Chinalco and Jiangxi Copper Reached Consensus Regarding Sichuan Rare Earth



Chinalco and Jiangxi Copper Reached Consensus Regarding Sichuan Rare Earth

Recently, the reporter learned from Chinalco and Jiangxi Copper Group’s official website that, recently senior executives of Jiangxi Copper Group visited Chinalco, both sides and reached consensus over “how to promote bilateral cooperation”, and “Sichuan province rare earth resources development”. Both sides guarantee to follow requirements of the MIIT and Sichuan local government to integrate rare earth enterprises in Sichuan, and on such basis “support each other, draw on the strong points of others to make up for one's own weak points, and seek joint development”.

In fact, since the startup of rare earth integration initiative last year, Chinalco engaged in long term tug-of-war confrontation with Jiangxi Copper Group over Sichuan rare earth integration, they one after another curried favor with local enterprises, in an attempt to dominate the integration. In March this year, Jiangxi Copper Group, which was troubled by lack of integration qualification, joined hands with Ganzhou Rare Earth to set up South Rare Earth Group, which appears to be confronting central enterprise Chinalco and Minmetals Rare Earth in the rare earth integration in Sichuan and Ganzhou.

So, does this time’s “hand-shaking” mean Sichuan’s rare earth integration will allow “Two Tigers in One Mountain”? According to some industry insiders, this still depends on whether or not both sides have substantial progress, there is precedence in such condition, as a matter of fact, China Minmetals Group integrated several big rare earth enterprises in Ganzhou.

Many years ago during the rectification of Sichuan rare earth industry, Jiangxi Copper Group began to cultivate Sichuan extensively. Amid the general trend of national rare earth integration, Chinalco also entered the Sichuan rare earth market early this year, a series of actions taken by the two enterprises are interpreted by industry insiders as integration tug-of-war and confrontation.

At the key node of entering the rare earth integration process, both Chinalco and Jiangxi Copper Group are determined to score success in Sichuan rare earth, but a meeting of senior executives from both sides came as a surprise to the industry.

According to news on the official website of Chinalco, recently Ge Honglin, Chairman and Secretary of CPC Party Leadership Group of Chinalco, held talks with Li Baomin, Chairman and Secretary of CPC Party Committee of Jiangxi Copper Group, at the company’s headquarters. Both sides carried out in-depth exchange and extensive communication on potential cooperation in copper, rare earth, and overseas development fields, and reached consensus on implementing state government’s requirement on rare earth industry integration in Sichuan by both sides.

Nevertheless, Chinalco did not disclose more detailed integration info. On the other hand, Jiangxi Copper Group alleged on its website that, both sides reached consensus on development of rare earth resources in Sichuan Province. Both sides guarantee to strictly follow the requirements of the “Guidance on the Organization Work of Large Rare Earth Enterprise Group” by the MIIT and Sichuan provincial and prefectural level governments to integrate relevant rare earth enterprises inside Sichuan Province.

According to the “Guidance” unveiled by the MIIT in early 2014, it is planned to develop six rare earth big groups including Chinalco and Minmetals Group in the whole country, and integrate all rare earth mines and smelting / separation enterprises nationwide by the end of 2015, in order to fulfill substantial restructuring with asset as the bond. But Jiangxi Copper Rare Earth is not included in the name list of 6 integration main bodies.

In order to join Chinalco to engage in competition in Sichuan on the same arena, Jiangxi Copper Group became shareholder of the newly founded South Rare Earth Group in March this year. This group is dominated by Ganzhou Rare Earth, and plans to incorporate rare earth division assets under all shareholders, which includes rare earth resources of Jiangxi Copper Group in Sichuan.

Sichuan boasts rich reserve of rare earth resources, for which it also becomes a hotly contested spot for rare earth enterprises. Sichuan Liangshan Prefecture is one of China’s three biggest supply origins of light rare earth crude ore, its reserve of light rare earth ranks second nationwide. As early as in 2008, Jiangxi Copper Group set up Sichuan Jiangxi Copper Rare Earth in cooperation with Sichuan local government state-owned enterprise through joint venture, and controlled the biggest rare earth mine resources and smelting & separation enterprise in Sichuan Province.

In the beginning of last year, Chinalco relied on policy advantage to enter Sichuan with overwhelming force. Chinalco joined force with Sichuan local enterprises represented by Shenghe Resources to set up Chinalco Sichuan Rare Earth Co., Ltd in Dechang County, Liangshan Prefecture, and acquired vigorous support from the MIIT.

Jiangxi Copper Group did not want to take it lying down, almost at the same time Sichuan Jiangxi Copper Rare Earth joined hands with 5 enterprises including Sichuan Wankaifeng Rare Earth New Energy Technology Co., Ltd, Liangshan Prefecture State-owned Investment Co., Ltd to set up Sichuan Jinpanxi Rare Earth (Group) Co., Ltd, and put forward the vision of creating 100 billion yuan worth rare earth industrial cluster. Both sides were trapped in gaming maneuver.

Regarding the fighting between Chinalco and Jiangxi Copper Group, Wang Hailin, the incumbent Director of Sichuan Province Economic and Information Commission, said the final result is integration into one enterprise, each side should bring out respective advantages for integration.

One insider of Sichuan Jiangxi Copper Rare Earth disclosed to journalist of “National Business Daily” that, at the group level what’s being discussed was about strategy issue, it’s unclear about detailed cooperation.

According to analysis by Gao Yuxin, rare earth analyst of www.ruidow.com, it could not rule out the possibility of “Two Tigers in One Mountain”. Minmetals Group previously integrated several big rare earth enterprises within the power scope of Ganzhou Rare Earth. But these enterprises had no mining right, rare earth mining right is still owned by Ganzhou Rare Earth, and the ultimate aim of integration is still integration of resources.