Sumitomo Metal Mining
Corporate History & Strategy

In 1691, the Sumitomo family discovered the 'Besshi Mine,' containing large-scale copper deposits, in Ehime Prefecture and commenced mining operations with permission from the shogunate. The Besshi Copper Mine continued to operate for over 200 years as the Sumitomo family's core business, but by the Meiji era, prolonged extraction had gradually diminished high-grade ore bodies, creating the challenge of declining production efficiency. In response, the Sumitomo family, led by Mr. Hirose, promoted mechanization investment at the Besshi Copper Mine, introducing Western technology in both extraction and smelting to increase the mine's output.

From the Meiji era onward, the Sumitomo family leveraged revenue from the Besshi Copper Mine as capital to pursue business diversification. The family successively entered a wide range of business fields including mining machinery (Sumitomo Heavy Industries), chemical fertilizers (Sumitomo Chemical), copper processing (Sumitomo Electric), forestry (Sumitomo Forestry), and finance (Sumitomo Bank), forming the Sumitomo zaibatsu. The Besshi Copper Mine functioned as the revenue source underpinning the entire Sumitomo Group's business foundation, and operations continued under the direct management of the Sumitomo Head Office through the 1920s.

In July 1927, the Sumitomo family established Sumitomo Besshi Mining Co., Ltd. for the Besshi Mine, which had been directly managed by the Sumitomo Head Office for 236 years since 1691, transitioning to a corporate management structure. Until then, the Besshi Copper Mine had been operated as a directly managed business of the Sumitomo Head Office—the governing body of the Sumitomo zaibatsu—with business decisions handled by the Head Office. The establishment of Sumitomo Besshi Mining transferred the operational management of the Besshi Copper Mine from the Sumitomo Head Office to an incorporated entity.

Sumitomo Besshi Mining Co., Ltd. was launched as the legal entity succeeding the mining business that the Sumitomo family had directly operated since the Edo period. Sumitomo's business originated from copper mining at the Besshi Mine, which held the longest history among the Sumitomo zaibatsu's operations. The establishment of Sumitomo Besshi Mining was a transition that separated this foundational business from the Head Office's direct management into an independent legal entity, marking the end of the direct management structure.

During the high economic growth period, small-scale gold mines were scattered across southern Kyushu, with Mitsui Mining operating a gold mine at Kushikino. For one of these—the Yamada Mine in Kagoshima Prefecture (later the Hishikari Mine)—an offer was made in 1969 to sell the mining claim to a Sumitomo Metal Mining subsidiary for 10 million yen. The Yamada Mine had a prewar record of small-scale gold production, but hot springs erupted during extraction, and the investment required for drainage technology had become a bottleneck that halted development.

At the time the offer was made, no large-scale gold deposits had been discovered, and Sumitomo Metal Mining's management was reluctant to make the acquisition. However, the engineering staff, whose morale had declined amid successive domestic mine closures, showed a positive attitude toward acquiring the claim, and the decision to acquire the Hishikari claim was ultimately made. For the engineers, the Hishikari claim represented an opportunity to pursue new mine development possibilities amid the trend of domestic mine closures.

However, throughout the 1970s, Sumitomo Metal Mining was directing management resources toward the closure of main mines such as Besshi and Konohi, leaving no budget for full-scale exploration at the Hishikari claim. For more than 10 years after the claim acquisition, in-house exploration made no progress, and the Hishikari claim was merely maintained as a held asset. The breakthrough came from a geological survey conducted by the Metal Mining Agency of Japan, a government-funded organization.

The Metal Mining Agency of Japan commenced geological surveys at the Hishikari claim, conducting three boreholes from 1980. The first borehole discovered a high-grade gold vein, initially considered a chance find. However, by 1982, a total of 18 boreholes had been drilled, and all of them struck gold-bearing veins, confirming the existence of gold deposits at the Hishikari claim. The survey results showing that all 18 boreholes reached veins substantiated that the Hishikari claim was a large-scale gold deposit.

With the existence of gold deposits confirmed, Sumitomo Metal Mining decided on large-scale development of the Hishikari Mine. Sixteen years after the claim acquisition, full-scale mine development was finally undertaken. During the survey process, it was also discovered that the gold veins existed within 60-degree hot springs, requiring mine development to proceed in parallel with hot spring drainage treatment.

In July 1985, Sumitomo Metal Mining commenced ore extraction at the Hishikari Mine. Initial results showed grades of 162 grams of gold and 125 grams of silver per 4,000 tons of ore, with annual gold production expected to reach 7–8 tons. At prevailing gold prices, this corresponded to annual revenue of approximately 14 billion yen, and amid the wave of domestic mine closures, the Hishikari Mine attracted attention as an exceptional gold mine.

As of 1991, the Hishikari Mine's estimated reserves were projected at 250 tons, more than three times the cumulative 76 tons produced at the Sado Gold Mine since the Edo period. The Hishikari Mine was positioned as one of the top-class gold mines in Japanese mining history by reserve size, and amid successive domestic mine closures, it demonstrated its presence as one of the few mines operating on a commercial production basis.

Sumitomo Metal Mining has consistently produced approximately 6 tons of gold annually at the Hishikari Mine since its opening, stably generating revenue of 10 billion to 24 billion yen. While revenue amounts vary by fiscal year depending on gold price fluctuations, the Hishikari Mine has continued to function as a stable revenue source within Sumitomo Metal Mining's business portfolio. As of 2024, the Hishikari Mine remains the sole mine in Japan operating on a commercial production basis, occupying a unique position in Sumitomo Metal Mining's business.

Additionally, the Hishikari Mine has served as a training facility for mining engineers at Sumitomo Metal Mining. As the country's sole operating mine, it provides opportunities for hands-on experience in extraction, smelting, and drainage treatment, serving a function of producing technical personnel who go on to participate in global resource development projects. Beyond its revenue contribution through gold production, the Hishikari Mine supports Sumitomo Metal Mining's business as the foundation for engineer development essential to overseas mine development and operations.

In 2011, Sumitomo Metal Mining and Sumitomo Corporation jointly acquired mining rights for the Sierra Gorda Copper Mine (northern Chile) held by KGHM International of Poland. The equity interests were 55% for KGHM, 31.5% for Sumitomo Metal Mining, and 13.5% for Sumitomo Corporation, with mine development proceeding under KGHM's majority-ownership operational structure. The Sierra Gorda Copper Mine, a large-scale copper mine located in northern Chile, was positioned as part of Sumitomo Metal Mining's overseas resource development strategy.

The Sierra Gorda Copper Mine commenced production in July 2015, with Sumitomo Metal Mining participating in operations through an equity-method affiliate. While approximately four years elapsed from rights acquisition to the start of operations, the timing of the transition to full operations coincided with a downturn in international copper prices. Copper prices fell significantly from 2014 to 2016, meaning the Sierra Gorda Copper Mine entered full-scale operations during a harsh market environment for copper mines.

The coincidence of the start of operations with the copper price decline resulted in deteriorating project economics at the Sierra Gorda Copper Mine. In February 2016, Sumitomo Metal Mining recorded an equity-method investment loss of 68.9 billion yen related to the Sierra Gorda development project. Total equity-method investment losses reached 73.2 billion yen in FY2016 (ending March) and 85.9 billion yen in FY2017, the majority of which were attributable to Sierra Gorda-related losses.

The impact on overall company performance was significant, and in FY2017 Sumitomo Metal Mining fell into a consolidated net loss of 18.5 billion yen. Management implemented executive compensation reductions to take responsibility for the Sierra Gorda Copper Mine losses. While the Sierra Gorda Copper Mine had been a major overseas resource development project for Sumitomo Metal Mining, the coincidence of the start of operations with the copper price downturn forced the company to record massive losses.

In October 2020, Sumitomo Corporation and Sumitomo Metal Mining began considering the sale of their Sierra Gorda Copper Mine mining rights, publicly signaling their intent to sell. Behind the consideration was unstable mine production combined with surging international non-ferrous metal prices that had increased the value of the mining rights. The policy of capturing the market upturn to sell the rights was chosen over continuing operations to improve profitability.

The sale was completed in October 2021, with the buyer being South32 Limited, an Australian resources company. In FY2022 (ending March), Sumitomo Metal Mining recorded a gain on subsidiary sale of 74.5 billion yen. Participation in the Sierra Gorda Copper Mine followed a trajectory of withdrawal through divestiture approximately 10 years after the rights acquisition, and the investment losses recorded during the operating period versus the 74.5 billion yen recovery upon sale demonstrate the magnitude of market cycle impact in resource development.