China Rare Earth Group Undergoes Major Consolidation

Significant progress has been made in the specialized consolidation of the state-owned medium and heavy rare earth industry in China. Following the signing of a rare earth cooperation framework agreement between Xiamen Tungsten Co., Ltd. and China Rare Earth Group Co., Ltd. in September 2023, a major development occurred on the evening of January 1, 2024. Rising Nonferrous Metals Share Co., Ltd. announced that its indirect controlling shareholder, Guangdong Rising Holdings Group Co.,Ltd., plans to transfer 100% of its directly held shares in Guangdong Rare Earth Industry Group Co., Ltd. to China Rare Earth Group without compensation. After the transfer, the actual controller of Rising Nonferrous Metals will change from the Guangdong Provincial State-owned Assets Supervision and Administration Commission to China Rare Earth Group. This transfer will consolidate the original three major southern medium and heavy rare earth groups into two: China Rare Earth Group and Xiamen Tungsten, the latter having significant cooperation with China Rare Earth Group. Following these changes, China’s rare earth industry landscape will essentially present a market pattern with Northern Rare Earth in the north and China Rare Earth in the south.

On the evening of January 1, 2024, Rising Nonferrous Metals announced that on December 29, 2023, its indirect controlling shareholder, Guangdong Rising Holdings signed an equity transfer agreement with China Rare Earth Group for the gratuitous transfer of 100% of the shares of Guangdong Rare Earth, a directly held subsidiary of Guangdong Rising Holdings, to China Rare Earth Group. The announcement stated that the purpose of this change in equity is to further deepen the reform of state-owned enterprises, optimize resource allocation, fulfill the responsibility of safeguarding national strategic resource security, and assist China Rare Earth Group in carrying out specialized consolidation of rare earth resources in the Guangdong region. Once this transfer of shares is implemented, it will change the indirect controlling shareholder and actual controller of Rising Nonferrous Metals. After the transfer, the controlling shareholder of Rising Nonferrous Metals will still be Guangdong Rare Earth, but the actual controller will change from Guangdong Provincial State-owned Assets Supervision and Administration Commission to China Rare Earth Group.

In 2011, according to the “Several Opinions on Promoting the Sustainable and Healthy Development of the Rare Earth Industry” issued by the State Council, the state established the Big Six rare earth groups: China Northern Rare Earth (Group) High-Tech Co., Ltd., Aluminum Corporation of China (Chinalco), Xiamen Tungsten Co., Ltd., China Minmetals Corporation (Minmetals), Guangdong Rare Earth Industry Group Co., Ltd., and China Southern Rare Earth Group Co., Ltd..

In December 2021, the central government consolidated Minmetals, Southern Rare Earth, and Chinalco from the Big Six groups. The China Rare Earth Group was officially established in Jiangxi, thus reducing the Big Six rare earth groups to four: Northern Rare Earth, China Rare Earth Group, Xiamen Tungsten, and Guangdong Rare Earth. Rising Nonferrous Metals is the only listed platform under Guangdong Rare Earth Group. Consequently, in the field of medium and heavy rare earths in the southern China, the main rare earth enterprises are China Rare Earth Group, Xiamen Tungsten, and Guangdong Rare Earth.

On October 31, 2022, at the central enterprise specialization consolidation project signing ceremony hosted by the State-owned Assets Supervision and Administration Commission (SASAC), China Rare Earth Group and Guangdong Rising Holdings signed a strategic cooperation agreement. The two sides will deeply collaborate in the rare earth industry and other fields, integrating resources and industry complementarity to accelerate the strategic coordination between central and local governments. However, specific plans for this cooperation were not finalized at that time. At that time, China Rare Earth Group and the listed company Rising Nonferrous Metals, controlled by Guangdong Rising Holdings, both issued relevant announcements regarding this matter. Rising Nonferrous Metals announced that the company would continue to monitor the progress and fulfill its information disclosure obligations in stages according to relevant laws and regulations, also noting the uncertainty of the cooperation. Before the transfer of equity, the strategic cooperation between China Rare Earth Group and Guangdong Rising Holdings had not made substantial progress since the signing of the aforementioned agreement.

On the evening of September 24, 2023, Xiamen Tungsten announced that to fully leverage each other’s strengths, strengthen rare earth industry cooperation, achieve mutual benefit and win-win results, and promote the high-quality development of Fujian Province’s rare earth industry, China Rare Earth Group and Xiamen Tungsten plan to carry out extensive cooperation in several areas. These areas include the development of rare earth mines in Fujian, the Fujian rare earth smelting and separation industry, raw material security for the deep processing industry of Fujian rare earths, rare earth industry funds, and innovation fields. The two parties intend to establish two joint venture companies, with China Rare Earth Group holding a 51% stake and Xiamen Tungsten or its controlling subsidiary holding a 49% stake, to jointly operate the rare earth mines and the rare earth smelting and separation industry controlled by Xiamen Tungsten (including its controlling shareholder and its controlling subsidiaries). It is important to note that, according to the agreement, the cooperation between the two parties is not limited to the rare earth assets controlled by Xiamen Tungsten and its controlling subsidiaries, but also includes the related rare earth assets controlled by Fujian Rare Earth (Group) Co., Ltd., the controlling shareholder of Xiamen Tungsten.

Clearly, after gaining 100% control of Guangdong Rare Earth, China Rare Earth Group has, to a great extent, completed the major consolidation of medium and heavy rare earths in the southern China. Consequently, this will shape the market competition landscape of China’s rare earth industry, characterized by Northern Rare Earth in the north and China Rare Earth in the south.