Posco buys controlling stake in Chinese rare earth company

South Korea's largest and the world's second-largest steel maker Pohang Iron and Steel Company, (Posco) and Korea Resources Corporation have teamed up to take a controlling stake in Yongxin Rare Earth Metal Co, a Chinese rare earth mining company.

Posco, through its Chinese investment subsidiary Posco-China and Korea Resources acquired a 60-per cent in Inner Mongolia autonomous region-based Yongxin Rare Earth Metal for 59.76 million yuan ($8.8 million).

The acquisition was made to sidestep China's restriction on rare earth exports, which it has implemented since last year. Only about one-fifth of rare earth mining companies in China hold export quotas.

Rare earth metals are used in wind turbines, superconductors, hybrid cars and other high-tech devices.

China holds 95 per cent of the world's rare earth elements reserves and Inner Mongolia accounts for about 75 per cent of it.

The deal will enable Posco to buy rare earth export quotas from other Chinese companies and export rare earth back to South Korea.

Posco will also be able to export the processed rare earth metals from Yongxin since China's policy on finished processed rare earth metals is more flexible.