Brazilian iron ore producer Vale has scrapped plans to buy FTSE 100 mining house, Xstrata. The mooted £44 billion takeover is thought to have been derailed by financing problems.

Xstrata's takeover by Vale had been in the offering for three months. Swiss commodities trader Glencore owns 35% of Xstrata and implied that it would only support the acquisition if it was guaranteed the same marketing rights for Xstrata's output as it currently holds.

Vale had made an initial proposal made up of cash and shares. With the financial markets remaining volatile, it was thought that the Brazilian group would have to pay more in cash because its share price was under pressure. Raising this money would have been a struggle in current market conditions.

Xstrata is likely to attract further takeover interest, potentially from Anglo American. Vale may also seek to undertake another major acquisition, albeit funded through paper.

Shares in Xstrata fell more than 10% in early trading on Wednesday. By 10am, they were trading down 8% at £34.08.