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A Chinese rare-earth company has announced its intention to list on the Alternative Investment Market of the London Stock Exchange.
Rare Earths Global Ltd, which concentrates on the extraction, separation, refinement and trading of rare-earth elements, expects to start share dealing on AIM later this month.
The company is looking to raise $50 million, which will give an indicative market capitalization of $270 million. Charles Stanley & Co Ltd is the company's adviser and broker.
Founded in May 2010, REG's operations are based in China, although it is registered in the Cayman Islands.
It is one of fewer than 10 foreign-owned (based on the country of legal registration) rare-earth companies in China to hold an export license. There are also 13 Chinese-owned companies with export licenses.
Simon Ong, the CEO of REG, said the company is planning to expand and needs to raise capital. "The rare-earth industry is growing very quickly, and you need to catch opportunities. In China, if we're a listed company, we can obtain more resources and respect," he said.
"There are so many rare earth businesses in Australia and Canada, but if we list in London we can label ourselves as 'the first rare-earth company listed in London, which is more eye-catching," Ong said.
He added that listing outside of China will also allow the company to better grasp international opportunities.
"Because the price of rare earths is rising, there may be people in other countries that have rare-earth mines, but not the expertise in separation. That will provide us with opportunities," he said.
Rare earths, comprising 17 elements, are used in a number of high-technology processes ranging from wind turbines to hybrid cars to missiles.
China has about 30 percent of the global rare-earth reserves, but produces 97 percent of the world's total supply. Alternative suppliers are mainly India, Brazil and Malaysia.
China's large production volume of rare earths owes a debt to a decades-old recognition of the strategic nature of the minerals by the former leader, Deng Xiaoping.
The industry was the target of huge amounts of subsidized loans in the mid-1980s. That resulted in the creation of small mining operations specializing in rare earths.
Recognizing the alarming level of pollution caused by rare earth production and the speed at which the resource is being depleted, the Chinese government started imposing taxes and quotas on exports of the minerals in 2006.
Production quotas were also introduced to prevent illegal production and trafficking.
Last year, China produced 93,800 metric tons of rare earths and exported 31,130 metric tons. Rare Earths Global was awarded a production quota of 300 tons and an export quota of 137 tons in the same year.
Ong said that his company is not worried about macroeconomic policies concerning rare earths, because REG will focus on opportunities in other countries if China continues to impose production and export quotas.
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