Baosteel and Aurizon have lobbed a joint off-market takeover bid at Aquila Resources that if accepted will see the target's shareholders receive $3.40 per share held.
The offer values the equity in Aquila at approximately $1.4 billion and would also see the bidders take the suitor's 50% stake in the West Pilbara Iron Ore Project.
The proposal offers a 38.8% premium to Aquila's closing share price of $2.45 on Friday and the bidders noted that the suitor's shares have not closed above the offer price since May 2012.
However, investors took up that challenge in late morning trade, pushing shares as high as $3.41, a cent above the offer price and their highest price since May 30, 2012.
At 12pm (AEST) Aquila shares were 36.73% higher at $3.35, against a benchmark index decline of 0.21%.
The proposal is subject to a minimum of 50% approval from shareholders.
Baosteel is one of China's leading iron and steel producers, but the bid requires no Chinese regulatory approvals or funding conditions.
The deal however is still dependent on receiving approval from the Foreign Investment Review Board (FIRB).
If the proposal is successful, Aurizon will own up to 15% of Aquila shares, while Baosteel will own the remaining shares, meaning its holding could be as high as 85%.
Bloomberg data shows Aquila chief executive Anthony Poli currently holds 29% of Aquila, while Baosteel holds 19.79%.
Aquila acknowledged receipt of the bid and said it would form an independent board sub-committee to consider and evaluate the proposal.
The takeover target has appointed Goldman Sachs as its financial advisor and King & Wood Mallesons as its legal advisor.