"There is no certainty that these discussion will lead to any agreement and a further announcement will be made only if they do so," Xstrata said in a statement.

The two-paragraph announcement could mark the ignominious birth of one of the world's major mining groups as the global minerals industry undergoes an unprecedented period of consolidation.

"It would make Xstrata a mini BHP or Rio Tinto, effectively," one coal industry analyst told MiningNews.net. "Glencore is spread a little bit - not quite as much as the majors of course - but Enex, if that was successful, would be pure coal."

The Australian coal assets had originally been planned to float on the Australian Stock Exchange as Enex Resources. But the $2.3 billion float was postponed indefinitely following the events of September 11, which caught Enex management in New York conducting a roadshow for the listing.

Xstrata, listed in Switzerland, has said previously it wanted to double its size through acquisitions. Chief executive Michael Davis told the Australian Financial Review he was looking to diversify the zinc, chrome and vanadium company's revenue streams.

For its part, Glencore said it was looking at the Xstrata option but also hadn't ruled out others.

"Glencore can confirm that one option they are looking at is to back their Australian coal assets into Xstrata, which they are a major (38.5%) shareholder in, but they're also looking at other options," a Glencore spokesman said.

"One of these is to continue with the Enex IPO in Australia, but they haven't settled on any option yet. When they do they will alert the market."

The merger of Xstrata, which has a market cap of Sfr1.3 billion (A$1.5 billion), and Enex would produce a A$6 billon company.

Enex owns a portfolio of 25 mines in Australia and South Africa and had sales of more than 41 million tonnes in 2000. Mines include West Wallsend, Liddell and Ulan in New South Wales' Hunter Valley region.