China is lining up another move to consolidate its world-leading rare earth sector, with a state-owned group reportedly seeking control of one of the country’s largest rare earth miners.
Reuters reported on Friday that China Rare Earth Group is in talks to acquire Shenghe Resources (SHE:600392), one of China’s leading rare earth mining and refining companies.
Founded in 1998, Shenghe is already partly state-owned, with China’s Ministry of Natural Resources its largest shareholder.
Talks between the two companies have been underway since earlier this year, with China Rare Earth Group seeking a controlling interest, according Reuters.
A deal would mark another step in Beijing’s decades-long effort to consolidate the country’s rare earth industry under state control.
Overseas holdings in focus
A takeover would also give China Rare Earth Group control over Shenghe’s stakes in several overseas companies, including its roughly 3% holding in MP Materials (NYSE:MP), which operates the only scaled, active rare earth mine in the US.
The company, based in Las Vegas, Nevada, US, also owns downstream facilities to refine rare earth elements (REEs) and manufacture permanent magnets domestically.
MP Materials counts the US Department of War (DoW) as its largest shareholder following a landmark investment last year.
Reuters, citing sources, says it remains unclear how a prospect of a major Chinese state-owned rare earth company appearing alongside the DoW on MP Materials’ shareholder register could affect the proposed transaction.
MP Materials has repeatedly said neither Shenghe nor the Chinese Government exercises control over its operations, according to Reuters.
Shenghe has also expanded its presence overseas. Last year, it acquired full ownership of Australia’s Peak Rare Earths, which is developing the Ngualla neodymium-praseodymium project in Tanzania.
Beijing tightens grip on rare earth sector
China Rare Earth Group was established in 2021 through the reorganisation of five state-owned rare earth-related companies and is now the country’s largest supplier of heavy REEs.
A deal could also give Shenghe greater access to China’s rare earth production quotas, which Beijing typically allocates to state-owned companies to manage supply, according to Reuters.
China’s quotas for rare earth mining, smelting, and separation have traditionally been closely watched as a barometer of global supply.
However, Beijing has recently stopped publicly disclosing the quotas, reducing visibility into production from the world’s dominant rare earth supplier.
Write to Jackson Chen at Mining.com.au
Main Image: Brücke-Osteuropa, Wikimedia Commons
