Hunan Chenzhou Mining Group Co Ltd, one of the nation's top gold miners, may acquire Hunan King Stone Minerals Group, a zinc miner, according to officials from Yuanling county, Hunan province.
"The takeover (group) which is led by the local government, is expected to ink an agreement by the end of this year," said one of the officials who asked not to be named.
Chenzhou Mining plans to expand its business into the zinc industry, they said, adding that the project is still under discussion and therefore, the bid's details have yet to be rolled out.
Chenzhou Mining could not be reached for comment.
Chenzhou said earlier that it will pump up to 500 million yuan ($73.79 million) per year for three consecutive years starting this year to acquire natural resources.
State-owned Chenzhou Mining had an output of 4.3 metric tons of gold in 2009. The company is also the world's second largest producer of antimony with an annual output of 1.9 metric tons last year.
Antimony is a silvery-white metal added to alloys to increase their strength and is also used in semiconductors.
The company forecasted in its preliminary report that it would see 50 percent to 100 percent revenue growth in the first half of 2010. It realized 129.3 million yuan in net profit last year, up 61.08 percent from the same period a year earlier. Its sales were up 23.9 percent to 1.68 billion yuan in 2009.
Private-held King Stone Minerals reported sales revenue of 100 million yuan with 800 million yuan in production value last year. It recorded output of 100,000 metric tons of zinc ingots, according to the company's website.
After the asset injection, Chenzhou Mining's annual sales are likely to reach 5 billion yuan in three years, the sources said.
"Chenzhou Mining has never touched the zinc industry, so the acquisition, if it takes place, will mark the company's first step into the sector," said Zhu Lida, a non-ferrous analyst at Northeast Securities.
Chenzhou Mining's gold mines in Yuanling county have nearly been depleted after 130 year of exploitation. Guotai Junan Securities estimates the firm's gold output will only rise 9 percent to 4.7 metric tons in 2010.
But Zhu added that King Stone's current assets are difficult to evaluate after zinc price's plunged during the financial crisis period.
A-shares of Chenzhou Mining sank 0.58 percent to end at 18.74 yuan on Wednesday.