CORRECTED - Brazilian miner Vale raises bid for Xstrata-source

(Corrects to show that while the source did confirm a newspaper report that Vale is raising its bid, the source did not specifically address a new price cited in that report or the question of timing of a formal offer) (Error was repeated in UPDATE 1)

SAO PAULO, Feb 21 (Reuters) - Brazilian miner Vale X(VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research) has raised its bid for rival Xstrata (XTA.L: Quote, Profile, Research), a source with direct knowledge of the merger talks said on Thursday.

The source, who asked to be unnamed, would not comment further on a report in local newspaper O Estado de S.Paulo that said Vale had sweetened its bid for Xstrata to 47 pounds a share from 40 pounds previously, or to more than $89 billion.

News of the new offer comes two days after Vale secured agreements with Asian and European steelmakers to raise its term iron ore prices by 65 percent from 2007. [ID:nPEK348125], [ID:nN19251222]

Analysts estimate that the increase in ore prices will result in an extra $10 billion a year in revenue for Vale. (Reporting by Denise Luna, Writing by Reese Ewing; Editing by Steve Orlofsky)