China Non-ferrous Metal Industry's Foreign Engineering and Construction Limited Company (NFC) and Australian zinc explorer Terrramin Australia Limited (ASX: TZN) plan to sign an agreement that NFC will subscribe to TZN's 15.50 million ordinary shares by means of direct placement.

NFC (SZSE: 000758) announced on March 29 that it had already signed a "subscription agreement" with TZN two days earlier. In the deal, NFC would buy 15.50 million ordinary shares at a price of AUD0.65 per share, or a premium of 43 percent against TZN's closing quotation – AUD0.455 – on March 26. Hence, NFC will become TZN's largest single shareholder and will be eligible to appoint a director to the board.

In the announcement, the transaction involves AUD10.075 million (approx RMB 48.26 million, or US$7.066 million), which accounts for 2.75 percent of NFC's 2008 net worth (unaudited figure, up to Sep. 30, 2008). Currently, TZN's total assets amount to AUD146 million, with a debt of AUD83.64 million. Its net assets are around AUD62.10 million.

TZN's major assets include the Angas Zinc Mine in Australia, and the Algerian Tala Hamza Zinc Project which is still under construction in Algeria. The two projects represent a reserve of 61.01 million tons of metal ores, containing up to 4.05 million tons of zinc.

Angas Project started production on July 21, 2008, and has an annual capacity of 400,000 tons of ore, which will yield 65,000 tons of fine zinc ores and 24,000 tons of fine copper-lead ores.

The pre-feasibility study of Tala Hamza will be concluded this coming April, followed by a formal feasibility study. This project is co-owned by TZN which holds the 65 percent majority, and the Algerian government with the other 35 percent share. It is scheduled to be completed in 2011.

In its announcement, NFC points out that this purchase is to raise the company's raw material reserves, considering its expanded presence in Inner Mongolia. Other than approval from both companies' boards, the purchase also requires consent from the Australian Treasury, and must not violate the relevant terms in Australian law.

In addition, NFC notes the fluctuating zinc price presents a risk to TZN's operations, which in turn may affect the deal.

For more information, please read the article in Chinese:

http://www.caijing.com.cn/2009-03-30/110129730.html

(China.org.cn by Maverick Chen, March 30, 2009)