JSW Steel Ltd, India's third-largest steelmaker, is in talks to buy Sierra Leone-focused iron ore miner London Mining Plc, two people with knowledge of the matter said.
The news, confirming a weekend report in Britain's Sunday Times newspaper, sent shares in AIM-listed London Mining up almost 18 percent in early trading on Monday.
London Mining, which has been hit by a falling iron ore price and the Ebola crisis that has gripped the region, would come "cheap" given its market value of $10 million, one of the sources said, adding the deal would help JSW meet some of its demand for steelmaking ingredient iron ore.
Action against illegal mining in India has led to a sharp fall in domestic iron ore output, forcing JSW to import heavily. It plans to ship in 10 million tonnes of iron ore this fiscal year ending March 31.
"Talks (with London Mining) have been going on for many months. JSW people have visited them also," said the source, who declined to be named as the information is not yet public.
Debt-laden London Mining said last week it was in talks with a potential investor for funds, but the funding would take a number of weeks to implement.
Like other junior iron ore miners, London Mining is battling record low prices for the steelmaking raw material in the face of stagnant demand from the world's top consumer, China, and oversupply from the biggest players in the industry.
A JSW spokesman did not immediately reply to a request for comment. London Mining was not immediately available for comment.
JSW is controlled by billionaire Sajjan Jindal.