China’s Shenghe Resources Acquires Jiahua Plants to Boost Rare Earth Production Capacity

In a strategic move to enhance its market presence, Shenghe Resources, a leading Chinese rare earth producer, announced its acquisition of significant stakes in Jiangyin Jiahua and Zibo Jiahua, two major rare earth separation plants. The acquisition, made through Shenghe’s wholly-owned subsidiary, Ganzhou Chenguang Rare Earth New Materials, is expected to bolster Shenghe's production capacity of rare earth oxides (REO) and improve its competitiveness in the global market.

Ganzhou Chenguang will purchase an 86 percent stake in Jiangyin Jiahua for 182.71 million yuan ($25.61 million) and a 95 percent stake in Zibo Jiahua for 29.38 million yuan ($4.11 million) from Toronto-based Neo Performance Materials. Following the transaction, Ganzhou Chenguang will fully own Zibo Jiahua after acquiring the remaining 5 percent stake from Zibo Shijia Industrial and Trading.

These acquisitions will significantly increase Shenghe Resources’ rare earth separation output. Jiangyin Jiahua, based in Jiangsu, specializes in the production of high-purity rare earth oxide and co-sediment products, with a current separation capacity of 3,800 tons per year of REO. Meanwhile, Zibo Jiahua, located in Shandong, boasts an output capacity of 5,500 tons per year for bastnaesite rare earth ores. Zibo Jiahua recently halted its light rare earth separation operations to optimize capital return, reduce earnings volatility, and mitigate concentration risk within China.

Furthermore, Zibo Jiahua has invested 500 million yuan to construct an 8,000 tons per year plant for producing high-performance rare earth catalytic materials used in exhaust catalysts to reduce emissions from internal combustion engines. If this plant reaches full operational capacity, Zibo Jiahua will become the largest producer of catalytic materials in China and globally, commanding 30-35 percent of the world market.

Shenghe Resources has also been actively pursuing global expansion to secure resources and enhance its supply chain resilience. The company recently announced plans to acquire an additional 50 percent interest in the Tanzanian rare earth mining company Ngualla Group UK Limited, in partnership with Australian firm Peak Rare Earths. Shenghe has also expanded its influence in Australia, acquiring an 18.2 percent stake in Vital Metal, an Australian rare earth exploration firm, and has reached a preliminary agreement with Blackstone Minerals to build an integrated rare earth value chain in Vietnam.

Despite these expansions, Shenghe Resources has forecasted a net loss of 48-72 million yuan in the first half of 2024, attributing the downturn to declining prices of rare earth and zirconium-titanium products, alongside increased costs of raw materials such as imported ore concentrates.