The Press Association reports HSBC is leading the consortium of banks believed to include Santander, BNP Paribas, Lehman Brothers, Credit Suisse and Citigoup, to fund the takeover after Vale's finance chief reportedly flew to London last week to meet up with 12 banks.

Vale is also believed to have been given the go ahead for the takeover by the President of Brazil, despite reports last week that the country's Government was trying to block the merger because it believed it was not in the country's interest.

The Brazil Government owns nearly 53% of Vale.

Some analysts believe the takeover bid - likely to be a cash and paper deal - could top $US100 billion, with insiders reportedly saying an offer of between $42-44 per share was being contemplated.

Last week Vale confirmed it was in ongoing discussions with Xstrata and investment banks over possible growth opportunities.

Glencore has reportedly held exploratory talks to sell its 35% stake in Xstrata with Russia's Rusal and the Chinese, while bankers acting for Xstrata are believed to have considered a merger with other companies, most notably with Anglo American.