Mining firms have been hit by falling demand for metals
Mining giant Anglo-American has rejected an approach from Swiss-based rival Xstrata about a possible merger as "totally unacceptable".
Anglo said that the proposals - which would have created a group worth more than £40bn lacked "strategic merit".
Xstrata had claimed a union "of equals" between "these two world-class companies" was "highly compelling".
Industry observers suggest a merger would make sense because of the vast cost savings that could be made.
But Anglo said that its current business strategy was already set to make "substantial savings".
It added that a merger with Xstrata would "profoundly impact" the nature of the group's interests in a way that was not beneficial - citing a negative effect on its position in the platinum, iron ore and diamond markets.
Anglo and Xstrata both have coal mines and infrastructure in Australia and South Africa, as well as copper mining operations.
The combined firm would be worth about £41bn based on their stock market value on Friday.
Mining firms have been hit by falling demand for metals amid the downturn.
They have also had problems raising cash because of the credit crunch, which last year led Xstrata to abandon its £5bn bid for its rival Lonmin.
And Anglo-American is cutting 19,000 jobs this year after a 29% fall in 2008 net earnings because of sliding demand for raw materials.
Last month Rio Tinto and BHP Billiton agreed a joint venture - a deal struck after Rio scrapped a planned tie-up with Chinalco, a state-controlled Chinese company.