- Neo Performance Materials Inc. (TSX:NEO) has agreed to sell majority equity interest of China rare earth separation assets for C$30 million
- The company will sell an 86 per cent equity interest in Jiangyin Jiahua Advanced Material Resources Co., Ltd. to Shenghe Resources Holding Co., Ltd. for cash and 100 per cent of the equity in Zibo Jiahua Advanced Material Resources Co., Ltd. to Shenghe for approximately C$5.5 million cash
- Shenghe, a leading rare earth company has strong supply chain relationships within and outside of China
- Neo Performance Materials Inc. last traded at C$7.60 per share
Neo Performance Materials Inc. (TSX:NEO) has agreed to sell majority equity interest of China rare earth separation assets for C$30 million.
The company will sell an 86 per cent equity interest in Jiangyin Jiahua Advanced Material Resources Co., Ltd. to Shenghe Resources Holding Co., Ltd for cash and 100 per cent of the equity in Zibo Jiahua Advanced Material Resources Co., Ltd. to Shenghe for approximately C$5.5 million cash. Jiangyin Jiahua sales proceeds represent 10.7 times multiple on average trailing five-year EBITDA for the facility. The Zibo Jiahua facility was valued using an asset-based approach, as the facility was closed in Q2 2024.
After the closing of the transactions, the company will retain a 9 per cent equity stake in Jiahua Advanced Material Resources and will sign an agreement granting it the exclusive right to distribute Jiahua Advanced Material Resources’ heavy rare earth products outside of China for an initial five-year term. This arrangement is expected to ensure a continuous supply of premium products, such as dysprosium for multi-layer ceramic capacitors and medical-grade gadolinium, to the company’s customers outside of China.
Shenghe, a leading rare earth company with more than 20 years of experience, has strong supply chain relationships within and outside of China. Shenghe is also expected to integrate the remaining assets and employees of Zibo Jiahua Advanced Material Resources into its operations.
“As the rare earth industry in China has evolved, this is the right time to transition our rare earth separation businesses inside China to an integrated rare earth industry leader,” NEO’s president and CEO, Rahim Suleman, said in a news release. “It is our view that larger production and sourcing scale is required to create more value for these midstream assets. We are pleased to have found a partner for this vision in Shenghe, a company with proven commercial excellence and an established global sourcing platform. We look forward to our continued partnership.”
For three decades, Jiahua Advanced Material Resources has been a key asset in the company’s portfolio, earning a reputation as a top producer of specialty heavy rare earth products for global markets. The leadership team at Jiahua Advanced Material Resources has made significant contributions to the company’s growth and the rare earth industry as a whole.
In April 2024, the company discontinued the rare earth separation operations at Zibo Jiahua Advanced Material Resources, shifting its operational focus to the newly constructed downstream rare earth specialty oxides facility, NAMCO, in the same region.
The transactions are expected to close in Q4 2024.
Neo Performance Materials Inc. provides advanced industrial materials, rare earth magnetic powders and magnets, specialty chemicals, metals, and alloys.
Neo Performance Materials Inc. (TSX:NEO) last traded at C$7.60 per share.
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