One week ago Xstrata increased its bid to $A3.20 per share for Resource Pacific, stating the price was final and would not be increased.

In response Resource Pacific said it had begun discussions with a third party for a "more attractive proposal".

"After detailed consideration, the Resource Pacific board has formed the view that it is unlikely that a superior proposal could be developed in a timely manner with that third party and accordingly has concluded these discussions," Resource Pacific said Friday.

Resource Pacific also released its formal recommendations - a mixed bunch with decisions riding on whether Xstrata manages to build on its current holding of 19.09% to more than 50%.

"If you are a shareholder with a longer-term investment horizon and want to participate in the opportunities presented by an independent Resource Pacific whilst accepting the risks, the board recommends that you do not accept the Xstrata offer," Resource Pacific said.

"However, if Xstrata's relevant interest exceeds 50 percent, the board of directors intends to recommend, at that time, acceptance of Xstrata's offer.

"If you are a shareholder with a shorter-term investment horizon or are otherwise considering selling your Resource Pacific shares during the Xstrata offer period, you should consider either selling on market at prices above Xstrata's offer (if available and after allowing for brokerage) or accepting Xstrata's offer in the absence of a superior proposal."

The company's directors, including managing director Paul Jury, intend not to accept the offer but said if Xstrata's shareholding exceeds 50%, they would sell.

Jury and other members of the board and management team do not expect to keep their jobs if Xstrata holds the majority, and said the strategic direction set by the board, including the expansion of the Newpac mine in the New South Wales Hunter Valley to 8 million tonnes per annum and the operation of two longwalls, may not be followed and Xstrata had no obligation to do so.

Resource Pacific warned shareholders that if Xstrata was to become a majority shareholder, and given the recent volatility of the share market, there was a risk Resource Pacific's share price would fall upon the close of Xstrata's bid.

"If Xstrata acquires more than 50 percent, it is unlikely that shareholders in Resource Pacific would receive a takeover offer for their shares, other than from Xstrata itself," Resource Pacific said.

"There is no guarantee that Xstrata will make any such offer or that the offer price will be the same as or higher than the revised offer price."

Xstrata's offer closes February 22.