CISRI Competes for Light Rare Earth in North China

In the light rare earth market of north China,REHT, the largest rare earth enterprise in the world, has to face a bitter rival in competition.

As 3 SOEs (CHINALCO, Minmetals and CNMC) are vying for the medium and heavy rare earth market of South China, a smaller SOE, i.e., China Iron & Steel Research Institute Group (hereinafter referred to as “CISRI”), focuses on the light rare earth market in north China.

CISRI recently announced that it has signed“Equity Transfer and Share & Capital Increase Agreement of ShandongWeishan Lake Rare Earth Co., Ltd.” with Weishan Huaneng Company, Cuizhuang Coal Mining Company and Aerospace Industry Foundation.

Analysts predict that, AT&M, which is a subsidiary of CISRI specializing in deep processing of rare earth, will benefit from the consolidation.

Shandong Weishan Lake Rare Earth Co., Ltd.(hereinafter referred to as “Weishan Lake Rare Earth”), which is acquired by CISRI, is mainly engaged in mining of Weishan Lake light rare earth raw materials. Currently, Weishan Lake Mine is one of the 3 key light rare earth bases in China.

After this equity transfer, with share and capital increased, CISRI will hold 40% shares of Weishan Lake Rare Earth.

According to CISRI, Weishan Lake Mine ranks No.2 in China in terms of geological reserves and its proven reserves has reached 12,700,000 tons REO (rare earth oxides), accounting for 9.6% of the total reserves of China, while its industrial reserves has reached 4,000,000 tons REO, accounting for 7.7% of that of China.

Wang Guozhen, rare earth expert and professor of Central Engineering Institute for Nonferrous Metallurgical Industries told China Business News, Weishan Lake Mine mainly contains bastnaesite and a small quantity of synchysite, quartz and barite, etc. The mine has obvious advantages, for its rare earth concentrate is easy to be deeply processed and separated into single rare earth elements.

It is reported that light rare earth is mainly produced in Inner Mongolia, Sichuan, Gansu and Shandong.

As a downstream deep-processing company in the rare earth industry, AT&M is capable of producing approximately 1,500 tons of NdFeB and is running in its full capacity now.

In the first half of 2011, affected by price hike of rare earth raw materials, fierce industrial competition and lower demand from downstream enterprises, many companies in NdFeB sector cut down or even stop their production.

Ju Guoxian, an analyst of Minsheng Security,deems that, more than 1200 tons of NdFeB may be available given 1500 tons of quota (approximately 375 tons of praseodymium oxide and neodymium oxide) of Shandong Weishan.Therefore, even though the products are in short supply, AT&M can always have great support in terms of its resources supply.

AT&M claimed that the signing was carried out by CISRI, i.e., its controlling shareholder,and there was no injection plan. Main raw material needed for AT&M’s NdFeB magnet production business is light rare earth. At the moment, AT&M has not purchased raw materials from CISRI. Therefore, the above mentioned event has no impact on performance of AT&M.

Special Plan for Rare Earth Industrial Development (2009-2015), which was formulated by the Ministry of Industry and Information Technology (MIIT), once positioned development of light rare earth, that is, to develop light rare earth of Baiyunebo and bastnaesite of Sichuan province primarily and exploit light rare earth resources of Shandong properly. Therefore,although CISRI has acquired Weishan Lake Rare Earth Mine, it seems that China does not intend to develop rare earth resources of Shandong on a large scale.