REPORT: JSW Steel in Negotiations to Buy London Mining

India’s third-largest steelmaker, JSW Steel Ltd, is reportedly in negotiations to acquire besieged iron ore producer, London Mining (LSE:LOND).

The UK-based company is struggling with declining iron ore prices, infrastructure woes and the ebola outbreak in Africa, where it operates a small mine. In addition, the company is riddled with debt, announcing last week it did not have enough cash to operate its only mine and was working to secure investors.

To make matters worse, London Mining was hit with an extra $2 a ton charge for docking their cargo ships in Sierra Leone, forcing the company to spend more on exporting its minerals.

Although a JSW spokesman could not comment, talks between the two groups have reportedly been going on for some time.

"Talks (with London Mining) have been going on for many months. JSW people have visited them also," said an unnamed source.

The debt-burdened miner is a prime candidate for a takeover; however, analysts and sources familiar with the situation believe JSW would still need to tackle many of the issues facing London Mining and its peers.

"Their operating cost is still too high against the current iron ore price. It's not a bad asset, but having so much debt when the iron ore price is so low, and when you're not generating free cash flow, just doesn't work," said analyst Carole Ferguson at SP Angel in London.

In addition to purchasing London Mining, the deal could potentially include African Minerals, a UK-based minerals exploration, development and mining company that owns a low-cost rail line and port in Sierra Leone.

News of the possible acquisition drove shares for London Mining up almost 18 percent on Monday.