The newspaper also said Anglo American had reignited plans to appoint Sir John Parker as chairman and had made an attempt to recruit him in recent days.

The report said Anglo, which rebuffed a proposal from Xstrata to consider a merger of equals, is to open talks with Aluminium Corp of China (Chinalco) and an unidentified Middle Eastern investor about a partnership to inject hundreds of millions of dollars into MMX, its Brazilian iron ore business.

The Financial Times reported on its website that the company had held informal talks with Gulf Industrial Investment Company, a Bahrain iron oxide pellet producer, and Japanese trading house Sojitz about taking a stake of up to 30 per cent in MMX.

The Sunday Times reported that Jim Leng, who recently stepped down as chairman of Rio Tinto, had been put forward as a potential candidate to succeed Sir Mark Moody-Stuart, who has announced his intention to step down.

The newspaper also names Niall FitzGerald, deputy chairman of Thomson Reuters and Paul Anderson, a director at BHP Billiton as candidates.

The Observer said South Africa's National Union of Mineworkers, with 317,000 members, had intervened in the proposed merger saying it would lead to "unacceptable" job losses.

A spokesman for Anglo American declined to comment on possible investment in the Brazilian iron ore business but said the process to appoint a new chairman was "progressing well."

($1=.6052 Pound)

(Reporting by Matt Scuffham and Victoria Bryan; Editing by Jon Loades-Carter)