Rio Tinto has rejected a takeover approach from the world's biggest mining company BHP Billiton.
Rio Tinto shares rose 27% on the news, while BHP Billiton shares fell by 1.3%. Rio Tinto says the proposed all-share offer "significantly undervalues" it.
Such a merger would create a mining giant worth about £120bn ($252bn), based on their current market values.
BHP confirmed that its approach had been rejected, but said that it was still seeking talks.
The proposal was for one Rio Tinto share to be swapped for three shares in BHP.
"I have to say I am very surprised at this deal. I wasn't expecting this," said Ian Henderson from JP Morgan's Natural Resources Fund.
"The only reason for consolidation in the sector is that investors continue to have this completely myopic view on the value of resources," he added.
Competition authorities may have objections to such a deal.
"It's a massive, massive deal," said Henk Groenwald from Coronation Fund Managers.
"In things like iron ore, there must be competition concerns - maybe as a combined group, they would have to dispose of something," he added.
It is not clear whether there will be talks between the two companies about the proposal.
"The board has given its response to BHP on the proposal that it put forward and there it ends, as far as we're concerned at this stage," according to Rio Tinto spokesman Nick Cobban.
If the approach were to succeed, it would be the world's second-biggest takeover deal after mobile phone giant Vodafone's purchase of Mannesmann in 2000.