Neo Performance Materials to sell majority equity interest of China rare earth separation assets

TORONTO — Neo Performance Materials Inc. announced that it has entered into agreements to sell 86% equity interest in Jiangyin Jiahua Advanced Material Resources Co., Ltd. to Shenghe Resources Holding Co., Ltd for approximately USD $25.6 million cash; and 100% of the equity in Zibo Jiahua Advanced Material Resources Co., Ltd. to Shenghe for approximately USD $4.1 million cash. JAMR sales proceeds represent a 10.7x multiple on average trailing five-year EBITDA for the facility. The ZAMR facility was valued using an asset-based approach, as the facility was closed in the second quarter of 2024.

The Company will retain a 9% equity interest in JAMR following the closing of the Transactions and will execute an agreement securing the exclusive right to distribute JAMR’s heavy rare earth products outside of China for an initial term of 5 years. This is expected to provide the Company’s customers outside of China with continuity of supply for premium products like dysprosium for multi-layer ceramic capacitors and medical-grade gadolinium.

“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. 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,” said Rahim Suleman, President and Chief Executive Officer of Neo.

“We are pleased to partner with Neo on this mutually beneficial agreement for both our companies and our customers. Both JAMR and ZAMR have had excellent reputations over the last three decades in Neo’s ownership and management. By integrating them into Shenghe’s large, global platform, we look forward to the next growth chapter for these assets, ” said Huang Ping, the acting Chairman of Shenghe.

Shenghe is a rare earth company with experience. Through its supply chain relationships both inside and outside of China, Shenghe reportedly has the capability to expand JAMR’s access to raw materials.

The Company discontinued ZAMR’s rare earth separation operations in April 2024, shifting operational focus to the newly constructed downstream rare earth specialty oxides facility, NAMCO, in the same region.