China Minmetals Corporation, the country's largest metals trader, received permission from the State-owned Assets Supervision and Administration Commission (SASAC) yesterday to acquire Changsha Research Institute of Mining & Metallurgy (CRIMM) and Luzhong Metallurgy & Mining Group.

The two State-owned enterprises would now be fully owned subsidiaries of Minmetals.

A spokesman for Minmetals said, however, that the companies were still in talks on the details of the transactions.

CRIMM, based in Hunan province, owns several big manganese mines with each having a deposit of more than 1 million tons. It is the largest producer of electrolytic manganese dioxide (EMD) in China.

CRIMM is the major shareholder in Shanghai-listed EMD producer Kingray New Materials Science & Technology Co Ltd, whose share price surged 23 percent last week on merger rumors.

Minmetals also owns ample deposits in Hunan and Hubei. Liang Qiuyan, an analyst with Investoday Information, said Kingray would serve as a platform for Minmetals to integrate the value chain of manganese.

Kingray produced some 17,000 tons of EMD in the first half of 2009, which accounts for 3 percent of domestic production. Kingray also produces nickel hydroxide used for green batteries and has taken up to a 20 percent market share.

Luzhong, with 3.5 million tons in annual capacity, is the largest iron ore miner in Shandong province. The company plans to expand its production to 6 million tons in 2010. Luzhong has 330 million tons of iron ore deposits in Shandong.

Luzhong also negotiated with Sinosteel Corporation on a deal but failed to reach an agreement and turned to Minmetals, said an expert with the Mining and Metallurgy Association.

Minmetals' revenue grew 15.9 percent to 180 billion yuan last year. Iron ore and nonferrous metals contributed some 80 percent to its business.

Many State-owned companies were reorganized or merged into bigger ones recently under the guidance of the SASAC. In September, China Nonferrous Metal Mining Group Co Ltd acquired Shandong Albetter Albronze Co Ltd. Minmetals is reportedly investing in the gold mining projects of Hunan Nonferrous Metals Holding Group Co Ltd.

Mergers of State-owned enterprises that have similar businesses or those in the same value chain would build up scale and competitiveness, China Business News cited a SASAC official as saying.

"CRIMM and Minmetals were cooperating earlier. The CRIMM management and staff are familiar with Minmetals, and we are not surprised," said a source at CRIMM who declined to be named.

Back in 2008, the management of Minmetals, including its president Zhou Zhongshu, visited CRIMM several times and the two companies signed cooperation agreements on technology exchange.