Thursday, 11 May, 2006

I.T.Metal

The mainland's largest zinc producer, Hunan Nonferrous, will pay US$23 million for a 10 per cent stake in Australia's Compass Resources NL, and the companies will form joint ventures to explore for base metals in Australia's Northern Territory.

State-owned Hunan Nonferrous Metals Corp Ltd, which is seeking to boost growth and exploration at home and abroad, has agreed to buy 12 million newly issued shares in Compass Resources at A$2.50 (US$1.9) a share, Compass Resources said in a statement yesterday.

The statement said the purchase of new shares would amount to about 10.4 per cent of the company's expanded share base.

Compass Resources said it would use the share placement to fund more aggressive exploration of base metals and would receive over A$10 million from Hunan Nonferrous to compensate it for past metals exploration expenditures.

Hunan Nonferrous will also pay 70 per cent of Compass Resources' metals exploration costs for the first five years of the deal and 50 per cent thereafter, as well as A$60 million in working capital for a plant.

Compass Resources and Hunan Nonferrous also hope to form 50-50 exploration and development joint ventures, the statement said, without specifying how many were planned.

Compass Resources said it would receive about A$90 million in cash from the arrangements with Hunan Nonferrous, and the money could be used for its own initial uranium developments, an expanded exploration programme and other projects.

But it also said uranium exploration and development would be excluded from the joint venture projects with Hunan Nonferrous.

Trading in shares of Hunan Nonferrous Metals Corp Ltd, China's largest zinc producer, was suspended yesterday, the Hong Kong exchange said. The stock ended at HK$3.45 on Thursday, prior to Friday's public holiday in Hong Kong.