If the indicative offer succeeds, it could save hundreds of jobs in northern England as well as diversify Anglo American's portfolio.

Sirius has so far struggled to get financing for the project and is reviewing the North Yorkshire polyhalite mine after scrapping in September a plan to raise $500 million in a bond sale, delaying the project.

Shares of Sirius surged 34% to Anglo's proposed offer price of 5.5 pence in morning trade, while Anglo slipped more than 1%.

The review includes a search for a major strategic partner and financial investor to raise $600 million in funding needed to develop the project.

Many local people have invested in the plan, which involves tunnelling under the North York Moors National Park to exploit what Sirius has said is the world's largest deposit of polyhalite, a multi-nutrient fertiliser.

Anglo said it had identified the project as a "tier one" asset - a large scale, long-life, high margin deposit.

Its finance director Stephen Pearce said the Sirius project provided a rare chance to buy near the bottom of the market.

"This is almost the ideal time," he said on a media call.

Sirius shares lost more than 80% of their value last year.

The project could also help Anglo move away from more polluting assets, notably coal, as investors demand miners become more climate aware.

"With a compelling entry point, and (Anglo's) financial capability to progress this project, we see this as being in the smart M&A camp," said RBC analyst Tyler Broda.

However, the question remains of whether there is a market for the kind of fertiliser Sirius would produce, and Broda added that more questions would be raised including regarding the viability of the project.

Pearce said the company was shifting its portfolio to commodities needed for developed economies with growing populations and "a cleaner, greener, more sustainable world".

If the offer succeeds, it would mark a return by Anglo to the fertiliser industry in northern England.

Until it sold out to Israel Chemicals in 2002, Anglo was joint owner of the Boulby mine, near Sirius' project, which is the world's only producing polyhalite mine.

($1 = 0.7617 pounds)

By Yadarisa Shabong and Barbara Lewis