BHP Billiton, the world's largest mining company, has dumped plans to take over rival Rio Tinto, blaming the poor global market outlook.
The company said the all-scrip takeover bid was no longer in the best interest of BHP Billiton shareholders.
"While we have not changed our view of the basic industrial logic of the combination, or of the longer term prospects for natural resource demand growth driven by emerging economies, we have concerns about the continued deterioration of near term economic conditions," said chairman Don Argus.
BHP Billiton was offering 3.4 of its own shares for every Rio Tinto share, with the proposal already clearing regulatory hurdles in South Africa - although with some conditions - Australia and the United States.
The European Commission, the European Union's antitrust regulator, was expected to rule on the takeover proposal on, or before, January 15, 2009.
"Recent global events and associated falls in commodity prices have, however, altered risk dimensions," BHP Billiton chief executive Marius Kloppers said in a statement.
"The greater debt exposure of the combination plus the difficulty of divesting assets have increased the risks to shareholder value to an unacceptable level."
Vocal opposition to the merger had emerged from steelmakers in Asia and Europe amid concerns a combined entity could have enormous control over global iron ore and other resource commodity prices.
BHP Billiton said it would book a $450 million cost incurred progressing the takeover bid over the past eighteen months.
Meanwhile, BHP Billiton said it would report a $US2.1 billion ($A3.22 billion) impairment charge on its Ravensthorpe and Yabulu nickel assets as a result of a "significant deterioration" in the nickel market.
The company has also approved a $US4.8 billion ($A7.35 billion) investment to expand its Pilbara iron ore operations in Western Australia by 50 million tonnes to 205 million tonnes per annum.
The Rapid Growth Project 5 (RGP5) expansion is expected to deliver first production in the second half of the 2011 calendar year.
"While there is substantial uncertainty in the short term outlook, this investment decision highlights BHP Billiton's confidence that the long term outlook remains positive," BHP Billiton chief executive of ferrous and coal Marcus Randolph said.
Analysts have applauded the move amid uncertain and volatile times in global financial and commodity markets.
"I think it is a wise strategy," Fat Prophets analyst Gavin Wendt said.
"It was always going to be a high risk bid with lots of potential stumbling blocks and the biggest one, aside from having to get European Commission approval, is that we're currently in one of the most uncertain financial times that has been witnessed in 80 years or more."
DJ Carmichael analyst James Wilson said the combination of uncertain markets, the likely EU requirement for BHP Billiton to divest iron ore and metallurgical coal assets to satisfy the deal, and debt concerns had sunk the deal.
"I think it is great for BHP, I think it shows a sign of maturity that they're willing to cut their losses and get out of there before it costs too much," Mr Wilson told AAP.
"With uncertain times in global stock markets it is probably a wise thing to do."
Both analysts, however, agreed that BHP Billiton's withdrawal from bid did not rule out the company revisiting the takeover when conditions improve in financial markets.