China's largest nickel producer Jinchuan Group, a major shareholder of Australia's Allegiance Mining, said that Zinifex's AUD 775 million offer for the Sydney based nickel miner undervalues the company.

In a statement lodged with the Australian Securities Exchange it said that Allegiance's highly prospective Avebury nickel mine in western Tasmania remained largely unexplored. It said that "Jinchuan believes that there is significant upside in Allegiance, therefore the AUD 1 per share offer for Allegiance is not reflective of the true value of the company.”

Mr Li Yongjun chairman of Jinchuan in the statement added that "We strongly support the management and board of Allegiance and believe they are creating excellent value for shareholders, and jointly we will
continue to do so.”

Zinifex launched its all cash offer of AUD 0.9 per Allegiance share last month and pledged to increase the offer to AUD 1 per share if it acquires more than 30% of Allegiance shares, or if Allegiance's board approves the offer. Allegiance has advised shareholders not to take action on the offer.

Jinchuan has a 10.4% stake in Allegiance, and strategic agreements with the miner including an offtake deal for production from the Avebury mine. Avebury is scheduled to begin production later this month.