Brazil's CVRD, the world's leading iron ore producer, on Friday joined the bidding war for Canadian nickel miner Inco Ltd. with an all-cash offer of $17.6 billion (10.5 billion pounds), one of the biggest overseas takeover bids ever by a Brazilian company.

Flush with cash from sky-high metals and minerals prices, mining companies have been aggressively seeking to consolidate to keep up with demand from fast-growing economies such as China's.

Companhia Vale do Rio Doce, as CVRD is formally known, is offering C$86 per Inco share, or a total of C$19.9 billion ($17.6 billion), trumping all other offers.

A tie-up between the two companies would create one of the world's three largest diversified mining groups, with leading market positions in products such as iron ore, nickel, bauxite, alumina and manganese.

"Our offer surpasses those of our competitors. If shareholders accept it, we'll be creating the largest nickel producer in the world," Roger Agnelli, CVRD's chief executive, said at a news conference.

The CVRD bid tops an offer from Canadian miner Teck Cominco Inc., whose cash-and-stock bid was worth C$18.7 billion ($16.7 billion) at the market close on Thursday. Teck, whose bid expires on August 16, has said it does not plan to raise its offer.

U.S. copper producer Phelps Dodge Corp. has also bid for Inco, but its stock-heavy offer has failed to gather wide support from Inco shareholders and faces opposition from some of its own investors.

Atticus Capital, a hedge fund that owns 8 percent of Phelps, said on Friday it opposed the bid for Inco, arguing that Phelps should be sold instead.

"The reality of it is, if you look at the competing bid and who Teck is up against, who Phelps Dodge is up against, I think CVRD certainly has the winning hand here," said David Davidson, an analyst at Paradigm Capital Inc. in Toronto.

Inco declined to comment on the CVRD bid, which expires in 45 days. No one at Teck was immediately available for comment.

Asked how CVRD would react if Teck or Phelps improved their offers, Agnelli was noncommittal. But some analysts said CVRD may be prepared to pay more for Inco, whose expertise would help it develop two massive nickel deposits in Brazil.

"We think CVRD has left some additional room in their bid to manoeuvre," Bear Stearns said in a research note.

CVRD shares fell 1.77 percent to 42.19 reais in afternoon trading in Sao Paulo. Inco shares rose 2.61 percent to C$88.75 in Toronto, while Teck was up 2.1 percent at C$78.29.

PATTERN OF AGGRESSIVE BIDS

It is not the first time that CVRD, one of Brazil's most dynamic corporations, has made a hostile bid for a large foreign rival.

Last December, the Rio de Janeiro-based company took over Canadian nickel miner Canico Resource Corp. for C$933 million ($825.7 million). Previously, it tried and failed to gain control of another Canadian mining company, Falconbridge Ltd., then known as Noranda.

Already the world's largest producer and exporter of iron ore, a key ingredient in steel, CVRD has spent $10.5 billion on a variety of expansion projects around the globe in the last five years as it seeks to branch out into other metals.

Besides its takeover of Canico, it has invested in coal projects in Mozambique, Australia and Venezuela, a potassium project in Argentina and coke and coal projects in China, which is its biggest market for iron ore.

But CVRD's spending spree has raised some red flags. Moody's Investors Service and Fitch Ratings on Friday both placed CVRD's credit rating under review for a possible downgrade, citing the anticipated increase in debt from an Inco deal.

CVRD's bid for Inco caps an extremely busy summer of merger activity in the global mining sector.

On July 28, Inco gave up its battle to acquire Falconbridge after not enough shares were tendered. At the time, Inco said it would concentrate on its planned merger with Phelps Dodge. Phelps Dodge had financially backed Inco in its takeover battle for Falconbridge with Swiss-based Xstrata Plc. On Tuesday, Falconbridge's board of directors recommended shareholders accept the Xstrata offer.