Anglo American strengthens defences

Mining giant Xstrata has confirmed interest in a merger with Anglo American

Mining giant Anglo American is strengthening its defences against an unwanted merger approach from rival Xstrata by planning talks over a Chinese investment, it has been reported.

Anglo, which last week rebuffed the tie-up advances and branded the terms of the £42 billion deal "totally unacceptable", is to open negotiations with Chinalco, China's state-backed aluminium producer, the Sunday Telegraph reported.

The talks are thought to centre on a partnership with the Chinese firm, along with at least one unidentified Middle Eastern investor, which would see hundreds of millions of dollars invested into Anglo's Brazilian iron ore business.

Negotiations are said to be at an early stage and there is understood to be no certainty that a deal will be reached.

Meanwhile, National Grid chairman Sir John Parker was linked with taking on the same role at Anglo as the firm looks to find a big hitter for the top job to help it fight Xstrata's approach.

Other names in the ring were reported to be Jim Leng, who stepped down from his position at Rio Tinto earlier this year, and Jeroen van der Veer, the former chief executive of oil giant Royal Dutch Shell.

This week Swiss-based Xstrata described its offer as highly compelling given the pair's interests in multiple commodities and regions.

But Anglo rejected the formal merger proposal, citing a negative impact on its position in the platinum, iron ore and diamond markets and putting faith in its existing business strategy as an independent.

Anglo American has endured a turbulent few months, announcing in February that it planned to shed 19,000 jobs this year in a bid to cut costs in the face of weaker global demand.

The London-based firm also reported a 29% slide in annual profits after a sharp deterioration in market conditions over the second half of 2008.