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UPDATE 1-Nunavut to settle with regulator on Baffinland bid

Published 01/05/2011, 11:54 PM
Updated 01/05/2011, 11:56 PM

* Nunavut says to address regulator's concerns on bid

* May extend bid beyond Jan. 10

* OSC staff were concerned with ability to complete bid

(Recasts with statement from Nunavut Iron)

TORONTO, Jan 5 (Reuters) - Nunavut Iron Ore said on Wednesday it has agreed with staff of Canada's largest securities regulator to settle concerns about its takeover bid for Baffinland Iron Mines .

The Ontario Securities Commission (OSC) said earlier on Wednesday it would hear arguments on Thursday for holding up the bid by ceasing trade of any shares tendered to Nunavut's offer.

The hearing was set up to address whether Nunavut, backed by a private equity fund, is capable of carrying out its offer of C$1.45 a share for 60 percent of the iron ore exploration firm.

The bid, due to expire on Jan. 10, values Baffinland, which has a vast iron ore deposit in the Canadian Arctic, at C$570 million ($570 million.)

In a competing bid, ArcelorMittal , the world's largest steelmaker, is offering C$1.40 a share for 100 percent of Baffinland. That bid is also due to expire Jan. 10.

The Nunavut bid includes a proposed warrant that would allow shareholders to earn partial shares in the new company. A source with knowledge of the offers said the proposed warrants were causing concern because they amount to a promise and not a solid component of the bid.

The Nunavut statement said it was taking steps to address the concerns of OSC staff and planned changes to the offer.

"It remains Nunavut Iron's present intention to file a notice of variation and extension (the "Exchange Right Variation") in order to amend its offer for the common shares of Baffinland ... in order to provide further consideration for Common Shares taken up in the form of an exchange right in respect of common share purchase warrants that Nunavut Iron proposes be issued by Baffinland," the statement said.

Nunavut Iron said it intended to file the Exchange Right Variation on or before Jan. 10. 2011. It said that if it cannot complete the necessary documentation, it would extend its offer on that date for an additional 10-day period.

BIDDING WAR

Nunavut and ArcelorMittal have been caught up in a bidding war for Baffinland since September.

Baffinland's shares have risen more than 154 percent since Nunavut's first offer.

At stake is Baffinland's huge iron ore deposit on Baffin Island in the northern Canadian territory of Nunavut. Experts say the Mary River deposit is large enough to meet all of Europe's needs for many years, although developing the mine will cost C$4 billion and present major logistical and environmental challenges.

Shares of Baffinland edged down on Wednesday to close at C$1.44 on the Toronto Stock Exchange. ($1=$1.00 Canadian) (Reporting by Julie Gordon, Pav Jordan and Jeffrey Hodgson; Editing by Dhara Ranasinghe)

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