In its sustained campaign to gain more foothold into the ballooning iron ore market, Swiss mining giant Xstrata announced on Tuesday that it is set on a friendly takeover of Sphere Minerals Ltd.

The mining firm said that deal was facilitated by its subsidiary, Sidero Pty Ltd, which sealed a deal with Sphere to purchase all the latter's shares at $2.50 per security, leading to an off-market buyout agreement that could reach $428 million.

The acquisition is the second iron ore expansion move by Xstrata following its purchase last year of an iron ore project in the Republic of Congo, marking the company's growing focus on other mining targets apart from its core production of coal and metals.

Analysts said that the mining giant was attracted by Sphere's magnetite projects in Askaf, Guelb el Aouj and Lebtheinia and their promises of million tonnes of output, further nudging the company to substantial role in the iron ore market, which has been witnessing accelerating prices as China heightens its steel production.

Xstrata chief executive Peter Freyberg characterised the acquisition as mainly the marriage of "Xstrata Coal's proven bulk mining and project development capabilities and Sphere's team of experienced iron ore professionals."

Mr Freyberg expressed confidence that the merger would greatly benefit the target company as "Xstrata has the financial and technical capabilities to expedite the development of Sphere's Greenfield growth projects and manage the inherent risks involved."

Sphere managing director Alexander Burns said that Xstrata's offer carries sufficient premium and the company's board of directors have given indications that they would sell their 5.4 percent share of Sphere to Xstrata.

Mr Burns conceded that with the offer pushed forward by Xstrata, "Spheres projects have now reached the stage at which they will benefit from the robust financial capacity and support of a major diversified mining group."