Investment

Baotou Steel keen on cornering rare earth market

By Zhou Yan (China Daily)
Updated: 2010-08-04 15:31

SHANGHAI - Inner Mongolia's Baotou Steel Rare-Earth (Group) Hi-Tech Co, the major producer of the minerals in the north, has planned to expand its presence in the south by investing 232.4 million yuan ($34.3 million) in three local rare earths firms in Jiangxi province's Ganzhou city.

The company will invest 73.87 million yuan to buy a 48 percent stake in Xinfeng Xinli Rare Earths Co Ltd. It will also inject 89.21 million yuan to set up a joint venture, in which it will own a 49 percent stake, with Quannan Jinghuan Technology Co Ltd. The company will also invest 69.34 million yuan to buy a 9.25 percent stake in Ganzhou Chenguang Rare Earths Co Ltd that aims to go public in three years.

"(The move) aims to promote united restructuring of the rare earth industry in China, boost the cooperation between the north and south and protect the nation's rare earth industry's long-term benefits," the company said in a statement to Shanghai Stock Exchange on Tuesday.

"The near completion of the Baotou Steel Rare-Earth integration plan in northern China is a strategic step. Thus, it has to move toward the south to expand its stance," said Liu Minda, an analyst at Huatai Securities, adding that Ganzhou is a good start for the company.

Ganzhou has verified reserves of 2.89 million tons of ion-absorbed-type rare earth elements, accounting for 40 percent of the nation's total.

China currently controls the majority of the known global reserves of rare earth elements, which are used in making everything from iPods to hybrid car batteries to missile-guidance systems, aircraft electronics and satellites.

Baotou Steel Rare-Earth's investment in the area may enrich the firm's resource categories from mainly focusing on light rare earth in Inner Mongolia autonomous region.

"The real intention behind the investment is to gain mining rights in the region, which is still difficult to achieve at the current stage as most rare earth mines are in local government hands," Liu said.

Baotou Steel Rare-Earth, the rare earth listed unit of Baotou Iron & Steel Group, realized a net profit of 354 million yuan for the first half of this year, a more than six-fold increase year-on-year, the company said in another statement on Tuesday.

The company attributed its revenue hike to a price jump for rare earth products on the back of a robust recovery in the industry.

Some of the major rare earths oxides, such as neodymium oxide, have jumped over 60 percent in the first half, according to Deng Xinrong, an analyst at Founder Securities.

"The price surge is mainly driven by polices to reform the industry via an illegal mining crackdown and a cut in exports," Liu said.

China Daily