Xstrata and Glencore went from dating to a (more) serious relationship

The long-term fling between mining group Xstrata PLC (LON:XTA) and commodities trader Glencore International PLC (LON:GLEN) is getting serious.  In a statement in response to increasing speculation about an upcoming merger, Xstrata confirmed today that it is in negotiations with Glencore. The deal, reports the National Post, would create a combined group worth more than US$79 billion.

The Anglo-Swiss diversified miner said that Glencore had proposed an all-share merger of equals. Glencore, which already owns 34% of Xstrata, said that there was no certainty of an offer being made, but acknowledged that under UK takeover rules, it must make an announcement by no later than March 1 about whether it intends to make a firm offer for Xstrata.

The new mining giant would have operations around the world, including key nickel mining and refining companies in Canada, where Xstrata owns the former Falconbridge nickel company. The combined miner would have a market capitalization of over $100 billion, putting it above Rio Tinto PLC but quite at the level of Brazilian miner Vale SA and BHP Billiton PLC.

After today’s news, shares in Xstrata went up by 10.9 percent to US$19.65 while Glencore's were up 6.2 percent at US$7.3.