Lynas Corp - a rare earth play, & China

I have been following Lynas for some time now with a view to investing in it. It has the Mt Weld deposit. It now has an agreement with a Chinese Company to refine its ore in China. This story, hwever, indicates an oversupply situation which just might put a dampener on its plans to make money.


Regards

Desmond

From the South China Morning Post

Sat*rday, October 26, 2002

Rare-earth sector faces north-south split


ERIC NG

Prev. Story | Next Story



--------------------------------------------------------------------------------

Beijing looks set to order China's rare-earth enterprises to be restructured into a northern and a southern group, a move aimed at curbing industry oversupply and environmentally damaging mining practices.
The industry revamp will also help curtail uncontrolled mining, refining and exporting of rare minerals.


The State Council has agreed in principle to a broad restructuring blueprint, the Beijing Modern Commercial Daily reported, citing unnamed Ministry of Foreign Trade and Economic Co-operation sources. No timetable has been set.

Under the plan, Inner Mongolian Rare Earth Group will lead the China Northern Rare Earth Group, which will focus on light rare-earth mining and refining.

The northern group will absorb Gansu Rare Earth Group and enterprises in Sichuan and Shandong provinces.

A leader in the China Southern Rare Earth Group has not been decided, but is expected to be one of the large state-owned enterprises in Shanghai and the provinces of Jiangsu, Jiangxi, Hunan and Guangdong.

The southern group will focus on heavy rare-earth products.

Rare-earth materials have high density, high melting points and high electrical and thermal conductivity, and have a wide range of applications in both high-technology and traditional industries such as metallurgy, petroleum, glass and ceramics.

China is estimated to be the main provider of about 80 per cent of the world's rare-earth needs.

The blueprint also stipulates that the state must hold more than 50 per cent of the shares of the northern and southern companies.

The two giants will control all mining and export quotas which will be handed down to its member firms.

In the three years after the establishment of the two groups, no new rare-earth mining permits will be granted, and companies with no permit will not be allowed to operate.

Annie To Siu-mui, executive director of Hong Kong-listed China Rare Earth, said the Jiangsu province-based company would not directly participate in the merger of the southern company as it was not considered a domestic mainland firm.

One of its mainland-registered subsidiaries would merge with the southern company and obtain the export quota for the listed firm.

But she said the industry overhaul would benefit the company as it would correct severe oversupply by ridding the industry of miners which used inefficient mining methods.

Of the more than 100 domestic rare-earth product makers, only about 10 are making a profit, according to Ms To.