Jul 01, 2012 (Dow Jones) MELBOURNE--Altona Mining Ltd. (AOH.AU) said Monday that it has begun negotiations with Anglo-Swiss mining giant Xstrata PLC (XTA.LN) about selling majority control of a project in eastern Australia that has the potential to produce 39,000 metric tons of copper and 17,000 troy ounces of gold a year.

Altona said in a statement that it has been notified that Xstrata intends to exercise an option it holds to acquire a 51% interest in the Little Eva project, a portion of the wider Roseby project in Queensland state.

Altona's shares jumped on the news and were trading 21% higher at A$0.29 at 0205 GMT.

"The decision by Xstrata demonstrates the attractiveness of Roseby and in particular of Little Eva," said Alistair Cowden, Altona's managing director.

The greater Roseby project covers 1,550 square kilometers in area that may contain copper, gold, zinc and uranium.

The notice from Xstrata kicks off a formal process in which the two companies will seek to reach an agreement on a price for the sale, Altona said. If they fail to reach an agreement, they may turn to an independent expert to determine the price.

Altona, which is listed on the Frankfurt stock exchange and the Australian bourse, has an underground copper mine and processing plant in Finland.