2 nd Quarter of FY2015 Progress of Business Strategy

Transcription

1 nd Quarter of FY215 Progress of Business Strategy November 215 SUMITOMO METAL MINING CO., LTD.

2 Contents Ⅰ Ⅱ Response to Changes in Business Environment Year Business Plan Strategy: Progress & Management Issues Ⅲ Trends in Business Performance Ⅳ Promotion of the 12 3-Yr Plan Strategy Ⅴ External Environment Ⅵ Financial Highlights and Information Materials SUMITOMO METAL MINING CO., LTD. 2

3 Ⅰ Ⅱ Response to Changes in Business Environment Year Business Plan Strategy: Progress & Management Issues Ⅲ Trends in Business Performance Ⅳ Promotion of the 12 3-Yr Plan Strategy Ⅴ External Environment Ⅵ Financial Highlights and Information Materials SUMITOMO METAL MINING CO., LTD. 3

4 1) Business Environment Lehman s collapse World financial crisis Uncertain future for world economy End of commodity supercycle China: Massive increase in energy resource consumption Establishment and oligopolization of huge resource companies Growth of economies in emerging countries Infusion of funds from financial markets Rise of resource nationalism Fiscal fears in emerging countries, deteriorating economies Speculation on monetary policy and volatility expansion for product prices Towards new normal in economic growth Financial damage...asset reorganization, organization trends, reshuffle? Further increase Slump in metal prices Balanced supply and demand Capex hovering at high levels, increased operating costs SUMITOMO METAL MINING CO., LTD. 4

5 2) Our Response (Towards Next 3-Yr Plan) 1 Aiming to be a World Leader in the Non-Ferrous Metals Industry & an Excellent Company of Japan Targets World Leader in the Non-Ferrous Metals Industry Nickel Copper interests FY 221 Gold interests 15kt 3kt 3t New materials Recurring profit 5 billion Net Sales Excellent Company of Japan 1 trillion Net Income 1 billion (Recurring profit 15 billion) Achievement of long-term vision No change in growth strategy goals Profit attributable to owners of parent SUMITOMO METAL MINING CO., LTD. 5

6 2) Our Response (Towards Next 3-Yr Plan) 2 Preparations for Yr Plan Strategy 1 Maximum utilization of competitive business assets Enhancement of cost advantage and maximization of profit 2 Project advancement through collaboration with partners Risk minimization (rigorous selection of investments, best timing) Mineral Resources business Enhancement of profitability through expansion of well-performing existing mines Get benefits out of new mines Smelting & Refining business Copper: Enhancement of competitiveness of Smelting & Refining business (cooperation with Mineral Resources business, maintain/improve operability and productivity) Nickel: Develop growth strategy by developing HPAL-related technologies Materials business Swift benefits from enhancement project, return to growth through selection and concentration Corporate department enhancement Human Resources Development Department (established October 215) Development of global human resources by promotion of systematic education and OJT Action for globalization Investigation into IFRS, integrated reporting, action for Japan s corporate governance code SUMITOMO METAL MINING CO., LTD. 6

7 Ⅰ Ⅱ Response to Changes in Business Environment Year Business Plan Strategy: Progress & Management Issues Ⅲ Trends in Business Performance Ⅳ Promotion of the 12 3-Yr Plan Strategy Ⅴ External Environment Ⅵ Financial Highlights and Information Materials SUMITOMO METAL MINING CO., LTD. 7

8 1) Management Issues 1 Progress of Projects FY 215 Progress of major projects Project name FY 214 FY 215 FY 216 and later Mineral Resources Cu Cu Cu Sierra Gorda Expansion of Morenci Mine Expansion of Cerro Verde Mine Start of ramp-up Mine opening ceremony Start Commercial production Start of full operation 11 kt production structure operation 216 Full production structure Investigation on construction of 22 kt production structure Smelting & Refining Materials Ni Nickel sulfate Taganito Project Harima Smelter Nickel sulfate Battery materials (Increased production of lithium nickel oxide) Start of full operation Start of first line production Decision on second line investment Completion of 85 t production structure Decision on production increase 85 t 1,85 t Toward 36 kt production structure 216 Second line launch 1,85 t production structure SUMITOMO METAL MINING CO., LTD. 8

9 1) Management issues 2 Progress towards achievement of long-term vision (kt) kt Cu 19 kt 175 kt Target 3 kt (kt) kt Ni 1 kt Target 15 kt (kt) Au 19t 17t Target 3t Recurring profit (JPY1M) Materials Business 13. B Target 7. B New products 5. B SUMITOMO METAL MINING CO., LTD. 9

10 Ⅰ Ⅱ Response to Changes in Business Environment Year Business Plan Strategy: Progress & Management Issues Ⅲ Trends in Business Performance Ⅳ Promotion of the 12 3-Yr Plan Strategy Ⅴ External Environment Ⅵ Financial Highlights and Information Materials SUMITOMO METAL MINING CO., LTD. 1

11 1) Profit Trends (JPY1M) 2, 1,75 1,5 1,25 1, Recurring Profit Net Income Forecast 12 3-Yr Forecast 12 3-Yr 215 Recurring profit (JPY1M) 1,238 1,88 1,15 1,144 1, ,5 Net income (JPY1M) (Profit attributable to owners of parent ) , Cu Price ($/T) 8,14 8,485 7,855 7,14 6,554 5,427 7,5 Ni Price ($/lb) Au Price ($/Toz) 1,294 1,646 1,654 1,327 1,248 1,129 1,55 Forex ( /$) SUMITOMO METAL MINING CO., LTD. 11

12 2) Recurring Profit Analysis (JPY1M) 1,5 1 FY215 Forecast in Nov. vs in May 16 Cu Price 1, 1,48 27 Ni Price 1 Au Price 11 Sierra Gorda 5 Pogo/ Cerro Verde Quantity 6 Materials Business Forex 2 Others FY215 Forecast in May FY215 Forecast in November SUMITOMO METAL MINING CO., LTD. 12

13 2) Recurring Profit Analysis (JPY1M) 1, 2 FY215/1H vs FY214/1H 75 Cost etc. 8 Cu Price Forex Quantity Ni Price 3 Au Price 6 Inventory 67 Evaluation Exchange Gain (only in FY214) FY214 /1H FY215 /1H SUMITOMO METAL MINING CO., LTD. 13

14 2) Recurring Profit Analysis 3 FY215 Forecast vs 12 3-Yr Plan 215 (JPY1M) 2, 1,75 Sensitivity 1,5 1,25 1$= , ,5 12-3Yr plan Cu Price $7,5 $5,43 57 Ni Price $9. $ Au Price $1,55 $1,13 Forex Sierra Gorda 5 Material Business Others 5 85 FY215 Forecast in Nov. SUMITOMO METAL MINING CO., LTD. 14

15 3) Profit Trends by Segment (JPY1M) 2, 1,5 1, 5 Adjustment Others Materials Segment profit Forecast Forecast 12 3-Yr 215 (JPY1M) 12 3-Yr 215 Mineral Resources Smelting & Refining Materials Others Smelting & Refining Mineral Resources Adjustment Recurring Profit 1,15 1,144 1, ,5 SUMITOMO METAL MINING CO., LTD. 15

16 4) Capital Expenditure Materials 35 Smelting & Refining (Japan, etc.) 12 3-Yr Plan (Total of 3 Years) Other ,7 (JPY1M) Smelting & Refining 11 Smelting & Refining (CBNC) Acquisition of overseas interest Mineral Resources Smelting & Refining (Taganito) Materials Smelting & Refining (Japan, etc.) FY213 Result Other Smelting & Refining (CBNC) 664 (JPY1M) Materials 281 FY215 Plan Other SUMITOMO METAL MINING CO., LTD. Mineral Resources Smelting & Refining (Taganito) 623 (JPY1M) 96 2 Materials 74 Smelting & Refining (Japan, etc.) Smelting & Refining (Japan, etc.) Mineral Resources Smelting & Refining (Taganito) Smelting & Refining (CBNC) FY214 Result Other 29 Smelting & Refining (CBNC) (JPY1M) 製錬 Smelting & Refining (Taganito) + Mineral Resources 海外権益の取得 Acquisition of overseas interest 16

17 5) Financial Strategies Maintenance of a Sound Financial Structure (JPY1M) (%) 2, 1. 15, Equity ratio 61% 75. Total assets 1, 5, D/E ratio.35 ROE 12% Interest-bearing debt Shareholder's equity Equity ratio Debt-to-equity ratio ROE /2Q 12 3-Yr 215. SUMITOMO METAL MINING CO., LTD. 17

18 5) Financial Strategies Maintenance of a Sound Financial Structure Dividend / Share ( ) Dividend per share Dividend pay out ratio Dividend payout ratio 25% or higher Dividend payout ratio(%) Dividend payout ratio 2% or higher Forecast FY215 Dividend Forecast : 31 Continue performance linked dividend SUMITOMO METAL MINING CO., LTD. 18

19 Ⅰ Ⅱ Response to Changes in Business Environment Year Business Plan Strategy: Progress & Management Issues Ⅲ Trends in Business Performance Ⅳ Promotion of the 12 3-Yr Plan Strategy Ⅴ External Environment Ⅵ Financial Highlights and Information Materials SUMITOMO METAL MINING CO., LTD. 19

20 1) Mineral Resources 1 Participation in Mine Development Project Sierra Gorda Project - Cu Sierra Gorda Project (Chile) Schedule Equity Interest Ratio KGHM 55% SMM 31.5% Sumitomo Corp. 13.5% Decided to participate in the project October Conducted opening ceremony End of June Achieved commercial production Total Investment for Phase 1 $4.2B 214 年 Current Progress In final ramp up Forecast Production volume of copper 11kt/year 1kt/year Full operation in first half of 216 Start of investigation into expansion plan (2 nd phase) from 216 or later SUMITOMO METAL MINING CO., LTD. 2

21 1) Mineral Resources 2 Increasing Production at Existing Mines Morenci - Cu Morenci Mine (USA) Expansion Project Upgrade Plan Preexpansion Equity Interest Ratio After expansion FCX 85% SMM 12% Sumitomo Corp. 3% 215 Forecast Total investment $1.9B Mining output 635kt/day 815kt/day Concentration capacity Production volume of copper Schedule 5kt/day 115kt/day 28kt/year 4kt/year 488kt/year January Decided on participation in project for increasing production May Start of new mill plant operation 215 2Q - Achievement of full production level (kt) Production volume of Cu (1%) (F) SUMITOMO METAL MINING CO., LTD. 21

22 1) Mineral Resources 2 Increasing Production at Existing Mines Cerro Verde - Cu Cerro Verde Mine (Peru) Expansion Project Upgrade Plan Equity Interest Ratio FCX 53.56% SMM 16.8% Sumitomo Corp. 4.2% Other 25.44% Total investment $4.6B Current status 216 Mining output 32kt/day 85kt/day Concentration capacity Production volume of copper 12kt/day 3kt/year 36kt/day 5kt/year Production volume of Cu (1%) Schedule Completed final planning, began construction February Decided on participation in project for increasing production (F) September Start of production from newly expanded facilities First half of Achievement of full production level (kt) Capa SUMITOMO METAL MINING CO., LTD. 22

23 1) Mineral Resources 3 Maintenance and Expansion of Existing Au Mine Volume - Hishikari Hishikari Mine Production volume and gold content FY 214 Performance: 6.9 t FY 215 Production forecast: 7.5 t Production increase in FY215 due to ore grade at locations planned for mining. Gold content as of December 31, 214: 17 t Development plan for lower ore body Confirmed quality mineral vein in the lower part of ore body being mined * Installed hot spring drawdown equipment at 8ML below sea level Total investment amount: Approx. 3.2 billion * November, Start construction * Scheduled to start mining (Note) Gold content of Hishikari mine: Content of gold in minable ore according to JIS standards: 17 t (t) Production volume of Au (F) SUMITOMO METAL MINING CO., LTD. 23

24 1) Mineral Resources 3 Maintenance and Expansion of Existing Au Mine Volume - Pogo Pogo Gold Mine 29 - Acquisition of additional mining interest (51% 85%) 214 Production Volume : 1.6 t 215 Production forecast : 9.3 t Gold content as of December 31, 214 : 163t * Actively continue exploration of the surrounding area tonnes Au Production volume of gold East Deep Section Development Plan 214 1Q Start mining Autumn 215 Main facilities scheduled for completion (F) (Note) Gold content of Pogo Gold Mine : Gold contained in reserves (55t), Resources(18t) under Canadian standards SUMITOMO METAL MINING CO., LTD. 24

25 1) Mineral Resources 4 Promotion of Exploration by SMM Stone Boy -Au/ Solomon -Ni Stone Boy Project Conduct gold exploration in Alaska Efforts being made in a wide-area survey to secure new mining blocks Solomon Project Conduct exploration, environmental research, and Pre/FS in Isabel Area 21 - Successfully bid for 3 mining blocks in Isabel Area in international bidding Government of Solomon unilaterally revoked successful bids and conferred mining blocks to Axiom KB Limited In same year, SMM sued government and Axiom KB Limited October High court Litigation began September Claim by our company dismissed by high court October Appeal to Court of Appeals March 215 Start proceedings at Court of Appeals SUMITOMO METAL MINING CO., LTD. 25

26 1) Mineral Resources ④ Promotion of Exploration by SMM - Worldwide Exploration Alaska, USA Au Yukon Territory, Canada Cu, Au NORTH AMERICA ASIA SOUTH AMERICA Brazil Cu, Au Solomon Islands Ni OCEANIA Australia Au SUMITOMO METAL MINING CO., LTD. Peru Cu, Au Chile Cu, Au 26

27 2) Smelting & Refining 1 Establish a 1kt Capacity for Ni - Taganito HPAL Taganito HPAL Nickel (Mindanao, Philippines) Investment ratio: SMM 62.5%, NAC 22.5%, MITSUI & CO., LTD. 15% Scheduled period for operation: 3 years Investment amount: US$1.6 billion Shift to 36 kt production capacity during next 3-Yr plan Schedule June Construction work Completion Sep - Inauguration Ceremony June Completion of work reached August - Achievement of 3 kt / month production for the month 2H kt production 215: 1H kt production Production forecast of 3 kt annually Production plan of MS (Ni-kt) 213/2H 214/1H 214/2H 215/1H 215/2H (F) SUMITOMO METAL MINING CO., LTD. 27

28 2) Smelting & Refining 2 Establish a 1kt Capacity for Ni - Coral Bay Nickel Coral Bay Nickel (Palawan, Philippines) Continued 24 kt/year full production Production plan of MS (Ni-kt) Manila Luzon Baguio (F) Puerto Princesa Cebu HPAL technology (High Pressure Acid Leach) allows Ni-Co recovery from low-grade Ni oxide ores world-first for SMM on commercial scale 25 Phase I: Start of production Current Capa: 24ktpa MS Ni intermediate produced at CBNC Final products produced from MS at Japan Palawan Coral Bay Nickel Davao Taganito Mindanao SUMITOMO METAL MINING CO., LTD. 28

29 2) Smelting & Refining 3 Promotion of 65 kt Electrolytic Nickel Production Operation Niihama Nickel Refinery Production Capacity 41 kt/year 65 kt/year Total investment 14 B Schedule FY29 - Completed 41 kt production structure FY21 - Decided to invest in 65 kt production operation End of March Refining facility completed November onward - Receipt of raw materials from Taganito Production Volume FY213 5 kt FY kt FY kt planned, through increased intermediate products processing at Taganito (Ni-kt) Production volume of Electrolytic Nickel (F) SUMITOMO METAL MINING CO., LTD. 29

30 2) Smelting & Refining 4 Ferro-nickel Production Plan Hyuga Smelting Co., Ltd. Ferro-nickel Production Plan 214, Jan Ban of export of unprocessed ore from Indonesia Centered in raw material from New Caledonia, Indonesia, in the past Shifted to raw materials from New Caledonia/Philippines Impacts on business Considerable rise in ore spot prices Increase in processing volume through reduction in ore grade Make efforts to reduce costs and minimize impact on profit FY215 Production of 2 kt planned Also investigate future optimum operation Production volume of Ferro-nickel (kt) (F) SUMITOMO METAL MINING CO., LTD. 3

31 2) Smelting & Refining 5 Cu Increasing Production of Nickel Sulfate Business structure change at Harima Smelter Start of manufacture of distillated zinc Halt of manufacture of distillated zinc from zinc concentrate: Shift to recycled zinc raw material on all smelting volume January Start of nickel sulfate production (First line) production capacity 2 kt / year September Ended distillated zinc production Autumn 216 (scheduled) Completion of nickel sulfate second line Production capacity 25 kt / year (kt) 75 Production volume of nickel sulfate (amount of nickel sulfate) Second line total investment About 5. B Planned Harima second line 播磨第二系列 Harima first line 播磨第一系列 Niihama Nickel 新居浜ニッケル工場 Plant SUMITOMO METAL MINING CO., LTD. 31

32 2) Smelting & Refining 6 Toward a 1 kt Capacity for Nickel (Ni-kt, nickel sulfate is indicated in terms of pure nickel content) (F) Toward 1 kt production of nickel Ferro nickel (Hyuga) Nckel sulfate (Harima) Nickel sulfate, etc. (Niihama) Electrolytic Nickel (Niihama) FY214 - Production volume: 91 kt FY215 - Toward 1 kt production through increase in intermediate products from Taganito SUMITOMO METAL MINING CO., LTD. 32

33 2) Smelting & Refining 6 Toward a 1 kt Capacity for Nickel Composition of nickel products and raw materials (Ni-kt, nickel sulfate is indicated in terms of pure nickel content) Ferronickel raw material Matte, etc. Ferronickel Nickel sulfate, etc 4 CBNC E-Nickel 2 Taganito 215 Raw material composition 215 By product SUMITOMO METAL MINING CO., LTD. 33

34 2) Smelting & Refining 7 Expanded Recycling of Valuable Metals Scandium (Sc) Recover small quantities of scandium contained in HPAL raw ore at CBNC Build pilot plant Start trial production (1 kg/month) 217 (scheduled) - Start of commercial production Current scandium production and usage status Global production of approx. 1 t/year Supplied by the United States, Ukraine, Russia, China, etc. Modest volume of production and high price result in limited demand Additive to aluminum (increases strength) Additive to solid electrolyte for fuel cells Provide stable supply in order to increase new demand Chrome (Cr) Recover chrome contained in HPAL raw ore as chromite at Taganito September Build pilot plant at CBNC Start test operation Based on pilot test results, build chrome recovery plant at Taganito Current chrome production and usage status Main suppliers: South Africa, Kazakhstan, and India Additive for special steels such as stainless steel Hematite Recover hematite contained in HPAL residue at Taganito as steel-making materials 213 3Q - Build pilot plant at THPAL 214 3Q - Scheduled completion Examining for the possibility of practical use SUMITOMO METAL MINING CO., LTD. 34

35 2) Smelting & Refining 8 New Ore Source Exploration -Ni Pomalaa Pre F/S Overview P.T. Vale Indonesia owns mining rights Pre F/S is underway Background June Began Pre F/S January Began environmental impact analysis survey (mandated) Jakarta Borneo (Kalimantan) Sorowako Pomalaa Makassar Sulawesi Current Progress Pre F/S is completed Acquisition of logging permit PTVI concluded new COW Preliminary survey underway Java Surabaya Denpasar SUMITOMO METAL MINING CO., LTD. 35

36 2) Smelting & Refining 9 Cu Enhance Competitiveness of Toyo Smelter Toyo Smelter & Refinery (Ehime, Japan) FY214 Electrolytic copper production volume: 429 kt FY215 Production plan: 42 kt Stable high-load operation at the flash furnace Progressively increased volume of recycled raw materials Large-scale shutdown for 25 days in October to November Promotion of initiatives to achieve further cost reduction inc. energy Taking full advantage of TC/RC improvements (kt) 5 Production volume of E-Cu 125 TC/RC (benchmark) (F) TC RC SUMITOMO METAL MINING CO., LTD. 36

37 3) Materials 1 Taking on Growth Strategies Promotion of the 12 3-Yr Plan Strategy (JPY1M) 15 Profit of Materials Segment Realigning of business structure (Forecast) Target in 12 3-yr plan 12 b Swift benefits from enhancement project, return to growth through selection and concentration Increased production of battery cathode materials (NCA 1,85 t/month).5 Increased production of crystal materials (LN/LT) (3 kp/month) Profit of lead frames (Index 13/1H=1.) 13/1H 13/2H 14/1H 14/2H 15/1H 15/2H(F) SUMITOMO METAL MINING CO., LTD. 37

38 3) Materials 2 Expansion of Battery Materials Business Increased production of lithium nickel oxide for electric vehicles September Decision to increase production volume: 3 t / month 85 t / month June t / month production structure completed October Decision to increase production volume: 85 t / month 1,85 t / month Total investment amount: 15. B December Planned completion of main facilities Increased production structure Harima Smelter (Hyogo Prefecture) Continued increased production at Isoura Plant Established Sumiko Energy Materials, Co., Ltd. in Naraha Town, Fukushima Prefecture Migrated a portion of processes Outsourced a portion of processes to Fukushima No. 1 Plant, Nihon Kagaku Sangyo Co., Ltd. Increased production of nickel sulfate (raw material) at Harima Smelter Isoura Plant (Ehime Prefecture) Sumiko Energy Materials, Co., Ltd. (Fukushima Prefecture) SUMITOMO METAL MINING CO., LTD. 38

39 3) Materials 3 Battery Materials Battery Materials (Rechargeable Battery Material) Nickel Hydroxide Lithium Nickel Oxide Used as cathode material in automotive nickel metal hydride batteries by PEVE* Final user: TOYOTA Motor Corporation (HEV: hybrid cars) SMM has large share in battery materials for HEV *PEVE: Primearth EV energy Co., Ltd /1H 12 /2H Battery materials 13 /1H (Net sales 12/1H=1) 13 /2H 14 /1H 14 /2H 15 /1H 15 /2H (F) Used in lithium-ion battery cathode material by Panasonic Corporation Used in electric vehicles by Tesla Motors Inc. as final user Ternary Material Start of NMC commercial production We aim at the global battery cathode materials producer in the invehicle / highly functional consumer market by utilizing the strength of our Ni and Co resources possession and technology of the battery materials development. SUMITOMO METAL MINING CO., LTD. 39

40 3) Materials 4 Thick Film / Crystal Materials Materials for smartphones and tablets Sales of many materials with top-class shares, 1.5 to favored customers Nickel paste for MLCC 1 Resistor paste for chip resistors.5 Crystal wafers for SAW filters (LN: lithium niobate; LT: lithium tantalate) 12 /1H Thick film materials 12 /2H 13 /1H 13 /2H 14 /1H (Net sales 12/1H=1) 14 /2H 15 /1H 15 /2H (F) SUMITOMO METAL MINING CO., LTD. 4

41 4) Promotion of Research & Development 1 Enhancement of Research Institute Functions Technology Development Mineral Resources and Smelting & Refining Business November, Decided on construction of new Resource & Hydrometallurgy Process Center Develop world s most advanced processes and facility technologies in the area of mineral resources and smelting & refining April Completion Materials Business Battery Research Laboratory (established October 21) Support start of lithium nickel oxide production increase project Develop cathode materials for next-generation batteries Materials Laboratory (in Ome District Div., renamed in October 215) Development of products in environmental and energy area Respond to decreasing size of final products and increasing speed of communications Resource & Hydrometallurgy Process Center SUMITOMO METAL MINING CO., LTD. 41

42 4) R&D Promotion 2 SMM core Technologies SMM technologies Powder Synthesis Technology Surface Treatment Technology Material Processing Technology Resin Technology Smelting & Refining/Processing Technology Crystal Fabrication Technology Evaluation & Analysis Technology Mine Development /Operation Technology Base formed by smelting & refining/processing technology, mine development/operation technology, and evaluation & analysis technology Use of powder synthesis technology, surface treatment technology, resin technology, material processing technology, and crystal fabrication technology Roll out to products and customers SUMITOMO METAL MINING CO., LTD. 42

43 5) Progress in Cost-Cutting Cost-Reduction Measures in Yr Business Plan Reduce costs by 1 billion/year Period of activity: October fully achieve in FY215 Target amount: Reduction of 1 billion/year Base: FY212 Improve productivity Switch to low-cost materials Carefully select fixed costs Progress in FY215 FY215 plan: 13 billion 2Q result : 6.5 billion Continuing cost reduction initiatives in all departments SUMITOMO METAL MINING CO., LTD. 43

44 Ⅰ Ⅱ Response to Changes in Business Environment Year Business Plan Strategy: Progress & Management Issues Ⅲ Trends in Business Performance Ⅳ Promotion of the 12 3-Yr Plan Strategy Ⅴ External Environment Ⅵ Financial Highlights and Information Materials SUMITOMO METAL MINING CO., LTD. 44

45 1) General Conditions Global GDP Growth (%) World China United States Advanced Economies Euro Area Japan (IMF Oct.215) SUMITOMO METAL MINING CO., LTD. 45

46 2) Forex Trends $/ /$ ($/ ) ( /$) /1 1/7 11/1 11/7 12/1 12/7 13/1 13/7 14/1 14/7 15/1 15/7 6 SUMITOMO METAL MINING CO., LTD. 46

47 3)Cu Price / Supply & Demand Balance $/T 1,. 9,. 8,. 7,. 6,. 5,. 4,. 3,. 2,. 1,.. LME Cash & Stock Historical Chart LME COMEX SHFE LME Cash KT 2, 1,8 1,6 1,4 1,2 1, [ICSG Estimation 215/1] (kt) Production 22,479 22,669 23,183 Usage 22,893 22,628 23,31 Balance SUMITOMO METAL MINING CO., LTD. 47

48 4) Ni Price / Supply & Demand Balance $/lb LME Stocks LME Prices Stocks(t) 5, 4, 15. 3, 1. 2, 5. 1,. /1 1/1 2/1 3/1 4/1 5/1 6/1 7/1 8/1 9/1 1/1 11/1 12/1 13/1 14/1 15/1 INSG Estimation 215/1 (kt) SMM Estimation 215/1 (kt) Production 1,999 1,954 1,942 1,981 1,95 1,938 Usage 1,869 1,95 1,965 1,933 1,924 1,945 Balance SUMITOMO METAL MINING CO., LTD. 48

49 5) Au -Price ($/Toz) 2, London Au Prices 1,8 1,6 1,4 1,2 1, /1 75/1 77/1 79/1 81/1 83/1 85/1 87/1 89/1 91/1 93/1 95/1 97/1 99/1 1/1 3/1 5/1 7/1 9/1 11/1 13/1 15/1 SUMITOMO METAL MINING CO., LTD. 49

50 Ⅰ Ⅱ Response to Changes in Business Environment Year Business Plan Strategy: Progress & Management Issues Ⅲ Trends in Business Performance Ⅳ Promotion of the 12 3-Yr Plan Strategy Ⅴ External Environment Ⅵ Financial Highlights and Information Materials SUMITOMO METAL MINING CO., LTD. 5

51 1) Performance Trends Forecast 12 3-Yr 215 Net Sales 8,641 8,479 8,85 8,35 9,213 8,65 9,1 Operating Income , ,2 Recurring Profit 1,238 1,88 1,15 1,144 1, ,5 Equity Method profit Net Income (Profit attributable to owners of parent) , ROA(%) ROE(%) Dividend Per Share( ) N/A Copper ($/t) 8,14 8,485 7,855 7,14 6,554 5,427 7,5 Nickel ($/lb) Gold ($/Toz) 1,294 1,646 1,654 1,327 1,248 1,129 1,55 Zinc ($/T) 2,187 2,11 1,95 1,99 2,174 1,99 1,8 Exchange( /$) SUMITOMO METAL MINING CO., LTD. 51

52 2) Operating Income by Segment (JPY1M) 1,5 Adjustment 1, Others 5 Materials Smelting & Refining Forecast 12 3-Yr 215 Mineral Resources (JPY1M) Forecast 12 3-Yr 215 Mineral Resources Smelting & Refining Materials Others Adjustment Total , ,2 SUMITOMO METAL MINING CO., LTD. 52

53 3) Profit Trends by Segment Segment profit (JPY1M) 2, 1,5 1, Forecast Yr Forecast Adjustment Others Materials Smelting & Refining Mineral Resources 12 3-Yr 215 Mineral Resources Smelting & Refining Materials Others Adjustment Recurring Profit 1,238 1,88 1,15 1,144 1, ,5 FY21 FY212 : Contribution Margin (Earlier Bases) /FY213, FY215Forecast, 12 3 Yr 215 : New Segment Profit (JPY1M) SUMITOMO METAL MINING CO., LTD. 53

54 4) Recurring Profit / Equity Method Profit (JPY1M) 2, Recurring profit (Equity method profit) 1,5 1, Forecast 12 3-Yr 215 (JPY1M) Forecast 12 3-Yr 215 Recurring profit 1,238 1,88 1,15 1,144 1, ,5 (Equity method profit) SUMITOMO METAL MINING CO., LTD. 54

55 5) Cash Flow Trends (JPY1M) 2, Operating CF Investment CF Free CF 1,5 1, , -1, Yr 215 SUMITOMO METAL MINING CO., LTD. 55

56 6) Sensitivity Element Degree of variation ( JPY1M ) Operating income/ Recurring profit Cu ±1$/t 11/21 Ni ±1 /lb 18/2 Au ±1$/TOZ 6/6 JPY/USD ± 1/$ 13/14 (Yen Depreciation= Positive) (Remark) USD/JPY translation include RC-related and Conversion rate of overseas consolidated / equity-method affiliate companies' profit. SUMITOMO METAL MINING CO., LTD. 56

57 7) SMM s Mines and Smelters / Refineries SUMITOMO METAL MINING CO., LTD. 57

58 8) 12 3-Yr plan 1 Long-Term Vision Targets Aiming to be a World Leader in the Non-Ferrous Metals Industry & an Excellent Company of Japan Targets Nickel World Leader in the Non-Ferrous Metals Industry Copper interests FY 221 Gold interests 15kt 3kt 3 t New materials Recurring profit 5 billion Excellent Company of Japan Net Sales 1 trillion Net Income 1 billion Profit attributable to owners of parent SUMITOMO METAL MINING CO., LTD. 58

59 8) 12 3-Yr plan 2 Long-Term Vision Targets World Leader in the Non-Ferrous Metals World Leader in the Non-Ferrous Metals Industry We are contributing to society by securing superior mineral resources, smelting and refining those resources into metal, and supplying them to the market. To provide added value in Materials Business that uses non-ferrous metals. Operates its own mines and smelters both in Japan and abroad Mineral Resources Among the top 5 companies in the world in production volume Smelting & Refining Expand our resource interests Pursue our own profit in mining business Stable procurement of raw materials for Smelting & Refining Business Materials Develop globally by being highly competitive Smelting technologies of less environmental impact Expanded recycling of valuable metals Growth in the Environment & Energy domain Development of new materials Continuous structural reform SUMITOMO METAL MINING CO., LTD. 59

60 8) 12 3-Yr plan 3Long-Term Vision Targets Excellent Company of Japan Excellent Company of Japan A solid corporate philosophy and management vision Practicing corporate governance and CSR activities as a pillar of our business Net sales: 1 trillion Net income: 1 billion Lays out continuous growth strategy Profit attributable to owners of parent SUMITOMO METAL MINING CO., LTD. 6

61 9) Enhancement of Corporate Governance Corporate governance system Multiple outside directors and increased ratio Establishment of governance committee regarding appointment and compensation of executives Start of internal assessment of board of directors/statistics and assessments by external parties (law office) Engagement Enhancement by top management with shareholders, etc. (in Japan/overseas) from FY214 Governance committee Explanation of business strategy from division managers to investors from FY214 Non-financial information Integrated report (Annual report + CSR report) from FY216 Accounting standards Start of investigating to implement IFRS SUMITOMO METAL MINING CO., LTD. 61

62 1) Glossary Mineral resources and metals 1)Metal trading London Metal Exchange (LME) The LME specializes in trading of non-ferrous metals such as copper, nickel, aluminum, lead and zinc. The LME trading prices for metals are used as the international pricing benchmarks for sales of refined metal and purchases of refining ores. TC/RC Treatment Charge (TC) and Refining Charge (RC) are commonly used in the terms of purchase for copper concentrate or nickel ore for refining. They are amounts designed to cover refining costs. For example, copper concentrate contracts may define a purchase price based on the LME price at a certain date, minus the TC and RC being used at the time. London fixing Gold is not traded on the LME. Its price is determined for each transaction between market participants. The financial institutions in the London Bullion Market Association (LBMA) agree a standard price for gold based on these transactions and publish it on the morning and afternoon of each trading day. This London fixing price is the benchmark for trading in gold. Pound (lb) The pound is the standard unit of weight used in measuring and pricing base metals such as copper and nickel, and in TC/RC calculations. One pound is equal to grams; an metric ton equals 2,24.62lb. Troy ounce (toz) The troy ounce is the standard unit of weight for precious metals such as gold and silver. It equals approximately 31.1 grams. It is named after Troyes, a city in the Champagne region of central France that was the site of a major market in Europe in medieval times. Originally used as a unit of exchange for valuing goods in terms of gold or silver weights, the troy ounce is still used today in gold trading. 2) Metal refining Smelting and refining Refining processes extract valuable metals from ores or other raw materials. They fall into two basic types: hydrometallurgical (wet) and pyrometallurgical (dry). At SMM s Toyo facilities in Ehime Prefecture, the copper concentrate pre-processing undertaken at Saijo uses pyrometallurgical processes and the nickel refining at the Niihama site uses hydrometallurgical processes entirely. The term smelting is used for the extraction of metal from ores using melting and heating (pyrometallurgy). The term refining refers to any process that increases the grade or purity of a metal. Pyrometallurgical Smelting The precursor ore is melted at high temperature in a furnace, and refining techniques are applied to separate the metal in a molten state. Although large amounts of ore can be processed at one time, the equipment needs periodic maintenance for heat proofing. Hydrometallurgical refining The ore and impurities are dissolved in a solution, and chemical reactions are used to separate out the metal. This approach allows continuous and stable refining, but incurs additional costs due to the refining chemicals consumed. 3) Metal ores Sulfide ores These ores contain copper, nickel or other metals chemically bonded to sulfur. Since the application of heat breaks these bonds, releasing the sulfur, such ores are generally refined using pyrometallurgical techniques. Oxide ores These ores contain metals in oxidized forms. Unlike sulfide ores, oxides need much more energy to achieve melting. For this reason, the hydrometallurgical approach is generally used to refine these ores. Copper concentrates Used as raw materials in copper smelting, copper concentrates have a copper content of about 3% by weight. The remainder consists mostly of sulfur and iron. Copper concentrates are made mostly from sulfide ores. Ores extracted from overseas mines have a typical grade of about 1%. The ores are then dressed at the mine to increase the purity and produce concentrate. Most of the copper ores imported by SMM for smelting in Japan are concentrates. Nickel oxide ores Whilst the higher-grade sulfide ores are used predominantly in nickel refining, nickel oxide ores are more prevalent than nickel sulfides. The sulfide-oxide ratio in current nickel reserves is believed to be about 3:7. High refining costs and technical issues have limited use of oxide ores in nickel refining to date, but SMM has succeeded in refining nickel from low-grade oxide ores based on HPAL technology. Mixed sulfide (MS) CBNC and Taganito produce a mixed nickel-cobalt sulfide intermediate containing about 6% nickel by weight. This is used as a raw material in electrolytic nickel production. Matte A matte is another term for metal sulfides. For raw material, electrolytic nickel production at SMM also uses a nickel matte (of about 75-8% purity) sourced from PT Inco. SUMITOMO METAL MINING CO., LTD. 62

63 1) Glossary 4)Metal content in ores Au (Canadian standard) Reserve (ore) Economically minable part of Measured or Indicated Mineral Resources demonstrated by at least preliminary feasibility study. Resource (ore) Quantity and of such a grade or quality that it has reasonable prospects for economic extraction. (Japan Standard (JIS)) "Prospective Mineable Resource"("Kasai Kouryo") Total weight of the crude ore to be mined within the deposit, which contains the mineable portion of the "Geological Resource" and the waste rocks to be added in the mining process. "Geological Resource" ("Maizo Kouryo") Total weight of the mineralized material in the crust within the deposit. Cu / Ni Reserve or equivalent of the standards in each countries. 5) Nickel production process Coral Bay Nickel Corporation (CBNC) Based in the Philippines, this SMM subsidiary produces mixed nickel-cobalt sulfides using HPAL technology and exports the raw materials to the SMM Group s nickel refining facilities in Niihama, Ehime Prefecture. High Pressure Acid Leach (HPAL) HPAL technology enables the recovery of nickel from nickel oxide ores that traditionally were difficult to process. SMM was the first company in the world to apply it successfully on a commercial scale. The oxide ores are subjected to high temperature and pressure and reacted under stable conditions with sulfuric acid to produce a nickel-rich refining intermediate. Matte Chlorine Leach Electrowinning (MCLE) MCLE is the technology used in the manufacturing process at SMM s nickel refinery. The matte and mixed sulfide ores are dissolved in chlorine at high pressure to produce high-grade nickel using electrolysis. MCLE is competitive in cost terms, but poses significant operational challenges. Other than SMM, only two companies are producing nickel based on this kind of technology. 6) Main applications for metals Copper Copper is fabricated into wires, pipes and other forms. Besides power cables, copper is used widely in consumer applications such as wiring in vehicles or houses, and in air conditioning systems. Electrolytic nickel This form of nickel, which has a purity of at least 99.99%, is used in specialty steels, electronics materials and electroplating, among other applications. SMM is the only producer of electrolytic nickel in Japan. Ferronickel Ferronickel is an alloy containing nickel (about 2%) and iron. Its main use is in the manufacture of stainless steel, which is about 1% nickel by weight. Based in Hyuga, Miyazaki Prefecture, SMM Group firm Hyuga Smelting produces ferronickel. Gold Gold is in demand worldwide for investment and decorative purposes. Gold is widely used in Japanese industry within the electronics sector because of its high malleability and ductility. Materials Copper-clad polyimide film (CCPF) CCPF is a polyimide film that is coated using a copper base. It is used as a material for making COF substrates. Lead frames (L/F) Lead frames are electronic packaging materials used to form connections in semiconductor chips and printed circuit boards. They contain thin strips of a metal alloy containing mostly nickel or copper. Secondary batteries Secondary batteries are ones that can be recharged and used again. SMM supplies battery materials that are used in the anodes of nickel metal hydride batteries and lithium-ion rechargeable batteries, which supply power for hybrid vehicles or notebook computers, among other consumer applications. SUMITOMO METAL MINING CO., LTD. 63

64 Note The materials provided herein are not intended as disclosure under the Securities Law, and no warranty is made as to their completeness or accuracy. Any projections included in these materials are based solely on information available at the time of this briefing, and are subject to change based on market conditions, competitive conditions, and a number of other factors. Therefore, we ask that you refrain from making any investment decisions based on these materials alone. The Company cannot be held responsible in any way for any losses that may occur as a result of the use of these materials. All copyrights, trademarks, and intellectual property rights attaching to the materials herein are the sole property of Sumitomo Metal Mining Co., Ltd. SUMITOMO METAL MINING Co., Ltd. SUMITOMO METAL MINING CO., LTD. 64