Miner Xstrata has rejected a cash-and-shares takeover approach from Brazil's Vale pitched at just under 40 pounds a share, or 39 billion pounds ($76 billion), the Financial Times said.
The newspaper quoted people close to the matter as saying London-listed Xstrata and its 35-percent shareholder, Swiss commodities trader Glencore, were holding out for a price equivalent to about 45 pounds a share.
Xstrata declined to comment. Glencore was not immediately available for comment. Vale could not immediately be reached.
"The two sides are nowhere near to an agreement," the Financial Times quoted a person close to Vale as saying, who added that the Brazilian group was "close to walking away from the whole thing."
Shares in Xstrata closed 0.4 percent higher on the FTSE-100.
Tobias Woerner, mining analyst at MF Global Securities in London, said Vale might have to bid well above 45 pounds a share to win over Xstrata's other shareholders.
"I would want to have closer to 50 (pounds) if not above. Glencore may have different views, because it can gain from the marketing agreements of the enlarged group," he said.
The Financial Times said Vale, the world's biggest producer of iron ore, planned to use $50 billion of bank finance to fund the cash portion of its proposed bid and to pay the rest in preference shares.
Vale said last month it was in talks over a possible bid for Xstrata to diversify its mining interests. A deal would give it significant production of copper and zinc and also lift it ahead of Russia's Norilsk Nickel to become the world's biggest nickel miner.
A deal would be the largest ever by a Brazilian company and would come amidst a wave of mergers and acquisitions in the mining industry as companies jostle to secure scarce resources and gain a bigger slice of a boom in commodities prices driven by rapid urbanization in China.
Rio Tinto, the world's second-biggest miner by market value, last week rejected an improved $147 billion all-share offer from bigger rival BHP Billiton.
From a small, Swiss-domiciled producer of steel alloys known as Sudelektra Holding in the late 1990s, Xstrata has grown rapidly through mergers and acquisitions to challenge the world's biggest miners.
A takeover by Vale would bring together Canada's former two top nickel producers -- Inco, which Vale bought in 2006 for $17 billion, and Falconbridge, which was bought by Xstrata.
Analysts and media have speculated that Anglo American might also be interested in a tie-up with Xstrata, or that Rio Tinto might look at the Anglo-Swiss company as a way of fending off BHP Billiton.
Britain's Telegraph newspaper said last week that China Development Bank had held talks with Glencore about buying its stake in Xstrata. Earlier this month, the bank backed Aluminum Corp of China's purchase of a 12 percent stake in Rio Tinto's London-listed shares, sources close to the matter have said.