$5.8Bln Merger Will Create World's No. 2 Zinc Producer

MELBOURNE, Australia -- Australian miner Oxiana has agreed to buy sector rival Zinifex in a share swap worth 6.2 billion Australian dollars ($5.8 billion), the two companies said Monday, to create the world's second-largest producer of zinc.

The deal, which the two called a "merger of equals," will give the pair more scope for acquisitions and mine development to meet Chinese and Indian demand for zinc, copper, gold, silver and other precious metals, they said.

The combined company -- to be split equally between Oxiana and Zinifex shareholders -- will have a market capitalization of about 12 billion Australian dollars, making it the third-largest mining company listed in Australia, the companies said in their joint statement.

The acquisition, which has been speculated on for months, comes as the global mining industry scrambles to consolidate amid continued surging demand for industrial metals. As well as giving both companies more products, doubling their size will give the pair a stronger chance of making bigger acquisitions in Australia and abroad.

"Both companies firmly believe in the continued strength of demand for base metals coming from the extraordinary economic growth from development in China, India and rest of the developing world," Zinifex chief executive Andrew Michelmore, who will head the combined company, said during a conference call to discuss the deal.

The new company will look at growing both by exploration and acquisition and will look at potential purchases in Australia, South America, Africa and Southeast Asia, where Oxiana is already firmly established, Michelmore said.

The company will be renamed and will remain based in Melbourne. A new name had not been chosen yet.