Rumours of the potential tie-up have been swirling in the resource sector for weeks, with Xstrata last night confirming it had sent a written proposal to Anglo’s board.

Xstrata said this merger would combine two world-class companies with complementary assets, calling the proposal “highly compelling”.

“The combination would create a premier portfolio of operations diversified across multiple commodities and geographies, with enhanced scale and financial flexibility to fund future growth,” the Zug-based company said in an announcement to the market.

The company also said it had identified “substantial operational synergies” as well as the optimisation of both companies’ growth pipelines.

Both companies are listed in London, where Xstrata has a market capitalisation of £20 billion while Anglo American is worth around £21 billion.

In Australia, both companies have major coal interests, with Xstrata controlling 17 coal mines and several new projects, and Anglo Coal owning six operations in the Bowen Basin and the Hunter Valley.

Xstrata also controls a number of base metal mines, including copper and nickel mines in Queensland and Western Australia.