The Financial Times reported that people close to the situation have said that Xstrata head Mick Davis has asked advisers Deutsche Bank and JPMorgan Cazenove to take interested parties seriously, which apparently prompted Vale to take notice.
MiningNews.net previously reported that Vale - formerly CVRD - had reportedly hired bankers to consider a possible bid for Xstrata, which would value the company at more than $88.2 billion. Vale chief executive Roger Agnelli denied the takeover rumours.
The FT reported that Vale and Xstrata's banks met at Merrill Lynch's London headquarters.
Meanwhile Davis is reportedly trying to raise the interest of his Anglo American counterpart, Cynthia Carroll, in a deal. According to sources, the two have met at UBS' headquarters in London.
"No serious proposal was discussed," one person was reported as saying, while another said "Xstrata has always said its main priority is to maximise shareholder value, and that includes considering any serious takeover proposals."
Talk of a takeover proposal has seen Xstrata's share price in London jump more than 30% since November 22, riding on speculation of further corporate activity in the major end of town thanks to BHP Billiton's proposed takeover three-for-one offer for Rio Tinto.
Despite the takeover talk surrounding Xstrata, any bid for the company would need approval from Glencore International, the world's largest commodities supplier, which holds a 35% stake.
In a brief statement released by Xstrata yesterday the company confirmed the rumours.
"Xstrata confirms that its ongoing interaction with other industry participants includes dialogue with a number of parties covering a range of topics of mutual interest such as industry consolidation," it said.
"Xstrata is continually reviewing opportunities within the industry with a view to adding value to its shareholders.
"None of these very 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."