2015 3-Year Business Plan - SMM

1 2015 3-Year Business PlanAiming to be a World Leader in the Non-Ferrous Metals Industryand an Excellent Company of Japan-Stage 2-Yoshiaki NakazatoPresident and Representative DirectorSUMITOMO METAL MINING CO., 2016 ContentsPlatform ReinforcementCore Business Growth StrategiesFinancial Information andSupplementary MaterialsBusiness EnvironmentLong-Term Vision (LTV) & Basic Strategy of 2015 3-Yr Business PlanSUMITOMO METAL MINING CO., Long-Term Vision (LTV) & Basic Strategy of 15 3-Yr Business PlanSUMITOMO METAL MINING CO., ReinforcementFinancial Information andSupplementary MaterialsBusiness EnvironmentLong-Term Vision (LTV) & Basic Strategy of 2015 3-Yr Business PlanCore Business Growth Strategies1) Long-Term Vision * Profit attributable to owners of parentSUMITOMO METAL MINING CO., to be a World Leader in the Non-Ferrous Metals Industry and an Excellent Company of JapanNet Sales 1 trillionNet Income* 100 billion(Recurring profit 150 billion)TargetsWorld Leader in the Non-Ferrous Metals IndustryExcellent Company of JapanNickel150 ktCopper interests300 ktGold30 tNew materialsRecurring profit 5 billion Grow steadily to achieve on our Long-Term Vision Reconsideration of strategy based on external Business environment changesLTV & Basic Strategyof 15 3-Yr Business PlanI4 Long-Term VisionFY2013-201512 3-Yr Business PlanFY2010-201209 3-Yr Business PlanFY2004-200903 & 06 3-YrBusiness PlansFY2016-20182015 3-Yr Business PlanSUMITOMO METAL MINING CO.

2 , to changes inbusiness environmentStrengthen globalcompetitivenessBecome a World Leader in theNon-Ferrous Metals Industry and an Excellent Company of Japan Positioning of the 3-Yr Plans in the Long-Term Vision5 Execute a continuousgrowth strategyStrengthen platform for global competitionLTV & Basic Strategyof 15 3-Yr Business PlanI3) Major Projects in 03 12 3-Yr Business Plans (1) 03 3-Yr Plan06 3-Yr Business Plan09 3-Yr Business Plan12 3-Yr Business plan 2006200720082009201020112012201320142015 Mineral ResourcesCuSierra GordaMineCuMorenci MineCuCerro VerdeMineAuPogo Gold MineSmelting & RefiningNiE-Ni65 ktNiCoral BayNickelNiTaganito HPALNiGoroNiHarima RefineryNickel sulfateCuToyo Smelter & Refinery 450 ktMaterialsMaterials BusinessDecision to participate2004 Start production2006 Start first line production 20052005 SUMITOMO METAL MINING CO., to participateDecision to expand projectDecision to participateStart productionF/S contract concludedAcquire additional interestDecision on projectStart second line productionCompletion of production structureDecision on investmentCopper-cladpolyimide filmSapphireStart mass productionStart commercialproductionStart full productionDecision to expand project65kt Productionstructure completedStart full-scale operationsStart nickel sulfateproductionWithdraw fromsapphire businessNCA850tProduction structure completedLT/LNDecision to expand production6 LTV & Basic Strategyof 15 3-Yr Business PlanI3) Major Projects in 03 12 3-Yr Business Plans (2)SUMITOMO METAL MINING CO.

3 , 3-Yr Business plan ReviewTaganito HPALS mooth ramp-up to full-scaleoperationsExpand Battery materials productionExpand LT/LN substrate productionMorenci MineComplete expansionMineral ResourcesSmelting & Refining 2012 3-Yr Business plan goals unmet 2012 3-Yr Business plan PrioritiesMaterialsDelay of Launch Sierra Gorda MineWithdraw from sapphire substratesCerro Verde MineExpansion: solid progressE-NiComplete 65 kt productionstructureHarima RefineryStart nickel sulfate productionEstablish 100k -t nickel production structureCreate the foundationfor the growthExpand copper interestLTV & Basic Strategyof 15 3-Yr Business PlanI Delay to involve as an active partner Cost reduction targets not achieved 4) Initiatives Towards Long-Term Visionkt01002003002013 2014 201520182021kt0501001502013 2014 20152018202101020302013 2014 201520182021t0501001502002502013 2014 201520182021 Recurring profit(JPY100M)SUMITOMO METAL MINING CO., Production InterestNiAnnual Production CapacityAuAnnual ProductionMaterials BusinessRecurring ProfitTarget100 kt150 kt300 kt170 kt30 t16 t BNew products BTargetTargetTarget B15 3-Yr 280 kt120 kt15 t8 LTV & Basic Strategyof 15 3-Yr Business PlanI200020052010201520085) Business Environment (1)Establishment and oligopolization of Huge resource companiesChina: Massive increase in energy resource consumptionRise of resource nationalismFurther increaseSUMITOMO METAL MINING CO.

4 , s collapseWorld financial crisisUncertain future for world economyEnd of commodity supercycleFiscal fears in emerging countries,deteriorating economiesSpeculation on monetary policy andvolatility expansion for product pricesGrowth of economies in emerging countriesInfusion of funds from financial marketsTowards new normal in economic growthFinancial reorganization, re-organization trends, reshuffle? Slump in metal prices Balanced supply and demand Capex hovering at high levels, increased operating costs9 LTV & Basic Strategyof 15 3-Yr Business PlanI5) Business Environment (2)SUMITOMO METAL MINING CO., growth rate in emerging countries Metal prices dropping Acquisition of resources by China Progression of resource nationalism Operations becoming more difficult due to location (higher, more remote locations) Decreasing ore grade of operating & new mines Intensifying environmental regulations; resource development receiving more scrutiny Smartphones requiring more parts to accommodate more functions and communication speed Energy, loT, and communications infrastructure greatly influencing next-generation tech trendsCompanies' capital policy being discussed more in the reflection of the Corporate Governance Code and Stewardship Code of JapanSocial landscape regarding metal resourcesLandscape regarding resource development/mining operationsFierce global competition continues in the electrical/electronic parts industriesInvestment costs increasing.

5 Greater initial CAPEXO perating costs increasing10 LTV & Basic Strategyof 15 3-Yr Business PlanI02040600204060801001201401606) Financial Situation of Resource ProducersInterest-bearing debt (billion US$)Total assets (billion US$)The size of the sphere and numbers in ( ) are total market valueBillion US$, as of Jan. 15, 2016, and Jan. 7, 2013 SUMITOMO METAL MINING CO., Billiton/RioTinto, Glencore's financial numbers are as of June end, 2012 and 2015 . Numbers for the others are as of September end, 2012 and (6)BHP2015(52)FCX2015(4)Rio Tinto2012(86)11 Vale2012(84)Glencore2012(33)Vale2015(11) Glencore2015(15)BHP2012(155)FCX2012(26)S MM2015(6)Rio Tinto2015(45)Company managing with debt leverage increase total assets decreasing in total market valuedue to drop in price of resourcesLTV & Basic Strategyof 15 3-Yr Business PlanILong-Term Vision Respond to external environment changes(Promote strategies focused on cost/investmentbenefit) Prepare for future growthGrow materials Business as core businessPromote Long-Term Vision-oriented growth strategies in the three core businessesMove toward growth strategiesBecome major player in non-ferrous metals industryAchieve world top share in each of material Business productChanges in the external Business environment7) Positioning of the 15 3-Yr Business PlanSUMITOMO METAL MINING CO.

6 , a World Leaderin the Non-Ferrous Metals Industryand an Excellent Company of Japan09 & 12 3-Yr Plans15 3-Yr Plan03 & 06 3-Yr PlansLarge Scale Mineral Resources/Smelting & Refining projects mostly completed in 2012 3-Yr Business PlanPositioning of the 15 3-Yr Business Plantowards long-term vision achievement12 Sowing seeds and planting towards further growth in the 15 3-Yr Business Plan3rd HPALS ierra GordaPhase 2/oxide ore developmentNew interest in gold mineExploration activitiesExpanded production of battery materialsNew materials productsLTV & Basic Strategyof 15 3-Yr Business PlanI8) Positioning of Businesses in the 2015 3-Yr Business PlanSUMITOMO METAL MINING CO., LTD. Harvesting of 2012 3-Yr Business plan investments Continually create next-generation products that satisfy customer needs13 Mineral ResourcesSmelting & RefiningMake great leap forward with large overseas projectsup to12 3-Yr Plan15 3-Yr PlanMaterialsup to12 3-Yr Plan15 3-Yr plan Increased production of battery and crystal materials --> Complete Business structure change through selection and concentration Effective operation of existing mines and smelters/refineriesCut costs to secure profits Sowing seeds and planting towards the next 3-Yr Business plan and beyondThe 2015 3-Yr Business plan is a period of extensive growth to become authentic core businessLTV & Basic Strategyof 15 3-Yr Business PlanICorporate Governance9) Top Priorities in the 15 3-Yr Business PlanSUMITOMO METAL MINING CO.

7 , LTD. Full-scale production at the Sierra Gorda Copper Mine Acquire new Gold mine interests Profit contribution from expanded battery material and LT/LNproduction Continuously create and adapt next-generation products Expand Taganito HPAL Advance growth strategies using HPAL peripheraltechnologies Enhance competitiveness of Copper Smelting Business Develop new products and processes Action for Japan s Corporate Governance CodeCorporate Governance GuidelineCorporate Governance Report More Outside Director to strengthen governance Publish integrated report (FY2016)Continually improve engagementMineral ResourcesMaterialsR&DSmelting & Refining Develop global staff and improve diversity in human resources Consider transitioning to IFRS( plan to implement during the 15 3-Yr Business plan Period) Build a global management IT systemPlatform Reinforcement14 Globalization MeasuresLTV & Basic Strategyof 15 3-Yr Business PlanI10) Major Projects in 2015 3-Yr Business PlanProject nameFY2013FY2014FY201515 3-Yr Business Plan18 3-Yr Business plan and laterMineral ResourcesCuSierra Gorda MineCuMorenci MineCuExpansion of Cerro Verde MineNiSolomonSmelting & RefiningNiTaganito HPALNiPomalaa ProjectNiHarima RefineryNickel sulfateMaterialsBattery materialsCrystal materials (LT/LN)36 kt production structureDecision on production increaseSUMITOMO METAL MINING CO.

8 , commercialproduction110 kt production structurePhase 2: project to increase productionStart expanded full-scale production2016 Start full-scale operationsOpening ceremonyStart full operationStart first line productionCompletion of NCA 850 t structureNCA1,850 t structure2016 Second line launchConduct FSDecision on investmentNCA 2,550 t structure300k piecesproduction structure2016400k pieces production structure20172017201815 LTV & Basic Strategyof 15 3-Yr Business PlanITernary typeIncrease production2018 Additional InterestacquiredStart operation201811) Consolidated Recurring Profit-25002505007501,0001,2501,5001,750 2,000201020112012201320142015 Forecast15 3-Yr Plan2018 Recurring profitNet income( 100 million)201020112012201320142015 Forecast15 3-Yr plan 2018 Recurring profit ( 100 million)1,2381,0881,1501,1441,742-401,70 0 Net income* ( 100 million)*Profit attributable to owners of parent841653866803911501,200Cu price ($/T) 8,1408,4857,8557,1046,5545,1746,000Ni price ($/lb) price ($/toz)

9 1,2941,6461,6541,3271,2481,1241,150 Forex ( /$) *SUMITOMO METAL MINING CO., & Basic Strategyof 15 3-Yr Business PlanI12) Recurring Profit Analysis 15 3 year 2018 vs FY2015 Forecast (Feb)JPY100 MSUMITOMO METAL MINING CO., 1,700 -25002505007501,0001,2501,5001,7502,000F Y2015 Forecastin Feb15 3-Yr2018 Sierra Gorda+690Ni Price+450 Exchange-20 MaterialsBusiness+150 HishikariGoldQuantity-70 Others-6017Cu Price+230 MorenciEquity+140 Taganito/NickelQuantity+100 Cerro VerdeExpansion+130 Strategy EffectPrice/ExchangeLTV & Basic Strategyof 15 3-Yr Business PlanI13) Maintenance of a Sound Financial ,5005,0007,50010,00012,50015,00017,50020 ,000201020112012201320142015 Forecast15 3-Yr Plan2018 Total assetsInterest-bearing debtShareholder's equityEquity ratioDebt-to-equity ratioROEE quity ratio65%D/E METAL MINING CO., LTD.( 100 million) 18 LTV & Basic Strategyof 15 3-Yr Business PlanI14) Financial Strategies Capital PolicySUMITOMO METAL MINING CO., PolicyFinancial Policy for 2015 3-Yr Business plan PeriodFinancial StructurePolicy on return to shareholders focused oncontinuing performance linked dividendsConsolidated dividend payout ratio raised from25% or higher 30% or higherPrepare for large-scale projects or M&A by maintaining sound financial standingMaintain an equity ratio of 50% or higherFocus on efficiency with investmentsfor improved ROA / ROE19 LTV & Basic Strategyof 15 3-Yr Business PlanI360 660 610 170 480 820 260 140 520 740 480 100 15) Capital Expenditure 1,700 JPY100 MMineral ResourcesSmelting & RefiningMaterialsR&D, OtherAcquisition of overseas interestSUMITOMO METAL MINING CO.

10 , ResourcesSmelting & RefiningMaterialsR&D, Other 1,840 JPY100 MMineral ResourcesSmelting & RefiningMaterialsR&D, Other2012 3-Yr plan Forecast(Total of 3 Years)12 3-Yr plan (Total of 3 Years) 1,800 JPY100M2015 3-Yr plan (Total of 3 Years)( 100 million)LTV & Basic Strategyof 15 3-Yr Business PlanIAcquisition of overseas interest(Morenci, 1,200 (JPY100M))16) R&D Expenses, Exploration Expenses160 180 010020030040009 3-Yr plan Results12 3-Yr PlanForecast15 3-Yr plan ( 100 million)R&D Expenses, Exploration ExpensesR&D ExpensesExploration ExpensesSUMITOMO METAL MINING CO., new product development inMaterials BusinessTechnological innovations inMineral Resources and Smelting & RefiningPromotion of process developmentExplorationTargeting regions for each metal (Au & Cu)Acquisition of advance-stage explorationprojects21 LTV & Basic Strategyof 15 3-Yr Business PlanI17) Cash Flow SUMITOMO METAL MINING CO., To t a lProfit before tax4,600 Depreciation1,700 Working capital/equity method profit/loss/debt/tax/dividend-4,100 Investment and financing-3,000 Total Cash flow-800 Cash Flow Projection (15 3-Yr plan 3 year Totals)-1,500-1,000-50005001,0001,500201 320142015 Forecast15 3-Yr2018( 100 million)Operating CFInvestment CFFree CF( 100 million)22 Expect minus total cash flow due to acquisition of overseas mining interests and aggressive investment in growth businessesLTV & Basic Strategyof 15 3-Yr Business PlanI18) Cost Reduction MeasuresPlan cost reduction measures--> Use FY2012 as base year and target 10 billion/ year reduction by FY2015 Almost achieved 10 billion goal in FY2014, one year early--> Work towards target of 13 billion/ year in FY201515 3-Yr Business Plan12 3-Yr Business PlanFY2016 Target : further reduce costs by 10 billion/ year compared to FY2015 SUMITOMO METAL MINING CO.