Bidding war breaks out over Nunavut’s Mary River

Hype alone appears to be enough for the Mary River iron deposit to generate money for the shareholders of its owner, Baffinland Iron Mines Corp.

A full–scale bidding war has broken out between ArcelorMittal, the world’s largest steel company, and Nunavut Iron Ore Acquisition Inc, for Baffinland, which owns the massive Mary River iron ore deposit in North Baffin.

Nunavut Iron Ore Dec. 15 upped an earlier 80-cent per share bid to $1.35. That offer trumps a $1.10 friendly takeover bid filed by ArcelorMittal on Nov. 8.

The new Nunavut Iron Ore offer is for 50.1 per cent of Baffinland, a stake worth $531 million. The company also announced it bought 9.3 million more Baffinland shares, bringing its total holding to almost 34.7 million shares, or nine per cent of the company.

“Nunavut Iron’s revised offer provides Baffinland shareholders with the opportunity to realize a substantial premium on a significant portion of their investment immediately and to benefit from the development of the Mary River Project in the longer term,” said Bruce Walter, chairman of Nunavut Iron, in a news release.

“We believe that the continuing ownership interest in Baffinland and the proposed royalty interests should generate significant additional returns to shareholders as Mary River is brought into production.”

The Mary River deposit consists of high-grade iron ore, but its location on northern Baffin Island and distance from European markets mean it could cost $4 billion or more to develop.

Nunavut Iron Ore said it wants to develop the site in phases, “with modest initial capital requirements.”

AcrelorMittal’s bid is set to expire Dec. 20, while Nunavut Iron Ore’s is good until Dec. 30.

Meanwhile, the Financial Post reported that Gordon McCreary, the former Baffinland board member who resigned Nov. 8, the same day the AcelorMittal bid was announced, said a Chinese company may enter the fray for Baffinland.

He wouldn’t name the company, but said it has been doing extensive research on Mary River.

McCreary was to head to New York City in an effort to convince some Baffinland shareholders not to sell to Nunavut Iron Ore and wait for a better offer.

Mary River wouldn’t be the first Nunavut mineral deposit to have Chinese owner. In 2009, China Minmetals bought a package of lead/zinc deposits in the Kitikmeot, including the Izok and High Lake properties.

Earlier in the week, ArcelorMittal said it has received approval for its Baffnland takeover bid from Canada’s competition commissioner, and the green light from Industry Canada.

With files from Postmedia News