In a short statement, Xstrata confirmed that it had been approached by Glencore.

“Xstrata confirms that it has received an approach from and is in discussions with Glencore International regarding an all-share merger of equals which may or may not lead to an offer being made by Glencore for Xstrata,” it said last night.

Glencore, which holds a 34% stake in Xstrata, said in a separate statement that there was no certainty that any offer would be made.

The merged entity would have a market value of around £52 billion ($A77 billion) placing it behind BHP and Rio who have market values of $A190 billion and $115 billion respectively.

Glencore listed on the London Stock Exchange in May last year following a $10 billion float.

There has been wide-spread speculation of a tie-up between the two companies after Glencore chief executive officer Ivan Glasenberg told London’s Financial Times the float would provide the firepower to target larger acquisitions “such as Xstrata”

Minelife senior resource analyst Gavin Wendt told ILN's sister publication MiningNews.net that a potential merger was a logical fit.

“I think a lot of people were expecting it when Glencore listed that it was going to be the likely outcome and it was just a matter of time really before the two groups got together,” he said.

“It just makes so much sense in terms of their management philosophy, the way the companies are run, the asset exposures … and also for the fact that these days it has certainly been the trend that groups are getting together and getting bigger.

“I think there was a fair degree of ‘we need to get larger’ because BHP is so big and there are obvious benefits to BHP that have materialised since the company got bigger in terms of its market influence.”

Wendt said the merger talks might prompt other major miners like Anglo American to go on the acquisition hunt.

“Maybe it does put a little bit pressure on them but again I don’t think it is a matter of betting bigger just for the sake of it,” he said.