Shenghe Resources: continue to increase the size of mergers and acquisitions to expand production capacity

On May 28th, the 12th International rare Earth Summit was held in Hangzhou. On the same day, the domestic rare earth giant 600392.SH also held a shareholders' meeting. Under the background of the continuous rise of the rare earth plate, Shenghe Resources how to improve the global layout and realize the structure of the whole industry chain has been widely concerned by investors.

At the Shenghe Resources shareholders' meeting, company executives said that due to the easing of the epidemic, the resumption of production, rare earth prices or continued high fluctuations, profits are still considerable. The company will adhere to the integration of domestic resources, actively develop foreign resources, create a complete industrial chain, and achieve international and domestic two-wheel drive.

Merger and acquisition, Integration of domestic Resources and tamping of rare Earth Resources

"it is very difficult to open a new mine and the audit is very strict." The company told reporters that the company's domestic expansion can only be achieved through mergers and acquisitions. In particular, on January 15 this year, after the Ministry of Industry and Information Technology issued the regulations on the Administration of rare Earths (draft for soliciting opinions), it clearly stipulated that index management should be implemented for the mining, smelting, and separation of rare earth mines, and strict restrictions should be set on production indicators and production capacity indicators. Therefore, Shenghe Resources can only acquire some mines that do not meet national mining standards or are difficult to operate, restructure production capacity and organize resources.

Since the great integration of the rare earth industry in 2019, the company has been actively looking for M & An opportunities. After successively acquiring Wensheng new materials, Chenguang rare earth, Coburi and Hainan Wensheng, the company has increased the links of rare metal smelting and NdFeB waste recycling and comprehensive utilization, forming a complete rare earth industry chain integrating rare earth mineral mining, separation, smelting, downstream rare earth application and rare earth waste recovery and comprehensive utilization.

"the large-scale integration of the industry is not over yet, and there is still existing capacity for 'cooperation'." Chairman Hu Zesong said confidently after the meeting that Shenghe Resources will continue to consolidate rare earth resources and integrate domestic resources. At present, the acquisition and rectification of the Chenguang rare earth annual output of 12000 tons of rare earth metals and alloys intelligent technical renovation project and Coburi 6000 tons of rare earth metal technology upgrading project have been started, and the Dechang annual output of 2000 tons of rare earth metals project has been approved.

The development of international resources is progressing smoothly.

"with the abolition of rare earth export tariffs in China in May 2020, the trade war basically has no impact on the import and export of rare earths." According to company sources, the international trade in rare earths is still stable, the company's overseas business is progressing smoothly, and the prospects for mines in the United States and Greenland are good.

Last year, Shenghe Resources revised the underwriting agreement with MPMO, the main operator of Mount pass Mine (Mountain Pass) in the United States, to increase the amount of prepaid payment, while MPMO was successfully listed on the New York Stock Exchange in November 2020, and the company's equity investment in MPMO was converted into MP Materials Corp., a company listed on the New York Stock Exchange. More than 13, 710000 common shares earned a total net profit of nearly 480 million yuan from the implementation of a series of cooperation agreements with MP, as well as the shares acquired by the company.

Mount pass Mine is the second largest mine in the world after Bayan Obo, with an annual output of 30, 000 tons. REO, is the largest light rare earth mine operating outside China. "since the separation line in the United States has not yet been put into production, we underwrite all the rare earth concentrates produced by Mount pass." According to the company, last year, the company underwrote about 40,000 tons of its minerals, and the underwriting contracts between the two sides were signed on a rolling basis.

New progress has also been made in the development of the Greenland mine. Mining restrictions on the Greenland Kvanefjeld deposit, the world's largest multi-element deposit, have been relaxed by the authorities. Earlier this year, IA (Inuit Ataqatigiit), a party staunchly opposed to rare earth mining in Greenland's general election, came to power, raising concerns among some investors about whether Australia's Greenland Mining Company, which is controlled by Shenghe Resources, could win the mining rights. "although the possibility of mining is still at the stage of public hearing, and the Greenland government has expressed support for the mining industry, it will impose restrictions on uranium mining." "the new government needs time to understand and study the project, and a final decision will be made after the hearing in June and July," the person told reporters. "

It is worth noting that under the influence of last year's epidemic and summer floods, the performance of Shenghe Resources has bucked the trend. The annual report shows that revenue in 2020 reached 8.157 billion yuan, an increase of 17.21 percent over the same period last year, while net profit returned to home reached 323 million yuan, an increase of 218.44 percent over the same period last year.

According to the above-mentioned person, affected by supply and demand, the price of rare earths continues to rise, and it is inevitable for the company to make a profit. Although the demand for rare earths brought by downstream new energy vehicles and smartphones has continued to increase in the past two years, due to the domestic implementation of total quantity control on the development of rare earths, the supply is relatively rigid, resulting in the supply of rare earths falling short of demand and prices fluctuating at high levels. Since last year, driven by new energy vehicles, the supply of praseodymium aluminum oxide and terbium oxide has become increasingly tight, with prices rising from 268000 yuan / ton to 458500 yuan / ton, an increase of 71%. It is estimated that there will be a shortage of 3000-5000 tons in 2020.