Demand for raw materials in Asia is supporting booming commodity prices

At $23 a share, the offer is at a 35% premium to Jubilee's trading price on Friday and has been recommended by the firm's board.

The offer comes at a time of record high metal prices, supported by the rapid growth of China and India.

Xstrata has been involved in a number of acquisitions recently.

The offer comes after the Jubilee board opened its books to a number of parties.

Shares in the firm, which currently produces less than 1% of global nickel output, jumped 42% to a record A$24.25, suggesting investors are betting that a rival suitor will enter the fray with a higher offer.

Commodity demand

Xstrata has been keen to boost its existing nickel capacity of 110,000 tonnes a year with the price of the mineral soaring on strong demand for stainless steel for infrastructure projects in fast-growing Asian economies.

Earlier this year, Xstrata was trumped in its efforts to take control of Canadian nickel miner LionOre by Russian outfit Norilsk.

But the company, which also mines coal, copper and iron ore, won its battle to buy bigger Canadian mining group Falconbridge in the middle of last year.

With China and India growing more than 10% a year, the prices of copper and zinc have also surged.