DOWA Holdings
Corporate History & Strategy

Denzaburo Fujita, founder of Fujita-gumi, leveraged relationships with figures from the Choshu domain (Meiji government officials) to expand operations through cooperation during the Satsuma Rebellion and winning contracts for civil engineering projects including the Tokaido Line (Osaka–Kyoto) and the Lake Biwa Canal. In 1881, Fujita-gumi was established with capital contributions from three brothers totaling 60,000 yen, with Denzaburo Fujita contributing 30,000 yen (50% equity), and Shikatarou Fujita and Shouzaburou Kuhara each contributing 15,000 yen (25% each). During the Meiji era, it became widely recognized as 'Fujita-gumi of the West.'

On September 18, 1884, the Meiji government decided to transfer the government-operated Kosaka Mine (Akita Prefecture) to Fujita-gumi, which thereby entered the mining business. The Kosaka Mine was a large-scale silver mine boasting the highest domestic output until 1888. Development funding was secured through a 200,000-yen loan from the Mouri family, former lords of the Choshu domain, facilitated by Kaoru Inoue's introduction. The existing civil engineering business was transferred to Nihon Doboku Kaisha, and Fujita-gumi transformed into a resource company centered on mining.

The Kosaka Mine was a distinctive mine producing black ore (kuroko)—a mixture of gold, silver, copper, zinc, and lead—requiring the establishment of new smelting technology to separate these metals. Initially, silver could be extracted from relatively easy-to-process surface ore, but depletion was anticipated, and the smelting technology for kuroko became the factor determining the mine's lifespan. Ten years after acquisition, the technology remained unestablished and losses continued, prompting the Mouri family (the lender) to order closure, and in 1900, Fujita-gumi decided to close the mine.

Fusanosuke Kuhara (a relative of Denzaburo Fujita), who was appointed site manager for the closure process, argued for continuing operations and began persuading the Mouri family. However, the Mouri family was firm in its closure decision, so Kuhara consulted Kaoru Inoue, an influential Meiji government politician (from Choshu), and secured his support for continuation. As a result, the Mouri family agreed to reverse the closure, and the decision to continue operations was made. Kuhara then worked on developing the processing technology for kuroko, adapting overseas smelting methods with proprietary improvements.

In 1902, Fusanosuke Kuhara succeeded in kuroko autogenous smelting trials, and in 1904, the smelter was put into operation for full-scale production. Kuroko autogenous smelting had the advantage of requiring minimal fuel, dramatically reducing smelting costs and transforming the Kosaka Mine's economics. It became possible to efficiently separate and recover gold, silver, and copper from kuroko, and output increased dramatically. This technology had few parallels globally and was a smelting method independently established by Fujita-gumi.

With the commercialization of kuroko autogenous smelting, by 1906 the Kosaka Mine surpassed competitors such as the Ashio and Besshi copper mines to become the top domestic mine by production value. The mine's transformation from a closure decision to the nation's top mine in just six years established Fujita-gumi's business foundation. The accumulated smelting technology subsequently became the technological foundation for Dowa Mining's electronic materials and environmental recycling businesses.

The Kosaka Mine (Akita Prefecture), Fujita-gumi's mainstay, had grown to achieve the top domestic production value among all mines in 1906, following the establishment of kuroko autogenous smelting after the government transfer in 1884. The Kosaka Mine was a distinctive mine producing kuroko—a mixture of gold, silver, copper, zinc, and lead—and the smelting technology independently established by Fujita-gumi was the source of its competitive advantage. However, after 30 years since acquisition, ore grade decline from prolonged large-scale extraction was progressing, and future depletion was anticipated. Fujita-gumi articulated a policy of pursuing acquisitions of prominent domestic mines in preparation for the declining ore reserves of its main mine.

The acquisition candidates were the Hanaoka Mine in Akita Prefecture and the Yanahara Mine in Okayama Prefecture. The Hanaoka Mine was a non-ferrous metal mine producing copper, lead, and zinc. Located in northern Akita like the Kosaka Mine, it was expected to leverage existing smelting infrastructure. The Yanahara Mine, on the other hand, was rich in sulfide ore, and as demand for sulfur was rising at the time as a raw material for agricultural fertilizers, stable revenue was anticipated. Fujita-gumi adopted a policy of acquiring mines of different ore types—non-ferrous metals and sulfide ore—to escape dependence on a single mine and single mineral.

In April 1915, Fujita-gumi decided to acquire the Hanaoka Mine (Akita Prefecture), owned by Seiichiro Kobayashi, purchasing the mine itself and the railway from Hanaoka to Odate for 1.28 million yen. However, immediately after the acquisition, the grade of the ore body being mined declined, and Fujita-gumi focused on exploring for new ore bodies. The discovery of a large-scale deposit called the 'Doyashiki deposit' in 1916 transformed the situation, and the Hanaoka Mine established its position as the second-largest mine in Fujita-gumi's portfolio after the Kosaka Mine.

In September 1916, the company also began acquiring the Yanahara Mine in Okayama Prefecture. Eleven mines held by individuals and small companies centered on Nawaki Village in the Yoshii River basin were successively acquired and operated as a unified entity called the 'Yanahara Mine.' The Yanahara Mine had abundant sulfide ore, which was shipped as raw material for chemicals including fertilizers. With the acquisition of the Hanaoka and Yanahara mines, Fujita-gumi transitioned from a business structure dependent solely on the Kosaka Mine to one securing revenue through multiple mines distributed across Akita and Okayama prefectures.

Throughout the 1990s, Dowa Mining's performance stagnated. While the company had pursued new business development during the bubble era to complement the core smelting business, it deferred profitability-based decisions on business withdrawal, and consolidated results showed a trend of rising revenue but declining profits. Profits were generated through the sale of securities and land, and profits from operations themselves were limited. The structure of maintaining financial results through gains on the sale of land and securities with low acquisition costs, while core business profitability declined, was unsustainable.

Structural issues also existed within Dowa Mining's organizational culture. A corporate character rooted in the history and tradition of a mining company had taken hold, with bureaucratic headquarters-centric decision-making that prioritized procedures, a culture where business survival was determined by internal politics, and a custom of treating the holding of non-ferrous metal inventory and bank borrowings as status symbols. Hirokazu Yoshikawa (then Senior Managing Director) judged that the company's future was unclear under these conditions and advocated within the company for the necessity of fundamental business structural reform. However, the vast majority within the company opposed the reform.

Despite opposition from the majority of the company, Dowa Mining decided to proceed with structural reform and assembled a team of 10 led by Hirokazu Yoshikawa. As the reform involved headcount reductions and company-wide resistance was anticipated, the approach was to have a small team develop the plan rather than seek company-wide consensus. Yoshikawa led the formulation of the reform plan within the team, compiling specific measures while navigating conflicts with the labor union. Predecessor President Koichiro Kanetani made the decision to position the reform-minded Yoshikawa as his successor candidate.

In November 1999, Dowa Mining (President Koichiro Kanetani) announced structural reform in response to deteriorating performance and decided to solicit voluntary retirees for headcount reduction. By February 2000, 322 employees had applied and retired. After the reform began, revenue declined as businesses were scaled back, and performance deteriorated for two years, but Yoshikawa maintained the policy. When profits began recovering around 2002, the third year, the reform's validity was backed by numbers, laying the groundwork for Yoshikawa's appointment as president in April 2002.

In April 2002, Hirokazu Yoshikawa, who had led the structural reform project since 1999, was appointed president of Dowa Mining. Predecessor President Koichiro Kanetani made the deliberate decision to install the reform advocate Yoshikawa as his successor despite 90% of the company opposing the reform. The fact that the structural reform launched in 1999 by a team of 10 began showing quantitative results in performance around 2002, its third year, is presumed to be behind this personnel decision.

Around 2002, Dowa Mining faced two structural challenges: declining profitability from the retention of unprofitable businesses, and deteriorating asset efficiency from the accumulation of land, securities, and precious metal inventory with limited relevance to operations. Throughout the 1990s, profits had been generated through sales of securities and land, while profits from operations remained limited. Yoshikawa's appointment as president signified the establishment of a structure to simultaneously pursue PL improvement on the business side and BS improvement through the reduction of unnecessary assets.

President Yoshikawa shifted to a policy of judging business viability based on three criteria (market growth potential, competitive strength, and employee motivation), dissolving, closing, or selling 18 businesses that failed to meet all criteria. Seventy percent of the businesses targeted for rationalization were profitable, yet withdrawal was executed. Previously, business survival had been determined by internal political power, but this was replaced by judgment based on market conditions and competitiveness. Remaining businesses were concentrated in areas capable of securing high market share in niche markets, a policy Yoshikawa described as 'mixed forest management.'

At the core of the focus areas was the environmental recycling business, with urban mining leveraging smelting technology being strengthened. In 2004, a controlled final disposal site was established at subsidiary Kosaka Smelting & Refining, and in 2006, a new recycling furnace (TSL furnace) for recovering precious metals (gold, silver) from waste electronic equipment was built at a cost of approximately 10 billion yen. By leveraging the smelting facilities of the Kosaka Mine, where extraction had ceased, and the relationships with local municipalities cultivated through years of operations, a system was built for the entire process from waste acceptance to rare metal recovery.

On the financial front, bulk sales of land and securities with limited relevance to operations, liquidation of precious metal inventory that had been held in anticipation of price increases, and reduction of bank borrowings without funding needs were executed. The traditional Dowa Mining culture of treating asset holdings and borrowing capacity as status symbols was overturned through the structural reform, with improvements in asset efficiency pursued. Balance sheet health was improved through the sale of unnecessary assets and the reduction of interest-bearing debt.

As a result of selection and concentration, in FY2007 (ending March), DOWA Holdings (renamed from Dowa Mining in 2006) achieved a record-high net income of 26.3 billion yen. Combined revenue from top-share products reached approximately 120 billion yen (25% of total company revenue), and the earnings structure was transformed such that each business segment posted profits. By around 2008, 15 businesses held top market share—7 globally and 8 domestically—and the transformation from a mining company to an environmental and recycling enterprise had progressed.