Sinosteel, the Chinese state-owned steelmaker, has ruled out increasing its A$1.36bn (US$1.3bn) cash offer for Midwest Corporation, clearing the way for the junior Australian iron ore miner to merge with domestic rival Murchison Metals.

Murchison made an agreed all-share offer for Midwest on Monday, valuing its target at A$1.5bn in a move likely to thwart Sinosteel’s ambitions to secure one of the biggest groups operating in the Mid West iron ore area of Western Australia.