Mainland highway operator Yue Da Holdings will acquire a metal mining company in Southwest China's Yunnan Province for 180 million yuan (US$22.5 million) in its bid to diversify into the mining sector.

Yue Da will fund the deal with 30 million yuan (US$3.75 million) in cash and 150 million (US$18.75 million) in new shares.

The company struck the deal because of the rising demand of precious metals and tough competition in the highway business. It plans to raise the mine's capacity from 900 to 1,200 tons a day, Yue Da Chairman Hu Youlin said yesterday.

"The resilience of the mainland's heavy industry has created a strong demand for precious metals... The price surge is a bonanza for ore companies and is the reason for us" to diversify into the sector, Hu said.

Yue Da made a foray into mining by buying stakes in Yuelong (Baoshan), Yuelong (Puer) and Yuelong (Yaoan) for 300 million yuan (US$37.5 million) in the first half of the year, and the three subsidiaries contributed 2 million yuan (US$250,000) to the group.

Yue Da now has four ore mines in Yunnan, three of which will start operation next year. "Our capacity is expected to be no less than 15,000 tons next year," Hu said.

The company runs two national highways, 204 and 106, which contributed 28.3 million yuan (US$3.54 million) and 27.3 million yuan (US$3.41 million) as revenues in the first half of 2006.

The average daily traffic flow on the national highways was 18,546 vehicles and 16,705 vehicles, respectively, in the first six months of the year.