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Xstrata has confirmed it is in talks with Glencore International to form a monster $US82 billion merger company to rival BHP Billiton.
In a statement Xstrata said Glencore, which already owns 34 per cent of the Switzerland-based miner, had approached it proposing an all-share "merger of equals".
The combined company would be the word’s fifth largest miner, behind BHP Billiton, Vale, Rio Tinto, and China’s Shenhua Energy.
The company would be the world’s largest zinc producer, controlling 15 per cent of global supply, and control 32 per cent of global thermal coal.
Together Xstrata and Glencore would have the financial power to make other large acquisitions, including Anglo American.
Anglo was targeted for a takeover by Xstrata in 2009 but the move eventually failed.
Xstrata said under United Kingdom takeover rules Glencore would be required to announce a firm intention to takeover by March 1.
Glencore has a range of different businesses, and while it sold 92.2m tonnes of thermal coal in 2011 it also sold 20.9m tonnes of grains.
In 2011 Xstrata produced 85.3m tonnes of coal, 517,900 ounces of gold, 92,411 ounces of platinum, and 105,925 tonnes of nickel.
If combined Xstrata and Glencore would report a net income of around $US11.2 billion in 2012.