CORRECTED-Brazilian miner Vale raises bid for Xstrata

Corrects to show that while the source did confirm a newspaper report that Vale is raising its bid, the source did not specifically address a new price cited in that report or the question of timing of a formal offer. Error was repeated in update.

SAO PAULO (Reuters) - Brazilian miner Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research) has raised its bid for rival Xstrata (XTA.L: Quote, Profile, Research), a source with direct knowledge of the merger talks said on Thursday.

The source, who asked to be unnamed, would not comment further on a report in local newspaper O Estado de S.Paulo that said Vale had sweetened its bid for Xstrata to 47 pounds a share from 40 pounds previously, or to more than $89 billion (45.3 billion pounds).

News of the new offer comes two days after Vale secured agreements with Asian and European steelmakers to raise its term iron ore prices by 65 percent from 2007.

Analysts estimate that the increase in ore prices will result in an extra $10 billion a year in revenue for Vale.

(Reporting by Denise Luna, Writing by Reese Ewing; Editing by Steve Orlofsky)