State-owned China Rare Earth Group is in talks to acquire Shenghe Resources, a Chinese rare earths company that owns a 3% stake in US-based MP Materials, according to a Reuters report.
The talks have been underway since earlier this year, with China Rare Earth Group seeking a controlling stake in Shenghe Resources, the report added. It remains unclear when a deal could be announced or completed.
If the acquisition goes through, Shenghe's stakes in foreign companies would come under China Rare Earth Group's control. This includes its 3% holding in MP Materials, a US rare earths company whose largest shareholder is the US Department of Defense following an investment last year.
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The prospect of a major Chinese state-owned rare earth company appearing on the same shareholder register as the US Department of Defense could complicate the deal. It also remains unclear what would happen to Shenghe's overseas assets and stakes if the acquisition goes ahead, Reuters reported.
MP Materials has repeatedly said that neither Shenghe Resources nor the Chinese government controls its operations.
The potential acquisition would bring one of the remaining major Chinese companies involved in rare earth mining and refining with some private ownership under state control, further consolidating the sector.
It could also give Beijing tighter control over rare earth elements used in electric vehicles, wind turbines, electronics and defence equipment. China has previously used its control over the sector as leverage in trade disputes with the US.
Shenghe Resources acquired Australia's Peak Rare Earths last year. It remains unclear how that asset and Shenghe's other overseas interests would be handled under a potential acquisition by China Rare Earth Group.
According to the report, the deal would also give Shenghe better access to China's state-controlled rare earth quotas. Beijing typically grants the quotas to state-run companies, which then allocate them to subsidiaries.
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The quotas for mining, smelting and separation are closely monitored as an indicator of global rare earth supply, although China has not publicly disclosed the figures.
China Rare Earth Group was established in 2021 through the reorganisation of five state-run rare earth companies and is the country's largest supplier of heavy rare earth elements.
China Rare Earth Group, Shenghe Resources and China's Ministry of Commerce did not respond to Reuters' requests for comment.
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