SYDNEY—Chinese investment in Australia's gold mines is gathering...

SYDNEY—Chinese investment in Australia's gold mines is gathering pace, with a unit of Shandong Gold Group Co. poised to take a majority stake in Focus Minerals Ltd. FML.AU 0.00% through a share placement worth 227.5 million Australian dollars (US$238.2 million).

The deal is the latest in a series of moves by major Chinese producers to plug a domestic shortfall and shore up long-term supply for the gold-hungry nation. Last month, China National Gold Group Corp., the country's largest gold miner, announced a potential $3.9 billion bid to acquire African Barrick Gold ABG.LN +1.46% PLC, while a subsidiary of Zijin Mining Group Co., 601899.SH -1.72% China's second-largest producer, acquired more than 50% of Kalgoorlie's Norton Gold Fields NGF.AU 0.00% .

Australia is the world's second-largest producer of the yellow metal, after China. Shandong is China's third-largest gold producer by output.

The shares will be priced at 5 Australian cents each. Directors of the ASX-listed company will unanimously recommend the placement, subject to an independent review. The deal will allow Shandong Gold International Mining Corp., a 65%-owned subsidiary of Shandong Gold Group, to take control of Focus with a 51% stake. The price represents a 13.6% premium to the company's last closing price of 4.4 cents a share.

At 0215 GMT, Focus' shares were up 4.6% at 4.6 cents a share.

Focus Minerals began negotiations with potential cornerstone investors in April after an annual review of operations. "The magnitude of our development [program] is so large that we weren't going to be able to fund it from organic operations," Chairman Don Taig said in an interview. "And Shandong wants to see money spent in the ground on a very significant drilling program, which was music to my ears."

He said the company would use a substantial portion of the cash to step up its exploration program. Focus has three key exploration projects in Western Australia's Laverton and Coolgardie regions. In Laverton, it holds around 1,200 square kilometers of tenements. The company may also pursue new acquisitions, after its off-market takeover of Crescent Gold Ltd. late in 2011, Mr. Taig said.

Focus, which produced almost 177,000 troy ounces of gold in the year to June 30, is targeting annual production of 500,000 ounces within the decade.

The deal comes amid a rebound in the price of gold, which has risen 10% over the past month to trade at its highest level since February. The market has been buoyed by a decision from the Bank of Japan to extend its asset purchase program just one week after the U.S. Federal Reserve announced another round of quantitative easing.

China has relatively short life-of-mine production levels compared with other countries, according to the World Gold Council. It also has one of the smallest percentages of global gold-mine reserves, at less than 5%, which underscores the need for the resource-hungry giant to find its bullion elsewhere.

Write to Rhiannon Hoyle at [email protected]

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