Nunavut plans to build, not flip Baffinland

By Pav Jordan

TORONTO (BestGrowthStock) – If its hostile bid for Baffinland Iron Mines (BIM.TO: ) is successful, Nunavut Iron Ore plans to develop the company’s giant Arctic deposit, and is confident it can get the financial backing to foot a C$4 billion ($4 billion) development bill, Nunavut’s chairman said on Wednesday.

Nunavut Iron Chairman Bruce Walter told Reuters in an interview that the Mary River deposit could be a small-scale mine within two years, with further expansion another two or three years after that.

“We view the appropriate development program for the asset to be to move to small-scale production as rapidly as possible and then, in parallel, to continue with the development and build out to take it to a much larger operation,” he said.

Nunavut Iron sweetened its hostile bid for Baffinland on Wednesday to C$1.40 a share for 60 percent of Baffinland’s shares.

It was the latest chapter in a tug of war with steel giant ArcelorMittal (ISPA.AS: ) for Baffinland’s Mary River deposit, said to have enough iron ore to supply all of Europe.

ArcelorMittal has a friendly bid on the table of C$1.25 a share for all of Baffinland’s shares.

The Luxembourg-based firm wants to add Baffinland’s Mary River project to its portfolio as it targets being about 80 percent self-sufficient in iron ore supply.

Mary River, on Baffin Island in the northern Canadian territory of Nunavut, is expected to produce about 18 million metric tons of iron ore a year when it is first built. Output could almost be doubled relatively quickly according to some reports.

Walter, a former head of Canadian miner Sherritt International Corp (S.TO: ), said Nunavut’s bid is demonstrably better than Arcelor’s, and represents a long-term bet on the vast Mary River deposit.

“We are operators, we are developers, that has been our objective from day one,” he said. “Short term financial flipping is of no interest to us whatsoever.”

Nunavut Iron Ore, whose Chief Executive Jowdat Waheed was a consultant for the Mary River project, is backed by U.S. private equity firm Energy & Minerals Group, which invests in the energy and mining sectors and whose family of funds has over US$2 billion under management.

Walters said the backing by EMG gives Nunavut Iron access to deep-pocketed investors who have a track record in developing major mineral deposits.

“The EMG group is backed by some of the largest pension funds and sovereign wealth funds in the world,” he said. “It’s the norm for EMG to be putting hundreds of millions of dollars into development projects that they are moving forward with.”

Nunavut has sweetened its bid for Baffinland several times since its original offer of 80 Canadian cents a share on September 22. On December 16 it offered C$1.35 a share for 50.1 percent of Baffinland’s shares.

It already holds about 10 percent.

($1=$1.00 Canadian)

(Reporting by Pav Jordan; editing by Jeffrey Hodgson and Rob Wilson)

Nunavut plans to build, not flip Baffinland