Mining company Xstrata PLC has confirmed it is in merger discussions with commodities trading giant Glencore International PLC.

In a statement on Thursday in response to mounting speculation that the two were in talks, Xstrata said Glencore had proposed an all-share merger of equals. However, it added that there is no certainty of an offer being made.

In London, shares in Xstrata rose by 10 per cent to STG12.28 ($A18.29) while Glencore's were up 4 per cent at STG4.50.

Glencore, which already holds more than a third of the shares in Xstrata, has until March 1 to announce whether it intends to make a firm offer. This is the first time there has been public confirmation of formal merger talks, but background discussions have been ongoing for some years.

Xstrata, based in Switzerland and the UK, was formed in 2002 when it bought Glencore's coal assets. The company mines copper in the Americas, zinc in Spain and ferrochrome and vanadium in Australia and South Africa.

Glencore extracts, ships and refines raw materials from coal, to copper, to corn. It is based in the Swiss town of Baar but has its main listing in London.

On Tuesday, Xstrata reported that coal production rose seven per cent last year but copper production declined by three per cent as deposits near exhaustion. Copper accounts for 44 per cent of Xstrata earnings and coal for 27 per cent.

Glencore spokesman Simon Buerk declined to comment.