Aquila Resources shares have plunged more than 12 per cent after the miner's suitors ruled out increasing their takeover offer.
Chinese steelmaker Baosteel and rail operator Aurizon have made a joint $1.4 billion, $3.40 a share takeover bid for Aquila.
However this week mining contractor Mineral Resources bought a near $200 million, 13 per cent stake at $3.75 a share in Aquila Resources in a bid to deal itself in to Aquila's large-scale iron ore project.
The company's chief Chris Ellison said publicly he was interested in being involved in the proposed - but stalled - multibillion dollar West Pilbara iron ore project, including mine, rail and port operations.
Mineral Resources' stake, along with chairman Tony Poli and co-founder Charles Bass's shareholdings represent more than 50 per cent and could block the suitors' who have nearly 40 per cent.
Baosteel chairman Dai Zhihao threatened to dump the company's 19.8 per cent stake and any involvement in the West Pilbara project if the bid failed.
The two suitors said they would not increase the offer price and that Aquila and its shareholders faced a more uncertain future getting the project up in a volatile iron ore environment.
"Baosteel and Aurizon announced the offer for Aquila shares with the intention to progress Aquila's stalled development projects," he said.
Aquila shares fell 44 cents, or 12.4 per cent, to $3.10.
It is due to respond to the bid next week.
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