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The battle over Canadian iron ore miner Baffinland Iron Ore Mines Corp. (BIMGF, BIM.T) between steel titan ArcelorMittal (MT, MT.AE) and a minority shareholder group is set to continue, as the minority group said Thursday it has satisfied the concerns of securities regulators over the details of its counteroffer.

Privately owned Nunavut Iron Ore Acquisition Inc., which holds 10% of Baffinland's shares, said it agreed to refile its hostile offer for Baffinland to include details of warrants, after the Ontario Securities Commission said it would hold a hearing into Nunavut's offer.

ArcelorMittal is offering C$1.40 a share for all of Baffinland's shares and warrants, valuing the company's equity on a diluted basis at about C$550 million. Meanwhile, Nunavut Iron is offering C$1.45 a share for Baffinland, valuing the Tronto-based junior miner's equity on a diluted basis at nearly C$570 million.

Nunavut Iron however is only bidding for 60% of the outstanding shares. The remaining shareholders would get 0.4 warrants for each share, and a whole warrant would be exercisable for a share of Baffinland stock at the C$1.45 a share exercise price. The value of the new warrants weren't included in the aforementioned valuation.

The staff of the Ontario Securities Commission had been concerned that the warrants hadn't been officially included in Nunavut's offer and wanted to hold a hearing with a view suspending Nunavut's offer.

Baffinland's board of directors continues to support ArcelorMittal's offer; ArcelorMittal has said it doesn't intend to raise its bid further since it said its bid "is superior to [Nunavut's] coercive partial offer."

Nunavut Iron said that it will refile its offer before Jan. 10, and that under Ontario securities laws, the refiling will effectively extend its offer by 10 days. ArcelorMittal is therefore the only suitor that will be able to take up Baffinland's shares when both suitors' offers expire on Jan 10.

Separately, Baffinland said the cost of building a road to its proposed Mary River mine site in Canada's northern territory of Nunavut will likely be higher than analysts have estimated. It said it won't release the results of a road feasibility study until after Jan. 10. It also said that it expects to file its draft environmental impact statement by mid-January and to complete the full environmental process toward the end of 2012 or early 2013. Baffinland expects the Mary River mine to produce 18 million metric tons of iron ore a year over a mine life of 21 years.

ArcelorMittal cautioned that Nunavut Iron's bid not only creates uncertainty about how to value the residual minority shareholding left over in Nunavut Iron's bid, it could also be dilutive since it involves the issuance of warrants, which if implemented, would increase the number of Baffinland shares outstanding at a later date.

Baffinland's shares traded at C$0.56 prior to when Nunavut Iron offered C$0.80 for all of Baffinland's shares on Sep 22. ArcelorMittal has already secured commitments from Baffinland's shareholders to take up its offer. Those shareholders hold about 25% of Baffinland's outstanding shares.

Equity analyst Peter Campbell of Jennings Capital said he prefers ArcelorMittal's bid to Nunavut's offer because it provides more certainty to shareholders and isn't dilutive. Furthermore, Nunavut doesn't seem likely to be able to raise its bid further after only raising its offer by five Canadian cents in its latest bid revision.

Campbell also added that if Nunavut's offer were to win, Baffinland's free floating shares would drop below ArcelorMittal's offer and move closer to a fair value of C$0.90 or lower if Nunavut was to issue more Baffinland shares to finance the capital expenditure costs of the project.

-By Edward Welsch and Alex MacDonald, Dow Jones Newswires; 403-229-9095; edward.welsch@dowjones.com

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