Vale talks to take over Xstrata hit impasse

By Eric Onstad

LONDON (Reuters) - A dispute over marketing rights held by mining group Xstrata's (XTA.L) biggest shareholder is threatening a possible takeover by Brazil's Vale (VALE5.SA) RIO.N worth around $90 billion (45.3 billion pounds), a source close to the situation said.

Shares in Anglo-Swiss Xstrata tumbled 4.8 percent to 39.38 pounds by noon on Thursday, making it the second-biggest percentage loser in the FTSE 100 .FTSE index. The UK mining index .FTNMX1770 fell 1.0 percent.

Xstrata has gained a quarter since Vale said on January 21 it was in talks about a possible acquisition of Xstrata.

The two sides have hit an impasse over demands by Swiss commodities trader Glencore, which holds a 35 percent stake in Xstrata, for an expansion of marketing rights in the combined firm, said the source, who declined to be named.

Glencore has a string of lucrative long-term contracts to sell a large portion of Xstrata's mining output and wanted further scope if Vale bought the firm, he added.

"They're a long way apart. If that's not resolved, there really isn't anything to talk about," the source said.

Negotiations have veered away from price, which previously had been a sticking point. The two sides are more or less happy with a price around 45 pounds a share, he added.

A European analyst who declined to be named said it was likely the two sides would still hammer out a deal.