Anglo-Australian mining giant Rio Tinto has scrapped a $19.5bn (£12.1bn) deal with China's Chinalco in favour of a tie-up with rival giant BHP Billiton.
The move is expected to save Rio - which has debts of close to $40bn - and its former suitor BHP some $10bn.
Both companies' shares jumped over 10% in London after the deal was announced.
State-owned Chinalco said it was "very disappointed" by Rio's rejection of the deal, which would have been China's largest investment in a foreign firm.
As well as the joint venture with BHP, Rio Tinto will launch a rights issue to raise $15.2bn.
The deal with Chinalco was originally announced in February, when commodity prices were low. They have since recovered strongly, making the terms of the deal less attractive.
"Since we announced the Chinalco transaction, financial markets have seen a significant improvement," said Rio chairman Jan du Plessis.
This meant the terms of the deal had "become markedly less valuable" and Rio's ability to raise capital had "improved very considerably", he added.
The deal could have seen Chinalco's stake in Rio double to 18%. The $19.5bn investment comprised $12.3bn on stakes in nine of Rio's mining assets, and $7.2bn on Rio bonds that could be converted into shares.
"Rio Tinto was in a difficult situation when the deal was signed and so the terms were relatively easy. Now the situation has changed and Rio must have found the deal wasn't worth it anymore," said Cui Jingyi at Guotai Jun'an Securities.
Rio Tinto will pay the Chinese company $195m in compensation for pulling out.
"We are very disappointed with this outcome. We had maintained an extremely flexible and constructive attitude in our consultations with Rio Tinto," said Chinalco president Xiong Weiping.
Chinalco still owns 9% of Rio and Mr Xiong said his company "will monitor closely the rights issue and the plans for the joint venture with BHP Billiton".
Others, however, were rather happier at the collapse of the deal.
"It is great for the Australian people that this deal falls over and we do not have the complications of the Communist People's Republic of China's government owning the wealth of Australia in the ground in Australia," said Australian Senator Barnaby Joyce.
'Too much power'
Rio and BHP have signed an agreement to set up a 50/50 joint venture.
They said they would combine their major iron ore operations in Western Australia, sharing port and rail facilities.
"The synergies in this combination are so substantial that both companies have been investigating ways to combine these operations for more than a decade," said BHP chief Marius Kloppers.
Under the deal, BHP will pay Rio nearly $6bn to take its equity interest in the joint venture to 50%.
The move is likely to upset the Chinese steel makers, who have said that Australian iron ore miners have too much power to decide prices, the BBC's Phil Mercer in Sydney says.
Global commodity prices hit record highs last summer before falling back sharply as the world economy slumped.