Australia on Thursday cleared China's Shenzhen Zhongjin Lingnan Nonfemet 000060.SZ to buy a controlling stake in outback zinc miner Perilya (PEM.AX: Quote), making it the latest Chinese firm to eye Australian mine assets.

Zhongjin, China's third-largest zinc producer, and Perilya said the approval by Australia's Foreign Investment Review Board would allow the Chinese group to proceed with a A$45.5-million offer to buy a 50.1 percent stake in Perilya, a medium-sized zinc and lead miner wrestling with low metals prices and undergoing a major revamp to boost profitability.

The move, endorsed by Perilya's board and approved by shareholders at a special meeting on Thursday, could lead to hundreds of thousands of tonnes of zinc and lead-bearing ore concentrates being shipped to China for smelting, starting as soon as 2010, Perilya Managing Director Paul Arndt said.

Korea Zinc Co (010130.KS: Quote) holds a supply contract for Perilya's zinc until 2012, though a deal for supplies of lead going to Belgium-listed Nyrstar (NYR.BR: Quote) expires in December.

Perilya shares, which have mostly traded downward since mid- December, gained as much as 15 percent before backtracking to close a half-cent stronger at 17.5 Australian cents.

Zhongjin President Zhang Shuijian told a teleconference through an interpreter that his company was not immediately in the market for further purchases in Australia, but would keep an open mind over any future acquisitions.

The Foreign Investment Board, answerable to the Federal Treasurer, recently gave a green light to Chinese aluminium group Chinalco to lift its stake in Rio Tinto (RIO.AX: Quote) (RIO.LQuote) to 14.99 percent from 9 percent and also has allowed Chinese companies to partner Australian iron ore miners.

Some analysts say Australia is softening its stance on foreign ownership of mines ever since the commodities boom turned to bust in mid-2008, but the government says its policy has not changed.

The treasurer, Wayne Swan, this month said that while Australia welcomed foreign investment, outsiders must first pass a national interest test.

Perilya this year joined a growing number of miners that include fellow Australian Oz Minerals (OZL.AX: Quote) and Canada's Teck Cominco (TCKb.TO: Quote) feeling the heat from a dramatic drop in metals prices that has seen zinc lose 51 percent in the last year.

Mining of ore this year by Perilya from its Broken Hill deposit will almost halve to 950,000 tonnes from 1.8 million tonnes last year, a level forecast to yield 55,000 tonnes of zinc and 50,000 tonnes of lead. ($1=1.56 Australian dollar) (Reporting by James Regan in Sydney and Alfred Cang in Shanghai; Editing by Clarence Fernandez)

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