The world's largest exporter of coal issued a brief statement yesterday that it was in ongoing talks with industry participants, where issues of "mutual interest such as industry consolidation" were raised.
"None of these preliminary discussions has resulted in any proposal being made either for or by Xstrata and there can be no certainty that any such proposal will result," the company said.
Speculation that Xstrata was possibly up for sale took hold late last week after a spike in its share price in London, followed by media reports that bankers from Xstrata and Vale, formerly CVRD, had met.
London media also reported that Xstrata head Mick Davis was also trying to rouse interest from his Anglo American counterpart, Cynthia Carroll, in a deal.
Fairfax analyst John Meyer said an Xstrata-Anglo American combination would be a less logical fit on first inspection, but the companies could offer substantial commodity and geographical diversification.
However Meyer said an Xstrata merger with Vale would prove a logical fit for Vale's strategy to diversify and expand in North and South America.
"Xstrata offers substantial growth in copper, zinc and nickel, and would enable Vale to add value through consolidation and through the development of a number of new projects in Vale's existing area of operation," Meyer said.
Meyer also said Xstrata could be hunting for its next acquisition, naming Freeport as a potential target with its substantial copper portfolio.
"Alternatively Xstrata could look to consolidate copper mines on the Zambian copper belt through acquisition of First Quantum Minerals, Equinox and Anvil Mining," Meyer said.
Xstrata dropped 33 pence to last trade at 3705p in London.