PE firm launches hostile bid for Canada's Baffinland Iron Mines

Nunavut Iron Ore yesterday launched a C$274 million hostile bid for Canada's junior iron ore explorer Baffinland Iron Mines, with an eye on Baffinland's $4-billion Mary River iron ore project that holds 500 million tonnes of high-grade iron ore reserves.

Nunavut Iron Ore, a special purpose vehicle created for the acquisition by the $2-billion private equity firm Energy & Minerals Group, is offering 90 Canadian cents a share for Baffinland, a premium of about 43 per cent to the stock's close price on 22 September 2010.

Energy & Minerals Group, which already holds a 6 per cent stake in Baffinland said that it will not sweeten the bid although the Toronto-based miner's stock price rose by 68 per cent yesterday after announcement of the offer, suggesting a rival bid may be in the offing.

''We're the only offer that has been made and at the moment we don't see anything to indicate that we've given anything other than an extremely fair offer,'' Bruce Walter, chairman of Nunavut Iron Ore and co-owner of Iron Ore Holdings said in an interview yesterday.

Toronto-based Baffinland has been looking for a strategic partner to fund its C$4.1billion Mary River iron ore project at Baffin Island, Nunavut, in the Canadian Arctic.

The company fully owns three mining leases covering approximately 1,600 hectares in the Mary River that is estimated to hold around 500 million tonnes of high-grade iron ore reserves.

Baffinland said that it has been pursuing strategic alternatives, and is in advanced stages of negotiations with one strategic party with respect to a potential transaction. However, it warned that there can be no assurance that these negotiations will result in a transaction.

The board of directors of Baffinland have set up a special committee of independent directors to review the offer and have recommended its shareholders to take no action until the committee completes the review Nunavut Iron Ore proposal.