(Yicai Global) Nov. 23 -- Xiamen Tungsten will invest USD40 million to purchase a 67 percent stake in Kazakh tungsten mine developer Severniy Katpar to increase the company's reserves of the rare metal.

The company signed an exclusive term sheet -- a document outlining the terms and condition of a business agreement preparatory to the execution of a final agreement -- yesterday in Beijing with Severniy Katpar's parent Tau-Ken Samruk to invest in the target firm, the famous Chinese tungsten resource developer said in an announcement yesterday.

Also known as wolfram, tungsten is used in incandescent light bulb filaments and electric contacts, arc-welding electrodes and as an alloy in steel, which it greatly strengthens.  It is extracted from wolframite or scheelite ores.

The agreement was signed during a two-day visit to the Chinese capital by a Kazakh trade delegation led by Bakytzhan Sagintayev, the country's prime minister, who met to talk commercial cooperation with his Chinese counterpart Premier Li Keqiang.

Fujian province-based Xiamen Tungsten will take a 67 percent share of the target after the deal, while the proportion Tau-Ken Samruk holds will drop to 33 percent from its current 100 percent, per the announcement.

The two agreed to complete due diligence, reserve verification and evaluation of the underlying assets before May 31, with formal contract documents signed before July 15, the announcement stated.

This cooperative investment seeks to develop the target's two wolfram deposits, and the parties will set up a joint processing plant for ammonium paratungstate, the raw material for many tungsten products, per the condition that concentrates from the two minefields qualify in both quantity and quality.

Severniy Katpar owns the right to use the subsoil in the two ore beds, Severniy Katpar and Verkhniye Kayraktinskoe, located in Northern Katpar and Upper Kairakinskoye of the Karaganda region in east-central Kazakhstan where the target is based, the announcement added.

The deal is subject to approval by the internal decision-making departments of both parties and regulators in China and Kazakhstan, the announcement noted.

Editor: Ben Armour