"These discussions are incomplete, no agreement has been reached, and whether any will be is uncertain," MIM told the Australian Stock Exchange last week.

MIM’s productive Bowen Basin coking coal mines would boost Xstrata's coal production by almost half. Xstrata is currently not active in Queensland, other than through a stake in the Cook colliery and interests in other lease areas.

Analysts have valued the shares at around $1.80 per share with interest expected from other suitors, such as Anglo American. It is also believed that Anglo would gain the most from combining its operations with MIM’s, as the two companies both operate in Queensland, with mining leases contiguous in some areas.

A contested bid for MIM could lift the going price to between $1.90 and $2.00 a share.

MIM is also the world's seventh biggest copper producer, with more than 6 million tonnes of copper yet to be mined at its Mount Isa operations - more than it has extracted over the past 60 years.

MIM, which employs 8000 people in Australia, the United Kingdom, Germany and Argentina, has an annual turnover of $3.5 billion and has often been speculated as a likely takeover target.

MIM is being advised by Gresham Partners and Merrill Lynch, while Deutsche Bank has been acting for Xstrata.