Anglo-African platinum miner Lonmin has rejected a £5bn ($10bn) takeover offer from bigger rival Xstrata.
The £33-per-share cash offer is at a 42% premium to Lonmin's share price at the close of business on 5 August.
The news drove Lonmin shares up 47% to £34.26 in London but Xstrata's shares fell in afternoon trade.
Xstrata said the move marked "the next step" in its strategy to develop a significant platinum business and diversify its business.
But Lonmin responded: "This is an opportunistic and entirely unwelcome attempt to acquire Lonmin at a price which undervalues its unique assets."
Xstrata later revealed that it now owned a 10.6% stake in Lonmin after buying additional shares in the business on Tuesday.
Xstrata shares initially rose as much as 4%, but in later trading erased earlier gains to close down 1% at £31.67.
Some analysts said that a bidding war could now break out for the world's third-largest platinum miner, with Brazil's mining giant Vale do Rio Doce named as one potential suitor.
Charles Cooper at Evolution Securities said that a fair price for Lonmin would be about £40 per share, valuing the firm at about £6.4bn.
Xstrata chief executive Mick Davis has previously said that he wants Xstrata, which predominantly mines copper, coal and zinc, to become a one million ounce per annum platinum producer within 10 years.
Mr Cooper says that if Xstrata succeeds in buying Lonmin it will achieve this in a year.
Global metal prices have soared over the past year or so on the back of rising demand from fast-growing countries such as China and India.
Platinum is used in catalytic converters in cars to trap carbon emissions and is being increasingly used for this purpose as regulations demand the production of greener vehicles.
Lonmin is seen as an attractive asset as it operates in South Africa, which has two-thirds of the world's platinum.
But Lonmin has not benefited from price rises as much as it could have, as safety problems at its smelters and a power crisis in South Africa have forced it to repeatedly cut production targets.
Lonmin's current production guidance of 765,000-770,000 ounces of platinum for the year to 30 September is 15% lower than the initial guidance provided for this period, Xstrata said.
For this reason, Seymour Pierce analyst Asa Bridle said: "We advise investors to sell into the strength created by this offer."