Fortescue shares soared more than 40 per cent in intraday trade before finishing up 44 cents, or 21.36 per cent, at $2.50.
It was the second most traded stock on the Australian stock exchange (ASX) on Monday.
Fortescue said it was not aware of any information that could explain the share price movement, when it responded to a query from the ASX.
Speculation is rife that BHP Billiton Ltd may be planning a takeover bid for the mid-tier company, after abandoning last week its hostile $100 billion-plus merger tilt for Rio Tinto Ltd.
A BHP Billiton takeover of Fortescue would end a long-running battle by Fortescue over access to BHP Billiton and Rio Tinto's extensive Pilbara rail network in Western Australian.
Fortescue recently won the right to negotiate rail access but analysts say the two mining giants would resist a commercial arrangement with the smaller company.
Another persistent rumour is that sovereign wealth fund China Investment Corp is seeking a minority stake in Fortescue.
A Hong Kong newspaper reported last month that the two companies had been in talks.
Fortescue said in a statement on Monday that it had held discussions with industry entities regarding product supply and investment opportunities.
Fortescue said the talks were confidential but there were none that "are progressed to a level that could be considered complete".
When Fortescue began exporting iron ore in May, chief executive Andrew `Twiggy' Forrest said the company would remain Australian owned.
Forrest owns 35.82 per cent of Fortescue, so he could block a potential bidder's attempt to gain full ownership.
ABN AMRO Morgans private client adviser Bill Bishop said there was a lot of speculation surrounding Fortescue.
"The optimistic stories are circulating about a so-called bid by a Chinese outfit, but it's strictly a rumour," Bishop said.
"It could be short covering."
Short covering or `buying to cover' is the practice of buying shares in order to close a short position.
Investors short cover when they speculate that the share price will rise, buying the same number of securities in a company that were sold short.
