(Yicai) March 16 -- China Northern Rare Earth Group High-Tech plans to form joint ventures with two clients to build rare earth alloy factories at a cost of CNY885 million (USD128 million), aiming to expand its metal alloy and magnet offerings and extend operations further downstream.

One JV is with Ningbo Funeng Rare Earth New Material, which makes high-performance rare earth metals and magnet materials. The pair will build a rare earth metal alloy production line in Baotou, Inner Mongolia Autonomous Region with an annual capacity of 10,000 tons, Northern Rare Earth said on March 13. Costing CNY290 million (USD42 million), it should be finished within a year.

Under the agreement, Northern Rare Earth will own 51 percent of the JV and Funeng Rare Earth the rest. The factory will produce high-purity light rare earth alloys such as cerium and cerium-praseodymium-neodymium alloys, as well as functional alloys containing medium and heavier elements such as dysprosium and terbium.

Once in operation, the plant is expected to generate average annual revenue of CNY1.3 billion (USD189 million) and average net profit of CNY24.6 million (USD3.57 million), with an investment payback period of about 12 and a half years, Baotou-based Northern Rare Earth said.

The other JV is with Ningbo Shuoteng New Material, a leader in the cerium magnet industry. The partners will build a rare earth permanent magnets production line also in Baotou with an annual capacity of 10,000 tons. The facility will turn out cerium-neodymium-iron-boron permanent magnets. Costing CNY595 million, it will be built in two phases, each with an annual capacity of 5,000 tons and taking 20 months to build.

Ningbo Shuoteng will have a 66 percent stake in this JV, with Northern Rare Earth holding the remainder. Once up and running, the plant is expected to generate average annual net profit of CNY73.3 million (USD10.3 million) each year on average operating revenue of CNY1.4 billion (USD209.6 million). The investment payback period is estimated to be just under 10 years.

The first factory will effectively expand Northern Rare Earth’s rare earth metal alloy product range, while the second will help the firm extend its business further downstream, positioning it as a leading producer of rare earth metal alloys and permanent magnets with a broad product mix and advanced technologies, the announcement said.

The new plants will also contribute to Baotou’s development as China’s leading rare earth raw materials supply base, helping build a globally leading complete rare earth industrial chain from raw materials and metals to new rare earth materials and applications as well as resource recycling, it said.

Northern Rare Earth’s stock [SHA: 600111] closed 2.4 percent lower at CNY49.60 (USD7.19) today. The benchmark Shenzhen Component Index gained 0.2 percent.

Editor: Kim Taylor