The world's largest steelmaker ArcelorMittal (MT) said Monday that Canada-based iron ore junior miner Baffinland Iron Mines Corp. (BIM.T) agreed to a C$433 million bid to acquire the company and will recommend its board approves the deal, after rejecting a previous unsolicited bid.

The junior miner recently declined a takeover bid from Nunavut Iron Ore Acquisition Inc.

ArcelorMittal is in the process of expanding its iron ore output to become more self sufficient. The company previously said it aims to be 75% self-sufficient in iron ore by 2014.

Baffinland said it is recommending shareholders accept the C$1.10-a-share offer from ArcelorMittal, noting it represents a premium of about 37.5% to the 80-Canadian-cent-a-share unsolicited bid from Nunavut.

"The offer is in line with ArcelorMittal's strategy of expanding its mining portfolio and selectively adding to its existing pipeline of high quality development projects," said ArcelorMittal's Chief Financial Officer, Aditya Mittal.

ArcelorMittal was about 60% self-sufficient in its iron ore needs in 2009, helped by lower steel capacity.

"ArcelorMittal already has a significant iron ore presence in Canada through ArcelorMittal Mines Canada and has the technical and project management expertise to develop the Mary River property," Mittal said.

Baffinland closed Friday in Toronto at 95 Canadian cents. It was halted early Monday.

The Toronto-based junior miner formally rejected Nunavut Iron Ore's bid in late October, saying the bid significantly undervalued the company.

Baffinland has entered a support agreement with ArcelorMittal, with all of its directors and officers agreeing to tender to the offer. Its largest shareholder, Resource Capital Funds, has also entered a lock-up agreement with ArcelorMittal and will tender its 23% stake.

A formal offer is expected to be mailed shortly.

Baffinland has been seeking a strategic partner to help develop its Mary River iron ore project on Canada's Baffin Island in the northern territory of Nunavut.

The miner said the Mary River property has 365 million tons of proven and probable reserves with a grade of 64.7% iron and 500 million tons of additional resources.

In a previous feasibility study the company said development of the mine, which is north of the arctic circle, would require capital expenditure of $4.1 billion, a figure that could be upgraded, said Jennings Capital analyst Peter Campbell.

The mine is still probably five years away from production, he said, it will require 150 kilometers of rail to be built and a port on the southern island of Baffin. Mining in such arctic conditions occurs year-round in Canada but poses challenges such as dealing with permafrost.

-By Judy McKinnon and Devon Maylie, Dow Jones Newswires; 416-306-2100; judy.mckinnon@dowjones.com
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