Chinese rare earth firm to form megacompany

China's top rare earth producer announced Friday it will gain control of 12 other firms in the sector, making its first move to form a megacompany.

Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co. (REHT) on Thursday signed framework agreements on consolidating and restructuring with other rare earth firms based in Inner Mongolia, the REHT said in a statement filed to the Shanghai Stock Exchange.

Under the agreements, the 12 firms and their shareholders will transfer 51 percent of the companies' combined equity to REHT for free while REHT will plan their management and production.

REHT will also provide the firms with support in terms of talent, technology, funding, production and export quotas.

REHT's light rare earth output accounts for more than half of the world's total.

The move is the company's first step in its ambition to create a massive rare earth enterprise that will integrate light rare earth resources in the country's northern region, a plan that was unveiled in August this year.

The industry consolidation is also part of efforts to control environmental damage caused in rare earth mining and processing, stave off resource depletion and nurture competitive domestic firms in the sector.

Authorities expect bigger enterprises to churn out products with higher added value and shoulder more responsibility in environmental protection.