① Northern Rare Earths plans to increase the capital of Huamei by 2 billion yuan in cash to provide it with the financial support required for project construction; ② Northern Rare Earths said that the overall goal of the project is to build the world's largest, highest quality, most efficient, the strongest technology, and the best environmental protection.
Financial Services Association, March 8 (Reporter Wang Bin) Baotou Huamei Rare Earth Hi-Tech Co., Ltd. (“Huamei Company”), a wholly-owned subsidiary of Northern Rare Earths (600111.SH), ushered in a major capital increase as the 7.8 billion yuan green smelting upgrade project was put into operation.
This evening, Northern Rare Earth announced that it plans to increase Huamei's capital by 2 billion yuan in cash to provide it with the financial support required for project construction. According to the announcement, the capital increase from Northern Rare Earth to Huamei Company comes from the company's own funds, and the actual payment of the capital increase will be gradually completed through installment payments.
According to Northern Rare Earth, the capital increase to Huamei is mainly to guarantee its capital requirements to advance project construction as the main project builder; it is not an additional investment formed by the company in the project. The company's capital increase to provide Huamei with the capital required for project construction will increase the size of its assets. While ensuring that project construction progresses smoothly, with high quality, efficiency, and at the same time, it is conducive to improving Huamei's financing capacity and resilience to risks.
In March 2023, Northern Rare Earths announced that it would invest no more than 7.799 billion yuan to build the “Green Smelting Upgrading Project for the Former Smelting Branch of China North China (Group) Hi-Tech Co., Ltd. and the surrounding area” (hereinafter referred to as the “Green Smelting Upgrading Project”) (hereinafter referred to as the “Green Smelting Upgrading Project”).
As the largest rare earth supplier in China, Northern Rare Earth said that the green smelting and upgrading project will help further enhance the resilience, resource supply guarantee capacity and safety level of China's rare earth industry chain supply chain.
According to the announcement, the construction cycle of the green smelting upgrade project is about 18 months. After completion, the project will have a processing capacity of 198,000 tons/year of 58.09% REO mixed rare earth concentrate, and 115,000 tons/year of extraction and separation capacity (measured in REO), 141,100 tons/year of precipitation and crystallization capacity (in terms of REO), and a burning capacity of 39,600 tons/year (in terms of REO).
According to estimates, the total investment in the green smelting and upgrading project is no more than 7.799 billion yuan, of which the construction investment is about 7.22 billion yuan, interest during the construction period is about 184 million yuan, and the bottom working capital is about 395 million yuan. Northern Rare Earth and Huamei Company provided financial support for project implementation through its own capital, direct or indirect financing, etc.
It is worth mentioning that Northern Rare Earths mentioned in the announcement that the company invests heavily in implementing green smelting and upgrading projects, which may increase the company's interest-bearing liabilities, increase financial costs, and increase the balance ratio. In response to possible financial risks in renovation projects, the company will strengthen overall budget management, arrange funds in an integrated manner according to capital requirements and usage plans, and improve the efficiency and efficiency of the use of funds.
According to Northern rare earth estimates, after the green smelting and upgrading project is delivered, the estimated internal financial return of the project after income tax is about 25.31%, and the expected payback period is about 5.56 years (including the construction period).
According to reports, the green smelting upgrade project was fully started in August 2023, and the first phase of the project is scheduled to be put into operation in the fourth quarter of 2024. On January 10, Northern Rare Earth stated once again on the Investor Relations Interactive Platform, “The overall goal of the project is to build the world's largest scale, the highest quality, the highest efficiency, the strongest technology, and the best environmental protection. It takes high-end, intelligence and greening as specific development requirements, and continuously promotes the healthy and sustainable development of China's rare earth industry.”