(Yicai) Oct. 10 -- Shares of Baotou Tianhe Magnetics Technology, a major Chinese maker of rare earth permanent magnets, rose after the firm said it will expand its capacity to meet rising demand for the powerful magnets by investing CNY900 million (USD126 million) in a new production base.

After jumping by as much as 9 percent in Shanghai earlier today, Tianhe Magnetics [SHA: 603072] closed up 2.2 percent at CNY50.75 (USD7.12) a share. The broader market fell 1 percent.

Tianhe Magnetics will spend CNY850 million on a research, development, and production base for high-performance rare earth permanent magnets and their related components and equipment in China’s Inner Mongolia Autonomous Region, the Baotou-based firm announced late yesterday. The other CNY50 million will fund the design and production of manufacturing gear.\

China's dual carbon goals have increased demand for rare earth permanent magnets, especially the high-performance type. The new base will help Tianhe Magnetics meet that demand and overcome the bottlenecks constraining the firm's rapid development, it said.

The base, which is expected to have a 25 percent return on investment, will be built in two phases. The first will have investment of CNY210 million and will start its 18-month construction period next March. The second phase will kick off after the first reaches its designated output capacity and depending on market conditions.

The production equipment project’s ROI is expected to be close to 31 percent, the company said. Construction will likely start this month and take 24 months.

Tianhe Magnetics mainly researches, produces, and sells high-performance rare earth magnets, including sintered neodymium-iron-boron (NdFeB) and sintered samarium-cobalt (SmCo).

The company produced nearly 6,184 tons of NdFeB magnets last year, when its overseas revenue exceeded CNY1.2 billion (USD174 million), accounting for 48 percent of the firm’s total income, according to its annual trading report.

Editor: Futura Costaglione