Reuters reported that Glencore Xstrata and Vale have revived talks over a potential combination of the mining groups' nickel operations in Canada's Sudbury basin in an effort to cut costs as prices for the metal languish.

The sources said that the discussions are still at an early stage but have revived hopes of a long debated Sudbury tie up, with the companies considering a number of options for their mining and processing operations in the area.

Depending on the details of a potential deal, several of the sources said a tie up could mean substantial savings for both mining heavyweights, if all and part of their mining, milling and even smelting operations are brought together.

In 2006, a proposed merger of Falconbridge and Inco the then-players in Sudbury, but later taken over by Xstrata and Brazil's Vale, respectively expected annual synergies and cost savings of about USD 550 million.

The sources said that talks restarted after Glencore completed its acquisition of Xstrata earlier this year. Discussions have progressed against the backdrop of a nickel price that has fallen by around a fifth since January to around four-year lows, weighed down by over supply. But there was not yet what one of those sources called a meeting of minds.

They said that there is material value to be created, but some difficult decisions have to be taken. Both Glencore Xstrata and Vale whose current chief executive Mr Murilo Ferreira led Vale Inco, later Vale Canada after the 2006 takeover. The two main operators in Sudbury have held talks on joining forces on more than one occasion before, both as Inco and Falconbridge and later as Vale and Xstrata.