On September 11, customs data showed that in August this year, China's rare earth exports fell by 3.4% annually, but the export amount increased from 36.4 million US dollars in July to 55 million US dollars, an increase of 51% annually, showing a trend of "volume reduction and price increase". It can be seen that rare earth has become a hot asset.
The continuous upgrading of supply side control has made the value of rare earth higher. At the same time, related enterprises have also benefited significantly in this cycle. "China Times" reporter noted that recently, China's rare earth industry mergers and acquisitions accelerated. Among them, Shenghe Resources Holding Co., Ltd. (600392. Rising Nonferrous Metals Co., Ltd. (600259.sh) (hereinafter referred to as "Rising Nonferrous Metals") was merged into China Rare Earth Group Resources Technology Co., Ltd. (000831.SZ) (hereinafter referred to as "China Rare Earth") to achieve integration.
On September 15, Li Congming, a rare earth analyst at the Ministry of Rare and Precious Metals Information of Shanghai Steel Union, told the China Times that the tightening of China's export quotas, the restrictions on the directional control of medium and heavy rare earths, and the scarcity of rare earth resources abroad have led to "volume reduction and price increase".
Raise the purchase price
On September 5, Shenghe Resources issued a notice on adjusting the transaction price of the acquisition of Pick's shares. It is reported that the main implementation of the acquisition is Shenghe Resources (Singapore) Limited (hereinafter referred to as Shenghe Singapore), which is a wholly-owned subsidiary of Shenghe Resources. The announcement shows that after full and friendly consultation, Shenghe Singapore and Pick Company agreed to adjust the price of 100% equity of Pick Company from about 743 million yuan to about 917 million yuan, an increase of about 23%.
The China Times reporter learned that in mid-May this year, Shenghe Resources considered and approved the acquisition of Pick's equity. Regarding the increase in the purchase price, Shenghe Resources said that since the signing of the relevant agreement, great changes have taken place in the domestic and foreign rare earth markets, and the market prices of major rare earth products have continued to rise substantially. The increase in the price is also a negotiation between Shenghe Singapore and Pick Company based on this background.
It is noteworthy that after the price increase, Pick's valuation has approached the highest point of the agreement. Shenghe Resources mentioned in the announcement that the adjustment of the purchase price is conducive to accelerating the implementation of the acquisition of Pick's equity. The adjusted price is still within the company's affordability and commercial rationality, and the investment risk is controllable. Except for the changes in the relevant contents of the purchase price, the other main core terms are consistent with the previous ones.
The China Times reporter learned that Pick is an Australian listed company, headquartered in Perth, mainly operating the Ngualla rare earth mine project in Tanzania, holding 84% of its equity. The Ngualla Rare Earth Mine Project has 18.5 million tons of rare earth reserves, and praseodymium and neodymium oxides account for about 21.26% of the rare earth oxides.
According to the company's dynamic report issued by Minsheng Securities, the Ngualla rare earth project is one of the largest, highest-grade and lowest-cost rare earth deposits in the world, according to the materials displayed by Pick in November 2024. The project is expected to complete the final investment decision in the first quarter of this year, complete in the fourth quarter of 2026, achieve the first batch of concentrate output in the first quarter of 2027 and ramp up in the second quarter of that year. At the same time, if the time of completion of the acquisition around October this year is taken as the final investment decision time, the corresponding production time of the Ngualla rare earth mine project may be around the third quarter of 2027.
Regarding the acquisition, the reporter of China Times first contacted Shenghe Resources by telephone for an interview. After explaining the relevant issues of the interview, he sent the interview outline again according to the request of the other party, but no reply was received as of the time of publication.
Net profit in the first half of the year increased by 650.09% year-on-year.
"China Times" reporter noted that the acquisition of Pick Company is "imminent" for Shenghe Resources. In April this year, there were a lot of reports on the Internet that "MP, an American rare earth producer, announced that it would stop exporting rare earth concentrates to China due to tariffs". It is reported that Shenghe Resources (Singapore) International Trade Co., Ltd., a holding subsidiary of Shenghe Resources, is the exclusive distributor of MP Company in China. In January 2024, the two sides renewed a new underwriting agreement with a term of two years, which can be extended for one year after expiration, and other rare earth products besides rare earth concentrates.
Due to the imposition of tariffs, MP temporarily suspended the export of rare earth concentrates to China. Shenghe Resources said in the announcement that the company has built a diversified supply channel of rare earth raw materials, Sichuan ore, monazite and other countries imported ore can be used as an alternative supply, MP company suspended the export of rare earth concentrates to China will not have a significant impact on the company's production and operation.
According to public information, Shenghe Resources currently owns two major industries of rare earth ore and zirconium and titanium. Among them, the rare earth business has formed a relatively complete industrial chain from mineral processing, smelting separation to deep processing, and has realized the dual layout at home and abroad. The main raw materials of Shenghe Resources are rare earth concentrate and coastal ore, and the main products are rare earth oxides, rare earth salts, rare earth metals and so on. Therefore, a stable supply of raw materials is very important for Shenghe Resources.
In the first half of this year, benefiting from the rising price of rare earth, the performance of Shenghe Resources was booming. Data show that in the first half of the year, the operating income of Shenghe Resources was 6.179 billion yuan, an increase of 13.62% over the same period last year; the net profit attributable to shareholders of listed companies was 377 million yuan, an increase of 650.09% over the same period last year.
In the first half of this year, Shenghe Resources intends to distribute a cash dividend of 0.50 yuan (including tax) per 10 shares to all shareholders, totaling 87.6413 million yuan (including tax), which is about 23.25% of the company's net profit attributable to shareholders of listed companies in the first half of this year.
Integration of rare earth industry accelerates
The increase of 650.09% is indeed eye-catching for investors, but this is not the "ceiling" of the rare earth industry. In the first half of this year, the operating income of Northern Rare Earth was 18.866 billion yuan, an increase of 45.24% over the same period last year; the net profit attributable to shareholders of listed companies was 931 million yuan, an increase of 1951.52% over the same period last year.