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By Myra P. Saefong, MarketWatch

TOKYO (MarketWatch) — Aluminum Corp. of China said Monday it plans to take on a majority stake in Jiangxi Rare Earth and Rare Metals Tungsten Group for an investment of “not less than” 10 billion yuan ($1.5 billion).

Under the agreement between the two companies, signed Sunday at the Expo Central China 2010, Chinalco /quotes/comstock/13*!ach/quotes/nls/ach (ACH 23.55, +0.87, +3.84%)   /quotes/comstock/22h!e:2600 (HK:2600 7.32, +0.30, +4.27%)   /quotes/comstock/28c!e:601600 (CN:601600 10.88, +0.99, +10.01%)   will help the Nanchang-based Jiangxi firm, a major producer of tungsten, develop rare-earth resources in the next 3-5 years.

The pact follows an announcement by China earlier this month that the country would encourage mergers and acquisitions in the rare-earth sector to speed up industry consolidation, according to a report from the state-run Xinhua news agency.

Last week, the New York Times reported that China halted shipments of rare-earth minerals to Japan amid a dispute over the detention of the captain of a Chinese fishing trawler, who has since been released.

However, Chinese officials have denied that such an export ban was in place. Read more about the reported ban on rare earths to Japan.

Rare earths are used in many products, gadgets and critical cutting-edge technologies, and China has all but cornered the market, accounting more than 90% of global rare-earth production. Read an in-depth story on rare earths.

Myra P. Saefong is MarketWatch's assistant global markets editor, based in Tokyo.