Yu, bidding through his 99%-owned private equity shop Cathay Fortune Corp., and the China-Africa Development Fund are offering A$1.70 per share for Discovery, a 17% premium to the target's Wednesday closing price.

The bid is further evidence of an uptick in interest in Australian-listed mining companies that has been triggered by a fall in commodity prices due to weaker demand from China. Earlier this week, Australian iron ore producer Arrium Ltd. rejected a A$1.01 billion bid from a South Korean consortium. At the end of September another privately owned Chinese investor, Zhongrun Resources Investment Corp., agreed to pay A$84.7 milllion for a 42% stake in Australian-listed, Africa-focused gold producer Noble Resources Ltd.

"We are keen to work with you, the board of directors of DML [Discovery Metals] and senior management of DML, to effect the transaction that would deliver signficiant value to shareholders of DML," Cathay Fortune's director and CFO Zhang Zhenhao wrote in a letter to the Discovery Metal's board. "We strongly desire to proceed on a recommended basis."

Cathay Fortune already owns 13.7% of Discovery Metals.

Discovery Metals said its board was evaluating the offer and gave the usual qualifiers that there was no guarantee that a deal would be forthcoming.

Discovery operates the Boseto Copper Project in Western Botswana, which began operations in July and is expected to produce as much as 36,000 tons of copper a year and 1.1 million ounces of silver. The company also owns further prospecting licenses covering 11,872 kilometers along the so-called Kalahari Copperbelt.

Under the terms of the bidders' partnership Cathay Fortune would own 75% of the group after the deal, with China-Africa Development Fund holding the remaining 25%. Debt financing for the deal from China Development Bank is already in place.

Shanghai-based Cathay Fortune claims to manage more than $3 billion in investments. China-Africa Development Fund was launched in 2007 by Chinese President Hu Jintao to help finance Chinese investment in Africa and has about $5 billion of capital and investments.

Discovery is taking financial advice from UBS AG and has tapped a team from GRT Lawyers for legal advice. The bidders are taking financial advice from Citigroup Global Markets Inc. and legal counsel from King & Wood Mallesons.

Discovery shares were suspended Thursday at A$1.50.