CHINA'S largest nickel producer has made a $150-million offer to purchase Toronto-based Crowflight Minerals and its Bucko Lake nickel mine in northern Manitoba.

The Jinchuan Group Ltd. offer comes less than a year after China's second-largest nickel company, Jilin Jien Nickel Industry Co. Ltd., secured a 20 per cent stake in Victory Nickel, another Toronto-based junior mining company with a large nickel property near Grand Rapids that it's working at developing into a producing mine.

Chinese mining companies have been on a global shopping spree, buying up base metal properties in Canada, Australia, South America and Africa.

Jinchuan last year bought controlling interest in a large nickel mine in Zambia and in addition to Victory Nickel, Jilin Jien owns a controlling stake in Liberty Mines Inc., an exploration company with properties in Ontario.

Last summer, a Chinese investor acquired about 20 per cent of Vancouver-based zinc, copper and coal giant Teck Resources, Canada's largest publicly traded miner, and earlier this year Jinchuan paid $214 million to acquire Tyler Resources Inc., a Calgary company with a metals development in Mexico.

The Jinchuan offer is richer than a $102-million offer Crowflight received in late January from Pala Investment Holdings Ltd. of Switzerland. That company holds a 26 per cent stake in Crowflight after providing a much-needed equity investment late last year.

Crowflight officials said the Chinese offer is further evidence its Manitoba operation, which includes several undeveloped properties in the rich Thompson Nickel Belt, is an attractive asset.

"I believe this is positive news for Manitoba," said Crowflight CEO Mark Trevisiol. "We have a good position in a well-known, prolific nickel belt. There is certainly upside there."

The Jinchuan offer for Crowflight equates to about 26 cents a share, close to a 50 per cent premium on their trading value.

Crowflight originally opened Bucko Lake last year, but had to close only months later because of inefficient mining procedures and a need to secure additional financing.

Its reopening this year coincided with rising nickel prices. Nickel traded down 20 cents to $11.15 a pound on the London Metals Exchange Tuesday, up from about $3.50 a pound a year ago.

Crowflight's shares spiked in early trading, but settled to close at 22 cents on very heavy trading, about 30 per cent above Monday's price.

Since Crowflight is a small and new producer, the markets were not overly impressed with the offer.

"Obviously the Chinese have more faith in Bucko and the nickel market than the rest of the market," said David Davidson, a mining sector equity analyst with Paradigm Capital Inc. of Toronto. "It is a fairly aggressive price for an asset that really has yet to prove it can deliver its nickel units."

The offer is conditional on Jinchuan obtaining 100 per cent of the concentrate from the Bucko Lake Mine and any other nickel that Crowflight's exploration properties are able to be develop into production.

If the deal goes through, Jinchuan would ship the high-quality concentrate from Crowflight's mine in Wabowden to its refinery in China.

That may prove a stumbling block for the deal as Crowflight has a "life-of-mine" agreement to sell all its concentrate to Xtrata's refinery in Sudbury.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition April 7, 2010 B5