PARIS/TORON­TO- Steel gi­ant Arcelor­Mit­tal upped its takeover bid for Baffin­land Iron Mines yes­ter­day, valu­ing the com­pa­ny at about C$550 mil­lion ($550 mil­lion) as it pur­sues its un­de­vel­oped iron ore de­posit in Cana­da's Arc­tic. Baffin­land shares rose 4.3 per cent to C$1.44, above Arcelor­Mit­tal's sweet­ened of­fer of C$1.40 a share, sug­gest­ing that some in­vestors hope the bid­ding bat­tle that be­gan in Sep­tem­ber will con­tin­ue. Ri­val Nunavut Iron, backed by pri­vate eq­ui­ty and a Cana­di­an man­age­ment team, is al­so of­fer­ing C$1.40 a share, but for 60 per cent of the com­pa­ny.

Arcelor­Mit­tal has plen­ty of am­mu­ni­tion if the con­test heats up, with cash and cash equiv­a­lents of $3.5 bil­lion as of the end of Sep­tem­ber. One Baffin­land in­vestor said it would be dif­fi­cult for Nunavut Iron-a com­pa­ny backed by US pri­vate eq­ui­ty firm En­er­gy & Min­er­als Group and formed sole­ly to bid for Baffin­land-to in­crease its of­fer. "My gut re­ac­tion is that this prob­a­bly is the end of the game. The sense has al­ways been that Nunavut stretched very hard to get to their last bid. Where are they go­ing to find more?" said the share­hold­er, who asked not to be named be­cause he was not cleared by his firm to speak to the me­dia. Nunavut Iron raised its of­fer for Baffin­land ear­li­er this week, chal­leng­ing Arcelor­Mit­tal's friend­ly bid of C$1.25 a share for all of the shares.

Nunavut start­ed the takeover bat­tle in Sep­tem­ber, of­fer­ing 80 Cana­di­an cents a share. Arcelor­Mit­tal ini­tial­ly coun­tered with an of­fer of C$1.10. Nunavut Iron Chair­man Bruce Wal­ter told Reuters the firm is now mulling its next move. "It would be fair to as­sume that what they've done was well with­in the ex­pect­ed range of re­spons­es from them, so we will be con­sid­er­ing our op­tions," he said in a phone in­ter­view. "We are go­ing to see how the mar­ket re­acts and talk to share­hold­ers and see where every­one's views are, and go from there." Ray­mond James Eq­ui­ty Re­search an­a­lyst Tom Mey­er urged clients to ten­der their shares to Arcelor­Mit­tal's of­fer. "We be­lieve the na­ture (100 per cent con­trol) of Arcelor­Mit­tal's pro­pos­al is su­pe­ri­or," he said in a note.

"Con­tin­ued own­er­ship of BIM shares un­der (Nunavut Iron), in our opin­ion, will be sub­ject to fur­ther share di­lu­tion, tech­ni­cal risk, project de­lays, cap­i­tal cost in­fla­tion, etc." Huge iron ore de­posit The takeover bat­tle re­volves around Baffin­land's huge iron ore de­posit on Baf­fin Is­land in the north­ern Cana­di­an ter­ri­to­ry of Nunavut. The de­posit is thought to be large enough to meet all of Eu­rope's needs for many years, al­though de­vel­op­ing the Mary Riv­er mine will be a ma­jor lo­gis­ti­cal and en­vi­ron­men­tal chal­lenge. For Arcelor­Mit­tal, which wants to be about 80 per cent self-suf­fi­cient in iron ore sup­ply, a suc­cess­ful bid would mean more di­rect ac­cess to the key raw ma­te­r­i­al-a sig­nif­i­cant is­sue giv­en tight glob­al sup­plies and healthy de­mand from Chi­nese steel mills.

That strong de­mand has meant that ma­jor pro­duc­ers such as BHP Bil­li­ton, Rio Tin­to, and Vale have con­sid­er­able clout in their ne­go­ti­a­tions with steel­mak­ers. "Arcelor­Mit­tal's in­creased of­fer of C$1.40 per share pro­vides demon­stra­bly su­pe­ri­or val­ue and cer­tain­ty for Baffin­land share­hold­ers, com­pared to Nunavut Iron Ore Ac­qui­si­tion Inc's re­vised co­er­cive par­tial of­fer," Pe­ter Kukiel­s­ki, head of min­ing and a mem­ber of the group man­age­ment board of Arcelor­Mit­tal, said in a state­ment.

"Our of­fer en­sures share­hold­ers re­ceive 100 per cent cash for all of their shares, rather than cash for just some shares and di­lut­ed val­ue for the shares not tak­en up un­der the Nunavut of­fer." But Nunavut Iron's Wal­ter told Reuters his of­fer was a bet on the com­pa­ny's fu­ture and was of greater val­ue to long-term hold­ers of the stock. "There are a num­ber of share­hold­ers who have been buy­ing in­to the com­pa­ny over the last two or three weeks, es­sen­tial­ly tak­ing out the short-term cash-ori­ent­ed arbs and tak­ing po­si­tions in the com­pa­ny with a longer term view," he said. "That again, we be­lieve, works in our favour, be­cause they are not go­ing to be in­ter­est­ed in cash­ing out at C$1.40. They'll be far more in­ter­est­ed in work­ing with us and re­al­is­ing much greater val­ue by de­vel­op­ing the project."