Shares in United Minerals Corporation have surged after BHP Billiton confirmed a $204 million takeover for the company.
UMC may reject the major investment by Chinese company it heralded last month, after recommending shareholders accept a takeover offer by BHP.
BHP Billiton made its move on UMC today, offering shareholders $1.30 cash for each UMC share, valuing the minerals explorer at $204 million.
The offer is conditional on UMC not proceeding with a major investment by the China Railway Materials Commercial Corp Group (CRM).
That CRM deal announced last month was described by UMC at the time as "groundbreaking" and a "significant milestone" for the company.
It was seen as a strategic move that could help the company develop its iron ore deposits and obtain key contacts inside China.
But on Friday, the directors said the BHP Billiton proposal crystallised value for UMC shareholders now.
"The directors have agreed to unanimously recommend BHP Billiton's offer (which is conditional on the CRM placement not being completed) in the absence of a superior proposal," UMC told the stock exchange.
UMC shares went into a trading half earlier this month, last trading at 91 cents, making the BHP Billiton offer of $1.30 per share a 43 per cent premium to the last market price.
The BHP offer values each share at less than the $1.35 CRM offered for the 20 million shares it sought, which would have given the Chinese company an 11.4 per cent stake in UMC.
UMC has been seen as a likely investment for BHP Billiton because its principal asset, the Railway Deposit in Western Australia's Pilbara region, abuts one of the mining giant's iron ore projects.
BHP Billiton iron ore president Ian Ashby said it was a "natural fit".
"This acquisition is consistent with our plan of capturing growth options to deliver long term shareholder value.
"We are pleased that we have been able to reach an agreement with the board of UMC to present what we believe to be a compelling cash offer to UMC shareholders," he said.
UMC's iron ore deposit has an indicated and inferred resource of 122.36 million tonnes.
The transaction is yet to be voted on by UMC shareholders, but has been unanimously recommended by the company's directors.
"By any measurement, this is a great result and it offers all of our shareholders an opportunity to deal away the significant development risks which we would need to overcome to bring the deposit into production," said UMC chairman Alan Birchmore.
Shares in UMC, which were previously in a trading halt, surged 37 cents, or 41 per cent, to a high of $1.28 before settling at $1.26 at 11:51 AEDST.