Steel giant ArcelorMittal and Nunavut Iron Ore Acquisition Inc are locked in a bidding war for Canadian coal miner Baffinland Iron Mines Corp with both suitors raising their offers over the New Year.

At stake is the Toronto-based Baffiinland's 365 million tonnes of undeveloped iron ore reserves at its Mary River project in the high Artic of Canada that will require an investment of C$4 billion to develop.

Over the weekend,Luxemburg-based ArcelorMittal, raised its offer from C$1.25 to C$1.40 per share, valuing the Canadian miner at C$550 million.

Nunavut, which has been created for the acquisition of Baffinland by the US-based private-equity firm Energy & Minerals Group that already holds about 10.5 per cent of Baffinland's shares, reacted immediately by raising its offer to C$1.45 per share, valuing the company at about C$570 million.

This is the third time that both suitors have raised their bids since Nunavut launched a 90 Canadian cents a share or C$274 million hostile bid in September 2010 for Canada's junior iron ore explorer Baffinland. (See: PE firm launches hostile bid for Canada's Baffinland Iron Mines)

But Nunavut offer is for 60 per cent of Baffinland, while the world's largest steelmaker's offer is for the whole of the company.

"This increase means our offer remains the clearly superior choice for Baffinland shareholders," said Bruce Walter, chairman of Nunavut.

"In light of ArcelorMittal's amendment to its offer announced earlier today, Nunavut Iron is continuing to assess its options beyond the increase of the offer price to C$1.45," Walter added, indicating that Nunavut would raise its offer again if ArcelorMittal does the same.

Responding to ArcelorMittal's C$1.40 per share, Baffinland had recommended its shareholders to accept the steelmaker's offer since it is for 100 per cent of the company, while Nunavut's offer is only for 60 per cent, which Baffinland said would likely have a negative and uncertain impact on the trading value of the remaining minority held common shares.