RENO, NV -

The battle between the world's largest steelmaker and a U.S. energy fund for control of Baffinland Iron Ore Mines has escalated into a bidding war as Nunavut Iron Ore Acquisition topped ArcelorMittal's latest offer.

Nunavut announced New Year's Eve that it had increased its offer to purchase Baffinland common shares for Cdn$1.45 per share.

"This increase means our offer remains the clearly superior choice for Baffinland shareholders," said Bruce Walter, chairman of Nunavut Iron. He indicated that Nunavut Iron "is continuing to assess its options beyond the increase of the offer price to $1.45."

However, Nunavut indicated it would purchase up to 60% of Baffinland's shares while ArcelorMittal's C$1.40 per share cash offer is for 100% of the Vancouver-based junior miner. Nunavut Iron's offer remains open until the end of Jan. 10, 2011.

Nunavut Iron is a wholly owned subsidiary of Iron Ore Holdings, which is a limited partnership formed for the purchase of making the Baffinland offer. The majority of the equity financing for the offer is coming from private investment firm, the Energy & Minerals Group.

The Baffinland board announced on New Year's Eve that they determined the amended ArcelorMittal offer "is in the best interests if Baffinland and Baffinland shareholders."

The Baffinland board noted, "The amended ArcelorMittal offer remains a partial offer for 49.5% of the outstanding common shares (or 55.4% of the 89.5% of the common shares not owned by Nunavut) and, therefore, remains structurally coercive."

ArcelorMittal has a lock-up agreement for 25% of Baffinland common shares, including 22.5% belonging to Baffinland's largest shareholder, Resource Capital Funds.

The prize in the heated bidding war between Nunavut Iron and ArcelorMittal is the Mary River iron ore mining project on Baffin Island in the territory of Nunavut