Andrew Forrest has accused global iron ore giants BHP Billiton and Rio Tinto of pressuring the federal government to change its tune on a parliamentary inquiry into the commodity.
But if the government won't act, independent senator Nick Xenophon has signalled he will not only seek a Senate inquiry in June but bring forward his own legislation to change competition rules in the mining sector.
The government is coming under pressure from BHP and Rio, as well as the broader mining lobby, to drop moves towards an inquiry.
Mr Forrest, who claims BHP and Rio are oversupplying the market to squeeze out smaller operators, says he is dismayed by their lobbying efforts to try to avoid the inquiry.
"I've never seen two quite conservative companies work so hard against the cause of transparency," he told ABC TV on Tuesday.
The Fortescue Metals founder says an inquiry could uncover what is happening in offshore markets and would be in the national interest.
That is a similar sentiment to that of Senator Xenophon, who is warning the government to be cautious of heeding what he describes as the "hysterical" response from mining bosses.
The South Australian senator says he was so encouraged by Treasurer Joe Hockey's response during a meeting last Thursday that he temporarily dropped the idea of a Senate inquiry, in favour of a joint select committee chaired by a Liberal MP.
But he said he could still bring on his Senate motion in June and put up a bill to strengthen competition rules.
"It seems that the government appears to be walking away, but the issue won't go away," Senator Xenophon said on Tuesday.
Prime Minister Tony Abbott had earlier indicated he was in favour of an inquiry, but on Tuesday he said no decision had been made.
"The last thing we would want is a one-sided inquiry which degenerates into a witch-hunt against some of our best companies," he said.
Mr Hockey said the government was still discussing the idea with Labor, other MPs and stakeholders as part of a "carefully thought-through, methodical" process.
"We are not just going to jump at shadows," Mr Hockey said.
BHP chief Andrew Mackenzie said an inquiry would drive trading partners to invest in other parts of the world, branding such a move a "ridiculous waste of taxpayers' money".
Rio Tinto iron ore chief executive Andrew Harding said an inquiry could have "extraordinary" ramifications for Australia's reputation as a promoter of free markets.
Opposition Leader Bill Shorten said he was waiting to see the terms of reference.
"They should be careful that they're allowing our international reputation to drift dangerously," he said.
Senator Xenophon said such comments were "verging on the hysterical".
Iron ore prices have plummeted by more than 60 per cent in the past year.
Mr Mackenzie said BHP had slowed its investment amid declining demand but slowing output would be crippling for the company.
Liberal senator Cory Bernardi said he was happy to buy supporters of the inquiry a "year 9 economics textbook" to explain how markets work.
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