Australian mining company Indophil Resources NL has rejected an A$426 million ($399 million) takeover offer by Xstrata, the world's fourth largest copper producer.

Swiss-based Xstrata offered $1 cash for every Indophil share to buy out its partner in the Tampakan copper and gold project, which is said to be Southeast Asia's largest undeveloped copper and gold project.

The offer price is at a 28 per cent premium to Indophil's A$0.78 closing price on Wednesday.

Indophil holds a 34.23 per cent interest in the Tampakan copper and gold project located on the Philippine island of Mindanao, about 65 km north of General Santos City.

Tampakan has the largest undeveloped copper deposit in South-East Asia, with 12.8 million tonnes of copper and 15.2 million ounces of gold. Xstrata is the the operator and major stakeholder in the project.

The Swiss miner has already bought a 17.8 per cent stake from Indolphil's largest shareholder, Lion Selection Ltd, which in turn is fighting a hostile bid from Indophil. Xstrata has also entered into a pre-bid acceptance agreement with Lion Selection.

Indophil was quick to turn down the offer which it said was "unrealistically opportunistic'' and "at a price that does not reflect the value of Indophil''.

The company said the board had not agreed to recommend the Xstrata approach and it has not entered into any agreement with Xstrata. And called it an ''attempt to frustrate its takeover of Lion.''

Indophil launched a takeover attempt for Lion Selection in a move aimed at ensuring that its largest shareholder doesn't sell its major stake to help finance the acquisition of the Cracow gold mine in Queensland.

Lion Selection owns 30 per cent of Cracow and is aiming to raise the necessary funds to pre-empt the $200 million that Beadell Resources has offered Newcrest Mining for its 70 per cent stake in the mine.

Xstrata, with a market cap of $81 billion, was until March the target of a bid by the larger rival Cia Vale do Rio Doce of Brazil.

Xstrata proposed to finance the deal through the company's existing credit facilities and cash in hand.