Shenghe Resources Expands Rare Earth Capacity with Jiahua Acquisitions

Shenghe Resources

Chinese rare earth giant Shenghe Resources has announced its acquisition of significant stakes in rare earth separation plants Jiangyin Jiahua and Zibo Jiahua, aiming to boost its production capacity and strengthen market competitiveness. The move underscores Shenghe's strategic commitment to enhancing its global footprint and securing supply chains amid fluctuating market conditions.

Strategic Acquisitions in Rare Earth Separation

Through its wholly-owned subsidiary, Ganzhou Chenguang Rare Earth New Materials, Shenghe Resources will acquire an 86% stake in Jiangyin Jiahua for 182.71 million yuan ($25.61 million) and 95% of Zibo Jiahua for 29.38 million yuan from Canadian-based Neo Performance Materials. Shenghe will gain full ownership of Zibo Jiahua by purchasing the remaining 5% stake from Zibo Shijia Industrial and Trading.

• Jiangyin Jiahua, based in Jiangsu, has an annual separation capacity of 3,800 tonnes of high-purity rare earth oxide (REO).
• Zibo Jiahua, located in Shandong, can process 5,500 tonnes per year of bastnaesite rare earth ores.

Zibo Jiahua has also invested 500 million yuan to construct an 8,000 t/yr plant for high-performance rare earth catalytic materials, vital for reducing emissions from internal combustion engines. Upon completion, this facility is expected to dominate 30-35% of the global market for catalytic materials.

A Focus on Global Expansion

Shenghe Resources continues to expand its international presence:

1. Ngualla Project: Shenghe increased its stake in the Tanzanian rare earth mining company Ngualla Group UK Limited, co-owned by Peak Rare Earths (PRR), to develop the Ngualla project.
2. Vital Metals: Shenghe acquired an 18.2% stake in the Australian rare earth exploration firm Vital Metals, which holds assets like the Nechalacho mine in Canada and the Wigu Hill deposit in Tanzania.
3. Vietnam Rare Earth Partnership: Shenghe's subsidiary reached an agreement with Blackstone Minerals to establish a fully-integrated rare earth value chain in Vietnam.

Market Challenges and Financial Outlook

Despite aggressive expansion, Shenghe expects a net loss of 48-72 million yuan for the first half of 2024, citing reduced sales prices and falling gross profit margins. This contrasts sharply with the company’s 83.97 million yuan net profit in the same period last year. The drop is attributed to the slump in rare earth and zirconium-titanium prices and increased raw material costs.

Shenghe remains optimistic, highlighting firm downstream demand and increased output of rare earth oxides, salts, and metals in 2023. These expansions position Shenghe as a key player in securing a resilient and diversified rare earth supply chain.