Risk Factors

The following are key risk factors that could impact the business performance, stock price, and financial position of the Group. Please note that forward-looking statements in this section are based on judgments made by the Group as of the end of the current consolidated fiscal year (March 31, 2025).

(1)Risks Related to Major Business Sites

1) Torigatayama Quarry Complex (Kochi Prefecture, Japan)

Approximately half of the limestone, which accounts for 17.6% of the Group’s consolidated net sales in the current fiscal year, is produced at the Torigatayama Quarry Complex (Torigatayama).

Since most shipments from the Torigatayama rely on marine transportation, disruptions in cargo handling due to typhoons or other weather events may adversely affect production and sales activities. Additionally, the quarry is located in a region with high annual rainfall (approximately 4,000 mm on average over the past 10 years), and heavy downpours may lead to flooding of production facilities, potentially disrupting operations.

Furthermore, in the event of a major Nankai Trough earthquake, significant damage from strong shaking and tsunamis is anticipated. Depending on the extent of such damage, the incident could have a material impact on the Group’s business performance and financial condition.

Given the potential for these risks to make it difficult to fulfill the Group’s management policy of ensuring a stable supply of high-quality resources in response to societal needs, we recognize this as one of the most critical risks we face.

To mitigate these risks, the Group—under the leadership of the BCM Promotion Office—holds regular meetings involving relevant departments several times a year to exchange views on risk countermeasures, including reviews of key facilities. We also update our Business Continuity Plan (BCP) as needed and work to share information across the organization.

Should a major incident occur involving critical facilities—such as the 26.2 km-long belt conveyor that transports limestone from the Torigatayama mine to the coastal processing plants—limestone production, transportation, and shipments could be suspended for an extended period. This could negatively impact the Group’s business performance and financial condition.

To address this, we are strengthening incident prevention measures, including enhanced facility inspections and monitoring systems, and have implemented damage mitigation strategies such as switching to flame-resistant conveyor belts. We are also working to reinforce our stable supply structure, including backup shipment capabilities from other sites such as the Sodegaura Logistics Center (Chiba Prefecture).

2) Operating and Developing Copper Mines (Republic of Chile)

One of the Group’s key products, copper concentrate, is produced and sold at the Atacama Mine, located in the Atacama Region of northern Chile.

This region is extremely dry, with annual precipitation averaging less than 10 mm, resulting in underdeveloped infrastructure for flood control. Therefore, when rare but heavy rainfall occurs, it often leads to large-scale flooding, which could disrupt production and sales activities.

In response, the Atacama Mine has implemented flood prevention measures such as the construction of embankments to prevent overflow, barricades to stop water from entering plant areas, elevation of substation grounds, and relocation of worker offices to higher ground.

In Chile, a new mining royalty law that increases copper royalty taxes was enacted in August 2023 and came into effect in January 2024. However, both the Atacama Mine and the under-development Arqueros Mine are largely exempt from these tax hikes, so the impact on the Group at this time is minimal. Nevertheless, depending on the nature of future legal revisions, changes in operations or development plans may become necessary, potentially affecting the Group’s business performance and financial condition.

To prepare for such risks, the Group strives to stay up to date with regulatory developments and maintains close communication with relevant Japanese government agencies through industry associations. We are also working to establish effective communication and response frameworks.

Generally, metal mining projects face rising production and development costs due to factors such as the remote location of deposits, deeper mining, declining ore grades, and increased impurities. The copper mining industry in Chile is no exception, with production and initial development costs trending upward, which may negatively affect the Group’s business performance and financial condition.

To mitigate these challenges, we are optimizing operational structures, improving the recovery rate of copper concentrate, and refining the ore processing workflow to control production costs and enhance profitability. Additionally, we are working to reduce financing costs and diversify risk through strategic partnerships.

(2)Risks Related to Disasters and Other Events

1) Risks Related to the Management of Inactive and Closed Mines

As a result of many years of business operations, the Group owns a large number of inactive and closed mines across Japan. In the event of mining-related damage caused by natural disasters such as heavy rainfall or earthquakes, the final mining rights holder is legally obligated to pay compensation under the Mining Act. Such incidents could adversely affect the Group’s business performance and financial condition.

To mitigate this risk, the Group conducts regular patrols and inspections in accordance with the Mine Safety Act. In addition, we carry out maintenance and preservation work on mining facilities as needed, including protective measures for tailings storage and preventing water pollution caused by mine wastewater.

2) Risks Related to Occupational Accidents and Other Incidents

Unexpected events such as serious occupational accidents or equipment malfunctions that result in a halt in production activities could negatively impact the Group’s business performance and financial condition.

In response to such risks, the Group, led by the Safety Administration Department, conducts safety inspections at business sites and factories, including those of affiliated companies. We also host safety training sessions across Japan and promote company-wide occupational health and safety management activities to prevent accidents and incidents.

(3)Risks Related to Fluctuations in Copper Prices, Exchange Rates, and Interest Rates

1) Risk of Copper Price Fluctuations

The Group produces electrolytic copper in Japan and copper concentrate at the Atacama Mine in Chile. As such, our business performance is heavily influenced by international copper market prices. Depending on future copper price trends, the Group’s business performance and financial condition may be significantly affected.

We estimate that a change of USD 0.10 per pound in copper prices in the next consolidated fiscal year would result in an annual change of approximately ¥1.9 billion in consolidated net sales and approximately ¥300 million in consolidated operating profit.

To hedge against price fluctuation risks in copper and related commodities in our Metals Business, we engage in forward contracts and other risk mitigation measures.

2) Risk of Exchange Rate Fluctuations

The Group’s operations are also subject to exchange rate fluctuations. For example, we purchase copper ore priced in foreign currencies for the production of electrolytic copper, and we convert the financial statements of overseas consolidated subsidiaries into Japanese yen for financial reporting. These factors can cause significant volatility in our business performance.

We estimate that a fluctuation of ¥5 per USD in the next consolidated fiscal year (in the direction of yen depreciation) would result in an annual change of approximately ¥2.7 billion in consolidated net sales and approximately ¥100 million in consolidated operating profit.

To mitigate currency exchange risks in the Metals Business, we utilize hedging instruments such as currency options.

3) Risk of Interest Rate Fluctuations

As of the end of the current consolidated fiscal year, the Group’s interest-bearing debt totaled ¥24.3 billion. Future fluctuations in market interest rates may put downward pressure on earnings. In addition, interest-bearing debt is expected to increase significantly during the development period of the Arqueros Mine in Chile, which will further increase our exposure to interest rate risk.

To manage this risk, the Group closely monitors interest rate trends, explores flexible financing options, and mitigates interest rate fluctuations by securing fixed interest rates or entering into interest rate swap agreements for long-term borrowings.

(4)Risks Related to the Business Environment

1) Risk of Dependency on Steel and Cement Demand

Limestone, the core product of the Group, is primarily sold to domestic steel and cement manufacturers. In the future, a decline in public and private capital investment, reduced production of industrial products such as automobiles, operational issues at customer production facilities, corporate restructuring within the steel industry, or technological changes in manufacturing methods could lead to reduced production volumes by our major clients in the steel and cement industries. Such developments may adversely affect the Group’s business performance and financial condition.

To mitigate this risk, the Group continuously gathers information on industry trends and the status of key customers, and explores opportunities to acquire new customers both in Japan and overseas.

2) Risk Related to Resource Development

Exploration and development of non-ferrous metals such as copper, as well as geothermal resource surveys and development undertaken by the Group, require substantial investment in surveys and development (including tunnel excavation, well drilling, and construction of production facilities). If mineral prices or resource quantities fall short of expectations, or if there are difficulties in obtaining government approvals or financing, significant revisions to development plans may become necessary. In such cases, the recovery of invested capital may become difficult, potentially affecting the Group’s business performance and financial condition.

To address this risk, the Group regularly reviews mineral price levels and resource estimates and revises development plans accordingly. We also maintain appropriate relationships with relevant government and regulatory bodies to facilitate the approval process. Furthermore, we strengthen communication with government-affiliated financial institutions and our main lenders, such as major commercial banks, to enable flexible financing.

3) Risk Related to Global Business Operations

The Group operates copper mines in the Republic of Chile and conducts business activities in various countries and regions around the world. If political instability such as terrorism or armed conflict, outbreaks of infectious diseases, natural disasters, or labor strikes occur in these areas and affect our business operations, there could be a negative impact on the Group’s business performance and financial condition.

To manage these risks, the Group strives to stay informed of developments in each country and region where we operate, maintains close communication with relevant Japanese government ministries through industry associations, and has established emergency communication frameworks.

With regard to the situation in Ukraine, the ongoing economic sanctions, international regulatory measures, logistical disruptions, and surging energy prices have contributed to global economic instability, which may also impact the Group’s performance and financial standing.

4) Risk Related to Environmental Regulations

Future amendments to relevant laws and regulations may result in additional costs for environmental measures or capital investment, potentially affecting the Group’s business performance and financial condition. Additionally, stricter environmental regulations in Japan and overseas, or rising societal expectations such as those reflected in the SDGs, could restrict the Group’s core mining operations and development activities, with potential negative effects on our business.

To mitigate these risks, the Group monitors regulatory and societal trends related to the environment and works to comply with international environmental management standards such as ISO 14001. We also obtain forest certifications for our company-owned forests and undertake greening initiatives at mine sites and tailing areas, contributing to environmental conservation across our domestic and international operations.

On the other hand, strengthened environmental regulations may also present growth opportunities for the Group’s Machinery & Environmental Business, particularly in areas such as dust collectors and water treatment chemicals. We are therefore actively working to expand our customer base in countries, regions, and industries where further regulatory tightening is anticipated.

5) Risk Related to Raw Material Procurement

Prolonged procurement lead times for raw materials may delay capital investment projects and equipment maintenance plans. Additionally, sharp increases in procurement costs or the downsizing/withdrawal of material suppliers may result in higher production costs, potentially impacting the Group’s business performance and financial condition.

To mitigate such risks, the Group is diversifying its procurement sources, strengthening inventory management, and promoting research and development of alternative raw materials.

(5)Risks Related to Corporate Governance

1) Compliance and Internal Control Risks

If any officer or employee of the Group fails to comply with laws and regulations relevant to our business or fails to meet social expectations in relationships with stakeholders, this could result in restrictions on business activities or a loss of trust. Consequently, it may have a negative impact on the Group’s business performance and financial condition.
To mitigate such risks, our Internal Audit Department—independent of operational departments—takes the lead in conducting internal audits at the head office, branches, and domestic and overseas group companies. In addition, we work to strengthen compliance and internal controls through regular compliance training sessions by job level and the establishment and operation of internal controls over financial reporting.

2) Risks Related to Quality Assurance and Management

If the Group delivers products or services with contractual non-conformities or defects that result in harm to customers or generate complaints, it could lead to product recalls, customer compensation, litigation-related costs, or a decline in corporate trust. These factors may negatively affect the Group’s business performance and financial condition.
To address these risks, the Group is committed to ensuring that defective or non-conforming products and services are not delivered to customers through thorough quality assurance and management.
We hold regular meetings of the Quality Assurance Committee to identify and assess risks related to product and service quality, and to discuss response strategies.
During the fiscal year under review, the committee convened twice, during which quality management conditions at each site and activities of the Subcommittee on Quality Risk Management were reported.

3) Risks Related to Information Security

Our information systems face various threats, including malicious emails, unauthorized access, and theft of PCs or electronic storage devices, which may lead to data breaches, falsification of critical corporate information, or the spread of malware via compromised devices.
As the Group uses IT equipment and internal/external networks for operating core systems and handling digital data, such threats pose significant information security risks. These risks have increased with the introduction of telework, which raises the chances of malware infection and the loss or theft of devices.
In the event of a serious incident, not only the Group but also stakeholders connected via networks or systems (including those in the supply chain) could suffer operational disruptions and recovery costs, along with reputational damage, potentially affecting our business performance and financial condition.
To counter these risks, our Information System Department leads efforts such as software updates, the deployment of anti-malware tools, multilayered network defenses, data encryption for external devices, and secure communication protocols. We also implement e-learning-based cybersecurity training to raise awareness and reduce targeted attack risks. Internal audits reinforce compliance with IT management policies and security standards across relevant departments.

(6)Risks Related to Infectious Diseases

The spread of infectious diseases caused by novel pathogens can severely affect political, economic, and business environments globally. Predicting the course and end of such outbreaks is inherently difficult.
The Group operates mines and other facilities throughout Japan and has business and copper mining operations overseas, including in the Republic of Chile. If outbreaks occur at any of these domestic or international sites, production, sales, and the provision of products and services may be disrupted.
Furthermore, if emergency declarations, lockdowns, border closures, or stay-at-home orders are imposed by governments—such as during the COVID-19 pandemic—these measures may limit the operation of our sites, affecting the Group’s business performance and financial condition.
To address this risk, the Group is committed to minimizing business disruption by adopting flexible work arrangements such as telework and staggered hours, while implementing optimal infection prevention measures at each site and staying informed of the latest developments and public health policies in each region.

(7)Litigation Risk

In September 2024, our consolidated subsidiary, Nittetsu Mining Consultants Co., Ltd. (“Consultants”), filed a lawsuit seeking damages of ¥2.129 billion against Mitsui Oil Exploration Co., Ltd. (currently Mitsui Oil & Energy Resources Development Co., Ltd., “MOECO”) regarding a steam eruption accident (“the Incident”) that occurred in Rankoshi Town, Hokkaido in June 2023. The claim includes payments for work completed before the Incident, on-site work post-Incident, and other damages suffered by Consultants.
In response, MOECO filed a counterclaim in October 2024, alleging that the Incident resulted from Consultants’ failure to fulfill its safety obligations, and is seeking ¥3.464 billion in damages allegedly incurred by MOECO. The lawsuit was formally received in November 2024.
These two lawsuits are currently being jointly heard by the Tokyo District Court and remain ongoing.
Should the court issue an unfavorable judgment against the Group, there is a risk that it may negatively affect our business performance and financial condition.