The Switzerland based mining giant Xstrata has confirmed that it has advanced towards its rival Anglo American for a potential merger deal worth £41bn to gain access to iron ore mines and control of the world's biggest platinum producer.

Now a days, Xstrata is mainly an exporter of coal used by power plants and has already spent more than $27 billion in the last 6 years to add nickel mines in Canada, copper production in Chile, coal in Australia and platinum in South Africa.

A statement issued by Xstrata said, "A merger of these two world-class companies with complementary assets is highly compelling and would provide enhanced scale and financial flexibility to fund future growth."

Earlier in May, Xstrata reported increased coal output for the Q1, whereas its copper and gold output dropped amid lower prices. The company also informed about its repayment of then existing debt of $3.7 billion.

While London based Anglo American's iron ore production soared by 22 per cent in the Q1. On the other hand, production of coal and diamond was reduced in anticipation of lower demand.

In February 2009, Anglo American declared in Feb. 2009 that it would do away with 19,000 posts by the end of this year and will suspended dividend payments in order to deal with the adverse economic conditions.

According to analysts at Citigroup, the merger would make full strategic sense and the merged company would emerge as a global leader in base metals, platinum, ferrochrome and coal.

Last but not the least, the deal would allow Xstrata to trim down its costs through joining operations.

Goldman Sachs and UBS are shouldering the responsibility of advising Anglo American, while Deutsche Bank and JPMorgan Cazenove are advising Xstrata.