Redstar Plans to Raise CNY 580 Million to Add Production Capacity for Manganese(II) Sulfate

As the Chinese industry for Li-ion NEV power batteries continues to grow, the demand for high-purity manganese(II) sulfate is also expected to rise significantly over the next few years. In view of the positive market outlook for manganese-related products, many Chinese chemical and material companies have hastened to expand related manufacturing capacity.

Chinese chemical company Redstar announced in early November that it will raise no more than CNY 580 million in order to pursue the following activities: acquisition of a 75% stake in Red Butterfly Precision Materials, construction of a plant (or production line) with 50,000 tons per year of production capacity for high-purity manganese(II) sulfate, and reinforcement of working capital.

According to Redstar’s fundraising plan, the amount of CNY 580 million will be the net proceeds minus fees and other expenses. Of that total, CNY 260 million will be used to obtain the controlling stake in Red Butterfly, CNY 200 million will be used to set up new production capacity for manganese(II) sulfate, and CNY 120 million will supplement Redstar’s working capital.

Acquisition of Red Butterfly

According to the available information, Redstar develops, manufactures, and sell chemical products related to barium salt, strontium salt, and manganese-based compounds. Its client base contains several major Chinese suppliers for battery materials. Examples include Yahua, DMEGC, and CNGR.

Barium salt and strontium salt are basic inorganic compounds with a wide range of applications. As for manganese-related compounds, they are mainly used in electronics. Electrolytic manganese dioxide (EMD), for example, is an ingredient in cathode materials of primary and secondary battery cells (including Li-ion battery cells). As for manganese(II) sulfate, it serves as a fertilizer and a precursor.

The acquisition target Red Butterfly is a major supplier for high-purity fine barium salt in both the Chinese and international market. The company has a sizable market share for barium sulfate, barium hydroxide, barium hydroxide monohydrate, and barium nitrate. Barium sulfate is often used as a radiocontrast agent for X-ray imaging. High-purity barium hydroxide is a precursor for electronics-related materials. Barium hydroxide monohydrate is used as a water purification agent, an industrial additive, and a precursor. With regard to high-purity barium nitrate, it is an ingredient in explosives.

Redstar is supplier to Red Butterfly for barium hydroxide, and there is a certain amount of connected transactions between the two companies. Redstar will use some of the proceeds from its upcoming fundraising round as a part of the payment for purchasing a 75% stake in Red Butterfly. Redstar said after the completion of the acquisition, Red Butterfly will become a holding subsidiary that provides close support in terms of resource sharing. Redstar also expects the deal to result in a significant growth in the scale of its business operations as well as other kinds of synergy.

Capacity Expansion for High-Purity Manganese(II) Sulfate

Apart from the acquisition of Red Butterfly, another considerable part of the proceeds from the upcoming fundraising round will be devoted to adding new production capacity for high-purity manganese(II) sulfate. This compound is mainly used in the manufacturing of ternary cathodes, which in turn are a critical component of Li-ion NEV power batteries. Cathode now account for more than 40% of the total material cost in the production of ternary NEV power batteries. Its quality affects the performance indicators of batteries as well.

Raising purity of the manganese compound is the first critical task in the development of a high-quality manganese-based cathode. Manganese(II) sulfate can be directly used in the manufacturing of a ternary cathode. Another method is to use manganese dioxide or manganese (II,III) oxide to manufacture lithium manganate, which itself is a cathode material. Regardless of the approach, obtaining high-purity manganese(II) sulfate is the first essential step.

As the Chinese industry for NEV batteries continues to advance technologically, Redstar anticipates rapid breakthroughs with respect to the role of high-purity manganese(II) sulfate in the production of lithium manganite and lithium manganese iron phosphate. These derivative materials, in turn, will find suitable applications in cathodes for Na-ion batteries, lithium-rich manganese-based battery materials, and cobalt-free binary cathodes featuring manganese and nickel. All in all, Redstar hopes to expand its portfolio to encompass both present and future solutions for batteries used in new energy applications.

For manufacturing high-purity manganese(II) sulfate monohydrate, Redstar has developed two processes: flue gas desulfurization and sintering oxidation. Both processes create crude manganese sulfate solution that is further refined to attain a higher purity. The company’s production capacity is currently at 30,000 tons per year. The upcoming fundraising round is expected to provide the capital for the company build on its existing process technologies and make further improvements. With the proceeds, the company will add 50,000 tons per year of new production capacity for high-purity manganese(II) sulfate monohydrate that can then be used in the manufacturing of materials related to NEV power batteries.

Once this new production capacity enters operation, Redstar expects a sharp rise in both its output and market share. By meeting the battery industry’s rapidly growing demand for superior products and services in a timely manner, Redstar will be able to capture business opportunities related to NEV power batteries and the trend of enterprises adopting new energy technologies. In sum, the implementation of the fundraising plan will reinforce Redstar’s leading position in its industry.

Redstar’s Fundraising Plan (Unit: CNY 10,000)

This article is a translation of a Chinese article posted by TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain. Some Chinese names are transcribed into English using Hanyu Pinyin.