Both companies today issued separate statements saying that discussions over a potential deal estimated to be worth around $US90 billion ($A99 billion) had been terminated.

Vale said it had made an indicative offer for 100% of Xstrata – in cash and shares – however discussions broke down after no agreement was reached between the two parties. The company did not disclose the offer’s value.

“While Vale and Xstrata continue to believe that a combination of the two companies could realise significant value for both sets of shareholders, we have not been able to reach agreement,” Xstrata’s chief executive Mick Davis said in a statement.

“We have therefore mutually decided to cease discussions.”

The news follows months of talks between Vale and Xstrata over a possible merger.

However, it has been rumoured that an agreement could not be reached between Vale and Xstrata’s major shareholder Glencore – which owns a 35% stake in Xstrata – over marketing rights for Xstrata’s copper, nickel, cobalt and coal production.

It was speculated earlier this month in the Folha de Sao Paulo that Vale may have agreed to Glencore keeping the marketing rights over five years – excluding iron ore which Vale would retain – after Glencore initially demanded a 10-year extension of its agreements, which was unacceptable to Vale.

Yesterday, Vale’s chief executive Roger Agnelli told reporters in Sao Paulo that discussions between the two parties had not been easy.

“It’s a difficult operation,” he said. “It’s not simple, and there are issues involving marketing rights that we’re discussing. But it’s not something that’s a priority for Vale.

“Xstrata is not the only opportunity. There are others.”

Shares in Vale gained 5.2% to 48.53 reais in Sao Paulo on the announcement, while Xstrata closed 233 pence higher at 3716 pence on the London Stock Exchange.