Zinc producer, Zinifex (ZFX) has made an all cash offer for all the shares in mineral explorer, Allegiance Mining (AGM).
Zinifex is offering 90 cents per Allegiance share, or $1.00 per Allegiance share if it acquires more than 30% or if the Allegiance board recommends the offer.
If successful, the offer values Allegiance up to $775 million.
The zinc producer said the offer represents a significant premium over Allegiance's last closing price.
"For Zinifex shareholders, we like nickel as an attractive long term growth business and Allegiance's Avebury project is an excellent entry point for Zinifex," chief executive officer Andrew Michelmore said.
"With nickel production due to commence in early 2008, this mine would add immediate growth to Zinifex's existing profit centres, the Century and Rosebery mines," he added.
The offer will be financed from Zinifex's current cash balance.
In a slide presentation submitted to the Australian Stock Exchange, Zinifex said the potential takeover is an excellent fit with Zinifex's strategy, an attractive entry into nickel and adds near term production with scope for expansion.
"Avebury is just the start of our strategy to vigorously grow in Zinifex's chosen base metals of copper, nickel and zinc. We like investing in high margin, long life, expandable mines, and Avebury delivers all of these attributes," Michelmore said.
Sydney-based Allegiance Mining listed on the stock exchange in 1993.
Shares in Allegiance jumped 28 cents, or 41% to 99 cents by 11am AEST.
Zinifex shares fell 21 cents to $13.84.
