, book value, market value and net unrealized gains (losses) of quoted securities of the Company

and its consolidated subsidiaries were as follows:
Millions of yen

2000

Current:
Shares
Bonds
OthersNon-current:
SharesTotal

5. Derivative transactions
Status of derivative transactions—The Company and its consolidated subsidiaries utilize derivative transactions in order tohedge various risks, such as fluctuation of metal prices,
exchange rates and interest rates, in the normal course of business; such as futures contracts for hedging fluctuation of international price of metals, forward foreign exchange contracts
and currency swaps for hedging fluctuation of exchange rates,

34

Book Value

Market value

Unrealized
gains (losses)¥10,02216
162
10,200¥ 14,301
16
121
14,438¥ 4,279
0
(41)
4,238

88,227¥98,427

136,912¥151,350

48,685¥52,923and interest swaps for hedging fluctuation of interests of floating-rate bonds and term loans payable.
Derivative transactions of the Company and its consolidated
subsidiaries cause market risk and credit risk. Market risk is thepotential loss the Company and its consolidated subsidiaries
may incur as a result of changes in the market value. The
Company’s and its consolidated subsidiaries’ exposure to mar-ket risk are determined by a number of factors, including fluctuation of market prices, exchange rates and interest rates.
Credit risk is the potential loss the Company and its consolidated subsidiaries could incur if the counterparties made default
on their obligation. The derivative transactions are solely madewith highly rated financial institutions, their subsidiaries or
LME brokers guaranteed by banks, so that the Company and its
consolidated subsidiaries might reduce the risk of default on an
obligation.
Each department of the Company and its consolidated subsidiaries involving derivative transactions have their own rules
for derivative transactions which stipulate purposes and scopeof using derivatives, standards for choosing transaction counterparties, and procedures of reporting and administration. The
derivative transactions are subject to approval by the General
Manager of the department in charge after consulting withrelated departments. Based on these rules, the person in charge
sets up the position. Then, the results are reported to the
Directors monthly.

The derivative positions are confirmed semi-annually withthe transaction counterparties. Also, the internal audit department of the Company regularly examines derivative transactions.
The Company and its consolidated subsidiaries are notexposed to market risk arising from commodity derivativetransactions, because the risk of fluctuation of market prices,that is caused by time lag between purchase and sale of materials and products, is hedged by the corresponding future contracts. The Company and its consolidated subsidiaries also utilize currency derivative transactions to hedge market risk of
exchange rates or interest rates. Taking receivables andpayables denominated in foreign currencies into account, theCompany and its consolidated subsidiaries are not exposed tomarket risk.
The contracted amount of interest swap is the notionalamount only, and not to be considered as an index for measuring market risk or credit risk of the Company and its consolidated subsidiaries.

The following tables summarize market value information as ofMarch 31, 2001 of derivative transactions for which hedge
accounting has not been applied:
Millions of yen
Contracted amount

2001
Currency related derivatives:
Forward contracts:
To sell foreign currencies—
U.S.dollars
To buy foreign currencies—
U.S.dollars

Interest related derivatives:
Pay fixed, receive variable:

Total

Recognized
gains(losses)

¥38

¥ (1)

2,214

106
¥105

¥6

¥ 6

Over one year

37

¥

2,108
¥2,145¥¥2,539¥2,116¥

Marketvalue

Thousands of U.S. dollars
Marketvalue

Recognized
gains(losses)

306

$ (8)

17,869

855
$847

$

$ 48

Contracted amount

2001
Currency related derivatives:
Forward contracts:
To sell foreign currencies—
U.S.dollars
To buy foreign currencies—
U.S.dollars

Interest related derivatives:
Pay fixed, receive variable:

Total

Over one year298$

17,014$17,312$$20,492$17,078

$

$

48

35

The aggregate amounts contracted to be paid or received andthe market value of derivative transactions in Japanese yen of

the Company and its consolidated subsidiaries at March 31,
2000 was as follows:
Millions of yen
Marketvalue

Unrealize
gains(losses)¥ 1,481
38
17

¥ (0)
(4)
(0)
¥ (4)

Contracted amount

2000
Currency related derivatives:
Forward contracts:
To buy foreign currencies—
U.S.dollars
France Francs
Swiss Francs

Interestswap:
To receive float/pay fixed
Commodity related derivatives:
Futures contract:
To sell metals
To buy metals

Total

Over one year

¥1,48142
17¥1,540¥¥2,701¥2,374

¥

77

¥77

¥ 661
3,563
¥4,224

¥

¥ 617
3,598

¥44
35
¥79

Millions of yen

Thousands of
U.S. dollars

¥

138
¥ 138

Prior to April 1, 2000, derivative transactions were not stated atfair value, and the changes in fair value were not recognized asgains or losses.

6. Inventories
Inventories at March 31, 2001 and 2000 consisted of the following:

2001
Merchandise
Finished products
Semi-finished products and work in process
Raw materials and supplies36¥ 1,266
18,768
12,77941,114¥73,927

2000

2001

835
14,52931,59020,447¥67,401$ 10,218
151,477
103,140
331,832$596,667¥

7. Bank loans and long-term debt
Bank loans are generally represented by short-term notes (mostof which are unsecured) and bank overdrafts, and bore interest
at annual rates of 0.38% to 8.30% and 0.49% to 7.85% at

March 31, 2001 and 2000, respectively. Long-term debt at
March 31, 2001 and 2000 consisted of the following:

Millions of yen

Long-term loans from:
Banks, insurance companies and other financial institutions,maturing through 2006 at interest rates of 1.34% to 7.79%:
SecuredUnsecured
Government owned banks and government agencies,
maturing through 2015 at interest rates of 1.15% to 7.4%:
SecuredUnsecured
2.75% domestic bonds due in 2000
3.0% domestic bonds due in 2001
2.4% domestic bonds due in 2002
1.75% domestic bonds due in 2002
2.2% domestic bonds due in 2004
1.825% domestic bonds due in 2002
2.225% domestic bonds due in 2004
2.0% domestic bonds due in 2005
1.6% domestic bonds due in 2003
Amount due within one year

Thousands of
U.S. dollars

2001

2000

2001

7,843 ¥
10,167

9,914
5,626

$ 63,301
82,05821,842440
10,00010,00010,000
8,000
8,000
7,000
7,000
6,000
6,000
15,00015,00010,00010,00010,00010,00010,00010,000123,822
110,165(26,326) (16,556)¥ 83,839 ¥ 107,266

127,603
2,785¥

15,810345

80,71064,56956,49748,426
121,066
80,71080,71080,710889,145(212,478)$ 676,667

The 2.75% domestic bonds were redeemed during the year
ended March 31, 2001.
The aggregate annual maturities of long-term debt at March 31,
2001 were as follows:Year ending March 31,

2002
2003
2004
2005
2006
Thereafter

Millions of yen

Thousands of
U.S. dollars¥26,326
30,676
20,695
18,143
11,883
2,442$212,478
247,587
167,030
146,433
95,90819,709Assets pledged as collateral for bank loans and long-term
debt at March 31, 2001 were as follows:

Notes and accounts receivable
Trade
Investment securities
Other
Property, plant and equipment,
at net book value

Millions of yen

Thousands of
U.S. dollars¥

614$ 4,956

10,65986,02945,222¥56,495

364,988$455,973

37

8. Income taxes
Income taxes in the accompanying statement of operations comprise corporation tax, inhabitants taxes and enterprise tax. The
aggregate statutory tax rate in Japan was approximately 42.1%
for the year ended March 31, 2001 and 2000 and 47.4% for theyear ended March 31, 1999.
Consolidated overseas subsidiaries are subject to income
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 con-solidated subsidiaries’ effective tax rate for financial statement
purposes for the year ended March 31, 2001 and 2000:
2001

2000

42.1%
(9.8)
3.8
(0.6)
1.9
(6.0)
0.6
(29.3)
(1.1)
1.6%

42.1%
(20.5)
11.0
(2.4)
4.8
(12.1)
1.9(24.9)
6.8
6.7%

Millions of yen

Thousands of
U.S. dollars

Statutory tax rate
Equity in earnings of unconsolidated subsidiaries and affiliated companies
Effect of elimination of counterparty dividends received
Difference in tax rates among the Company and its consolidated subsidiaries
Permanently nondeductible expenses
Permanently nontaxable dividends received
Per capita inhabitant tax
Decrease in valuation allowance
Others
Effective tax rateSignificant components of the Company’s and its consolidated
subsidiaries’ deferred tax assets and liabilities as of March 31,
2001 and 2000 are as follows:

Deferred tax assets:
Net operating loss carry forwards
Retirement benefits
Reserve for restructuring charges
Allowance for doubtful accounts
Reserve for indemnification of damages caused by a consolidated subsidiary
Write-off of investment securities
Depreciation
OthersGross deferred tax assets
Less valuation allowance
Deferred tax assets-less valuation allowance

2001

2000

2001

¥ 8,726
6,459
1,160
482
739

¥ 8,362
3,633$ 70,428
52,131
9,362
3,890
5,964

1,008
4,077
22,651(7,184)
15,467

794
1,730
1,253
2,991
18,763(8,669)10,0948,136
32,905
182,816(57,982)
124,834

Deferred tax liabilities:
Reserve for losses on overseas investment
Reserve for special depreciation of fixed assets
Deferred gains on properties for tax purpose
Reserve for explorations
Depreciation
Allowance for doubtful accounts
Accumulated earnings of overseas subsidiaries
OthersDeferred tax liabilities

(380)
(251)
(3,386)(1,212)(2,706)(1,807)(1,325)(369)(11,436)

(391)
(264)
(2,430)(1,276)(2,139)(254)(6,754)(3,067)(2,026)(27,329)(9,782)(21,840)(14,584)(10,694)(2,978)(92,300)

Net deferred tax assets¥ 4,031¥ 3,340$ 32,534

38

9. Retirement benefits and pension costs
As explained in Note 2. Significant Accounting Policies, effective April 1, 2000, the Company and its domestic subsidiaries
adopted the new accounting standard for employees’ severance

and retirement benefits, under which the liabilities and expenses for severance and retirement benefits are determined basedon the amounts obtained by actuarial calculations.

The liabilities for severance and retirement benefits included in
the liability section of the consolidated balance sheet as ofMarch 31, 2001 consists of the following:

Projected benefit obligation
Fair value of pension assets
Excess of projected benefit obligation over pension assets
Unrecognized net obligation at transition
Unrecognized actuarial differences
Unrecognized prior service cost
Net pension liability recognized in the balance sheet
Prepaid pension expenses
Retirement benefits
Retirement benefits in the consolidated balance sheets also
include estimated liabilities for the unfunded lump-sum benefit

Millions of yen

Thousands of
U.S. dollars

2001

2001

¥(41,488)
17,139¥(24,349)$(334,850)
138,329$(196,521)

2,703

21,816¥(21,646)
18¥(21,664)$(174,705)
146$(174,851)

plan covering directors and corporate auditors (¥463 million($3,737 thousand)).

Included in the consolidated statement of income for the year
ended March 31, 2001 are severance and retirement benefit
expenses comprised of the following:
Millions of yen

Service cost–benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of entire net transition obligation

The discount rate and the rate of expected return on plan assets
used by the Company are primarily 3.0 % and 3.5 %, respectively. The estimated amount of all retirement benefits to be
paid at the future retirement date is allocated equally to eachservice year using the estimated number of total service years.
Actuarial gains and losses are recognized in income statement

10. Research and development expense
Research and development expense included in selling, generaland administrative expenses for the years ended March 31,

11. Special reserves
For the purpose of obtaining tax benefits the Company andsome consolidated subsidiaries have set up special reserves
mainly for losses on overseas investments and explorations inaccordance with the Special Taxation Measures Law of Japan.

Thousands of
U.S. dollars

2001

2001

¥2,212
982
(507)
5,858
¥8,545$17,853
7,926(4,092)47,280$68,967

using the straight-line method in ten years.
Prior to April 1, 2000, the charges to income with respect toretirement benefits and pension costs amounted to ¥4,078 million, and ¥3,100 million for the years ended March 31, 2000,
and 1999, respectively.

2001, 2000, and 1999 were ¥3,484 million ($28,119 thousand),¥4,830 million and ¥6,104 million, respectively.

Such reserves included in retained earnings at March 31, 2001
and 2000 were ¥6,213 million ($50,145 thousand) and ¥4,259
million, respectively.

3912. Shareholders’ equity
The diluted net income per share for the year ended March 31,
2001 and 2000 were not calculated because there were no securities with dilutive effects. The diluted net income per share forthe year ended March 31, 1999 was not calculated because of
net loss incurred for the year. For calculating diluted net income
per share, the number of shares outstanding were adjusted byassuming full conversion of the outstanding convertible bonds
and full exercise of the outstanding warrants.
Under the Commercial Code of Japan (the “Code”), at least
50% of the issue price of new shares, with a minimum of thepar value thereof, is required to be designated as stated capital.
The portion which is to be designated as stated capital is determined by resolution of the Board of Directors. Proceeds inexcess of the amounts designated as stated capital are credited
to additional paid-in capital.
Under the Code, certain amounts of retained earnings equal toat least10% of cash dividends and bonuses to directors and corporate auditors must be set aside as a legal reserve until thereserve equals 25% of common stock. The reserve is not available for dividends but may be used to reduce a deficit by resolution of the shareholders or may be capitalized by resolutionof the Board of Directors. The legal reserve is included in theretained earnings.
At the June 26, 1998 annual meeting, the Company’s shareholders approved certain changes in the articles of incorporation of the Company including an article of treasury stock purchase program, so that the Company could retire its own sharesacquired in a timely manner by offsetting the cost of the treasury stock against retained earnings within the maximum limitof 57,100 thousand shares by resolution of the Board of
Directors. There was no acquisition of treasury stock for thispurpose during the year ended March 31, 2001.
The maximum amount that the Company can distribute as
dividends is calculated based on the unconsolidated financial
statements of the Company and in accordance with the Code.

13. Contingent liabilities
Contingent liabilities at March 31, 2001 were as follows:

As endorser of notes receivable discounted
As guarantor for loans of:Unconsolidated subsidiaries and affiliated companies
Other

14. Effect of bank holiday on March 31, 2001
As financial institutions in Japan were closed on March 31,
2001, amounts that would normally be settled on March 31,
2001 were collected or paid on the following business day,Cash and cash equivalents
Notes receivable trade
Notes payable trade
Notes payable otherNotes receivable discounted

15. Segment information
Business segment information— The primary business activities of the Company and its consolidated subsidiaries include
mineral resources, metallurgy, electronics materials, construction materials & housing and other segments.
(The effects of changes in accounting policies on segment information)(1) Change in depreciation method (in the year ended March
31, 1999)
As explained in Note 2, buildings, excluding building fixtures, acquired after April 1, 1998 are depreciated using the40

Millions of yen

Thousands of
U.S. dollars¥ 3,302$ 26,651

5,659
6,058
¥15,019

45,674
48,894$121,219

April 2, 2001. The effects of the settlements on April 2 insteadof March 31 included the following:

Decreased by ¥403 million ($3,253 thousands)
Increased by ¥2,091 million ($ 16,877 thousand)Increased by ¥1,634 million ($ 13,188 thousand)Increased by ¥54 million($ 436 thousand)Increased by ¥692 million($ 5,585 thousand)straight-line method. The effect of this change regarding
operating income on the segment information was immaterial in the year ended March 31, 1999.
(2) Change in estimated useful lives (in the year ended March
31,1999)
As explained in Note 2, effective April 1, 1998, theCompany and its consolidated domestic subsidiaries shortened the estimated useful lives of buildings, excluding
building fixtures. The effects of this change on the segment
information were to decrease (or increase) operating

income (loss) of mineral resources, metallurgy, electronics
materials, construction materials & housing and others by¥13 million, ¥96 million, ¥60 million, ¥46 million and ¥36
million, respectively in the year ended March 31, 1999.
(3) Foreign currency translation (in the year ended March 31,
1999)
As explained in Note 3, in the year ended March 31, 1999,
the Company and its consolidated domestic subsidiaries
changed the method of translating both short-term receivables and payables denominated in foreign currencies into
Japanese yen from the method using historical exchange
rates to the method using current exchange rates. The effectof this change on the segment information was to decrease
identifiable assets of mineral resources by ¥16 million, andto increase identifiable assets of metallurgy by ¥3 million
and those of electronics materials by ¥9 million in the year
ended March 31, 1999.
(4) Change in depreciation method (in the year ended March
31, 2000)
As explained in Note 3, in the year ended March 31, 2000,
the Company and its ten consolidated domestic subsidiaries
changed the method of depreciation from the declining-balance method to the straight-line method except certain
plant facilities and buildings, excluding building fixtures,acquired after April 1, 1998 which have been computed by
the straight-line method. The effect of this change on thesegment information were to increase (decrease) operating
income (loss) of mineral resources, metallurgy, electricmaterials, construction materials & housing and others by¥307 million, ¥2,500 million, ¥1,768 million, ¥980 millionand ¥376 million, respectively.

(5) Retirement benefits and pension costs (in the year ended
March 31, 2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the new accounting standard
for employees’ severance and retirement benefits. The effectof this change on the segment information were to increase
operating income of mineral resources, metallurgy, electronics materials and others by ¥15 million ($121 thousand), ¥110 million ($888 thousand), ¥211 million ($1,703
thousand) and ¥76 million ($613 thousand) and decrease
operating income of construction materials & housing by¥17 million ($137 thousand), in the year ended March
31,2001, respectively.
(6) Financial instruments (in the year ended March 31, 2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the new accounting standard
for financial instrument. The effect of this change on thesegment information were to increase identifiable assets ofmetallurgy by ¥939 million ($7,579 thousand) in the year
ended March 31,2001.
(7) Foreign currency translation (in the year ended March 31,
2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the new accounting standard
for foreign currency translation. The effect of this change on
the segment information were to decrease identifiable assetsof Elimination or corporate by ¥10,861 million ($87,659
thousand) in the year ended March 31,2001.

Net sales, costs and expenses, operating income (loss), depreciation expense and capital expenditures by segment of businessactivities for the years ended March 31, 2001, 2000, and 1999,

and identifiable assets by segment of business activities at
March 31, 2001, 2000, and 1999 are summarized as follows:
Millions of yen

Mineralresources

Metallurgy

Electronics
materials

Construction
materials& housing

Net sales:
Outside customers
Inter segment
Total¥ 16,987
6,626
23,613¥190,862
29,733
220,595¥129,991
3,268
133,259¥ 24,82852
24,880¥ 12,684
2,390
15,074¥(42,069)(42,069)

375,352

Costs and expenses
Operating income(loss)
Identifiable assets
Depreciation expense
Capital expenditures

21,253¥ 2,360¥ 57,258
2,956
4,420

202,351¥ 18,244¥186,326
4,371
9,031

125,251¥ 8,008¥115,066
7,564
13,31825,184(304)¥¥ 25,222
746
243

14,740334¥¥ 45,382
549
282(40,357)¥ (1,712)¥100,826
588
784

348,422¥ 26,930¥530,080
16,77428,078

2001

OthersEliminationor corporate

Consolidated¥375,352

41

Millions of yen
Mineralresources

Metallurgy

Electronics
materials

Construction
materials& housing

Net sales:
Outside customers
Inter segment
Total¥ 18,938
7,388
26,326¥ 179,538
29,437208,975¥ 116,772
2,483
119,255¥ 26,940
47
26,987¥ 18,111
2,288
20,399¥(41,643)(41,643)

360,299

Costs and expenses
Operating income(loss)
Identifiable assets
Depreciation expense
Capital expenditures

25,058¥ 1,268¥ 54,899
3,764
1,635

201,822¥ 7,153¥ 174,325
4,369
3,865

117,818¥ 1,437¥ 103,356
6,524
12,312

28,131¥ (1,144)¥ 25,064
1,091
856

19,320¥ 1,079¥ 47,437
363
864(40,840)(803)¥¥ 139,040
500
958

351,309¥ 8,990¥ 544,121
16,611
20,4902000

OthersEliminationor corporate

Consolidated¥ 360,299

Millions of yen
Mineralresources

Metallurgy

Electronics
materials

Construction
materials& housing

Net sales:
Outside customers
Inter segment
Total¥ 23,479
9,649
33,128¥ 184,913
23,938208,851¥ 100,220
2,463
102,683¥ 31,394
58
31,452¥ 10,282
3,538
13,820¥(39,646)(39,646)

350,288

Costs and expenses
Operating income(loss)
Identifiable assets
Depreciation expense
Capital expenditures

29,045¥ 4,083¥ 63,396
4,403
3,596

204,559¥ 4,292¥ 165,515
6,644
11,572104,286¥ (1,603)¥ 95,642
7,856
14,062

38,142¥ (6,690)¥ 35,841
2,586
1,602

12,696¥ 1,124¥ 48,536
739
642(39,298)(348)¥¥ 135,589
867
1,025

349,430858¥¥ 544,519
23,09532,499Construction
materials& housing

1999

OthersEliminationor corporate

Consolidated¥ 350,288

Thousands of U.S. dollars
Mineralresources

Metallurgy

Electronics
materials

Net sales:
Outside customers
Inter segment
Total$ 137,102
53,478
190,580$ 1,540,452
239,976
1,780,428$ 1,049,161
26,376
1,075,537$ 200,387
420
200,807

Costs and expenses
Operating income(loss)
Identifiable assets
Depreciation expense
Capital expenditures

171,533$ 19,047$ 462,131
23,85835,674

1,633,180$ 147,248$ 1,503,842
35,27872,8891,010,904
64,633$$ 928,701
61,049107,490203,261$ (2,454)$ 203,567
6,021
1,961

2001

Geographic segment information—(The effects of changes in accounting policies on segment information)(1) Change in depreciation method (in the year ended March
31, 1999)
As explained in Note 2, buildings, excluding building fixtures, acquired after April 1, 1998 are depreciated using thestraight-line method. The effect of this change on the segment information was to decrease operating loss in Japanby ¥17 million in the year ended March 31, 1999.
(2) Change in estimated useful lives (in the year ended March
31, 1999)
As explained in Note 2, effective April 1, 1998, the Company
and its consolidated domestic subsidiaries shortened theestimated useful lives of buildings, excluding building fix-42

Eliminationor corporate

Consolidated$ 102,373
19,290121,663$$ 3,029,475

118,967$ 2,696$ 366,279
4,431
2,276

2,812,122(325,723)$ (13,817) $ 217,353$ 813,769 $ 4,278,289
135,383
4,746
226,618
6,328

Others(339,540)(339,540)

3,029,475

tures. The effect of this change on the segment information
was to increase operating loss in Japan by ¥251 million in
the year ended March 31, 1999.
(3) Foreign currency translation (in the year ended March 31,
1999)
As explained in Note 3, in the year ended March 31, 1999, theCompany and its consolidated domestic subsidiaries changed
the method of translating both short-term receivables andpayables denominated in foreign currencies into Japanese yenfrom the method using historical exchange rates to the method
using current exchange rates. The effect of this change on thesegment information was to decrease identifiable assets inJapan by ¥4 million in the year ended March 31, 1999.

(4) Change in depreciation method (in the year ended March
31, 2000)
As explained in Note 3, in the year ended March 31, 2000,
the Company and its 10 consolidated domestic subsidiaries
changed the method of depreciation from the decline-balance method to the straight-line method except certain plantfacilities and buildings, excluding building fixtures, acquired
after April 1, 1998 which have been computed by thestraight-line method. The effect of this change on the segment information were to increase operating income inJapan ¥5,931 million in the year ended March 31, 2000.
(5) Retirement benefits and pension costs (in the year ended
March 31, 2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the new accounting standard
for employees’ severance and retirement benefits. The effectof this change on the segment information were to increase
operating income of Japan by ¥395 million ($3,188 thou-sand) in the year ended March 31,2001.
(6) Financial instruments (in the year ended March 31, 2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the new accounting standard
for financial instrument. The effect of this change on thesegment information were to increase identifiable assets ofJapan by ¥939 million ($7,579 thousand) in the year ended
March 31, 2001.
(7) Foreign currency translation (in the year ended March 31,
2001)
As explained in Note 2. Significant Accounting Policies,
effective April 1, 2000, the Company and its consolidated
domestic subsidiaries adopted the new accounting standard
for foreign currency translation. The effect of this change on
the segment information were to decrease identifiable assetsof Elimination or corporate by ¥10,861 million ($87,659
thousand) in the year ended March 31,2001.

Geographic segment information for the years ended March 31,
2001, 2000, and 1999 are summarized as follows:
Millions of yen
Domestic

North
AmericaSoutheast
Asia

Net sales:
Outside customers
Inter segment
Total¥328,608
10,334
338,942¥ 14,922
18
14,940¥ 23,663
718
24,381¥

Costs and expenses
Operating income
Identifiable assets

313,854¥ 25,088¥376,180

14,766174¥¥ 36,099

23,407974¥¥ 19,900

2000

Domestic

North
AmericaSoutheast
Asia

Net sales:
Outside customers
Inter segment
Total¥ 318,397
2,920
321,317¥ 14,066
13
14,079¥ 21,216
781
21,997¥

Costs and expenses
Operating income(loss)
Identifiable assets

312,585¥ 8,732¥ 361,881

15,253¥ (1,174)¥ 32,605

20,724¥ 1,273¥ 15,299

Domestic

North
AmericaSoutheast
Asia

Net sales:
Outside customers
Inter segment
Total¥ 308,670
2,336
311,006¥ 18,363
17
18,380¥ 18,017
1,805
19,822¥

Costs and expenses
Operating income(loss)
Identifiable assets

313,405¥ (2,399)¥ 360,398

17,273¥ 1,107¥ 46,710

18,647¥ 1,175¥ 16,684

6,980
854
¥
¥ 10,429

2001

OthersEliminationor corporate

8,159
1,155
9,314

¥

Consolidated¥375,352(12,225)(12,225)

375,352

8,711
603
¥
¥ 12,095(12,316)91¥¥ 85,806

348,422¥ 26,930¥530,080

OthersEliminationor corporate

6,620
1,425
8,045

¥

Millions of yen
Consolidated¥ 360,299(5,139)(5,139)360,299

7,967
78¥¥ 10,912(5,220)81¥¥ 123,424

351,309¥ 8,990¥ 544,121

OthersEliminationor corporate

5,238
2,596
7,834

¥

Millions of yen

1999

Consolidated¥ 350,288(6,754)(6,754)350,288(6,875)121¥¥ 110,298

349,430858¥¥ 544,519

43Thousands of U.S. dollars
Domestic

North
AmericaSoutheast
Asia

Others

Net sales:
Outside customers
Inter segment
Total$ 2,652,203
83,406
2,735,609$ 120,436
145
120,581$ 190,985
5,795
196,780$ 65,851
9,322
75,173

Costs and expenses
Operating income
Identifiable assets

2,533,123$ 202,486$ 3,036,158

119,177$ 1,404$ 291,356

188,918$ 7,862$ 160,614

70,307$ 4,866$ 97,619

2001

Eliminationor corporate

Consolidated$ 3,029,475$$$(98,668)(98,668)

3,029,475(99,403)
735
692,5422,812,122$ 217,353$ 4,278,289

Information for overseas sales
Millions of yen
North
AmericaSoutheast
Asia

EastAsia¥ 18,736¥ 21,681¥ 53,258

2001
Overseas net sales
Consolidated net sales
Share of overseas net sales

5.0%

5.8%

Others

¥

Total

5,278

¥ 98,953¥ 375,352
1.4%
26.4%

14.2%

Millions of yen
North
America

2000¥

Overseas net sales
Consolidated net sales
Share of overseas net sales

17,240Southeast
Asia

¥

4.8%

EastAsia

20,021¥

43,271

5.6%

OthersTotal¥ 84,723¥ 360,299
23.5%
1.1%

¥

4,191

12.0%

Millions of yen
North
America

1999¥

Overseas net sales
Consolidated net sales
Share of overseas net sales

21,308
6.1%

Southeast
Asia¥

EastAsia

17,854¥37,433

5.1%

Others

¥

Total

2,771

¥ 79,366¥ 350,288
0.8%
22.7%

10.7%

Thousands of U.S. dollars

2001
Overseas net sales
Consolidated net sales
Share of overseas net sales

North
AmericaSoutheast
Asia

EastAsia

Others$ 151,219$ 174,988$ 429,846$ 42,599

5.0%

16. Information for certain leases
As a lessee
A summary of assumed amounts (inclusive of interest) of
acquisition cost, accumulated depreciation and net book value

5.8%

14.2%

Millions of yen

Machinery and equipment
OthersTotal

44¥2,494351¥2,845¥1,190179¥1,369Net bookvalue¥1,304172¥1,476$ 798,652$ 3,029,475
1.4%
26.4%

of finance leases accounted for in the same manner as operating leases at March 31, 2001 and 2000 were as follows:

2001
Acquisition Accumulated
cost
depreciation

Total

Thousands of U.S. dollars

2000
Acquisition Accumulated
cost
depreciation¥2,708336¥3,044¥1,110127¥1,237

Net bookvalue¥1,598209¥1,807

2001
Acquisition Accumulated
cost
depreciation$20,129
2,833$22,962$ 9,604
1,445$11,049

Net book
value$10,525
1,388$11,913

Future lease payment, inclusive of interest, at March 31, 2001
and 2000 under such lease were as follows:

Due within one year
Due after one year
Total

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥ 517
959
¥1,476¥ 564
1,243¥1,807$4,173
7,740$11,913Millions of yen

Thousands of
U.S. dollars

Total expenses and assumed depreciation charges for the years
ended March 31, 2001, 2000, and 1999 were as follows:

Total expenses
Assumed depreciation charge

As a lessor
A summary of assumed amounts (inclusive of interest) of acquisition cost, accumulated depreciation and net book value at

2001

2000

1999

2001

¥591
¥591

¥680
¥680

¥773
¥773

$4,770$4,770March 31, 2001 and 2000 were as follows:
Millions of yen

Thousands of U.S. dollars

2000

2001

2001
Acquisition Accumulated
cost
depreciation

Machinery and equipment
Others
Total

¥510
1
¥511

¥164
0
¥164

Net book
value

¥346
1
¥347

Acquisition Accumulated
cost
depreciation

Net book
value

¥382

¥164

¥218

¥382

¥164

¥218

Acquisition Accumulated
cost
depreciation$4,1168$4,124$1,3230$1,323

Net bookvalue$2,7938$2,801

Future lease receipt, inclusive of interest, at March 31, 2001 and2000 under such lease were as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of
U.S. dollars

2001

2000

2001

¥ 65
301
¥ 366

¥ 48
215
¥ 263

$ 525
2,429
$2,954

Millions of yen

Thousands of
U.S. dollars

Total revenue and Depreciation charges for the years ended
March 31, 2001, 2000, and 1999 were as follows:

Total revenues
Depreciation charge

17. Subsequent events
On June 28, 2001 the shareholders of the Company approved
payment of an annual cash dividend of ¥6.0 ($0.05) per share or

2001

2000

1999

2001

¥ 51
¥ 24

¥ 55
¥ 21

¥105
¥ 71

$412
$194

total of ¥3,431 million ($27,692 thousand) to shareholders ofrecord at March 31, 2001.

45

Report of Independent Public Accountants

To the Shareholders and the Board of Directors of
Sumitomo Metal Mining Co., Ltd. :We have audited the accompanying consolidated balance sheets of Sumitomo Metal Mining Co., Ltd. (a Japanese corporation) andsubsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended March 31, 2001, expressed in Japanese yen. Our audits were made in accordance with generally accepted auditing standards in Japan and, accordingly, included such tests of the accounting records and suchother auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position of Sumitomo
Metal Mining Co., Ltd. and subsidiaries as of March 31, 2001 and 2000, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended March 31, 2001 in conformity with accounting principles generally accepted in Japan applied on a consistent basis during the periods, except as noted in the following paragraph.
As explained in Note 2, Sumitomo Metal Mining Co., Ltd. and consolidated domestic subsidiaries adopted, on a prospective basis in
all cases, new Japanese accounting standards for financial instruments, employees' severance and retirement benefits and foreign
currency translation effective April 1, 2000, and for consolidation and income taxes effective April 1, 1999. Also, Sumitomo Metal
Mining Co., Ltd. and its consolidated domestic subsidiaries changed the method of translation, effective April 1, 1998, and Sumitomo
Metal Mining Co., Ltd. and its ten consolidated domestic subsidiaries changed the method of depreciation, effective April 1, 1999, as
referred to in Note 3, with which we concur.
Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated financial statements have been translated fromJapanese yen on the basis set forth in Note 1.

Tokyo, Japan
June 28, 2001

Statement on Accounting Principles and Auditing Standards
This statement is to remind users that accounting principles and auditing standards and their application in practice may vary among
nations and therefore could affect, possibly materially, the reported financial position and results of operations. The accompanying
financial statements are prepared based on accounting principles generally accepted in Japan, and the auditing standards and theirapplication in practice are those generally accepted in Japan. Accordingly, the accompanying consolidated financial statements andthe auditors’ report presented above are for users familiar with Japanese accounting principles, auditing standards and their application in practice.

46

SMM Group

Branches, Divisions & Laboratories

Principal Affiliated Companies

Overseas Affiliated Companies

Head Office11-3, Shimbashi 5-chome
Minato-ku, Tokyo 105-8716, Japan
Phone : 81-3-3436-7701
Facsimile : 81-3-3434-2215

MINERAL RESOURCES
Sumiko Consultants Co., Ltd.*
Sumiko Development andConstruction Co., Ltd.*

Sumitomo Metal Mining
America Inc.*
900 Fourth Avenue, Suite 3950
Seattle, WA 98164, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814

Osaka Branch
5-33, Kitahama 4-chome
Chuo-ku, Osaka 541-0041, Japan
Phone : 81-6-6223-7718
Facsimile : 81-6-6223-7755

METALLURGY ANDMETAL FABRICATION
Hyuga Smelting Co., Ltd.*SMM Trading Co., Ltd.*
Sumitomo Metal Mining Brass &Copper Co., Ltd.*
Taihei Metal Industry Co., Ltd.*
Sumico Lubricant Co., Ltd.*
Nittosha Co., Ltd.*

Sapporo Branch
Kita Ichi-jo Nishi 3-chome
Chuo-ku, Sapporo 060-0001, Japan
Phone : 81-11-261-6431
Facsimile : 81-11-261-6434
Nagoya Branch
1-6, Higashi-Sakura 1-chome
Higashi-ku, Nagoya 461-0005, Japan
Phone : 81-52-963-2360
Facsimile : 81-52-963-2365
Fukuoka Branch
12-1, Tenjin 2-chome
Chuo-ku, Fukuoka 810-0001, Japan
Phone : 81-92-721-3170
Facsimile : 81-92-721-3179
Besshi-Niihama District Div.
5-3, Nishibara-cho 3-chomeNiihama, Ehime 792-8555, Japan
Phone : 81-897-37-4800
Facsimile : 81-897-37-4804
Harima District Div.
346-4, Miyanishi
Harima-cho, Kako-gun
Hyogo 675-0145, Japan
Phone : 81-794-37-8651
Facsimile : 81-794-37-0223
Kunitomi District Div.
Kunitomi, Kyowa-cho
Iwanai-gun, Hokkaido
048-2143, Japan
Phone : 81-135-72-1211
Facsimile : 81-135-72-1015
Electronics Div.
6-1, Suehiro-cho 1-chome
Ome, Tokyo 198-8601, Japan
Phone : 81-428-31-1181
Facsimile : 81-428-31-9170
Hishikari Mine
3844, Maeme, Hishikari-cho
Isa-gun, Kagoshima 895-2701, Japan
Phone : 81-9952-6-3111
Facsimile : 81-9952-6-4130
Central Research Laboratory
18-5, Nakakokubun 3-chome
Ichikawa, Chiba 272-8588, Japan
Phone : 81-47-372-7221
Facsimile : 81-47-372-9133
Niihama Research Laboratory
17-5, Isoura-cho
Niihama, Ehime 792-0002, Japan
Phone : 81-897-37-7171
Facsimile : 81-897-37-7173

ELECTRONICS
Ohkuchi Electronics Co., Ltd.*
Shinko Co., Ltd.*
Sumitomo Metal Mining
Electronics Co., Ltd.*
Niihama Electronics Co., Ltd.*
Ajimu Electronics Co., Ltd.*
Maruzen Industry Co., Ltd.*
Sumiko Tec Co., Ltd.*
Fuji Electronics Industries Co., Ltd.*CONSTRUCTION MATERIALSAND HOUSING
Sumitomo Metal Mining Siporex
Co., Ltd.*
Igeta Heim Co., Ltd.*
Sumiko Tatsumi Construction
Materials Co., Ltd.*OTHER SERVICES
Sumiko Engineering Co., Ltd.*
Igeta Auto Industries Co., Ltd.*Bekko Development & Construction
Co., Ltd.*
Sumiko Information Systems
Co., Ltd.*N. E. Chemcat Corporation
Nippon Ketjen Co., Ltd.

Sumitomo Metal Mining
Arizona Inc.*
900 Fourth Avenue, Suite 3950
Seattle, WA 98164, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814
SMMA Candelaria Inc.*
Corporation Trust Center, 1209
Orange Street, Wilmington,
Delaware, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814
Sumitomo Metal Mining
Canada Ltd.*602-700 West Georgia Street
P.O. Box 10150
Pacific Center, Vancouver
B.C. V7Y1C6, Canada
Phone : 1-604-685-3274
Facsimile : 1-604-685-3276
Sumitomo Metal Mining
Oceania Pty. Ltd.*
Level 21, Governor Phillip Tower
1 Farrer Place, Sydney
N.S.W. 2000, Australia
Phone : 61-2-9247-6511
Facsimile : 61-2-9247-6599
COMPAÑIA CONTRACTUALMINERA CANDELARIAAVENIDA APOQUINDO 4499 4˚
PISO SANTIAGO CHILE
Phone : 56-2-251-1200
Facsimile : 56-2-251-1290

Overseas Office

P.T. International Nickel
Indonesia
Bapindo Plaza II, 22nd Floor
Jalan Jend Sudirman Kav 54-55
Jakarta, Indonesia
Phone : 62-21-5249000
Facsimile : 62-21-5249020

London OfficeVintners Place
68 Upper Thames Street
London EC4V 3BJ, U.K.
Phone : 44-020-7246-3865
Facsimile : 44-020-7246-3931

FIGESBAL
21-23, rue de L'Alma
BP C4 Noumea Cedex
New Caledonia
Phone : 687-27-2031
Facsimile : 687-27-2922

Shanghai Office
RM1105,11th Floor
Shanghai International Trade Center
2201 Yan An Road WestShanghai, China
Phone : 86-21-6219-4077
Facsimile : 86-21-6219-0466

Sumitomo Metal Mining
Asia Pacific Pte. Ltd.*
No. 35/41, Kallang PlaceSingapore 339163
Phone : 65-293-4377
Facsimile : 65-294-8658

Malaysian Electronics
Materials SDN. BHD.*
Lots 7 & 9, Jalan Ragum 15/17
40200 Shah Alam Selangor
Darul Ehsan, Malaysia
Phone : 60-3-5519-8302
Facsimile: 60-3-5519-8305
Sumiko Electronics Taiwan
Co., Ltd.*
16. East 7th St., N.E.P.Z.
Kaohsiung, Taiwan, R.O.C.
Phone : 886-7-365-3592
Facsimile : 886-7-361-2458
Sumiko Leadframe (Thailand)Co., Ltd.*
1/49 Rojana Industrial Park Moo 5,
Tambol kanham, Amphur Utai,
Ayutthaya 13210, Thailand
Phone : 66-35-226303
Facsimile : 66-35-226309
P.T.SUMIKO LEADFRAME BINTAN*
Lots D6&D7, Bintan Industrial
Estate, Lobam/Bintan, Riau
Province, Indonesia
Phone : 62-770-696020
Facsimile: 62-770-696025
Sumiko Leadframe Singapore
Pte.Ltd.*
No.35/41 Kallang Place, Singapore
339163
Phone : 65-293-4377
Facsimile: 65-294-8658
Sumiko Taiwan Precision Co., Ltd.*
16-1.East 7th St., N.E.P.Z.
Kaohsiung, Taiwan,R.O.C.
Phone : 886-7-365-5768
Facsimile: 886-7-365-5758
Sumitomo Metal Mining U.S.A.Inc.*
4055 Calle Platino, Oceanside,CA
92056,U.S.A.
Phone : 1-760-941-4500
Facsimile: 1-760-941-0900
Sumitomo Metal Mining
Electronics Parts Pte. Ltd.*No. 6 Tuas Avenue 20
Singapore 638820
Phone : 65-863-1123
Facsimile : 65-863-2062*Consolidated subsidiaries

M-SMM Electronics SDN. BHD.*
Lots 7 & 9, Jalan Ragum 15/17
40200 Shah Alam Selangor
Darul Ehsan, Malaysia
Phone : 60-3-5519-8140
Facsimile : 60-3-5519-8110

47

Corporate Data
As of March 31, 2001

FOUNDED
1590

PAID-IN CAPITAL¥88.3 billion

INCORPORATED1950

NUMBER OF EMPLOYEES
2,668

HEAD OFFICE
11-3, Shimbashi 5-chome, Minato-ku, Tokyo 105-8716, Japan

Investor Information
As of March 31, 2001

CLOSING DATEThe Company’s books are closed on March 31 each year.

STOCK TRANSACTION UNITS
1,000-share units

REGULAR GENERAL MEETING
The regular general meeting of shareholders is held in June eachyear. The 2001 regular general meeting was held on June 28.

STOCK TRANSFER AGENTThe Sumitomo Trust and Banking Company, Limited
Head office:5-33, Kitahama 4-chome, Chuo-ku, Osaka 540-8639
Stock Transfer Agency Department:
4-4, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8233

COMMON STOCK
Number of authorized shares:
1,000,000,000 shares
Number of issued and outstanding shares:
571,872,794 shares
LISTING OF SHARES
Domestic:
Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo stock
exchanges

PUBLIC NOTICESThe Company’s public notices appear in the Nihon Keizai
Shimbun published in Tokyo, Japan.
INDEPENDENT PUBLIC ACCOUNTANTS
Asahi & Co.
1-2, Tsukudo-cho, Shinjuku-ku, Tokyo 162-8551

PRINCIPAL SHAREHOLDERS
Number of shares held
(thousands)
Japan Trustee Services Bank, Ltd. (Trust accounts)
The Mitsubishi Trust and Banking Corporation (Trust accounts)
The Sumitomo Bank, Limited*
Separately managed money trustee, The Chuo Mitsui Trust and Banking Company, Limited "1"
Pension trustee, The Chuo Mitsui Trust and Banking Company, Limited "2"
Sumitomo Life Insurance Company
Japan Trustee Services Bank, Ltd./The Sumitomo Trust and Banking Co., Ltd.
(Retirement benefit trust account)
The Toyo Trust and Banking Co., Ltd. (Trust accounts "A")
NEC Corporation
Sumitomo Corporation* The Sumitomo Bank, Limited merged with The Sakura Bank, Ltd. on April 1, 2001, and has become The Sumitomo Mitsui Banking Corporation.

48

Percentage of total
shares outstanding

33,091
29,744
20,39817,99916,712
16,193

5.8%
5.2
3.6
3.1
2.9
2.8

14,00012,287
10,001
10,000

2.4
2.1
1.7
1.7

Corporate Officers

DIRECTORDIRECTORDIRECTORDIRECTOR

Yuji Yokoyama

Noboru Hishida

Hirosuke Chihara

Nobuto Yamaguchi

REPRESENTATIVE DIRECTOR

REPRESENTATIVE DIRECTOR

Koichi Fukushima

Chitsura Arakawa

DIRECTORS AND AUDITORSEXECUTIVE OFFICERS(As of June 28, 2001)(As of June 28, 2001)

REPRESENTATIVE DIRECTORSPRESIDENT

Koichi Fukushima
Chitsura Arakawa
DIRECTORS
Noboru Hishida
Hirosuke Chihara
Yuji Yokoyama
Nobuto Yamaguchi
AUDITORS
Isao Shima
Masahide Tsuno
Setsuya Kuroda

Koichi Fukushima
SENIOR MANAGING EXECUTIVEOFFICER
Chitsura Arakawa
MANAGING EXECUTIVE OFFICERS
Noboru Hishida

EXECUTIVE OFFICERS
Takeshi Yamane
Takayoshi Kimura
Ryoichi Suzuki
Yukio Ishikawa
Takuro Mochihara
Kenji Fujimura

Hirosuke Chihara
Akira Ichinose
Koji Aiba
Yuji Yokoyama
Nobuto Yamaguchi

Hajime Ohta
49