(Yicai Global) March 5 -- Jiangxi Copper, one of the largest copper producers on the Chinese mainland, plans to obtain an almost 30 percent stake in gold smelter Shandong Humon Smelting for CNY3 billion (USD444 million).

The Nanchang-based buyer will hold 273 million shares after the deal, it said in a statement yesterday. Jiangxi Copper did not hold any shares before the agreement.

Shares in Humon Smelting [SHE:002237] closed at CNY10 (USD1.5) a share on March 1, before it suspended trading to announce the deal and resumed today. Jiangxi Copper will pay a 9 percent premium over that price.

Founded in 1988, Humon is an important national smelter that explores and mines gold and also produces other chemicals, the statement added. The target earned CNY404 million (USD60.3 million) in net profit on revenue of CNY21.2 billion (USD3.2 billion) last year, up 1.5 percent and 5.4 percent, according to its financial report.

In comparison, Jiangxi Copper believes its own net profit soared 50 percent to CNY2.6 billion last year, according to its performance forecast for the period.

Humon and Jiangxi Copper are both in the non-ferrous metal smelting and rolling industry, but the buyer mostly engages in copper-related mining and mineral processing while Humon focuses on smelting and recycling gold, the statement said, implying there would be limited horizontal competition between the two.

Once in control of Humon, Jiangxi Copper plans to use the firm as a development platform for the gold sector and inject its own gold assets -- including 60 percent of Jiangxi Gold, which trades almost-pure bullions of the metal in London and Shanghai -- into the listed target in order to further minimize competition, it added.

Editor: James Boynton