Baotou Steel Rare-Earth Group to integrate Inner Mongolia resources

China's Inner Mongolia Baotou Steel Rare-Earth Group (BSR, 600111.SH), one of the largest producers of rare earth minerals in the world, announced Thursday that it has signed agreements with 12 Inner Mongolia-based upstream rare earth enterprises and their shareholders, which indicates the company has started to integrate rare earth resources in northern provinces.

Based on the agreements, which will be valid for one year, the twelve enterprises agree to transfer a 51 percent stake to Baotou Steel Rare-Earth for free.

After the restructuring, Baotou Steel Rare-Earth will carry out integrated planning on their operating strategy, adjust their industrial and product layout, and offer talent, technology, funding, resources, and export quota support in return.

Analysts believe that this indicates the consolidation of upstream rare earth enterprises in Inner Mongolia by Baotou Steel Rare-Earth.

In August, BSR announced its application to set up a new rare earth group China Northern Rare-Earth Group to integrate rare earth resource exploration.

But BSR may not only be interested in the rare earth resources in north China, the new group may also participate in rare earth exploration in south China, and BSR is seeking foreign cooperation as well.

According to the application, the new group has three steps in rare earth resource integration.
First, mainly relying on BSR, the new group will complete mergers and acquisitions in the rare earth upstream in Inner Mongolia Autonomous Region with the resource advantage in Bayan Obo.

Second, the new group will cooperate with companies in Gansu, Sichuan, and Shandong provinces to merge resources in these districts, where light rare earth resources dominate.

Third, the company may set up platforms to participate in the exploration of South China provinces, for example Jiangxi and Guangdong. According to Zhang Zhong, general manager of BSR, the company now has three rare earth companies in Jiangxi Province, and one of them, Ganzhou Rare Earth Mineral Industry Co., Ltd., would dominate in the resource integration in Jiangxi province.

"We are the largest light rare earth provider in the world, and now we are seeking more heavy rare earth resources abroad," Zhang said.

China has taken multiple measures on rare earth exploration since imposing rare earth export curbs beginning in June. Rare earth mineral occurrences have been integrated to 65 points, and stricter threshold were also imposed on the exploration.