LONDON (Reuters) - Britain's top share index steadied at the close on Friday after hitting a one-week high, with stronger miners following a rally in metals prices offsetting weaker companies such as British American Tobacco (>> British American Tobacco plc).

British American Tobacco showed choppy moves, with the stock closing 2.9 percent lower after rising sharply earlier in the day following its offer to buy out U.S. cigarette maker Reynolds American (>> Reynolds American, Inc.) in a $47 billion takeover.

The move would create the world's biggest listed tobacco company with brands including Newport, Lucky Strike and Pall Mall. The deal would mark the return of BAT to the lucrative U.S. market after a 12-year absence, making it the only tobacco giant with a leading presence in American and global markets.

Reynolds American shares were up 15 percent after setting a record high earlier in the session.

"BAT shares reversed their sharp gains to trade lower as arbitrage trades were going on, with BAT being sold off and Reynolds being snapped up on the back of the merger news," Jawaid Afsar, senior trader at Securequity, said.

"The FTSE 100 has failed to make any real progress above 7,000 as it faces stiff resistance at current levels. Investors and traders may pause until the U.S. election is out of the way, before trying to push the index any higher. A range of around 6950-7020 is a likely outcome for the next couple of weeks."

The blue chip FTSE 100 index <.FTSE> closed 0.09 percent lower at 7,020.47 points after hitting an intra-day peak of 7,058.39, the highest level since Oct. 12.

Basic resources stocks were the top sector gainers, with the UK mining index <.FTNMX1770> rising 1.3 percent following a rally in metals prices. Shares in Anglo American (>> Anglo American plc), Rio Tinto (>> Rio Tinto plc) and Antofagasta (>> Antofagasta plc) rose 1.2 to 2.8 percent.

Burberry (>> Burberry Group plc) rose 3.1 percent after a blog, citing sources, said rival U.S. company Coach (>> Coach Inc) was working on a potential merger with Burberry. However, sources familiar with the matter said the companies were not in active merger talks, paring some earlier gains in the stock.

The FTSE 250 <.FTMC> mid cap index, made up of more domestically-focused firms, also steadied.

Outside of the blue chips, well-received results buoyed shares in Acacia Mining (>> Acacia Mining PLC), which soared 12.7 percent after the precious metals miner said that it saw its full year gold production ahead of forecasts.

(Additional reporting by Kit Rees, editing by Larry King)

By Atul Prakash