Shenghe Resources intends to sell its subsidiary for more than 1.6 billion yuan, with China Rare Earth Group taking over the transaction.
Major moves have emerged in the rare earth sector.
On the evening of October 18, Shenghe Resources (600392.SH) issued an announcement stating that the company plans to transfer part of the equity of its rare earth smelting and separation business to China Rare Earth Group Industrial Development Co., Ltd. (hereinafter referred to as "CREC Development"). The two parties will reach equity cooperation in the rare earth smelting and separation business to achieve win-win cooperation. The transaction has been reviewed and approved by the board of directors, and still needs to be submitted to the company's shareholders' meeting for deliberation.
"After the completion of this equity transfer, the company will cooperate with CREC Development to give full play to the advantages of resources and industries to fully guarantee the production indicators and raw material supply of the target companies, make every effort to expand the production scale of the target companies, and realize win-win cooperation for both parties," Shenghe Resources stated.
Following the release of the news, Shenghe Resources opened lower and moved lower on October 19, fluctuated and rebounded after hitting the limit down during the trading session, and finally closed at 16.19 yuan per share, with the decline narrowing to 6.90% and a turnover rate of 5.20%.
Adding 200 million yuan to the acquisition last year, packaged transfer starting at 1.658 billion yuan this year
According to the announcement, Shenghe Resources will transfer 51% equity of four companies (collectively referred to as the "target companies") including Leshan Shenghe Rare Earth Co., Ltd. (hereinafter referred to as "Leshan Shenghe") after stripping non-rare earth smelting and separation businesses, Quannan New Resource Rare Earth Co., Ltd. (hereinafter referred to as "Quannan New Resource"), a rare earth smelting and separation enterprise held by its holding subsidiary, Jiangyin Jiahua New Materials Resources Co., Ltd. (hereinafter referred to as "Jiangyin Jiahua"), and Zibo Jiahua New Materials Resources Co., Ltd. (hereinafter referred to as "Zibo Jiahua") to CREC Development.
CREC Development is a wholly-owned subsidiary of China Rare Earth Group, which is a diversified central state-owned enterprise directly supervised by the State-owned Assets Supervision and Administration Commission of the State Council, mainly engaged in rare earth resource development, smelting and separation, deep processing, and import and export trade of rare earth products.
According to the evaluation of a third-party institution, with June 30, 2026 as the base date, the estimated evaluation result of the target companies ranges from 3.25 billion yuan to 3.55 billion yuan, and the corresponding equity transfer price is expected to be 1.658 billion yuan to 1.811 billion yuan.
The payment arrangement is deeply bound with the performance bet. The target equity transfer price will be paid in five installments, of which the total 50% payment of the third to fifth installments is linked to the completion of the performance commitment. The performance commitment period is three complete accounting years after delivery, and the specific amounts of the evaluation result and performance commitment have not been determined yet. This means that it will take Shenghe Resources at least more than 2 years to get all the money from the transferred equity.
It is worth noting that without considering the offset impact of related party transactions, the total operating revenue of the target companies from January to June 2026 was 1.759 billion yuan, and the total net profit was 332 million yuan, accounting for 20.09% and 36.57% of the consolidated statements of Shenghe Resources respectively. After the transaction is completed, the target companies will no longer be consolidated, and Shenghe Resources will change from "holding operation" to "equity method accounting", and the short-term consolidated profit volume may decline to some extent.
Times Finance noticed that the above target companies were all integrated by Shenghe Resources over many years. From 2012 to 2017, it successively obtained the controlling equity of Leshan Shenghe and Quannan New Resources through major asset restructuring and listing; from February to March 2025, it acquired the controlling equity of Zibo Jiahua and Jiangyin Jiahua for a total of 206 million yuan. Shenghe Resources stated in the announcement that all target companies are operating normally at present.
After the transaction, Shenghe Resources will still retain 49% equity of Leshan Shenghe, 48% equity of Quannan New Resource, 35% equity of Jiangyin Jiahua, and 39% equity of Zibo Jiahua. It will also nominate the general manager of the target companies, retain seats on the board of directors, and the annual cash dividend ratio will not be less than 80% of the distributable after-tax profits. This is equivalent to replacing "consolidated profit" with "high-dividend equity assets" while recovering cash.
However, both the announcement in August 2024 and the 2025 annual report mentioned that due to the local government land use planning, Zibo Jiahua is in a state of production suspension waiting for relocation. It will cooperate with the relocation after the government demolishes the office site, and the subsequent operation will restart after the enterprise completes the relocation.
Shenghe Resources chose to transfer the equity at this time with very precise timing. According to the financial report, in 2025, Shenghe Resources achieved operating revenue of 14.991 billion yuan and attributable net profit of 839 million yuan, with year-on-year increases of 31.83% and 304.94% respectively, reversing the previous situation of double decline in operating revenue and profit; in the first half of 2026, Shenghe Resources' operating revenue was 8.759 billion yuan and attributable net profit was 887 million yuan, the latter exceeding the total of last year. It expects the attributable net profit in the first three quarters to reach 1.1 billion yuan to 1.23 billion yuan, refreshing the second highest record in the same period in history.
Behind the high growth of performance, the prices of main rare earth products are fluctuating at a high level driven by factors such as changes in the market supply and demand pattern. According to data from the China Rare Earth Industry Association, the average price of praseodymium neodymium oxide in 2025 was 491,200 yuan per ton, up 25.10% year-on-year; the average price of praseodymium neodymium oxide in January 2026 was 661,800 yuan per ton, and it rose to 731,800 yuan per ton in September, with an interval increase of 10.58%. Giving up the controlling stake when prices and profits are at a relatively high level is a cost-effective deal in terms of finance.
However, Shenghe Resources' choice is not an isolated case, and it is behind the profound shift of the policy environment of the entire industry.
It has become a trend for central SOEs in the rare earth sector to hold controlling stakes in rare earth smelting and separation capacity
The core driving force for Shenghe Resources to choose to transfer the controlling stake of its subsidiaries at this time may come from the changes in the supply-side system of the rare earth industry.
As an important non-renewable strategic resource, rare earths are increasingly widely used in new energy, new materials, energy conservation and environmental protection, aerospace, electronic information and other fields. In order to solve the development problems of the rare earth industry and form benign and healthy development, rare earth enterprises have embarked on the road of merger and reorganization.
In December 2021, Aluminum Corporation of China, China Minmetals Corporation, and Ganzhou Rare Earth Group Co., Ltd. introduced China Iron & Steel Research Institute Group and GRINM Group Co., Ltd. to establish China Rare Earth Group. After the establishment of China Rare Earth Group, the concentration of total control indicators for rare earth mining and production has been further improved, the long-term situation of "multiple, small and scattered" in the rare earth industry has been further reversed, and the industry development has entered a new pattern.
At this point, the pattern of two giants in the north and south of the rare earth industry has initially emerged. China Rare Earth Group and Northern Rare Earth Group go hand in hand, forming a supply pattern of "one in the south and one in the north, one heavy and one light", which jointly dominates the development of the domestic rare earth industry. The six major rare earth groups have smoothly become four major rare earth groups: China Rare Earth Group, Northern Rare Earth, Xiamen Tungsten, and Guangdong Rare Earth Industry Group.
However, not everyone has indicators for rare earth mining and smelting. According to the query of Times Finance, when the second batch of total control indicators for rare earth mining, smelting and separation in 2023 was issued, all four groups obtained the indicators, but the third batch of indicators disclosed in December 2023 were only obtained by China Rare Earth Group and Northern Rare Earth.
In February 2025, the Ministry of Industry and Information Technology issued the "Interim Measures for the Administration of Total Quantity Regulation of Rare Earth Mining and Rare Earth Smelting and Separation (Draft for Public Comments)". The draft clearly stipulates that rare earth mining enterprises and rare earth smelting and separation enterprises shall be the large-scale rare earth enterprise groups established under the national promotion and their subordinate rare earth mining enterprises and rare earth smelting and separation enterprises, and no other organizations or individuals shall obtain rare earth indicators. Organizations and individuals that have not obtained rare earth indicators shall not carry out rare earth mining and smelting and separation production activities. At that time, the industry generally believed that the "large-scale rare earth enterprise groups" mentioned here mainly refer to China Rare Earth Group and Northern Rare Earth.
With China's strict total quantity regulation system for rare earth mining and smelting and separation, and the institutional arrangement of bringing the smelting and separation of imported rare earth ores into the total quantity regulation system for the first time, the supply side of the domestic rare earth industry has become more orderly, standardized and rigid.
In this context, the path of southern rare earth resource integration after the establishment of China Rare Earth Group has gradually evolved into forms such as equity cooperation or joint ventures between central SOEs and other enterprises.
For example, in September 2023, China Rare Earth Group and Xiamen Tungsten established CREC Xiamen Tungsten (Fujian) Rare Earth Mining, with the former holding 51% equity to jointly operate Fujian rare earth mines and smelting and separation capacity; at the end of 2023, Guangdong Rising Group announced that it would transfer 100% equity of Guangdong Rare Earth Industry Group Co., Ltd. to China Rare Earth Group free of charge, thus transferring the controlling stake of Rising Nonferrous Metals to China Rare Earth Group; in 2024, China Nonferrous Metals Co., Ltd. transferred 41.56% equity of China Nonferrous Southern Rare Earth (Xinfeng) Co., Ltd. to China Rare Earth Group for 168 million yuan, successfully transferring the controlling stake to China Rare Earth; in 2026, Shenghe Resources transferred part of the equity of its rare earth smelting and separation business to CREC Development, and finally realized the transfer of controlling stake of relevant subsidiaries.
These cases all point to a trend: the smelting and separation link is accelerating to concentrate in the central SOE system, and the model of "central SOE holding stake + operation enterprise holding shares" is becoming the mainstream integration paradigm of the rare earth industry.
Li Congming, a rare earth industry analyst at Shanghai Steel Union, said in an interview with Times Finance that the profit of the smelting and separation link is highly dependent on the rare earth price cycle and the ability to obtain indicators, and the indicator distribution right is continuously concentrated to central SOEs such as China Rare Earth Group. If local enterprises retain the controlling stake, it means that they have to bear all the risks of indicator application, environmental compliance and price fluctuation alone; transferring the controlling stake to central SOEs is equivalent to transferring the "uncertainty" in exchange for cash recovery and long-term order stability, which has both advantages and disadvantages.
Li Congming pointed out that local enterprises transferring controlling stakes is to exchange control rights for survival rights and resource security under the rigid constraints of "indicator control + central SOE leadership"; and the model of "central SOE holding stake + local enterprise holding shares" will most likely become the mainstream integration paradigm in the smelting and separation field, because it meets both the national control demands and the interest preservation needs of local enterprises.
This article is from the WeChat official account "Times Finance APP" (ID: tf-app), author: Zhou Li, editor: Gao Qiurong, published with authorization from 36Kr.