The silvery metal, used to manufacture stainless steel and in batteries, has risen $500 per tonne to $27,800 (£15,000) from Friday’s peak as concern mounted over shrinking stocks.

CVRD last week waded into a three-way battle for Inco with a cash offer of C$17.2 billion (£8 billion). Yesterday the Toronto-based company decided that CVRD’s bid of C$86 per share was large enough to justify Inco discussing terms. Hinting that CVRD might be persuaded to raise its offer, Inco’s board said that it had given its executives a mandate to conduct negotiations.

Inco said: “The board did determine, based on information then available and after consultation with its advisers, that the CVRD offer could reasonably be expected to result in a ‘superior proposal’.”

However, Inco is still recommending that shareholders accept a cash-and-shares offer from the American miner, Phelps Dodge, valued at C$17.7 billion, until the talks with CVRD are concluded. It also continued to recommend that its investors reject a rival proposal from Teck Cominco, the Canadian zinc miner.

The bid frenzy over Inco reflects the soaring price of nickel and other base metals, such as copper, which have been transformed by rising demand from dull industrial commodities into financial assets, chased by pension funds.

Stocks of nickel freely available from London Metal Exchange warehouses have dwindled to just one day’s supply. The shortage, caused by rising demand for construction materials, has been made worse by a strike at Inco’s Voisey Bay mine in Labrador.

A takeover by CVRD would make the Brazilian firm a base metals behemoth — the largest producer of nickel and iron ore, with an important position in bauxite and alumina, used to manufacture aluminium.