SUMITOMO METAL MINING Co., Ltd. Bataraza, Palawan, May 2011

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SUMITOMO METAL MINING Co., Ltd.


Taganito Project

Bataraza, Palawan



Progress of Business Strategy

May 2011

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SUMITOMO METAL MINING Co., Ltd. Bataraza, Palawan, May 2011

  1. 1. 5713 FY2010Progress of Business Strategy May 2011 SUMITOMO METAL MINING Co., Ltd.
  2. 2. ContentsⅠ. Progress of 09 3-Yr Business PlanⅡ. External EnvironmentⅢ Business Results / Forecast for FY2011Ⅲ.Ⅳ. Financial Highlights and Information Materials SUMITOMO METAL MINING CO., LTD. 2
  3. 3. Kanki-ko (Pit of exultation), Besshi Copper MineFirst shaft dug in 1691 SUMITOMO METAL MINING CO., LTD. 3
  4. 4. 1) Exploration by SMM SMM can secure the majority Longer lead-time lead time (Border Project)2) External project partnering Shorter lead-time Difficult to secure the majority Competition among companies C titi i Risk of cost increase (Sierra Gorda Project)3) B Boost existing output t i ti t t Leveraging partners’ capacity Few projects for output boosting F j t f t tb ti Difficult to increase ratio of interest (Cerro Verde Mine) SUMITOMO METAL MINING CO., LTD. 4
  5. 5. Border Project Background Project mining area2005 JOGMEC and Minotaur commenced exploration Broken Hill2007 SMM acquire exploratory rights of JOGMEC2010 Exploration of magnetite ore was commenced in Mutooroo MutoorooRatio of interests South Australia New South Wales SMM 59% Minotaur 41% Mi tTarget minerals Copper, zinc, Copper zinc magnetite ore Adelaide SUMITOMO METAL MINING CO., LTD. 5
  6. 6. Stone Boy Project BackgroundExploration started i 1991E l i d in(This project discovered PogoMine.) アンカレッジThe exploration is currentlybeing conducted centrally Fairbanksalong Monte Cristo area. Monte Cristo areaRatio of interests PogoSMM 95%Sumitomo Corp 5%Target minerals Au ・ Sb SUMITOMO METAL MINING CO., LTD. 6
  7. 7. Solomon Project Current Status Locations for International Tender CompetitionDec. 2010 ChoiseulAcquired exploratory Isabelrights for 3 mining zonesthrough internationaltendert d competitiontiti HoniaraNegotiation to access to Jejevo Zonethe local properties has p p Takatabeen concluded and Zone Zcurrently applying for San Jorge Zoneexploratory right.→Exploration will start assoon as obtainingapproval.approval SUMITOMO METAL MINING CO., LTD. 7
  8. 8. Stone Boy JV Engaged in approx. g g pp Alaska, USA (Au) 20 exploration Yukon Territory, Canada p j projects (Cu, Au, Ni, PGM) Philippines (Au) Carajas JV Brazil (Cu, Au) Solomon Islands Peru (Ni) (Cu, Au) Radiss JVBorder JV Australia Chile (Cu, Au) (Cu, Au) SUMITOMO METAL MINING CO., LTD. 8
  9. 9. 100 80 AsiaExploration cost Exploration 60 around (JPY existing mines Cu Y100M) Oceania 40 Asia Cu Oceania ts New deposit Ni South 20 South exploration Ni America America North North Au A Au A America America 0 2010 2011 2010 2011 2010 2011 By Stage y g By Metal By Area SUMITOMO METAL MINING CO., LTD. 9
  10. 10. Sierra Gorda copper mine development project Participation agreement signed May 15, 2011 Location Cu e owner Current o e Sierra GordaRegion 2, Republic of Chile Quadra FNX Mining Ltd. AntofagastaApprox. 140km northeast Ratio of interest of Antofagasta SantiagoAltitude roughly 1,700 meters Quadra FNX – 55% SMM – 31.5% Sumitomo Corp.(SC) – 13.5% SMM gains SMM and SC right to 50% of will together invest roughly produced copper $720M concentrate Commencement of operations 2014 (tentative) SUMITOMO METAL MINING CO., LTD. 10
  11. 11. Sierra Gorda Project ChileMinable reserves Highway 5Approx. 1.3B tons; Expected mine life – 20 years pp ; p y Chuquicamata Cu Mo Au Calama Metals contained 5,000kt 300kt 80t Spence p ✈ Grade 0.4% 0.025% 0.06g/t 140km Sierra GordaSpecial features Esperanza E・ Flat terrain ✈・ Adjacent to highway and railway, close to port Antofagasta Approx. Approx 140km from Antofagasta, 60km from Calama Antofagasta・ Adjacent to currently operating Spence and Esperanza mines → Low risk・ Practically zero precipitation → will use seawater Escondida E did・ High molybdenum grade → revenue from byproducts expected SUMITOMO METAL MINING CO., LTD. 11
  12. 12. Sierra Gorda ProjectDevelopment chronology Production plan Cu production volume (kt) Mining volume (kt)1991 971991-97 Various companies carry out 250 500,000 exploratory drilling Cu production volume (kt) Mining volume (kt) 200 400,000 2004 Quadra acquires exploration rights2010.3 Memorandum of Understanding 150 300,000 (“MOU”) announced with State Grid 100 200,000 Corporation of China (“SGCC”) for ( SGCC ) acquisition of exploratory rights 50 100,0002010.6 Official contract with SGCC not 0 0 concluded b MOU d dli l d d by deadline, 2014 2015 2016 2017 2018 agreement annulled ・ All production will be2011.5 SMM acquires exploratory rights concentrated. ・ After the operation starts, the operation will expand till 2017. SUMITOMO METAL MINING CO., LTD. 12
  13. 13. Cu Mton nnes ( pp 0 5 10 15 20 25 30 35 Pebble Oyu To olgoi Resolut tion La Gran nja Tampa kan V n Cerro Verde Expansion Cerro Colorado C Espera nza G Sierra Gorda g Toromoocho Las Bambas accay Antapa (copper reserves and grade) ) Relinch ho Copper development projects Alejand Hales dro(Reference: Metals Economics Group, SMM) Agua Rica R Salobo anco Rio Bla Frieda River Quellav veco C u M to n n e s Panant tza Petaquilla hon El Pach Cadia East E ( Cu % Galore Creek ules Los Azu Mirado r ones Casero political instability, high altitude, ore body deep underground) Pumpk in Hollow Cerro Casale C Haquira a Rosemont ro El Morr Conchi r Copper Mountain Quechuua Large development risk (environmental measures, insufficient infrastructure, Trapich he San Nic colas 0 .0 0 .2 0 .4 0 .6 0 .8 1 .0 1 .2 1 .4 1 .6 SUMITOMO METAL MINING CO., LTD. Cu % (includes estimated mineral volume) ) 13
  14. 14. Sierra Gorda ProjectDevelopment schedule 2011 2012 2013 2014 2015 2016 2017 Acquisition ofrequired approvals Construction C t tiOperations at 110kt Expansion ofoperations to 190ktOperations at 190ktInvestment for development Financing・ For 110kt operations - $2,900M ・ Project finance, primarily through JBIC j ,p y g・ For expansion to 190kt - $800M ・ Remainder through investments and loans from 3 companies SUMITOMO METAL MINING CO., LTD. 14
  15. 15. Sierra Gorda Project Investment scheme Quadra FNX SMM Sumitomo Corp. 100% 100% 100% Quadra Barbados SMM Chile (Subsidiary) 70% 30% SMM Sierra Gorda 55% Inversiones Ltda.. 45% Minera Quadra Chile Sierra Gorda mine ・ Quadra is operator ・ SMM will dispatch personnel (approx. 8 staff) (approx Will participate from construction stage SUMITOMO METAL MINING CO., LTD. 15
  16. 16. Quadra FNXOverview of Quadra FNX Business Performance Headquarters: Vancouver, CanadaOverview (Sales: MUS$) (Income: MUS$) Listed on the Toronto Stock Exchange 1,200 400 Sales 売上高 Operating Income History 1,000 営業利益 Net income 純利益 3002002 Quadra Mining Ltd. Established 8002004 Acquired Robinson mine 600 200 Acquired exploration rights t Si A i d l ti i ht to Sierra G d Gorda2009 Acquired Centanario Copper 400 Corporation, acquired Franke mine 100 2002010 Acquired FNX Mi i C A i d Mining Company 0 0Assets owned Results of operations at copper mines 2005 2006 2007 2008 2009 2010 Production Project Interest Location Reserves (kt) volume (2010, kt) Robinson 100% Nevada, U.S.A. 49 554 Carlota 100% Arizona, U.S.A. Arizona U S A 13 190 Franke 100% Chile 17 263 Podolsky 100% Canada 11 15 SUMITOMO METAL MINING CO., LTD. 16
  17. 17. Cerro Verde mine – Expansion project Background Dec. 2008 FS f E D for Expansion C i Completed l t dVolume of concentration process doubles to240kt/day from 120kt/day→ Negative estimation based on the copper price in those days. 2Q 2011- Review of FS for expansion to be completed (expected)・ Aiming to triple the current volume of concentration process 120kt/day to 360kt/day・ Cost of operation launch shall be up to $3 5b $3.5b Start proceeding with environmental impact assessment in late 2011 SUMITOMO METAL MINING CO., LTD. 17
  18. 18. Morenci mine – Expansion projectIncrease of mining outputMining t t i 2010 450kt/dMi i output in 2010: 450kt/day → Increased to 650kt/dayIncrease of concentration capabilityCurrently increased from 48kt/day to50kt/day→ Commenced F/S to boost it to 115kt/dayCu production volume will be (Cu t) Morenci Production volume 400increased to approx. 70 - 90kt/year 300within 2 to 3 years 200 100 0 2007 2008 2009 2010 2011F SUMITOMO METAL MINING CO., LTD. 18
  19. 19. Pogo Mine Production volume in 2010: 12t Reserves(as of end of Dec. 2010): 122t Conducting field C d ti fi ld exploration t l ti to further reserves. Pogo Mine p g production volume and recovery rate y Au (t) Recovery (%) % 14  92  Hishikari Mine 12.1 12.0 11.6 es Au 12  10.8 10  10 89.6  90.3  89 6 90 3tonne 8.1 88  8  87.0  Sales volume in FY2010: 7.5t 6  84.5  3.5 83.8  84  Reserves (as of end of Dec. 2010): 4  2  2 82.0  82.0 149t 0  80  Maintaining reserves by carrying on 06 07 08 09 10 11Forecast the policy of “Explore the same amount we have mined” The recovery rate rose to 89.6% in FY2010. SUMITOMO METAL MINING CO., LTD. 19
  20. 20. Value US$130BValue(M$) 80,000 70,000 70 000 7.1Mt Notes: 1. Based 1 B d on SMM equity interests it i t t 2. SMM share of reserves = reserves × SMM equity interest in mine (%) 60,000 3. Estimated Value = SMM share of reserves ×standard metal price Sierra Golda 50,000 1.8Mt 1 8Mt 4. St d d 4 Standard metal price = average price in Jan – M 2011 t l i i i J (Cu:$9,650/t Ni:$12.0/lb Au:$1,380/toz) Mar, Batu Hijau North Parkes Nickel Asia 40,000 Portfolio of the amount of production by metal h f d i b l Cerro Verde 30,000 Goro 20,000 0,000 Ojos Del Salado j Au b l Figesbal La Candelaria 250t 10,000 Cu Morenci PT Inco Pogo Ni Hishikari 0 Cu Ni Au SUMITOMO METAL MINING CO., LTD. 20
  21. 21. Toyo capacity (ktpa) 50 450kt (100%) 40 Cerro Verde 300kt 30 Expansion (67%) Sierra Gorda 20 70k 180kt (40%) 10 0 Great progress to meet the target of p p proprietary ore ratio of two third. y SUMITOMO METAL MINING CO., LTD. 21
  22. 22. Steady progress of the 2nd construction of world’smost advanced HPAL plant b t d d l t based on CBNC results d lt◆ Production capacity: Ni 30kt/year; Co 2.6kt/year◆Investment amount: US$1.3bln Dormitory constructionInvestment ratio: SMM (62.5%), (Mar. 2011) NAC (22.5%), Mitsui & Co. (15%)Expected operation life: 30yrs Plant site construction in steadySchedule progress (Mar. 2011) Mar. 2010 Launch of construction 2013 Construction to be completed Test operation Commercial production will start SUMITOMO METAL MINING CO., LTD. 22
  23. 23. Facility ReinforcementElectrolytic Ni productioncapacity reinforcement Technical Expertise Improvement◆Capacity: 41kt/year →65kt/year Operation in Conjunction with◆Investment amount: ¥14bln Taganito◆Schedule Construction t b completed to enter mass C t ti to be l t dt t production in 2013 → In line with Taganito HPAL operationProduction capacity is to be Ni100kt /year Ni100kt Niihama Nickel Refinery SUMITOMO METAL MINING CO., LTD. 23
  24. 24. Flash furnace will undergo complete brickwork renovation duringits mandatory shutdown maintenance period (Sep. 13 – Nov. 11).◆ The first complete brickwork renovation including bottom brick since its inauguration in 1971◆ Strengthening and improving furnace cooling mechanism◆ Improving operation environment≪Effect≫◆ Prevention of molten metal leakage → Reduction of operation risk◆ Improvement of response capabilities to high-load operations◆ Reduction of copper slag loss Morning assembly during mandatory shutdown maintenance (Conducted every day during the period) → Increase profitability SUMITOMO METAL MINING CO., LTD. 24
  25. 25. S.O.F (Side-blowing and Oxy-fuel Flash smelting) has been employed (Side- Oxy- Upgraded version of Sumitomo method concentrate burner ◆Air for reaction is blasted from the side nozzles on the side walls of the shaft ≪Effect≫ ◆ Lower dust generation rate, higher oxygen efficiency, less copper slag loss → Operational efficiency and productivity are improvedConcentrate Burner ConcentrateAir for reaction Operation will start in Feb 2012 Air for reaction Top from Apr May to Aug to Oct to Dec blast Feb Test operation Side blast (3) Side blast (2) Review of test results and study facility Side blast improvement Side blast (1) Modification of (4) cooling mechanism Application to operation Schematic view of flash furnace shaft SUMITOMO METAL MINING CO., LTD. 25
  26. 26. ◆ Business secto s where S us ess sectors e e SMM a s to p o ote g o t aims promote growth Materials for environment and energy fields◆ Business sectors where basic operating platforms need to be reinforced Pursue productivity improvement and cost reduction◆ Business sectors where SMM cannot pursue a growth strategy t t Withdraw / Transfer SUMITOMO METAL MINING CO., LTD. 26
  27. 27. (trillion yen /year) From 2010 report by Institute of information Technology 6 NiCd batteries b tt i 5 NiMH batteries for automobiles 4 NiMH batteries for consumer use LIB batteries for automobiles 3 LIB batteries for consumer use 2 1 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20Prioritized Strategy“Expand market share in automotive sector”① Continuous development of nickel hydroxide for NiMH battery② Acceleration of material development and commercialization of LIB for HEV and PHV③ Gain market advantage with the strategy of battery material recycling SUMITOMO METAL MINING CO., LTD. 27
  28. 28. Customers’ strong inquiries 350 LED demand by use Unit: 1bln unitsfor large substrates g 300 EtcEstablishment of stable mass production 250 Lightingtechnology Automotive 200 Sign Display◆Crystal fabrication in large fabrication Back Lightfurnace 150 Mobile◆ vest e t plan◆Investment p a to boost 6inφ substrate 6 φ subst ate 100production 50Fabrication in large furnace is under testing 0process to establish the condition. condition 2008 8 2009 9 2010 0 2011 2 2012 2013 3 2014 4 2023 3 2024 4 2025 5 2015 5 2016 6 2017 7 2018 8 2019 9 2020 0 2021 2022 2Have reached to the idea for process costreduction. [Plan] Autumn in 2011 – Operation launch Aim to start mass production in 2012 SUMITOMO METAL MINING CO., LTD. 28
  29. 29. SMM Chinese Sales companies Allocation o ocat o of Feedback of sales volume market information SMMGr SMM SMM Manufacturing Metals Sales Materials Sales Dept.◆ China is the most important market from the view point of both scale and growth potential.◆ Gather up-to-date market information and accumulate the knowledge/expertise. knowledge/expertise◆ Unique marketing approach based on the customer profile of Metals/Materials business. SUMITOMO METAL MINING CO., LTD. 29
  30. 30. Sales Trend (Index 08/1H=100) (JPY 100M) Operating Income120 160100 140 80 120 60 100 40 80 20 60 0 40 08/1H 08/4Q 09/4Q 10/1Q 10/2Q 10/3Q 10/4Q 11/1H 11/2H 20 Copper‐clad polyimide film(sales) 0 Bonding Wire(Sales Volume) B di Wi (S l V l ) FY2010 FY2011 09‐3Yr Leadframe(Sales) Forecast 2012 Advanced Materials (sales) ◆ B tt Battery/crystal (incl. sapphire)/thin and thick film/COF: Profit / t l (i l hi )/thi d thi k fil /COF P fit growth by volume increase ◆ Copper-clad polyimide Film/COF/Lead frame: Cost reduction through improvement of yield and productivity th hi t f i ld d d ti it ◆ Other businesses: Promote ‘selection and concentration’ SUMITOMO METAL MINING CO., LTD. 30
  31. 31. Current Besshi Copper MineSUMITOMO METAL MINING CO., LTD. 31
  32. 32. (%) 20.0 China Chi 15.0 Emerging and Developing Economies 10.0 World Advanced Economies 5.0 United States 0.0 Euro area -5.0 Japan-10.0 2007 2008 2009 2010 2011 2012 Forecast Forecast (Source:IMF2011/Apr) SUMITOMO METAL MINING CO., LTD. 32
  33. 33. ($/€) $/Euro $/¥ ($/¥)1.75 175 Euro is trending up (Dollar is weakening) 1.5 1501.25 125 1 1000.75 75 Yen appreciated after the Great Earthquake, and now around lower ¥80 level 0.5 50 09/1 09/7 10/1 10/7 11/1 SUMITOMO METAL MINING CO., LTD. 33
  34. 34. Current LME Cash & Stock Historical Chart $/T KT SHFE COMEX LME LME Cash12,000 2,000 1,80010,000 1,600 1,4008,000 1,2006,000 1,000 8004,000 600 4002,000 200 0 0 ICSG Macquarie (kt) 2010 2011 2012 2010 2011 Production 19,061 19,724 20,686 18,776 19,308 Consoumption 19,314 20,102 20,965 18,961 19,821 Balance △ 253 △ 378 △ 279 △ 185 △ 513 Estimated Timing 2011.4 2011.1 SUMITOMO METAL MINING CO., LTD. 34
  35. 35. (t) ($/lb) LME Nickel 25.00350,000350 000 LME Stocks LME Prices300,000 20.00250,000 15.00 15 00200,000150,000 10.00100,000 5.0050,000 0 0.00 SMM INSG M ac qu ar ie (Kt) 2009 2010 2011 2009 2010 2011 2011 Output O t t 1,292 1 292 1,416 1 416 1,592 1 592 1,329 1 329 1,439 1 439 1,600 1 600 1,596 1 596 Consumption 1,265 1,468 1,557 1,238 1,466 1,545 1,596 Balance 27 △ 52 35 91 △ 27 55 0 Estimated Timing 2011.04 2011.04 2011.04 Ni Pig Iron (Included) 95 160 180 - - - 217 Stainless steel 25,865 31,256 32,262 - - - 35,718 SUMITOMO METAL MINING CO., LTD. 35
  36. 36. ($/Toz) London Gold L d G ld Public ld P bli gold reserves by country b t 1,600  (March 2011) Gold Gold / 1,400  Sectors reserves foreign 1,200  (t) reserves (%) 1 USA 8,134 73.8% 1,000  2 Germany 3,401 69.8% 800  3 IMF 2,814 2 814 - 4 Italy 2,452 68.0% 600  5 France 2,435 64.8% 400  6 China 1,054 1.6% 7 Switzerland 1 040 1,040 17.4% 17 4% 200  8 Russia 789 3.0% 9 Japan 765 7.0% 0  10 Netherlands 613 57.3% 73/1 1 74/9 9 76/5 5 78/1 1 79/9 9 81/5 5 83/1 1 84/9 9 86/5 5 88/1 1 89/9 9 91/5 5 93/1 1 94/9 9 96/5 5 98/1 1 99/9 9 01/5 5 03/1 1 04/9 9 06/5 5 08/1 1 09/9 9 11 India 558 7.9% SUMITOMO METAL MINING CO., LTD. 36
  37. 37. Tounaru Area, Besshi Copper MineSUMITOMO METAL MINING CO., LTD. 37
  38. 38. (JPY100M) 2,000 Inventory Au Price impairment 1,750 +50 50 Ni Price +130 +220 Exchange 1,500 (TC・RC) Exchange loss Materials Cu Price ▲50 ▲50 segment Goro +160 ▲70 PJ 1,250 ▲70 Cost etc. ▲183 1,000 , 1,237 1,100 750 500 09 3-Yr 2010 2012 Result SUMITOMO METAL MINING CO., LTD. 38
  39. 39. (JPY100M) (%) 14,000 70 Equity Ratio 60% 12,000 60 10,000 50 Total assets D/E Ratio 8,000 , 0.4 40 Interest Interest- bearing debt 6,000 30 Shareholders equity Equity ti E it ratio 4,000 20 D/E ratio 2,000 10 ROE 10% ROE 0 0 2007 2008 2009 2010 09 3‐Yr 2012Dividend payout ratio of +20% FY2009 20.8% FY2010 21.4% SUMITOMO METAL MINING CO., LTD. 39
  40. 40. FY2010 FY2011 (forecast)Loss on direct damage - 400 mil. yen - 100 mil. yen(damage on properties) Impact on earnings - 300 mil. yen - 1,400 mil. yen Forecast as of【Damage on properties】 properties】 this point◆ Sumiko Teck Co., Ltd. : Partial damage on the inner wall, wall damage on mold/measurement equipment etc equipment, etc.【Business loss】 loss】◆ Materials bus ess e c a e a s business etc Effect of rolling blackout and power restrictions during peak time Effect f th d l Eff t of the delay of supply chain restorations, etc. f l h i t ti t SUMITOMO METAL MINING CO., LTD. 40
  41. 41. Jan. 2010 Front-end process (HPAL) test operation startedMar.Mar 2010 Back-end Back end process (refining process)test operation startedApr. 2010 Refining process (solvent extraction) Facilities partially damagedAug. 2010 First Metal ProductionDec. 2010 First shipment of Nickel Hydroxide2011-2011 Dispatch one executive l Di t h ti level person, t l two process engineers i and one facility engineer from SMM. → Support for fundamental solution on the issue of pp solvent extraction facilities Establish production system to make final products (Ni Hydroxide) from intermediates promptly2012- Large scale production of Nickel Oxide Ni NiLimonite HPAL HPA Hydroxide Refinery R fi Oxide SUMITOMO METAL MINING CO., LTD. 41
  42. 42. (JPY 100M) Consolidated recurring profit (Equities in earnings of affiliated companies) 1,400 1 400 1,200 1,000 800 600 400 200 0 2009 2010 FY2011 09 3‐Yr Forecast 2012 (JPY 100M) 2011 09 03 Yr 03-Yr 2009 2010 Forecast 2012 Consolidated recurring profit 878 1,237 1,240 1,100 (Equities in earnings of 461 763 820 550 affiliated companies) Cu ($/T) 6,101 8,140 8,500 6,000 Ni ($/lb) 7.7 10.7 11.0 8.0 Au ($/Toz) A ($/T ) 1,023 1 023 1,294 1 294 1,400 1 400 1,000 1 000 Exchange 92.9 85.7 80.0 90.0 SUMITOMO METAL MINING CO., LTD. 42
  43. 43. View of Seto Inland Sea from Douzan-mine (peak of Besshi mine) SUMITOMO METAL MINING CO., LTD. 43
  44. 44. 2011 09 3-Yr 2006 2007 2008 2009 2010 Forecast F 2012Net Sales 9,668 11,324 7,938 7,258 8,641 8,090 7,800Operating Income 1,626 1 626 1,554 1 554 105 663 960 940 850Recurring Profit 2,053 2,179 326 878 1,237 1,240 1,100 Equity Method profit 467 740 315 261 348 340 300Net Income 1,261 1,378 220 540 840 850 700ROA(%) 14.8 13.6 2.2 5.8 8.3 N/A 6ROE(%) 29.0 29 0 25.4 25 4 4.0 40 9.9 99 13.8 13 8 N/A 10Dividend Per Share(¥) 27.0 30.0 13.0 20.0 32.0 32.0 N/ACopper ($/t) 6,970 7,584 5,864 6,101 8,140 8,500 6,000Nickel ($/lb) 14 15.5 7.5 7.7 10.7 11.00 8.0Gold ($/Toz) 629 766 867 1,023 1,294 1,400 1,000Zinc ($/T) 3,579 3 579 2,986 2 986 1,560 1 560 1,934 1 934 2,187 2 187 2,200 2 200 2,000 2 000Exchange(¥/$) 117.0 114.4 100.7 92.9 85.7 80.0 90.0 SUMITOMO METAL MINING CO., LTD. 44
  45. 45. (JPY 100M)2,0001,5001,000 Others Materials 500 Smelting & Refining Mineral Resources 0 Diff. Diff Adjustment 500 2006 2007 2008 2009 2010 2011 09 3‐Yr Forecast 2012 (JPY 100M) 2011 09 3-Yr 2006 2007 2008 2009 2010 Forecast 2012 Mineral Resources 337 383 179 309 430 490 290 Smelting & Refining 1,181 1,174 107 417 569 460 470 Materials 152 98 △ 87 45 78 90 160 Others 63 37 6 △1 10 10 20 Sub total Sub-total 1,733 1 733 1,692 1 692 205 770 1,087 1 087 1,050 1 050 940 Diff.Adjustment △ 107 △ 138 △ 100 △ 107 △ 127 △ 110 △ 90 Total 1,626 1,554 105 663 960 940 850 SUMITOMO METAL MINING CO., LTD. 45
  46. 46. (JPY 100M) 2,500  Consolidated recurring profit Equities in earnings of Affiliated Companies 2,000  1,500  1,500 1,000  500  0  2006 2007 2008 2009 2010 2011 Forecast (JPY100M) 2011 2006 2007 2008 2009 2010 ForecastConsolidated recurring profit 2,053 2,179 326 878 1,237 1,240(Equities in earnings 467 740 315 261 348 340 of Affiliated Companies) SUMITOMO METAL MINING CO., LTD. 46
  47. 47. 4)FCF (JPY 100M)2,000  Operating1,500  Activities Investing1,000  activities Free Cash 500  500 Flow Fl 0  ‐500 ‐1 000 1,000 ‐1,500  2003 2004 2005 2006 2007 2008 2009 2010 SUMITOMO METAL MINING CO., LTD. 47
  48. 48. Gold Nickel Copper Pogo(85.0%) Morenci(12.0%) Jinlong Copper Co., Ltd.(27.1%) Taganito ( g (62.5%) ) タガニート(62.5%) タガ ト(62 5%) Coral Bay (54.0%)Soroako(20.1%)Batu Hijau(3.5%) Cerro Verde(16.8%) Ojos del Salado(16.0%) Candelaria(16.0%)Northparkes(13.3%) Figesbal(25.5%) Goro(11.0%) SUMITOMO METAL MINING CO., LTD. 48
  49. 49. Sensitivity JPY100M/Year FY2011 Fluctuation Profit up/down Cu ±100$/t 5/10 Ni ±10¢/lb 7/9 Au ±10 $/Toz $ 4/4 ¥/$ ±1 /$ 12/12(Remarks)Operating income/Recurring profit USD/JPY translation applied to RC-related only. pp y (Oversea profit effects excluded). SUMITOMO METAL MINING CO., LTD. 49
  50. 50. Mineral resources and metals 2) Metal refining Copper concentrates1)Metal trading Smelting and refining Used as raw materials in copper smelting, copperLondon Metal Exchange (LME) Refining processes extract valuable metals from ores or concentrates have a copper content of about 30% byThe LME specializes in trading of non-ferrous metals such p g o e a other raw materials. They fall into two bas c types: ae as ey a o o basic ypes weight. The remainder consists mostly of sulfur and iron.as copper, nickel, aluminum, lead and zinc. The LME hydrometallurgical (wet) and pyrometallurgical (dry). At Copper concentrates are made mostly from sulfide ores.trading prices for metals are used as the international SMM’s Toyo facilities in Ehime Prefecture, the copper Ores extracted from overseas mines have a typical grade ofpricing benchmarks for sales of refined metal and purchases concentrate pre-processing undertaken at Saijo uses about 1%. The ores are then “dressed” at the mine toof refining ores. pyrometallurgical processes and the nickel refining at the increase the purity and produce concentrate. Most of the Niihama site uses hydrometallurgical processes entirely. copper ores imported by SMM for smelting in Japan areTC/RC The term ‘smelting’ is used for the extraction of metal from concentrates.Treatment Charge (TC) and Refining Charge (RC) areT t t Ch d R fi i Ch ores using melting and heating (pyrometallurgy) The term (pyrometallurgy).commonly used in the terms of purchase for copper ‘refining’ refers to any process that increases the grade or Nickel oxide oresconcentrate or nickel ore for refining. They are amounts purity of a metal. Whilst the higher-grade sulfide ores are used predominantlydesigned to cover refining costs. For example, copper in nickel refining, nickel oxide ores are more prevalent thanconcentrate contracts may define a purchase price based Pyrometallurgical refining nickel sulfides. The sulfide-oxide ratio in current nickelon the LME price at a certain date, minus the TC or RC The precursor ore is melted at high temperature in a reserves is believed to be about 3:7. High refining costs andbeing used at the time. furnace, and refining techniques are applied to separate the technical issues have limited use of oxide ores in nickel metal in a molten state. Although large amounts of ore can refining to date, but SMM has succeeded in refining nickelLondon fixing be processed at one time, the equipment needs periodic from low-grade oxide ores based on HPAL technology.Gold is not traded on the LME. Its price is determined for maintenance for heat proofing.each transaction between market participants. The financial Mixed sulfide (MS) oresinstitutions in the London Bullion Market Association (LBMA) Hydrometallurgical refining CBNC produces a mixed nickel-cobalt sulfide intermediateagree a standard price for gold based on these transactions The ore and impurities are dissolved in a solution, and p , containing about 60% nickel by weight. This is used as aand publish it on the morning and afternoon of each trading chemical reactions are used to separate out the metal. This raw material in electrolytic nickel production.day. This “London fixing” price is the benchmark for tradingin gold. approach allows continuous and stable refining, but incurs additional costs due to the refining chemicals consumed. MattePound (lb) A matte is another term for metal sulfides. For rawPart of the imperial system of measures, the pound is the 3) Metal ores material, electrolytic nickel production at SMM also uses astandard unit of weight used in measuring and pricing base Sulfide ores nickel matte (of about 75-80% purity) sourced from PT Inco.metals such as copper and nickel, and in TC/RC These ores contain copper, nickel or other metalscalculations. One pound is equal to 453.59 grams; an chemically bonded to sulfur. Since the application of heat Proprietary ore ratioimperial ton equals 2,204.62lb. breaks these bonds, releasing the sulfur, such ores are This ratio is the proportion by volume of ore procured from generally refined using pyrometallurgical techniques. overseas mining interests relative to the overall volume ofTroy ounce (toz) smelting ores used as raw materials. Typically, off-takeThe troy ounce is the standard unit of weight for precious Oxide ores rights are proportional to the equity interest in a mine. In themetals such as gold and silver It equals approximately 31 1 silver. 31.1 These ores contain metals in oxidized forms. Unlike sulfide case of Cerro Verde, SMM has secured 50% off-take rights Verde off takegrams. It is named after Troyes, a city in the Champagne ores, oxides need much more energy to achieve melting. for the first ten years of production from 2006, based on aregion of central France that was the site of a major market For this reason, the hydrometallurgical approach is 21% equity interest.in Europe in medieval times. Originally used as a unit of generally used to refine these ores.exchange for valuing goods in terms of gold or silverweights, the troy ounce is still used today in gold trading. SUMITOMO METAL MINING CO., LTD. 50
  51. 51. 4) Nickel production process Ferronickel Semiconductor and advanced materialsCoral Bay Nickel Corporation (CBNC) Ferronickel is an alloy containing nickel (about 20%) and iron. Copper-clad polyimide film (CCPF)Based in the Philippines, this SMM subsidiary produces mixed Its main use is in the manufacture of stainless steel, which is CCPF is a polyimide film that is coated using a copper base. Itnickel-cobaltnickel cobalt sulfides using HPAL technology and exports the about 10% nickel by weight. Based in Hyuga, Miyazaki weight Hyuga is used as a material for making COF substrates SMM substrates.raw materials to the SMM Group’s nickel refining facilities in Prefecture, SMM Group firm Hyuga Smelting produces commands a global market share of over 70% of the CCPFNiihama, Ehime Prefecture. ferronickel. supplied for use in large liquid crystal displays.High Pressure Acid Leach (HPAL) Gold Chip-on-film (COF) substratesHPAL technology enables the recovery of nickel from nickel Gold is in demand worldwide for investment and decorative COF substrates are electronic packaging materials used tooxide ores that traditionally were difficult to process SMM process. purposes. Gold is widely used in Japanese industry within the make integrated circuits for LCD drivers They connect these drivers.was the first company in the world to apply it successfully on electronics sector because of its high malleability and circuits to the LCD panel.a commercial scale. The oxide ores are subjected to high ductility. Part of SMM’s gold production goes to SMM Grouptemperature and pressure and reacted under stable conditions companies engaged in fabricating and selling bonding wire. Lead frames (L/F)with sulfuric acid to produce a nickel-rich refining Lead frames are electronic packaging materials used to formintermediate. connections in semiconductor chips and printed circuit boards. They contain thin strips of a metal alloy containing mostlyMatte Chlorine Leach Electrowinning (MCLE) nickel or copper.MCLE is the technology used in the manufacturing process atSMM’s nickel refinery. The matte and mixed sulfide ores are Bonding wiredissolved in chlorine at high pressure to produce high-grade Composed of gold wire that is just a few micrometersnickel using electrolysis. MCLE is competitive in cost thick, bonding wire is used to make electrical connectionsterms, but poses significant operational challenges. Other than between lead frames and the electrodes on semiconductorSMM,SMM only two companies are producing nickel based on this chips.kind of technology. Secondary batteries5) Main applications for metals Secondary batteries are ones that can be recharged and usedCopper again. SMM supplies battery materials that are used in theCopper is fabricated into wires, pipes and other forms. anodes of nickel metal hydride batteries and lithium-ionBesides power cables copper is used widely in consumer cables, rechargeable batteries, which supply power for hybrid vehiclesapplications such as wiring in vehicles or houses, and in air or notebook computers, among other consumer applications.conditioning systems.Electrolytic nickelThis form of nickel, which has a purity of at least 99.99%, isused in specialty steels electronics materials and steels,electroplating, among other applications. SMM is the onlyproducer of electrolytic nickel in Japan. SUMITOMO METAL MINING CO., LTD. 51
  52. 52. The materials provided herein are not intended as disclosure under the Securities Law and Law,no warranty is made as to their completeness or accuracy. Any projections included in thesematerials are based solely on information available at the time of this briefing, and aresubject to change based on market conditions, competitive conditions, and a number ofother factors. Therefore, we ask that you refrain from making any investment decisionsbased on these materials alone. The Company cannot be held responsible in any way forany losses that may occur as a result of the use of these materials.All copyrights, trademarks, and intellectual property rights attaching to the materials hereinare the sole property of Sumitomo Metal Mining Co Ltd Co., Ltd. SUMITOMO METAL MINING Co., Ltd. SUMITOMO METAL MINING CO., LTD. 52

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