Metals & Mineral Resources Division Strategies and Initiatives
Industry Environment and Fiscal 2010 Results
Steady Progress in Existing Business Investments
The industry environment in fiscal 2010 made strides towards recovery on a global scale. Powerful growth in emerging economies, supported by high demand, eclipsed more modest recovery tones in Japan, the United States, Europe and other developed economies. Market prices for copper, coal and other products handled by the division were also firm, buoyed by the recovery and an influx of speculative capital triggered by a weak dollar. Consequently, earnings improved dramatically in both the division’s investment and trade businesses.
In non-ferrous metals, we initiated operations in November 2010 at the Esperanza copper project in Chile, where the division acquired a 30% interest in 2008. Our first shipment of 5,000 tons of copper concentrates to Japan took place in January 2011. The start of operations and initial production shipments were largely on schedule despite unforeseen setbacks that occurred since the start of development in 2008, including the global economic crisis and an earthquake in Chile. With production at the project now underway, Marubeni will expand its share of total payable copper production to 125,000 tons per annum.
In coal, expansion work is underway at the Lake Vermont Coal Mine in Australia, where Marubeni has a 33% interest, following a decision to double annual production capacity from its current 4 million tons to 8 million tons. Since starting production in January 2009, the mine has successfully stepped up to full-scale operations in a short time frame to meet strong demand from China and other emerging economies. Efforts to expand capacity have also moved ahead steadily.
As a result, the division’s consolidated gross trading profit was ¥27.7 billion, and net income was ¥33.7 billion in fiscal 2010.
Initiatives in Fiscal 2011
Extending Existing Business Investments and Broadening Scope for New Investments
The Metals & Mineral Resources Division will continue adhering to a policy of acquiring prime resource assets as part of its long-term strategy. Today, the race between major mining firms and companies from emerging economies to acquire resource interests is intensifying. In this climate, the division will pursue measures to expand operations at the coal and copper mines, as we consider efforts to extend existing businesses to be very likely to succeed. We will also take steps to broaden the scope of potential business investment opportunities to include mines in the early exploratory stages, as well as metals that the division has no previous track record of investing in. Our intent here is to increase opportunities for the division to acquire mining interests.
In trade, along with striving to expand business scope in offshore trading and other areas that need powerful risk management skills, we will focus on further reinforcing division functions to fully meet requests from both buyer and seller clients.
Observers are projecting firm market prices for raw materials for steel, as well as for non-ferrous and light metals in fiscal 2011. This trend, together with full-year operation of the Esperanza copper mine, will likely result in greater earnings from division business investments, most notably its coal and copper mines. We also aim to increase earnings by boosting trading volume through efforts to capture demand from emerging economies.
