Consolidated Financial Statements
Toho Zinc Co., Ltd.
and Consolidated Subsidiaries
For the years ended March 31, 2011 and 2010
with Report of Independent Auditors

Report of Independent Auditors
The Board of Directors
Toho Zinc Co., Ltd.
We have audited the accompanying consolidated balance sheets of Toho Zinc Co., Ltd. andconsolidated subsidiaries as of March 31, 2011 and 2010, and the related consolidated
statements of income, comprehensive income, changes in net assets, and cash flows for theyears then ended, all expressed in yen. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Toho Zinc Co., Ltd. and consolidated subsidiaries at
March 31, 2011 and 2010, and the consolidated results of their operations and their cash flows
for the years then ended in conformity with accounting principles generally accepted in Japan.
Supplemental Information
As described in Note 1, effective April 1, 2010, the Company adopted the “AccountingStandard for Business Combinations” (Statement No. 21 issued by ASBJ on December 26,2008).
The U.S. dollar amounts in the accompanying consolidated financial statements with respect
to the year ended March 31, 2011 are presented solely for convenience. Our audit also
included the translation of yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 2.

Ernst & Young ShinNihon LLC
June 28, 2011

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31,
2011
2010
2011
(Millions of yen)(Thousands of
U.S. dollars)
AssetsCurrent assets:
Cash and time deposits
Notes and accounts receivable, trade
Inventories (Note 3)
Advance payment
Deferred tax assets (Note 11)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥

12,739 ¥16,74627,867
1,674
2,317
734
(24)
62,055

12,216 $17,161
29,559
2,219
765
878
(23)
62,779Less: Accumulated depreciation
Net property, plant and equipment

21,40058,39016,959175
7,954
104,881(58,982)
45,89819,12855,652
16,951
175
2,382
94,290(58,958)
35,331

257,366
702,224
203,956
2,104
95,658
1,261,346(709,344)
551,990

Investments and other assets:
Investment securities (Notes 7and 15)
Investments in non-consolidated subsidiaries (Note 6)
Deferred tax assets (Note 11)
Goodwill (Note 19)
Mining right (Note 5 and 21)
Other assets (Note 6)
Less: Allowance for doubtful accounts
Total investments and other assets

4,982
389
789
571
24,433
2,669(781)
33,053

8,582
389
1,465
–
36
5,025
(786)
14,71359,915
4,678
9,488
6,867
293,842
32,098(9,392)397,510141,007¥ 112,823$ 1,695,814

Property, plant and equipment:
Buildings and structures (Note 7)
Machinery and equipment (Note 7)
Land (Notes 4 and 7)
Lease assets
Construction in progress

Total assets¥

153,205
201,395
335,141
20,132
27,8658,827(288)
746,3012

March 31,
2011
2010
2011
(Millions of yen)(Thousands of
U.S. dollars)
Liabilities and net assets
Current liabilities:
Notes and accounts payable, trade
Short-term borrowings (Note 7)
Current portion of long-term debt (Note 7)
Commercial papers (Note 7)
Lease obligations (Note 7)
Accrued income taxes
Accrued expenses
Accrued directors’ bonus
Reserve for loss on disaster
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Note 7)
Lease obligations (Note 7)
Deferred tax liabilities related to land revaluation (Note 4)
Accrued employees’ pension and severance costs (Note 8)
Accrued directors’ and statutory auditors’ retirement
allowances
Accrued environmental allowances
Asset retirement obligations (Note 9)
Other long-term liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders’ equity:
Common stock:
Authorized – 264,000,000 shares
Issued– 135,855,217 shares in 2011 and
135,855,217 shares in 2010
Capital surplus
Retained earnings
Less: Treasury stock, at cost – 55,228 shares in 2011 and
54,528 shares in 2010
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains on other securities
Loss on deferred hedges
Surplus from land revaluation (Note 4)
Foreign currency translation adjustments
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

¥

7,321
22,509
2,760
2,000
209
1,906
3,246
30
368
10,70451,056¥

6,227
22,478
6,031
2,000
17
2,208
2,193
39
–
4,531
45,727$88,045
270,70333,19324,052
2,513
22,92239,037360
4,425
128,731614,022

17,086
232
5,779
2,669

2,896
160
5,779
2,896

205,484
2,790
69,50032,098

52
168
763
3,101
29,85480,91167
157–
91
12,04957,777

625
2,020
9,176
37,294359,037
973,072

14,6309,876
27,748

14,6309,876
21,153

175,947
118,773
333,710(23)
52,232(23)
45,637(276)
628,165

2,663
899
10,811(176)(28,514)(2,371)
7,572
91,064
7,572
(649)
1,763
21,202
9,409
7,864
94,57655,04660,096
722,742¥ 141,007 ¥ 112,823 $ 1,695,814

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

3

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Income
Year ended March 31,
2011
2010
2011
(Millions of yen)(Thousands of
U.S. dollars)
Net sales
Cost of sales
Gross profit¥ 103,628
87,62016,007¥ 83,592
69,85013,741$ 1,246,277
1,053,758
192,507

3,801
1,143
61
30
7
102
249
2,113
7,510
8,497

2,974
848
68
39
–
54
237
1,217
5,439
8,301

45,712
13,746
733
360
84
1,226
2,994
25,41190,318102,188

293
(682)
939
(153)
(224)
(303)
(130)
35
–
2,266
3,213
(1,379)

451
(416)
136
296
–
(292)
(418)
–
(321)
–
–
–

3,523
(8,202)
11,292(1,840)(2,693)(3,644)(1,563)420–
27,25138,641(16,584)

–

13

–

(6)
110
3,978
12,476

–
34
(516)
7,784

(72)
1,322
47,841150,042

3,107
1,823
4,930
7,545
7,545

2,585
544
3,130
–
4,654

37,36621,92459,29090,73990,739Selling, general and administrative expenses:
Transportation expense
Salaries and wages
Pension and severance costs
Directors’ bonus
Provision for doubtful accounts
Depreciation
Research and development costs
Other
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Foreign exchange gains, net
Investment (losses) gains on equity method
Loss on valuation of derivatives
Loss on disposal of property, plant and equipment
Impairment losses on fixed assets (Note 5)
Gain on sales of investment securities, net
Write-down of investment securities
Gain on step acquisitions
Gain on redemption of investment securities
Loss on disaster (Note 5)
Gain on adjustment for changes of accounting standard forconstruction contracts
Loss on adjustment for changes of accounting standard for
asset retirement obligations
Other, net
Income before income taxes
Income taxes:
Current
DeferredIncome before minority interests
Net income

¥

¥

$

4

Year ended March 31,
2011
2010
2011
(Yen)
Per share:
Net income – basic
Cash dividends

¥
¥

55.57
7.00

¥
¥

(U.S. dollars)
34.27
7.00

$
$

0.66
0.08

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

5

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Comprehensive Income

Income before minority interests¥

Other comprehensive income:Net unrealized gains (losses) on other securities
Loss on deferred hedges
Foreign currency translation adjustments
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests¥

Year ended March 31,
2011
2010
2011
(Millions of yen)(Thousands of
U.S. dollars)
7,545 ¥
4,654 $ 90,739(1,754)(2,194)
1,763

2,029
(60)
–

(21,094)(26,386)
21,202640(1,544)
6,001

504
2,472
7,126

7,696
(18,568)
72,1707,126 $–

72,170
–

6,001
–

¥

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

6

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets
Shareholders’ equity
Number ofshares ofcommon stock
issuedCommonstock

CapitalsurplusRetainedearnings

Accumulated other comprehensive income

Treasurystock (*)

(Thousands)
Balance at March 31, 2009
Dividends from surplus
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equityBalance at March 31, 2010
Dividends from surplus
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equityBalance at March 31, 2011

135,855––––

Loss ondeferredhedgesSurplusfrom land
revaluation

Foreigncurrencytranslation
adjustments

Total
net assets

7,574
–
–
–
–

(1,145)––––

48,599
(679)
4,654
(0)
1

(Millions of yen)
14,630
–
–
–
–

9,877
–
–
–
(0)

17,176
(679)
4,654
–
1

(22)
–
–
(0)
0

625
–
–
–
–

(116)
–
–
–
–

–

–

–

–

–

2,038

(60)

(1)

495

2,470

135,855––––

14,630
–
–
–
–

9,876
–
–
–
0

21,153
(950)
7,545
–
–

(23)
–
–
(0)
0

2,663
–
–
–
–

(176)
–
–
–
–

7,572
–
–
–
–

(649)
–
–
–
–

55,046
(950)
7,545
(0)
0

–

–

135,855¥ 14,630

¥

–

–

9,876

¥ 27,748

–
¥

(23)

Shareholders’ equity

Balance at March 31, 2010
Dividends from surplus
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equityBalance at March 31, 2011

Net
unrealized
gains onothersecurities¥(1,763)(2,194)899¥ (2,371)

–
¥

7,572

2,413

(1,544)

1,763¥ 60,096

Foreigncurrencytranslation
adjustments

Total
net assets¥

Accumulated other comprehensive incomeNet
unrealized
gains onothersecurities

Loss ondeferredhedgesSurplusfrom land
revaluation

Commonstock

CapitalsurplusRetainedearnings

Treasurystock (*)

$175,947––––$ 118,773–––
0$ 254,395(11,425)
90,739––(Thousands of U.S. dollars )$ (276)$ 32,026$ (2,116)
–
–
–
–
–
–
(0)
–
–
0
–
–

$ 91,064–––––$175,947–$ 118,773–$ 333,710–$ (276)(21,202)$ 10,811–$ 91,064(26,386)$ (28,514)$$(7,805)––––$662,008(11,425)
90,739(0)029,01921,202(18,568)$722,742(*) There were 55,228 shares and 54,528 shares of treasury stock as of March 31, 2011 and 2010,
respectively.

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

7

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Year ended March 31,
2011
2010
2011
(Millions of yen)(Thousands of
U.S. dollars)
Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Impairment loss on fixed assets
Amortization of goodwill
Write-down of investments securities
Gain on redemption of investment securities
Decrease in allowance for doubtful accounts(Decrease) increase in accrued directors’ bonus
Decrease in accrued employees’ pension and severance costs
Increase in reserve for loss on disaster
Interest and dividend income
Interest expenses
Investment losses (gains) on equity method
Gain on step acquisitions
Loss on disasterNet loss on sale and disposal of property, plant and equipment
Decrease (increase) in notes and accounts receivable, trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable, trade
Other, net
Sub totalInterest and dividend income received
Interest expense paid
Income taxes (paid) refunded
Net cash provided by (used in) operating activities¥ 12,476
4,160
130
17
–
(3,213)
(2)
(9)
(226)
368
(293)
682
153
(2,266)
382
263
537
2,719
1,024
1,579
18,484469(575)(3,422)
14,954

¥

7,784
3,184
418
–
321
–
(24)
39
(251)
–
(451)
416
(296)
–
–
286
(5,755)(7,908)(1,829)(108)(4,174)
403
(419)
1,366
(2,824)$ 150,042
50,0301,563
204–(38,641)(24)(108)(2,717)
4,425(3,523)
8,202
1,840(27,251)
4,594
3,162
6,458
32,69912,31518,989222,297
5,640(6,915)(41,154)
179,843

Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for purchases of investment securities
Payments for purchases of investments in affiliates
Payments for purchase of investments in subsidiaries resulting inchange in scope of consolidation (Note 19)
Payments of loans receivable
Other, net
Net cash used in investing activities(7,540)51(3,604)–(2,890)
15
(5)
(139)

(90,679)613(43,343)–(11,993)–(969)(24,057)

–
(11)
(128)
(3,158)(144,233)–(11,653)(289,320)

Cash flows from financing activities:
Increase in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
Redemption of convertible bonds
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities

25
16,950(6,031)
(507)
(950)
(131)
9,354

–
–
(3,390)–(679)(6)(4,076)300
203,848(72,531)(6,097)(11,425)(1,575)
112,495

280
532
12,201¥ 12,7342(10,056)
22,258¥ 12,201

3,367
6,398
146,734$ 153,144

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 16)

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

8

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2011

1.

Summary of Significant Accounting Policies(a) Basis of presentation
Toho Zinc Co., Ltd. (the “Company”) and its domestic subsidiaries maintain their booksof account in conformity with accounting principles generally accepted in Japan, and, itsforeign subsidiaries maintain their books of account in conformity with International
Financial Reporting Standards (“IFRS”) or those of their countries of domicile.
The accompanying consolidated financial statements of the Company and its
consolidated subsidiaries (the “Companies”) are prepared on the basis of accounting
principles generally accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of IFRS, and are compiled from the consolidated
financial statements prepared by the Company as required by the Financial Instruments
and Exchange Law of Japan.
Certain amounts in the prior years’ financial statements have been reclassified toconform to the current year’s presentation.
Effective April 1, 2010, the Company adopted the “Cabinet Office Ordinance Partially
Revising Regulation on Terminology, Forms and Preparation of Financial Statements”(Ordinance No. 5 issued by Cabinet Office on March 24, 2009) based on the“Accounting Standard for Consolidated Financial Statements” (Statement No. 22 issuedby Accounting Standards Board of Japan (“ASBJ”) on December 26, 2008). As a result,“Income before minority interests” was independently presented on the consolidated
financial statements for the year ended March 31, 2011.
In addition, effective April 1, 2010, the Company adopted the “Accounting Standard for
Presentation of Comprehensive Income” (Statement No. 25 issued by ASBJ on June 30,2010). As a result, the consolidated statements of comprehensive income have beenpresented in the consolidated financial statements. The amounts of “Accumulated othercomprehensive income” and “Total accumulated other comprehensive income” as ofMarch 31, 2010 indicate the amounts of “Revaluation and translation adjustments” and“Total revaluation and translation adjustments,” respectively, as of March 31, 2010.
As permitted under the Financial Instruments and Exchange Law, amounts of less than
one million yen have been omitted. As a result, the totals shown in the accompanying
consolidated financial statements (both in yen and in U.S. dollars) do not necessarily
agree with the sums of the individual amounts as of and for the years ended March 31,
2011 and 2010.
Certain items presented in the consolidated financial statements submitted to the
Direction of Kanto Financial Bureau in Japan have been reclassified in theaccompanying consolidated financial statements for the convenience of readers outside
Japan.

9

(b) Principles of consolidation
The accompanying consolidated financial statements include the accounts of theCompany and its significant subsidiaries that are controlled by the Company. Under theeffective control approach, all significant majority-owned companies are to beconsolidated. Additionally, companies in which share ownership equals 50% or lessmay be required to be consolidated in cases where such companies are effectively
controlled by other companies through the interests held by a party who has a close
relationship with the parent. All significant inter-company transactions and accounts
are eliminated in consolidation.
For the year ended March 31, 2011, CBH Resources Ltd., which was an affiliate
accounted for using the equity method for the year ended March 31, 2010, was includedin the scope of consolidation due to additional acquisition of its shares. Please refer toNote 19 Business Combination for details.
(c) Foreign currency translation(1) Foreign currency transaction
All receivables and payables denominated in foreign currencies are translated into
Japanese yen at the exchange rate prevailing at the balance sheet date.
(2) Foreign currency financial statements
The assets and liabilities of the foreign consolidated subsidiaries are translated into
Japanese yen at current exchange rate prevailing at the balance sheet date.
Revenue and expense accounts are translated at the current exchange rate prevailingat the balance sheet date. Foreign currency translation adjustments are included in
net assets.
(d) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of
cash on hands, bank deposits be able to withdraw on demand and short-term investmentswith original maturity of three months or less and minor risk for the fair value
fluctuation.
(e) Inventories
Finished goods, work in process and raw materials are stated at the lower of cost or net
selling value, for which cost is primarily determined by the first-in first-out method.
Supplies are stated at the lower of cost or net selling value, for which cost is determinedby the moving average method.
(f)Financial instruments(1) Investment securities
Marketable securities classified as other securities are carried at fair value based on
the average of market price during the last month of the fiscal year with any
changes in unrealized gains or losses, net of income taxes, included directly in net
assets.
10Non-marketable securities classified as other securities are carried at cost.
securities sold is determined by the moving average method.

Cost of(2) Derivatives
The Company has entered into various derivative transactions, including forward
foreign exchange contracts, interest rate swaps and commodity futures, in order tomanage certain risk arising from adverse fluctuations in foreign currency exchange
rates, interest rates and commodity prices.
All derivatives are recognized in the balance sheet at fair value, with changes in fairvalue included in net income for the period in which they arise, except forderivatives that are designated as “hedging instruments” (see Note 1 (f) (3) Hedge
accounting below).
(3) Hedge accounting
Gains or losses arising from changes in fair value of the derivatives designated as“hedging instruments” are deferred as an asset or liability and included in net
income in the same period during which the gains and losses on the hedged items ortransactions are recognized.
Hedging instruments are derivative transactions including forward exchange
contracts, commodity futures and interest rate swaps. The related hedged items areprimarily payables denominated in foreign currency in connection with purchases ofraw materials and products, commodities and long-term debt, respectively.
The Company has a policy to utilize the above hedging instruments in order toreduce the Company’s exposure to the risk of the currency, price and interest rate
fluctuations.
The Company evaluates effectiveness of its hedging activities by reference to theaccumulated gains or losses on the hedging instruments and the related hedged
items from the commencement of the hedging transactions. The Company omits
to assess hedge effectiveness of interest rate swaps which qualify for hedge
accounting and meet specific matching criteria.
(g) Property, plant and equipment and depreciation
Property, plant and equipment, except for lease assets, are stated at cost and have been
mainly depreciated by the straight-line method over the estimated useful lives ofrespective assets.
(h) Intangible assets and amortization
Mining right is mainly amortized by using the unit-of-production method. Goodwill,
software for internal use and other assets are amortized by using the straight-line method.
Amortization period of goodwill is determined on a reasonable basis within 20 years.
Software for internal use is amortized over estimated useful lives (less than 5 years).

11

(i)

LeasesLease assets used under finance leases, primarily the storage equipments (structures) in
Smelting industry, and capitalized, are depreciated over the lease terms of the respective
assets by the straight-line method with no residual value.
Finance leases which took place prior to April 1, 2008, and do not transfer ownership ofthe leased assets to the lessee, continue to be accounted for as operating leases.

(j)

Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount sufficient to coverpossible losses on collection. The allowance consists of the estimated uncollectible
amounts with respect to specific receivables plus a percentage based on historical credit
losses.

(k) Accrued directors’ bonuses
Accrued directors’ bonuses at the balance sheet date are based on an estimate of theamount to be paid as bonuses for services rendered by that date.
(l)

Accrued employees’ pension and severance costs
Accrued employees’ retirement benefits are provided mainly at an amount calculated
based on the retirement benefit obligation and the fair value of the pension plan assets asof the balance sheet date, as adjusted for unrecognized actuarial gain or loss andunrecognized prior service cost. The retirement benefit obligation is attributed to eachperiod by the straight-line method over the estimated years of service of the employees.
Actuarial gain and loss are amortized in the year following the year in which the gain orloss is recognized primarily by the straight-line method over the period of 10 years
which is the average remaining number of years of service of the employees.
Prior service cost is being amortized as incurred by the straight-line method over theperiod of 10 years which is the average remaining number of years of service of theemployees.

(m) Accrued directors’ and statutory auditor’s retirement allowances
In order to prepare for the disbursements of the directors’ and statutory auditor’s
retirement allowances, the Company records an amount required to be paid out as at theend of the fiscal year which is calculated based on internal rules.
Note that the Company discontinued the system for directors’ and statutory auditor’s
retirement allowances in accordance with a decision by the board of directors held on
May 22, 2007, and hence the balance as at the end of this consolidated fiscal year is theamount for periods in which the directors and statutory auditors served prior to June
2007.

12

(n) Accrued environmental allowances
Accrued environmental allowances are estimated and recorded to provide for future
potential costs, such as costs related to disposal of polychlorinated biphenyl (“PCB”).
(o) Accrued expected losses on construction contracts in process allowances
In order to prepare for future losses related to construction orders, the Company hasrecorded an estimated amount for construction which has yet to be transferred as at theend of the consolidation fiscal year. The accrued expected losses, which are included inother current liabilities and inventories are presented in gross on the consolidated balance
sheets.
(p) Reserve for loss on disasterIn order to prepare for future payments of restoration costs on the Great Eastern Japan
Earthquake, the Company has provided a reserve at an amount which is reasonably
estimated to be incurred after March 31, 2011.
(q) Income taxes
Deferred tax assets and liabilities are determined based on the differences between
financial reporting and the tax bases of the assets and liabilities and are measured using
the enacted tax rates and laws which will be in effect when the differences are expected
to reverse.
(r)Recognizing revenues
Revenues and costs of construction contracts of which the percentage of completion canbe reliably estimated are recognized by the percentage-of-completion method. The
percentage of completion is calculated at the cost incurred as a percentage of theestimated total cost. The completed-contract method continues to be applied for contracts
for which the percentage of completion cannot be reliably estimated.

(s) Appropriation of retained earnings
Cash dividends and transfers to legal reserve are recorded in the fiscal year that the
proposed appropriation of retained earnings is approved at the shareholders’ meeting.
(t)

Net income per share
Net income per share is computed based on the net income available for distribution toshareholders of common stock and the weighted average number of shares of common
stock outstanding during the year.

(u) Asset retirement obligations
Asset retirement obligations are calculated based on the estimated exploration period
from commencement of operation deemed as estimated usable period, using 5% discountrate. The amount presents mainly for the CBH’s obligations to restore its mine site at
Endeavor Mine to its original state upon the closure of Endeavour Mine owned by CBH.
13

(v) Accounting changes(1) Asset retirement obligations
Effective April 1, 2010, the Company adopted the “Accounting Standard for Asset
Retirement Obligations” (Statement No.18 issued by ASBJ on March 31, 2008) andthe “Guidance on Accounting Standard for Asset Retirement Obligations”(Guidance No.21 issued by ASBJ on March 31, 2008). The effect of this change
on income was insignificant.
(2) Business combinations
Effective April 1, 2010, the Company adopted the “Accounting Standard forBusiness Combinations” (Statement No. 21 issued by ASBJ on December 26, 2008),
the “Accounting Standard for Consolidated Financial Statements” (Statement No.
22 issued by ASBJ on December 26, 2008). the “Partial Amendments to AccountingStandard for Research and Development Costs” (Statement No. 23 issued by ASBJ
on December 26, 2008), the “Revised Accounting Standard for Business
Divestitures” (Statement No. 7 issued by ASBJ on December 26, 2008), the“Revised Accounting Standard for Equity Method of Accounting for Investments”(Statement No. 16 issued by ASBJ on December 26, 2008) and the “Revised
Guidance on Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (Guidance No. 10 issued by ASBJ on
December 26, 2008).

2.

U.S. Dollar Amounts

U.S. dollar amounts presented in the accompanying consolidated financial statements and inthese notes are included solely for the convenience of readers outside of Japan, at theprevailing exchange rate of ¥83.15 to U.S.$1 on March 31, 2011. These translations should
not be construed as representations that the yen amounts actually represent, or have been or
could be converted into U.S. dollars at that or any other rate.

3.

Inventories

Inventories at March 31, 2011 and 2010 consisted of the following:
March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)
Finished goods
Work in process
Raw materials and supplies
Total

¥

4,548
10,541
12,776¥ 27,867

¥

6,352
7,326
15,881¥ 29,559$

54,696
126,770
153,650$ 335,14114

4.

Land Revaluation

In accordance with the Land Revaluation Law, the Company’s land used for its business
operations was revalued as follows:
Date of revaluation: March 31, 2000
The difference between total fair value of land and the total book value after revaluationof land at March 31, 2011 and 2010 were ¥6,116 million ($73,553 thousand) and ¥5,743
million, respectively.
The tax effect of the excess on revaluation is recorded as “Deferred tax liabilities related toland revaluation” which is included in liabilities, and the remainder, net of income taxes
portion of the excess on revaluation is presented as “Surplus from land revaluation” which isincluded in net assets.

5.

Impairment Loss on Fixed Assets

The Company has recognized impairment losses on the assets group for the years ended
March 31, 2011 and 2010 as follows:

Location

Year ended March 31, 2011
Use
Category(Millions (Thousands ofof yen)U.S. dollars)

Annaka City,
Gunma (Note*)

Idle assets

Building and structures
Machinery and equipment
Other

Iwaki City,
Fukushima

Idle assets

Building and structures
Machinery and equipment
Other

10
4
0
15

120
48
0
180

Western Australia,
Australia

Resource
assetsMining right

114

1,371

¥

¥

Location
Annaka City,
Gunma, otherYear ended March 31, 2010
Use
Category
Idle assets

Machinery, etc.
Structures, etc.
Others

217
163
0
382

512

$

$

2,609
1,960
0
4,594

6,157

(Millionsof yen)
¥

¥

382
34
0
418

The Company determined asset group based on the categories used for their managerial
accounting. With respect to idle assets, each asset is treated as an individual unit to apply
the accounting for the impairment.

15

The Company recognized impairment losses for entire book value of idle assets on the groundthat they were projected to generate no future cash-in flows and were not readily salable
either.
Note* Impairment loss on idle assets at Annaka City, Gunma, amounting to ¥382 million($4,594 thousand) was included in Loss on disaster for the year ended March 31,
2011 as follows:Year Ended March 31, 2011
(Millions of (Thousands ofyen)
U.S. dollars)
Provision for loss on disaster
Impairment loss on fixed assets and loss oninventories
Fixed costs during idle period and other expenses
Loss on disaster, total

6.

¥

368

¥

722
288
1,379

$

4,425

$

8,683
3,463
16,584

Investments in Non-Consolidated Subsidiaries and Affiliates

Investments in non-consolidated subsidiaries and affiliates as of March 31, 2011 and 2010
were summarized as follows:
March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)
Subsidiaries
Affiliates

¥
¥

389
94
484

¥
¥

389
5,446
5,835

$
$

4,678
1,130
5,820

16

7.

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt at March 31, 2011 and 2010 consisted of thefollowing:
March 31,

Amount(Millions ofyen)
Short-term bank loans ¥Commercial papers
Current portion of
long-term debt
Current portion oflease obligations
Long-term debt
Lease obligations
Total
¥

2010

2011
Weighted
averageinterest
rate

Last due on

2011

AmountAmount(Millions of (Thousands ofyen)
U.S. dollars)¥

22,478 $ 270,703
2,000
24,05222,509
2,000

0.8%
0.2

2,760

1.3

6,031

209
17,086232
44,798

–
0.9
–

17
2,513
2,896
205,484
160
2,790
33,584 $ 538,761

2012.4 ~ 2022.9
2012.4 ~ 2025.3¥

33,193

Average interest rates are calculated by using weighted-average interest rates as at March 31,
2011. Average interest rates on lease obligations are not provided because interest
equivalents included in the total lease payments are allocated to each applicable fiscal year ona straight-line basis.
The maturities of long-term debt and lease obligation outstanding as at March 31, 2011 wereas follows:Year ending March 31,
2012
2013
2014
2015
2016
Thereafter
Total

Long-term
Lease
debt
obligation(Millions of yen)

Long-term
Lease
debt
obligation(Thousands of U.S. dollars)

¥

$

¥

2,760
3,317
2,897
4,225
6,632
13
19,846

¥

¥

209
107
16
13
9
86
442

33,19339,891
34,84050,81179,759156$ 238,677

$

$

2,513
1,286
192
156
108
1,034
5,315

Assets pledged as collateral for the long-term debt, including the current portion, at March 31,
2011 and 2010 were as follows:17March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)

Pledged assets

Land (*)
Buildings and structures (*)
Machinery and equipment (*)
Investment securities
Total¥ 13,792
4,752
8,605
155
¥ 27,305¥ 13,792
5,048
9,768
172
¥ 28,781$ 165,868
57,149103,487
1,864$ 328,382(*) For the above assets, a revolving mortgage is set at the maximum amount of ¥1
million ($12 thousand) with one bank at March 31, 2011.

8.

Employees’ Pension and Severance Costs

The Company and its domestic consolidated subsidiaries have defined benefit plans, i.e.,
defined benefit corporate pension plans and lump-sum payment plans, covering substantiallyall employees who are entitled to lump-sum or annuity payments, the amounts of which are
determined by reference to their basic rates of pay, length of service, and the conditions underwhich termination occurs.
The funded status of retirement benefit obligations at March 31, 2011 and 2010 were as
follows:
March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)
Projected benefit obligations
Plan assets at fair value
Unfunded status
Unrecognized actuarial loss
Unrecognized prior service costs
Accrued employees’ pension and severance costs

¥

4,182
(1,675)
2,506
(110)
272
¥ 2,669¥

4,468 $
(1,719)
2,749
(164)
311
¥ 2,896 $50,294(20,144)
30,138(1,322)
3,271
32,098The compositions of employees’ pension and severance costs for the years ended March 31,
2011 and 2010 were as follows:Year ended March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service costs
Total

¥

¥

193
85
(34)
93
(38)
298

¥

¥

198 $
87
(27)
106
(38)
325 $

2,321
1,022
(408)
1,118
(457)
3,583
18

The assumptions used in accounting for the defined benefit pension plans for the years ended
March 31, 2011 and 2010 were as follows:Year ended March 31,
2010
2011
Discount rate
Expected rate of return on plan assets

9.

2.0%
2.0%

2.0%
2.0%

Asset retirement obligations

The changes in asset retirement obligations for the year ended March 31, 2011 were as
follows:
March 31, 2011

(Millions (Thousands ofof yen)U.S. dollars)
Balance at the beginning of year
Additional provisions associated with the acquisition ofproperty, plant and equipment
Reconciliation associated with the passage of time
Increase due to newly consolidated subsidiary (Note*)
Foreign currency translation adjustment
Balance at the end of year

¥

28

¥

105
15
549
64
763

$

336

$

1,262
180
6,602
769
9,176

Note* The increase is due to the consolidation of CBH Resources Ltd. (hereinafter “CBH”)
which became a wholly-owned subsidiary of the Company during the year ended
March 31, 2011.

10. Net Assets
The Corporation Law of Japan provides that an amount equal to 10% of the amount to be
disbursed as distributions of capital surplus (other than the capital reserve) and retained
earnings (other than the legal reserve) be transferred to the capital reserve and the legal
reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of
the common stock. Such distributions can be made at any time by resolution of thestockholders, or by the Board of Directors if certain conditions are met.

19

11. Income Taxes
At March 31, 2011 and 2010, significant components of deferred tax assets and liabilities
were as follows:
March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Losses on deferred hedges
Accrued employees’ pension and severance costs
Net loss carried forward
Accrued employees’ bonus
Tangible fixed assets
Asset retirement obligations
Accrued enterprise tax
Reserve for loss on disaster
Elimination of intercompany profits
Inventories write-off
Write-down of investment securities
Other
Gross deferred tax assets
Less: Valuation allowance
Total deferred tax assets

¥

1,627
1,086
741
277
252
220
163
149
122
80
–
1,245
5,965
682
5,283

¥

121
1,173
–
279
–
–
172
–
109
164
1,733
722
4,474
418
4,056

$

19,567
13,060
8,911
3,331
3,030
2,645
1,960
1,791
1,467
962
–
14,972
71,737
8,202
63,535

Deferred tax liabilities:
Mining right(1,262)
Unrealized gains on other securities(606)
Special tax-purpose reserve for condensed bookingof tangible assets(19)
Asset retirement obligations
(8)
Other
(278)
Total deferred tax liabilities(2,176)
Net deferred tax assets¥ 3,106–(1,799)(15,177)(7,288)(25)––(1,825)¥ 2,231(228)(96)(3,343)(26,169)$ 37,354

Deferred tax liabilities:
Deferred tax liabilities related to land revaluation

¥

$

¥

5,779

5,779

69,500

The reconciliation between the statutory tax rate and the effective tax rate for the years ended
March 31, 2011 and 2010 is not shown because the difference was less than 5% of thestatutory tax rate.

2012. Leases
As lessees:
As described in Note 1 (i), the Company and domestic consolidated subsidiaries accounted forfinance leases which took place prior to April 1, 2008, and do not transfer ownership of theleased assets to the lessee, as operating leases.
The following pro forma amounts represent the acquisition cost, accumulated depreciationand net book value of the leased assets at March 31, 2011 and 2010 which would have beenreflected in the consolidated balance sheets if these lease transactions had been accounted for
as financing leases:
March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)
Acquisition cost of machinery and equipment
Accumulated depreciation of machineryand equipment
Net book value

¥

125

¥

137

¥

(88)
37

Acquisition cost of furniture and fixtures
Accumulated depreciation of furniture andfixtures
Net book value

¥

46

¥

(40)
5

$

1,503

¥

(80)
56

$

(1,058)
444

¥

66

$

553

¥

(52)
14

$

(481)
60

Future minimum lease payments (including the interest portion thereon) subsequent to March
31, 2011 for finance leases accounted for as operating leases are summarized as follows:Year ending March 31,
20122013 and thereafter
Net book value(Millions (Thousands ofof yen)U.S. dollars)
¥
¥

20
22
43

$
$

240
264
517

Lease payments relating to finance leases accounted for as operating leases in theaccompanying consolidated financial statements for the years ended March 31, 2011 and 2010
totaled ¥28 million ($336 thousand) and ¥31 million, respectively. The pro forma
depreciation of the assets leased under finance leases accounted for as operating leases for theyears ended March 31, 2011 and 2010 amounted to ¥28 million ($336 thousand) and ¥31
million, respectively.
There were no impairment losses allocated to lease assets for the years ended March 31, 2011
and 2010.

2113. Commitments and Contingent Liabilities
The Companies were contingently liable as guarantors for loans of other companies in theaggregate amount of ¥463 million ($5,568 thousand) and ¥614 million at March 31, 2011 and2010, respectively.
The Company has entered into loan commitment agreements amounting to ¥5,600 million($67,348 thousand) and ¥5,600 million with financial institutions at March 31, 2011 and 2010,
respectively. The loans payable outstanding was zero, and therefore, the unused balance was¥5,600 million ($67,348 thousand) and ¥5,600 million under the credit facilities as of March
31, 2011 and 2010, respectively.
The Company has repurchase obligation of ¥688 million ($8,274 thousand) in connection
with securitization as of March 31, 2011.

14. Financial Instruments
Overview(1) Policy for financial instruments
In consideration of plans for capital investment, the Company and its consolidated
subsidiaries (collectively, the “Group”) raise funds mainly through bank borrowings.
The Group manages temporary cash surpluses through highly liquid financial assets.
The Group raises short-term capital through bank borrowings and issuances ofcommercial papers. The Group uses derivatives for the purpose of reducing
after-mentioned risks and does not enter into derivatives for speculative or trading
purposes.
(2) Types of financial instruments and related risk
Trade receivables––trade notes and accounts receivable––are exposed to credit risk inrelation to customers. In addition, the Group is exposed to foreign currency exchange
risk arising from receivables denominated in foreign currencies. However, the foreign
currency exchange risks deriving from the trade receivables denominated in foreign
currencies are hedged by forward foreign exchange contracts.
Investment securities are exposed to market risk. Those securities are composed of theshares of common stock and bonds of other companies with which the Group hasbusiness relationships.
Substantially all trade payables––trade notes and accounts payable––have payment due
dates within two months. Although the Group is exposed to foreign currency exchange
risk arising from those payables denominated in foreign currencies, forward foreignexchange contracts are arranged to reduce risk.
Trade receivables and payables in connection with Smelting industry are exposed tocommodity price fluctuation risks of London Metal Exchange (“LME”), but such risks
are hedged by metal futures contracts.

22

Long-term debt is taken out principally for the purpose of making capital investments
and its repayment dates extend up to 11 years from the balance sheet date. Althoughpart of long-term debt is exposed to interest rate fluctuation risk, interest rate swaps arearranged to mitigate the risk.
Regarding derivatives, the Group enters into forward foreign exchange contracts to
reduce the foreign currency exchange risk arising from the receivables and payables
denominated in foreign currencies, metal futures contracts to reduce commodity pricefluctuation risk of LME arising from the receivables and payables in connection withSmelting industry and interest rate swap transactions to reduce fluctuations risk derivingfrom interest payable for long-term debt. Information regarding the method of hedge
accounting, hedging instruments and hedged items, hedging policy, and assessment of
the effectiveness of hedging activities is found in Note 1 (f) (3).
(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk
arising from receivables, each related division monitors credit worthiness of theirmain customers periodically, and monitors due dates and outstanding balances by
individual customer. In addition, the Group is making efforts to identify andmitigate risks of bad debts from customers who are having financial difficulties.
The Group also believes that the credit risk of derivatives is insignificant as it enters
into derivative transactions only with financial institutions which have a soundcredit profile.
(b) Monitoring of market risks (the risks arising from fluctuations in foreign exchange
rates, commodity prices, interest rates and others)
For trade receivables and payables denominated in foreign currencies, the Groupidentifies the foreign currency exchange risk for each currency on a monthly basis
and enters into forward foreign exchange contracts to hedge such risk. In order tomitigate commodity price fluctuation risks of LME for trade receivables andpayables in connection with Smelting industry, the Group may enter into metal
futures contracts. In order to mitigate the interest rate risk for interest payments oflong-term debt, the Group may also enter into interest rate swap transactions.
For investment securities, the Group periodically reviews the fair values of suchfinancial instruments and the financial position of the issuers. In addition, theGroup continuously evaluates whether securities should be maintained taking into
account their fair values and relationships with the issuers.
Derivative transactions are conducted and managed by the treasury personnel
including Directors and each division in charge of each derivative transaction.
Risk management is sufficiently made by making reports to management every timea transaction is executed as well as on a periodical basis.
(c) Monitoring of liquidity risk (the risk that the Group may not be able to meet its
obligation on scheduled due dates)
23Based on the report from each division and affiliates, the Group prepares andupdates its cash flow plans on a timely basis and maintains liquid funds to manage
liquidity risk.
(d) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if
available. When there is no quoted market price available, fair value is reasonably
estimated. Since various assumptions and factors are reflected in estimating thefair value, different assumptions and factors could result in different fair value. In
addition, the notional amounts of derivatives in Note 17 Derivative Transactions are
not necessarily indicative of the actual market risk involved in derivativetransactions.
Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheet as of March 31,
2011 and 2010 and estimated fair value are shown in the following table. The following
table does not include financial instruments for which it is extremely difficult to determine thefair value (Please refer to Note 2 below).
March 31, 2011
Carrying
Estimated fair
value
value
Difference(Millions of yen)
(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Investment securities
Total assets(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Long-term debt (*1)
Total liabilities
Derivatives (*2)¥¥

12,73916,746
4,068
33,555
7,321
22,50919,84649,677(4,106)

Carryingvalue(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Investment securities
Total assets(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Current portion of long-term debt
(4) Long-term debt
Total liabilities
Derivatives (*2)¥¥

12,216
17,161
7,668
37,047
6,227
22,4786,031
2,896
37,633(297)¥¥

12,73916,746
4,068
33,555
7,321
22,50919,84349,674(4,106)¥¥

March 31, 2010
Estimated fairvalue(Millions of yen)¥¥

12,216
17,161
7,668
37,047
6,227
22,4786,089
2,880
37,675
(297)

–
–
–
–
–
–
(2)
(2)
–

Difference
¥

¥

–
–
–
–
–
–
57
(16)
41
–
24

March 31, 2011
Carrying
Estimated fair
value
value
Difference(Thousands of U.S. dollars)(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Investment securities
Total assets$ 153,205
201,395
48,923
403,547$ 153,205
201,395
48,923
403,547

$

–
–
–
–

88,04588,045(1) Notes and accounts payable, trade–(2) Short-term borrowings–
270,703
270,703(3) Long-term debt (*1)
238,677
238,641(24)
Total liabilities
597,438
597,402(24)
Derivatives (*2)
$ (49,380) $ (49,380)$–(*1) Current portion of long-term debt is included in long-term debt at March 31, 2011.
(*2) The value of assets and liabilities arising from derivatives is shown at net value, and withamounts in parentheses representing net liability positions.
Notes:
1.

Methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactions
Assets(1) Cash and time deposits and (2) Notes and accounts receivable, trade
Since these items are settled in a short period of time, their carrying value approximatesfair value.
(3) Investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt
securities as of March 31, 2010 is based on quoted market prices. For information on
securities classified by holding purpose, please refer to Note 15 Investment Securities of
the notes to the consolidated financial statements.
Liabilities(1) Notes and accounts payable, trade and (2) Short-term borrowings
Since these items are settled in a short period of time, their carrying value approximatesfair value.
(3) Current portion of long-term debt and (4) Long-term debt
The fair value of long-term debt is based upon the present value of the total of principle
and interest discounted by the interest rate to be applied if similar new borrowings wereentered into.
Derivative transactions
Please refer to Note 17 Derivative Transactions of the notes to the consolidated financial
statements.

25

2.

Financial instruments for which it is extremely difficult to determine the fair value
March 31,
2010

2011

2011
(Thousands of
U.S. dollars)(Millions of yen)
Unlisted stocks

¥

1,005

¥

1,005

$

12,086

Because no quoted market price is available and it is extremely difficult to determine thefair value, the above financial instruments are not included in the above table.
3.

Redemption schedule for receivables at March 31, 2011

Due in one
year or less
Cash and time deposits
Notes and accounts receivable, trade
Total¥ 12,616
16,746¥ 29,363

March 31, 2011
Due after
Due after
one yearfive years
throughthrough ten
five years
years(Millions of yen)
¥
¥

–
–
–

¥
¥

–
–
–

Due after
ten years
¥
¥

–
–
–

March 31, 2011
Due after
Due after
one yearfive years
Due in one
throughthrough ten Due after
year or less five years
ten years
years(Thousands of U.S. dollars)
Cash and time deposits
Notes and accounts receivable, trade
Total
4.

$ 151,725
201,395$ 353,132

$
$

–
–
–

$
$

–
–
–

$
$

–
–
–

The redemption schedule for long-term debt is disclosed in Note 7.

15. Investment Securities
The Company classified investment securities other than those of subsidiaries and affiliates
into two categories: held-to-maturity securities or other securities.
The aggregate cost and fair value (carrying value) of marketable securities that were included
in investment securities at March 31, 2011 and 2010 were as follows:

26

Cost
Securities for which fair value
exceeds cost:
Equity securities
Securities for which cost exceeds
fair value:
Equity securities
Total

¥

1,690

¥

857
2,548

Cost
Securities for which fair value
exceeds cost:
Equity securities
Debt securities
Securities for which cost exceeds
fair value:
Equity securities
Total

¥

¥

1,775
704

728
3,207

March 31, 2011
Fair value(carrying value)(Millions of yen)
¥

3,353

¥

714
4,068

Unrealized
gains (losses)

¥

1,662

¥

(143)
1,519

March 31, 2010
Fair value(carrying value)(Millions of yen)
¥

¥

3,646
3,373

647
7,668

Unrealized
gains (losses)

¥

¥

1,871
2,668

(80)
4,460

March 31, 2011
Fair value
Unrealized
Cost(carrying value) gains (losses)(Thousands of U.S. dollars)
Securities for which fair value
exceeds cost:
Equity securities
Securities for which cost exceeds
fair value:
Equity securities
Total

$

20,324$

10,30630,643$40,324$

8,586
48,923$

19,987$(1,719)18,268As at March 31, 2011 and 2010, non-marketable equity securities amounting to ¥913 million($10,980 thousand) and ¥913 million, respectively, were not included in the above tablebecause there were no quoted market prices available and they are extremely difficult todetermine the fair value.
For the year ended March 31, 2010, the Company recognized ¥321 million of impairment
losses for marketable securities. In the impairment of relevant equity and bond securities, inthe case that the market value at the end of the year is lower than the acquisition cost by 50%
or more, impairment losses are recognized for all carrying values of securities; and in the casethat the market value is lower than the acquisition cost by around 30 to 50%, impairment
losses are recognized for the amount deemed necessary after taking into consideration factors
such as the materiality and recoverability of the amount.

27

Sales of equity securities classified as other securities and the aggregate gain and loss for theyear ended March 31, 2011 were as follows.
Year Ended March 31, 2011
(Millions of(Thousands ofyen)
U.S. dollars)
Sales proceeds
Aggregate gain
Aggregate loss

¥

69
41
5

$

829
493
60

16. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2011 and 2010 were composed of the followings:
March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Less:Time deposits with a maturity of more than
three months when purchased
Cash and cash equivalents¥ 12,739¥ 12,216$ 153,205

(15)
(5)
(60)
¥ 12,734 ¥ 12,201 $ 153,144

17. Derivative Transactions(1) Summarized below are the notional amounts and the estimated fair value of thederivative instruments outstanding at March 31, 2011, for which hedged accounting has
not been applied.
(a) Currency-related transactions
March 31, 2011
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)
OTC transactions:
Forward foreignexchange contracts
Sell:
USD
Total

¥
¥

13
13

¥
¥

–
–

¥
¥

(0)
(0)

Unrealized
Gain (Loss)

¥
¥

(0)
(0)

Note: The measurement of fair value is based on prices obtained from financial
institutions and others.

28

March 31, 2011
Notional amount
Maturing
Unrealized
Contract
after one
amountyear
Fair value Gain (Loss)(Thousands of U.S. dollars)
OTC transactions:
Forward foreignexchange contracts
Sell:
USD
Total

$
$

156
156

$
$

–
–

$
$

(0)
(0)

$
$

(0)
(0)

No currency-related transaction as of March 31, 2010.
(b) Commodity-related transactions
March 31, 2011
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)
OTC transactions:
Commodity futurescontracts
Sell:
Metals
Total

¥
¥

691
691

¥
¥

–
–

¥
¥

(107)
(107)

Unrealized
Gain (Loss)

¥
¥

(107)
(107)

Note: The measurement of fair value is based on prices obtained from counterparties of
the contracts and others.
March 31, 2011
Notional amount
Maturing
Unrealized
Contract
after one
amountyear
Fair value Gain (Loss)(Thousands of U.S. dollars)
OTC transactions:
Commodity futurescontracts
Sell:
Metals
Total

$
$

8,310
8,310

$
$

–
–

$
$

(1,286)(1,286)$$(1,286)(1,286)

No commodity-related transactions as of March 31, 2010.
(2) Summarized below are the notional amounts and the estimated fair value of thederivative instruments outstanding at March 31, 2011 and 2010, for which hedged
accounting has been applied.
29

(a) Currency-related transactions
No currency-related transactions as of March 31, 2011.
March 31, 2010
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)
Forward foreign exchange contracts,
accounted for as part of accounts
receivable:
Sell:
USD
¥
¥
Total

24
24

¥
¥

–
–

¥
¥

(0)
(0)

Note: The measurement of fair value is based on prices obtained from financial
institutions and others.
(b) Interest-related transactions
March 31, 2011
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)Interest rate swaps hedging
long-term debt, accounted for byshort-cut method:
Receive/floating and pay/fixed
Total

¥
¥

6,992
6,992

¥
¥

6,541
6,541

(Note)March 31, 2010
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)Interest rate swaps hedging
long-term debt, accounted for byshort-cut method:
Receive/floating and pay/fixed
Total

¥
¥

2,540
2,540

¥
¥

460
460

(Note)

Note: Interest rate swaps, to which the matching criteria is applied, is accounted fortogether with long-term debt designated as a hedged item (“short-cut method”),
therefore, their fair values are included in the fair value of long-term debt.

30

March 31, 2011
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Thousands of U.S. dollars)Interest rate swaps hedging
long-term debt, accounted for byshort-cut method:
Receive/floating and pay/fixed
Total

$
$

84,08884,088$ 78,665$ 78,665(Note)(c) Commodity-related transactions
March 31, 2011
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)
Commodity futures contracts,
accounted for as part of raw
materials and finished goods:
Sell: Metals
Total

¥
¥

10,91010,910

¥
¥

–
–

¥
¥

(3,998)(3,998)March 31, 2010
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)
Commodity futures contracts,
accounted for as part of raw
materials and finished goods:
Sell: Metals
Total

¥
¥

12,497
12,497

¥
¥

–
–

¥
¥

(296)
(296)

Note: The measurement of fair value is based on prices obtained from counterparties
and others.
March 31, 2011
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Thousands of U.S. dollars)Commodity futures contracts,
accounted for as part of raw
materials and finished goods:
Sell: Metals
Total$ 131,208$ 131,208

$
$

–
–

$ (48,081)$ (48,081)
31

18. Related Party Transactions
The Company owns 25.9% and 23.0% of outstanding shares of CBH Resources Ltd.
(hereinafter “CBH”), which operates mining business for the fiscal years ended March
31, 2011 and 2010, respectively.
The transactions and account balances with CBH were as follows:•

Transactions
Year ended March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)
Redemption of bonds
Redemption proceeds
Gain on redemption
Interests

•

¥

7,517
3,213
66

¥

–
–
323

$ 90,402
38,641793

Account balances
March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)Long-term loans receivable
Investment securities
Other current assets

¥

–
–
–

¥

1,361
3,373
167

$

–
–
–

Notes 1. CBH, which was an affiliate accounted for using the equity method for theyear ended March 31, 2010, has become a consolidated subsidiary due to theCompany’s acquisition of additional shares during the year ended March 31,
2011. Therefore, the above table only includes the information for theperiod when CBH was an affiliate.
2. Loan and convertible bonds to CBH as of March 31, 2010 were redeemed
before their maturities. Terms and interest rates of such loan andconvertible bonds to CBH whose repayment period was 5 years were
determined under general market conditions.

19. Business Combination
On July 1, 2010, the Company acquired, in exchange for cash, 74.12% or 817,357 thousand
shares of 1,101,217 thousand outstanding voting common shares of CBH Resources Limited(hereinafter “CBH”), which was previously an affiliate accounted for using the equity method,and made CBH a wholly-owned subsidiary. CBH engages in the business of natural
resources in Australia. This acquisition was made to ensure a stable supply of ore material,
which is one of the mid- and long-term management challenges of the Company.

32

The Company accounted for CBH using the equity method from January 1, 2010 to June 30,
2010. CBH’s results of operation for the period from July 1, 2010 to December 31, 2010
were included in the consolidated statement of income for the year ended March 31, 2011.
For the consolidation purpose, the Company used the financial accounts of CBH as ofDecember 31, 2010 and made necessary adjustments for significant transactions during theperiod from January 1, 2011 to March 31, 2011.
The following table summarizes the acquisition cost of CBH.
(Millions of (Thousands ofyen)
U.S. dollars)
Fair value of CBH’s shares (25.88%) originally heldat acquisition date
Consideration paid for acquisition of 74.12% of
CBH’s shares
Direct cost of acquisition – Advisory fees, etc.
Total acquisition cost

¥

5,114

$

61,503¥

14,75532
19,902

177,450384$ 239,350

Difference between the total acquisition cost and total cost of acquisitions by individualtransaction amounted to ¥3,168 million ($38,099 thousand).
Assets acquired and liabilities assumed at acquisition date are as follows:(Millions of (Thousands ofyen)
U.S. dollars)
Current assets
Non-current assets
Total assets acquired
Current liabilities
Non-current liabilities
Total liabilities assumed
Net assets acquired

¥

¥

4,491
30,24834,7401,798
13,591
15,38919,350$54,010363,776
417,799
21,623
163,451
185,075$ 232,711

Goodwill, amounting to ¥552 million ($6,638 thousand), was recognized since the fair valueof net assets was below the acquisition cost at acquisition date. The goodwill is amortizedusing the straight-line method over 16 years.
The following summarizes the cash payment for acquisition.
(Millions of (Thousands ofyen)
U.S. dollars)
The acquisition cost
Amount of CBH’s shares originally held
Cash and cash equivalent of CBH
Net cash payment made for acquisition of CBH¥¥

19,902(4,731)(3,177)
11,993$ 239,350(56,897)(38,208)$ 144,233

It is very difficult to estimate the impact on the consolidated statement of operations for theyear ended March 31, 2011 as if this business combination had been completed at the
beginning of the fiscal year since fair value assumptions have significant impact on such
estimates. Thus, the Company has omitted the estimate and disclosure of such impact.

33

20. Segment Information
Effective April 1, 2010, the Company and its consolidated subsidiaries have applied the“Accounting Standard for Disclosures about Segments of an Enterprise and RelatedInformation” (Statement No. 17 issued by ASBJ on March 27, 2009) and the “Guidance on
Accounting Standard for Disclosures about Segments of an Enterprise and Related
information” (Guidance No. 20 issued by ASBJ on March 21, 2008).
(1) Overview of reportable segments
The Company defines reportable segments as a component of the Company for which
separate financial information is available and whose operating results are regularly
evaluated by the Board of Directors to make decisions about how resources are allocatedand assess its performance.
Operating departments of the Company and its consolidated subsidiaries are organizedaccording to products and services, and each department of the Company and its
consolidated subsidiaries develops and implements comprehensive domestic andoverseas strategies for its products and services. Thus, reportable segments of theCompany are determined based on such operating departments; namely, Smelting,Electronic Components and Materials, Environment and Recycling, and Mineral
Resource organized based on CBH, a consolidated subsidiary.
The Company previously had three reportable segments: Smelting, Electronic
Components and Materials, Environment and Recycling. Effective October 1, 2010, a
new reportable segment of Mineral Resource has been newly established by theacquisition of full ownership of CBH.
The Company operates in the following segments:• Smelting segment engages in sales and production of zinc, lead, electric silver andsulfuric.
•

Mineral Resource segment engages in exploration, development and production of
non-ferrous metals resources and sales of their output.

•

Electronic Components and Materials segment engages in sales and production ofelectronic parts, electrolytic iron, plating and machine parts.

•

Environment and Recycling segment engages in sales and production of zinc oxide
and recycling of waste materials.

(2) Basis of measurement for the amounts of net sales, profit or loss, assets and other items
for each reportable segment
The accounting policies of each reportable segment are consistent to those described in
Note 1 Summary of Significant Accounting Policies. The measure of segment profit isoperating income, and intersegment sales are accounted for based on prices of ordinarytransactions with independent third parties.

34

(3) Information about net sales, profit or loss, assets and other items
Year ended March 31, 2011
Reportable segment
Electronic
Compon- EnvironMineralents and ment andSmelting Resource Materials Recycling

Other(Note 1)

Total

Amounts on
consolidated
financial
Reconcilistatements
ation(Note 3)(Note 2, 4)

Total(Millions of yen)
Net sales:
External customers
Inter-segment
Total
Segment profit (loss)
Segment assets
Other items
Depreciation andamortization
Increase in property,
plant and equipment
and intangible assets
Impairment losses on
fixed assets
Amortization of
goodwill
Unamortized balanceof goodwill¥ 72,921 ¥ 3,709 ¥ 8,129
3,872
1,644
211
76,793
5,354
8,341
5,720
(295)
1,050
61,12432,893
10,407¥ 4,848
2
4,851
995
5,249

¥ 89,609
5,731
95,3407,470
109,676¥ 14,019 ¥ 103,628
6,217
11,94920,236
115,577
1,450
8,921
6,941
116,617¥– ¥(11,949)(11,949)(423)
24,390103,628–
103,6288,497
141,007¥ 2,180 ¥¥359¥ 3,916

¥

¥

108

4,160

981 ¥

394

135 ¥

4,052

¥

7,100

1,363

165

248

8,879

72

8,952

52

9,004

–

114

–

–

–

–

–

397

512

–

17

–

–

–

–

–

–

17

–

571

–

–

–

–

–

–

571

Reconciliation(Note 2)

Amounts on
consolidated
financialstatements(Note 3)

Year ended March 31, 2010
Reportable segment
Electronic
Compon- EnvironMineralents and ment andSmelting Resource Materials Recycling

Total

Other
(Note 1)

Total

(Millions of yen)
Net sales:
External customers
Inter-segment
Total
Segment profit (loss)
Segment assets
Other items
Depreciation andamortization
Increase in property,
plant and equipment
and intangible assets¥ 61,300 ¥2,962
64,262
5,996
62,600–––––¥ 6,461
191
6,653
402
11,208¥ 4,274
32
4,307
802
6,275

¥ 72,036
3,186
75,223
7,202
80,085¥ 11,555 ¥ 83,592
4,491
7,678
16,047
91,270
1,339
8,541
5,441
85,527¥– ¥(7,678)(7,678)(240)
27,296

83,592–
83,592
8,301
112,823¥ 2,253 ¥

–

¥

¥

¥

¥

¥

92

3,184

3,027

–

436
157

391
176

3,081
3,360

9 ¥

3,091

69

3,430

61

¥

3,491

35

Year ended March 31, 2011
Reportable segment

Smelting

Electronic
Compon- EnvironMineralents and ment andResource Materials Recycling

Total

Other
(Note 1)

Total

Reconciliation(Note 2, 4)

Amounts on
consolidated
financialstatements(Note 3)(Thousands of U.S. dollars)
Net sales:
External customers$ 876,981 $ 44,606 $ 97,763 $ 58,304 $ 1,077,678 $ 168,598 $ 1,246,277 $–$ 1,246,277

Inter-segment
46,566
19,7712,537
24
68,92374,768
143,704 (143,704)–
Total
923,547
64,389100,31258,340 1,146,602
243,367 1,389,981 (143,704)
1,246,277
Segment profit (loss)
68,791(3,547)
12,627
11,96689,837
17,438107,288(5,087)102,188
Segment assets
735,105
395,586
125,159
63,126 1,319,013
83,475 1,402,489
293,325
1,695,814
Other items
Depreciation and$ 26,217 $ 11,797 $ 4,738 $ 4,317 $ 47,095 $ 1,623 $ 48,731 $ 1,298 $amortization
50,030
Increase in property,
plant and equipment
and intangible assets
85,387
16,392
1,984
2,982
106,782865
107,660
625
108,286
Impairment losses on
–
–
–
–
–
fixed assets
–
1,371
4,774
6,157
Amortization of
–
–
–
–
–
–
goodwill–
204
204
Unamortized balance
–
–
–
–
–
–
of goodwill
–
6,867
6,867

Notes 1. “Other” represents business segments not belonging to reportable segments andincludes sound insulation building materials, civil engineering, construction andplant engineering, transportation, environmental analysis and others.
2. “Reconciliation” includes the followings.
Year ended March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)

Segment profit (loss):
Inter-segment elimination
Corporate expense (*)
Total

¥
¥

43
(467)
(423)

¥
¥

26
(267)
(240)

$
$

517
(5,616)(5,087)(*) “Corporate expense” presents mainly general and administrative expenses thatare not allocated to each reportable segment.

Segment assets:
Corporate assets (*)

Year ended March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)¥ 24,390¥ 27,296$ 293,325(*) “Corporate assets” presents mainly the Company’s investments of excess funds
including cash and investment securities and assets relating to administrative
divisions.

36Year ended March 31,
2010
2011
2011
(Millions of yen)(Thousands of
U.S. dollars)

Other items:
Depreciation and amortization
Increase in property, plant and equipment
and intangible assets (*)

¥

108
52

¥

92
61

$

1,298
625

(*) “Increase in property, plant and equipment and intangible assets” presents
mainly capital expenditures that do not belong to reportable segments.
3. Segment profit or loss is reconciled to operating income on the consolidated
statement of income.
4. “Reconciliation” of impairment losses on fixed assets, amounting to ¥397 million($4,774 thousand) of which ¥382 million ($4,594 thousand) is included in loss on
disaster, presents impairment losses on fixed assets that do not belong toreportable segments.
(4) Related information(a) Information by products and services
Information by products and services has been omitted for the year ended March 31,
2011 since it is consistent to the information disclosed in segment information
described above.
(b) Information by geographical area
Net sales information by geographical area has been omitted for the year ended
March 31, 2011 since net sales to external customer in Japan exceed 90% of theconsolidated sales.
Property, plant and equipment information by geographical area as of March 31,
2011 is as follows.
(Millions of (Thousands ofyen)
U.S. dollars)
Japan
Australia
Total¥ 39,247
6,650¥ 45,898$ 472,002
79,975$ 551,990(c) Information by major customers
Information by major customers has been omitted since there was no single externalcustomer accounting for 10% or more of the consolidated sales for the year ended
March 31, 2011.

37

For the year ended March 31, 2010
Business segment information
Information about the business segments of the Companies for the years ended March 31,
2010 is as follows:Year ended March 31, 2010
Business segment
Industry B
Industry C
Other(Millions of yen)

Industry A
Net sales:
Customers
Inter-segment
Total
Cost and expenses
Operating income (loss)¥

Total assets
Depreciation andamortization
Impairment loss of fixed
assetsCapital expenditures

Notes

¥

63,513646
64,16058,230
5,929

¥

6,646
2
6,649
6,234
414

¥

4,798
53
4,852
4,037
814

¥

8,632
3,882
12,515
11,212
1,302

Eliminations
and corporate Consolidated¥–(4,584)(4,584)(4,424)(160)¥

83,592–
83,59275,2908,301

62,744

11,208

6,275

5,441

27,152

112,823

2,265

436

391

9

81

3,184

345

58

14

–

–

418

3,027

¥

157

¥

176

¥

69

¥

61

¥

3,491

The business segment is determined by the similarity of primary products
including type, nature, manufacturing and marketing process.
The primary products of each business segment are as follows:•

Industry A, the Smelting industry, consists of mainly zinc, lead, electric silver
and sulfuric acid etc.;•

Industry B, the Electronic Components and Materials industry, consists ofelectronic parts, electrolytic iron, plating and machine parts etc.;•

Industry C, the Environment and Recycling industry, consists of Zinc oxideetc.; and,•

Other consists of Soundproofing construction materials etc.

Of Cost and expenses, the amount of unallocated cost and expenses
corresponding to the administrative department of the parent company, which isincluded in Eliminations and corporate, was ¥187 million for the year ended
March 31, 2010.
Of Total assets, the amount of corporate assets included in Eliminations andcorporate was ¥27,152 million for the year ended March 31, 2010. This amountprimarily consisted of excess funds such as cash or securities and other assets
corresponding to the administrative department.
Geographical segment information
Information about geographical segments for the year ended March 31, 2010 has been omitted
since sales and assets in Japan were more than 90% of the total consolidated sales and assets.
38

Overseas sales information
Information about overseas sales for the year ended March 31, 2010 has also been omitted
since overseas sales were less than 10% of the consolidated sales.

21. Subsequent Events
For the year ended March 31, 2011
In February, 2011, CBH Resources Ltd. (hereinafter “CBH”), a consolidated subsidiary of theCompany, sold its subsidiary, CBH Sulphur Springs Pty Ltd. retaining mining rights tocopper-zinc mine at Panorama in Western Australia to Venturex Resources Ltd. (hereinafter“Venturex”) located in Western Australia.
This sale was made since CBH had determined that this sale agreement with Venturex, which
is an owner of mines in nearby areas, could facilitate development of this mine area rather
than continuing its standalone development in Panorama. The sales price was AUD 26.2
million (approximately ¥ 2,148 million).
As a result of this sale, the Company is expecting to record gain on transfer of business of
AUD 12.2 million (approximately ¥1,003 million) under other income for the year ending
March 31, 2012. The effect on net income would be AUD 4.3 million (approximately ¥359
million).
The Company is granted zinc off-take rights capped at total 230,000t (zinc metal) of zinc inzinc concentrate expected to be produced when Venturex develops copper-zinc mine atPanorama in the future. This quantity is equivalent to the whole estimated zinc output fromzinc concentrate from Panorama.

39