- Purchaser is an integrated rare earth mining and separation
industry leader, supporting growth potential and scale of
assets
- Neo to retain exclusive distribution rights for JAMR's premium
heavy rare earth products to international customers
TORONTO, Aug. 20,
2024 /CNW/ - Neo Performance Materials Inc.
("Neo" or the "Company") (TSX: NEO) announced today
that it has entered into agreements (the "Transactions") to
sell (i) 86% equity interest in Jiangyin Jiahua Advanced Material
Resources Co., Ltd. ("JAMR") to Shenghe Resources Holding
Co., Ltd ("Shenghe") for approximately USD $25.6 million cash; and (ii) 100% of the equity
in Zibo Jiahua Advanced Material Resources Co., Ltd.
("ZAMR") 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 leading rare earth company, with over 20 years of
experience. Through its strong supply chain relationships both
inside and outside of China,
Shenghe has the capability to expand JAMR's access to raw
materials. Shenghe is also expected to integrate ZAMR's remaining
assets and employees in its operations.
JAMR has been a continuously operating asset in the Company's
portfolio for three decades, earning a reputation as a leading
producer of specialty heavy rare earth products for global markets.
JAMR's leadership team have made valued contributions to the
development and success of the Company and the rare earth industry
at large.
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.
Sale Aligns with Strategic Transformation Initiatives
This change in operating footprint is aligned with the Company's
continuous operational excellence strategy to:
- improve return on capital employed and free up working capital
to further pursue Company's downstream strategy; and
- reduce overall Company earnings volatility, as rare earth
separation is the process step with highest exposure to underlying
rare earth price volatility.
Neo remains committed to a transformation through a
simplification of operations and a clear focus on high margin,
downstream areas. The Company will continue its midstream rare
earth separation operations in Europe.
Closing Conditions and Timing
The Transactions are subject to approval by regulatory
authorities in China and other
customary conditions to closing. The Transactions are expected to
close in Q4 2024.
All financial information presented in this press release is in
USD equivalents, while the Transactions are denominated in
RMB.
Cautionary Statements Regarding
Forward Looking Statements
This news release may contain "forward-looking information"
within the meaning of applicable Canadian securities legislation.
Generally, but not always, forward-looking information and
statements can be identified by the use of words such as "plans",
"expects", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates", or "believes" or the
negative connotation thereof or variations of such words and
phrases or state that certain actions, events or results "may",
"could", "would", "might" or "will be taken", "occur" or "be
achieved" or the negative connotation thereof. Specific
forward-looking statements in this news release include, but are
not limited to, the completion of the Transactions and other
matters relating thereto. In making the forward-looking information
in this news release, the Company has applied certain factors and
assumptions that are based on its current beliefs as well as
assumptions made by and information currently available to the
Company. Although the Company considers these assumptions to be
reasonable based on information currently available to it, they may
prove to be incorrect, and the forward-looking information in this
release are subject to numerous risks, uncertainties and other
factors that may cause future results to differ materially from
those expressed or implied in such forward-looking information.
There are many risk factors associated with the completion of the
Transactions. A number of factors could cause actual results to
differ materially from those anticipated by the Company, including
but not limited to the risks and uncertainties inherent in the
nature of the Transactions including the failure to obtain
necessary regulatory approvals, or to otherwise satisfy the
conditions of the Transactions, in a timely manner by the outside
date or at all, risks of a material adverse change the Company's
assets or revenues, or risks of unknown liabilities that may
arise.
Readers are cautioned not to place undue reliance on
forward-looking information. The Company does not intend, and
expressly disclaims any intention or obligation to, update or
revise any forward-looking information whether as a result of new
information, future events or otherwise, except as required by law.
For more information on Neo, investors should review Neo's
continuous disclosure filings that are available under Neo's
profile at www.sedarplus.ca.
About Neo Performance Materials
Neo manufactures the building blocks of many modern technologies
that enhance efficiency and sustainability. Neo's advanced
industrial materials - magnetic powders and magnets, specialty
chemicals, metals, and alloys - are critical to the performance of
many everyday products and emerging technologies. Neo's products
help to deliver the technologies of tomorrow to consumers today.
The business of Neo is organized along three segments: Magnequench,
Chemicals & Oxides and Rare Metals. Neo is headquartered in
Toronto, Ontario, Canada; with
corporate offices in Greenwood Village,
Colorado, United States;
Singapore; and Beijing, China. Neo has a global platform that
includes 10 manufacturing facilities located in China, the United
States, Germany,
Canada, Estonia, Thailand and the United Kingdom, as well as one dedicated
research and development centre in Singapore. For more information, please
visit www.neomaterials.com.
SOURCE Neo Performance Materials, Inc.
