Shenghe Resources Accelerates Its Overseas Rare Earth Resources Layout, Increases Stake in Core Rare Earth Project of Target Company, Which Is Expected to Go into Production Next Year

After US rare earth producer MP Materials (hereinafter referred to as "MP Company") suspended the export of rare earth concentrate to China, its exclusive domestic dealer Shenghe Resources (600392.SH) accelerated its layout of overseas rare earth resources.

Shenghe Resources announced tonight that in order to promote the development of the Ngualla rare earth mine project as soon as possible and further consolidate the resource foundation for the company's development, its wholly-owned subsidiary Ganzhou Chenguang Rare Earth New Materials Co., Ltd. (hereinafter referred to as "Chenguang Rare Earth") plans to acquire 100% equity of Peak Rare Earths Limited (hereinafter referred to as "Peak Company").

According to the announcement, Shenghe Resources spent a total of AUD 158 million (approximately RMB 742.6 million) on this acquisition. According to the "Valuation Consulting Report" issued by Beijing Tianjian Xingye Asset Appraisal Co., Ltd., based on the valuation of Peak Company's total equity value using the comprehensive income method and market method as of the valuation base date of December 31, 2024, the total equity value of Peak Company ranges from AUD 170 million to AUD 196 million (approximately RMB 799 million to RMB 921.2 million).

Shenghe Resources stated that the company adheres to the rare earth business as its core and insists on both domestic and international resources and markets. If this project can be successfully implemented, it will help promote the development of the project as soon as possible, further consolidate the resource foundation for the company's development, and optimize the company's global business layout.

The announcement shows that Peak Company is an Australian publicly listed firm headquartered in Perth, Western Australia, and listed on the Australian Securities Exchange (code: PEK). The core asset of Peak Company is the Ngualla rare earth mine project located in Tanzania, which is jointly owned by Peak Company and Tanzania with 84% and 16% equity respectively, and owns Mamba Mining and Mamba Smelter.

It is reported that the Ngualla rare earth mine project is located in southern Tanzania. According to the JORC (2012) standard, with a cut-off grade of 1%, the ore resource is 214 million mt with an average grade of 2.15%, equivalent to 4.61 million mt of REO. The rare earth reserve is 18.5 million mt with an average grade of 4.8%, equivalent to 887,000 mt of REO. The proportion of Pr-Nd oxide in rare earth oxides is about 21.26%. The project has obtained a special mining license (mining right), and the mining right holder is Mamba Mining.

Financial data shows that in 2023 and 2024, Peak Company achieved revenues of 0 yuan, with net losses of RMB 53.8917 million and RMB 48.9456 million respectively. As of December 31, 2024, the company's total assets were approximately RMB 403 million, and the owner's equity was RMB 386 million.

Shenghe Resources emphasized that the acquisition of Peak Company's equity does not constitute a related party transaction. However, a reporter from Cailian Press noticed that Shenghe Resources and Peak have a close relationship. As early as February 2022, Shenghe Resources (Singapore) Co., Ltd., a holding subsidiary of Shenghe Resources (hereinafter referred to as "Shenghe Singapore"), invested 179 million yuan to acquire a 19.9% stake in Peak from Appian. In April 2023, the Ngualla rare earth mine project was granted mining rights by the Tanzanian government. In August of the same year, Shenghe Resources and Peak Rare Earths signed an off-take agreement, stipulating that the company would purchase 100% of the rare earth concentrate, at least 50% of the intermediate rare earth products, or the final separated rare earth oxides produced by the Ngualla project, with the agreement lasting for seven years.

At the same time, the two parties also signed a non-binding memorandum of understanding, in which Peak proposed to appoint Shenghe to provide the EPC (engineering, procurement, and construction) plan for most of the engineering works of the Ngualla project, as well as project financing solutions.

In May 2024, Shenghe Resources disclosed on its investor relations platform that PEAK was expected to make a final investment decision in the second half of the year and commence project construction, with the project expected to be completed and put into operation by the end of 2025 or early 2026. In the initial stage of the project, it was estimated that the annual output of rare earth concentrate, equivalent to 18,000 mt of oxides, would be produced, corresponding to approximately 4,000 mt of Pr-Nd oxide.

Two months later, Shenghe Resources, Shenghe Singapore, and Peak signed a term sheet on investment, funding, and development to support the development of the Ngualla project, mainly covering investment, funding, and development solutions for the Ngualla project. The company would subscribe to a 50% stake in the newly issued shares of Ngualla Group UK Limited for approximately 96 million Australian dollars. This company holds an 84% stake in the Ngualla project.

In January this year, Shenghe Resources again stated on its investor relations platform that Peak expected the Ngualla project to be completed and put into operation in 2026.