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The proposed move, which may be of interest to those involved in stock market trading, is estimated to be worth around £41 billion.
Xstrata explained that the deal would help to increase its operations in South Africa.
"The combination would create a premier portfolio of operations diversified across multiple commodities and geographies, with enhanced scale and financial flexibility to fund future growth," it said in a statement, adding that such a move would be "highly compelling".
A similar move was recently made by BHP Billiton and Rio Tinto, which have announced a joint venture that will see it combine its operations in the Australian iron ore sector.
Shares in Anglo American rose following the announcement, climbing 97p to 1720p at 14:22 BST on the FTSE 100.
However, Xstrata's share price declined, dropping 2.86 per cent to 661.5p in London.
