Under the deal, Oxiana would offer 3.2 of its shares for each Zinifex share, and the new entity would be equally held by shareholders of each company, the two firms said in a statement.
The new company, which would be renamed once the merger was completed around June or July, would have combined earnings before interest, tax, depreciation and amortization (EBITDA) of A$1.7 billion ($1.6 billion).
It would have a cash balance of A$1.9 billion, providing a strong platform for both organic growth and acquisitions, the companies said.
Talk of a tie-up between the two miners flared in July last year when Oxiana chief executive Owen Hegarty said in an interview that Zinifex had quality assets and a takeover would create cost savings.
Oxiana Chairman Barry Cusack will chair the new company, while Hegarty will become a director and head up the integration process at board level.
Zinifex reshaped itself as a pure miner last year with the spin-off of its smelting assets into Nyrstar, a venture with Belgium's Umicore NV/SA.
The tie-up will provide diversification for both companies, although the combined entity will still remain highly exposed to zinc, which has fallen sharply in the past year because of a looming supply surplus as new mines are activated.
Zinifiex said its recommended A$852 million takeover offer for nickel group Allegiance Mining will not be affected by the Oxiana proposal.
Shares in Oxiana closed on Friday at A$3.97, giving it a market capitalisation of A$6.1 billion. Shares in Zinifex closed at A$11.13, valuing it at A$5.4 billion.