State-owned China Rare Earth Group is in talks to acquire Shenghe Resources and wants a controlling stake, according to two people familiar with the matter. A deal would consolidate Beijing’s control over one of the last major Chinese rare-earth mining and refining companies with some private ownership, while transferring Shenghe’s overseas holdings, including its 3% stake in U.S. rare-earths producer MP Materials. The U.S. Department of Defense became MP Materials’ largest shareholder after investing last year. Shenghe acquired Australia’s Peak Rare Earths last year, but it remains unclear what would happen to its overseas assets or how the ownership overlap between China’s state-owned sector and the Defense Department could affect the transaction. The deal could also give Shenghe improved access to Beijing’s production quotas for mining, smelting and separation. China Rare Earth Group was established in 2021 after the reorganization of five state-run rare-earth-related companies and is China’s largest supplier of heavy rare earth elements, materials used in products including electric vehicles, wind turbines, electronics and defense equipment.