Chinese rare earths company Shenghe Resources continues to build its footrprint as a globally connected rare earths company. In two recent moves, it pledged to invest $96 million in Australian minerals firm Peak Rare Earths that provides critical funding for its mine development in Tanzania and agreed to pay Toronto-based Neo Performance Materials $30 million to acquire processing assets of Neo in China.
In August, Neo announced that it has entered into agreements to sell its 86% equity interest in Jiangyin Jiahua Advanced Material Resources Co., Ltd. (JAMR) to Shenghe for $25.6 million cash; and 100% of the equity in Zibo Jiahua Advanced Material Resources Co., Ltd. (ZAMR) to Shenghe for $4.1 million cash. JAMR sales proceeds represent a 10.7x multiple on average trailing five-year EBITDA for the facility. The ZAMR facility was valued using an asset-based approach, as the facility was closed in the second quarter of 2024. The transactions are expected to close in the fourth quarter of this year.
Neo will retain a 9% interest in JAMR and plans to execute an agreement securing the exclusive right to distribute JAMR’s heavy rare earth products outside of China for an initial term of 5 years, a move expected to provide Neo customers outside of China with continuity of supply for premium products like dysprosium for multi-layer ceramic capacitors and medical-grade gadolinium.
“As the rare earth industry in China has evolved, this is the right time to transition our rare earth separation businesses inside China to an integrated rare earth industry leader,” explained Rahim Suleman, CEO of Neo. “It is our view that larger production and sourcing scale is required to create more value for these midstream assets. We are pleased to have found a partner for this vision in Shenghe, a company with proven commercial excellence and an established global sourcing platform. We look forward to our continued partnership,” Neo discontinued ZAMR’s rare earth separation operations in April of this year, shifting operations to the newly constructed downstream rare earth specialty oxides facility, NAMCO, in the same region.
Through its strong supply chain relationships both inside and outside of China as well as its 20 years of experience in the rare earths industry, Shenghe is seen as having the capability to expand JAMR’s access to raw materials. Shenghe is also expected to integrate ZAMR’s remaining assets and employees in its operations. JAMR has been a continuously operating asset in the Neo’s portfolio for three decades, earning a reputation as a leading producer of specialty heavy rare earth products for global markets.
“We are pleased to partner with Neo on this mutually beneficial agreement for both our companies and our customers. Both JAMR and ZAMR have had excellent reputations over the last three decades in Neo’s ownership and management. By integrating them into Shenghe’s large, global platform, we look forward to the next growth chapter for these assets,” said Huang Ping, the acting chairman of Shenghe.
Investing for Peak’s rare earths mine in Tanzania
A month earlier, Australian minerals company Peak Rare Earths forged a transformational partnership with Shenghe in which it agreed to invest $96 million in the company. The agreement creates a fully funded project solution for Peak’s Ngualla rare earths development project in Tanzania and secures offtake supply from it for Shenghe.
“We continue to believe that the Ngualla Project is the premier undeveloped rare earth project in the world,” commented Huang Ping, Deputy Chairman of Shenghe. Shenghe becomes Peak’s largest shareholder with about 19.9% shareholding.
“This marks yet another major de-risking milestone and further strengthens Ngualla’s position as one of the world’s most attractive and advanced rare earth projects,” noted Bardin David, CEO of Peak. “Our offtake agreement with Shenghe delivers a higher level of payability and is supporting our rapidly advancing debt financing process.” According to the company, its Ngualla Rare Earth Project in Tanzania contains one of the largest, highest grade and lowest cost Neodymium Praseodymium (NdPr) rare earth deposits in the world.
The project entails the construction of a mine, mill, concentrator, community projects and associated infrastructure. Construction of the project is expected to cost approximately US$320 million.
Shenghe’s global footprint
Based in Chengdu, the capital of Sichuan Province in southwest China, and listed on the Shanghai stock exchange with about US$2 billion market capitalization, Shenghe is the largest importer of rare earth concentrate into China, primarily due to its processing arrangement with MP Materials. It owns about 7.7% of MP Materials and has been a long-time provider of separations services for ore shipped from MP’s Mountain Pass mine near Las Vegas – a relationship likely changing as MP ramps up its own separations facility at its site in Mountain Pass, California. Other Shenghe rare earths investments include holdings in Vietnam Rare Earths, Australian companies Energy Transition Minerals, WIM Resources, and Vital Metals which is developing the Nechalacho rare earths project in Canada.
For more info, see www.en.shengheholding.com, www.neomaterials.com, www.peakrareearths.com.
