Xiamen Tungsten Makes Two Acquisitions in Two Days, Aiming at Upstream Tungsten Mine Resources

Securities Times Reporter Ye Lingzhen

Xiamen Tungsten (600549) announced acquisition plans for two consecutive days, both related to tungsten resources. On the evening of March 25, the company announced that to improve self-sufficiency in tungsten resources, Xiamen Tungsten signed a tripartite cooperation agreement with Fujian Industrial Holding Group Co., Ltd. (hereinafter “Fujian Industrial Group”) and Jiangxi Tungsten Holding Group Co., Ltd. (hereinafter “Jiangxi Tungsten Group”). Fujian Industrial Group agreed to transfer part of its equity in Jiangxi Jutong Industrial Co., Ltd. (hereinafter “Jiangxi Jutong”) to the company and Jiangxi Tungsten Group, with the company planning to acquire a 30.17% stake.

According to reports, the equity transaction price is based on the total equity value of Jiangxi Jutong as reflected in an asset valuation report, approximately 1.966 billion yuan. The final valuation will be subject to the assessment results approved by the Fujian State-owned Assets Supervision and Administration Commission, with the payment method and schedule to be separately agreed upon.

Public information shows that Fujian Industrial Group is an indirect controlling shareholder of Xiamen Tungsten and the actual controller of Jiangxi Jutong. Currently, Fujian Industrial Group, through its subsidiaries Fujian Rare Earth (Group) Co., Ltd. (hereinafter “Fujian Rare Earth Group”), Xiamen Sanhong Tungsten Molybdenum Co., Ltd., and Fujian Juhong Rare Metals Investment Partnership (Limited Partnership), holds a total of 85.17% of Jiangxi Jutong’s equity.

According to the agreement, after the completion of this equity transfer, Xiamen Tungsten, Jiangxi Tungsten Group, and Fujian Rare Earth Group will hold 30.17%, 30%, and 25% of Jiangxi Jutong, respectively.

The Securities Times·e Company reporter noted that this is not Xiamen Tungsten’s first plan to acquire equity in Jiangxi Jutong. As early as 2015, the company planned to acquire a 32.36% stake from Fujian Rare Earth Group, but the deal was not completed due to litigation involving Jiangxi Jutong. Currently, the litigation over Jiangxi Jutong’s equity has been settled, with clear ownership rights and no major disputes, prompting the company to restart the acquisition process.

Jiangxi Jutong was chosen by Xiamen Tungsten because of its tungsten mineral assets. The announcement shows that Jiangxi Jutong is the operating entity for the Dahu Tang tungsten mine development, holding mining permits for the North and South areas of Dahu Tang tungsten mine. The North area has an annual production capacity of 6.6 million tons, with as of November 2017, industrial tungsten ore reserves of 502,215 tons, WO3 metal content of 843,300 tons, and an average grade of 0.168%. The South area has an annual capacity of 1.65 million tons, with reserves of 180,457 tons as of December 31, 2020, WO3 metal content of 370,283 tons, and an average grade of 0.205%. Notably, the North area has not produced since December 2015, and the South area ceased production at the end of December 2020.

Xiamen Tungsten stated that as the company’s capacity in the hard alloy, cutting tools, tungsten wire, and other downstream tungsten processing and application fields continues to grow, its demand for tungsten resources increases year by year. Currently, the three tungsten mines it owns and one under construction can only meet part of the demand. Acquiring Jiangxi Jutong will help increase mineral reserves, promote the construction of the Dahu Tang tungsten mine, and improve resource self-sufficiency.

In addition to the proposed stake in Jiangxi Jutong, Xiamen Tungsten also announced a tungsten mine investment plan on the evening of March 24: the company intends to acquire a 69% stake in Jiujiang Dadi Mining Development Co., Ltd. (hereinafter “Jiujiang Dadi Mining”) for about 295 million yuan in cash, with 128 million yuan used to acquire the 30% stake held by Jiangxi Jutong, and 167 million yuan for the 39% stake held by unrelated parties. According to the announcement, Jiujiang Dadi Mining and its subsidiaries hold exploration rights for the Yangshidian copper-molybdenum polymetallic deposit in Xiushui County, Jiangxi Province, and mining permits for the Kunshan tungsten-molybdenum deposit. After the transaction, Xiamen Tungsten will become the controlling shareholder of Jiujiang Dadi Mining, further securing upstream tungsten resources.

Currently, the domestic tungsten industry is in a high prosperity phase characterized by tightening supply and steady demand, driving continuous increases in tungsten prices. Industry insiders say that the trend of tightening tungsten supply domestically is expected to continue at least until 2028. Increasing resource self-sufficiency will become a core competitive advantage for industry companies, and profitability along the industry chain is likely to concentrate upstream.