Terramin Australia Ltd., an Australian zinc and lead producer, is in talks with state-owned Algerian banks to help fund development of a planned $266 million project in the North African country.

“The environment is good for financing the project at the moment, particularly in Algeria,” Kevin Moriarty, chairman of the Adelaide-based company, said today in an interview, adding he hopes to complete a loan by the end of 2010. “We are working on it at the moment with the banks.”

Finance from Algerian banks is the favored option as the terms would likely be more attractive than those offered by commercial western banks or smelters, Moriarty said. Zinc has jumped 91 percent this year as demand from steelmakers rebounds.

Terramin, which started production from its Angas zinc and lead mine in South Australia state last July, dropped 3.2 percent to 75.5 cents at 2:27 p.m. Sydney time on the Australian stock exchange. The stock has jumped 68 percent this year.

There has been interest from zinc smelters in Europe, Asia and Brazil for sales accords from the Oued Amizour project, Moriarty said. The mine has been estimated to produce as much as 500,000 metric tons of zinc and lead concentrate annually with production planned to start late 2011 or in 2012.

The company owns 65 percent of the project with two Algerian state-owned companies owning the balance. A study completed in the first quarter of this year estimated a cost of $266 million to build the mine, Moriarty said. The company is studying a doubling of the proposed production capacity, which, if approved, would boost the construction cost, he said in an interview in Melbourne.