Swiss diversified mining group Xstrata has proposed acquiring Sphere Minerals Limited, a West African focused iron ore exploration and development company, for A$428 million ($383 million) in cash.

Xstrata's offer is for A$2.50 per share, valuing Sphere at approximately A$428 million, representing a 61-per cent premium over the closing price of A$1.55 per Sphere share on 23 August 2010 on the Australian Securities Exchange.

Xstrata said that its offer, which has been agreed by all the directors of Sphere, follows extensive consideration by the Sphere board of the strategic options for Sphere's projects, including discussions with other parties.

It said that the Sphere board concluded that Xstrata's offer represents the best opportunity for Sphere shareholders to maximise the value of their investment.

West Perth, Australia-based Sphere is a West-Africa focused iron ore company, with interests in three iron ore projects in Mauritania, West Africa:

It has 50:50 joint venture with Société Nationale Industrielle et Minière (SNIM), Mauritania's state-owned iron ore producer in the large-scale Guelb el Aouj iron ore project.

Sphere also owns a 100-per cent interest in the Lebtheinia project, and a 100-per cent interest in the Askaf project located 35kms south of the Guelb el Aouj project area.

"Xstrata's acquisition of Sphere will add a range of organic growth projects in iron ore to our portfolio. This includes potential near-term production from the Askaf project and longer term growth potential from the large-scale Guelb El Aouj project in Mauritania, a country with an established history of iron ore exports," said Peter Freyberg, Xstrata Coal chief executive.

The acquisition brings together Xstrata Coal's proven bulk mining and project development capabilities and Sphere's team of experienced iron ore professionals operating in Mauritania.

Xstrata has the financial and technical capabilities to expedite the development of Sphere's greenfield growth projects and manage the inherent risks involved.

"Sphere's projects have now reached the stage at which they will benefit from the robust financial capacity and support of a major diversified mining group to ensure they reach their full potential, for the benefit of all our stakeholders in Mauritania. We recommend that, in the absence of a superior proposal, shareholders accept Xstrata's offer," said Alexander Burns, managing director of Sphere.

Xstrata said that it fund the acquisition through its existing credit facilities and cash on hand.