July 3, 2019 / 3:10 PM / 3 months ago

Japan's JX Nippon Mining seeks pot of gold in high-tech chips, batteries

TOKYO(Reuters) - The mining and smelting unit of giant Japanese energy-to-metals company JXTG Holdings plans to drill down into the world of consumer electronics and high-tech batteries to beef up profits while pausing on traditional, high-investment base metals projects that drain resources.

JX Nippon Mining & Metals’ new president, Seiichi Murayama, said his firm is interested in buying stakes in smaller mines of rare metals such as tantalum and niobium, key examples of the kind of materials needed to make the advanced semiconductors and batteries used in everything from smartphones to electric vehicles.

Murayama aims to make what he calls “electronic materials” the most profitable business at JX after cost overruns at its key Caserones copper mine project in Chile and weaker copper prices that have weakened the firm’s financial health.

“Electronic materials will be our core growth driver through 2040,” Murayama told Reuters in an interview on Tuesday. “We want to supply most-advanced materials to help improve functions of various digital and electronic products.”

JX currently generates more than half of operating profit from upstream mining and mid-stream smelting business. But Murayama hopes that the downstream materials segment, including products using rare metals, will overtake the others.

The company is already boosting production of semiconductor components, used to make metal thin film just several billionths of a meter thick, and rolled copper foil used in smartphones.

“We are also developing materials used in all-solid lithium ion batteries for electric vehicles and metal powders used in smartphones,” he said.

CASERONES’ COSTS

Amid the push to develop such materials, Murayama said mining and smelting will remain core JX business to generate stable income. But he said JX is not in position to make another huge investment in new copper mine.

The Caserones’ project cost has ballooned to $4.2 billion, doubling its original plan of $2 billion, due to spiking labor costs and bad weather among other factors.

A series of ramp-up delays and weaker copper prices forced JX to post a total of 276.9 billion yen ($2.57 billion) in impairment losses for the mine by March 2018.

“We want to keep our unique and broad supply chain from upstream to downstream, but we can’t make hundreds of billions of yen of investment now in copper mines where development cost is expected to increase even further,” Murayama said.

Asked whether JX is looking to sell a stake in Caserones, as reported by the Wall Street Journal in April, Murayama said, “We are not seeking such a deal now, but we wouldn’t rule out such a possibility as we always look to improve our portfolio through buying and selling assets.”

Meanwhile JX, which bought a German maker of tantalum and niobium products last year, is studying the possible acquisition of stakes in mines producing the two rare metals, he said.

Murayama didn’t identify any potential investment targets.

Reporting by Yuka Obayashi; Editing by Kenneth Maxwell

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