Vale eyes major takeover target

Vale do Rio Doce, the Brazilian mining group, is reported to be working on a bid for one of the world’s largest mining companies.

According to a report in the daily newspaper, O Estado de S Paulo, the group is planning to raise funds for the takeover through the issue of shares in the international market.

Sources at Vale have apparently suggested three names as likely takeover targets: Anglo American, Freeport-McMoRan Copper & Gold, and Alcoa Inc.

The rumours had an immediate impact on Alcoa’s shares, which rose by around 4% yesterday on the New York Stock Exchange.

Vale could certainly be in the mood for a major acquisition. The group made a bid for Xstrata earlier this year in a deal could have been worth as much as £45 billion.

Negotiations took place over several months but were eventually abandoned by Vale, which stood to match BHP Billiton in iron ore production had the acquisition gone ahead.

At the time, mining company experts at Citigroup predicted that the demise of the Vale/Xstrata deal would not be the end, but just the beginning of a new wave consolidation in the mining sector.