Nunavut Iron hiked its bid for Baffinland Iron Mines late on Friday, refusing to back down in a fight with steel giant ArcelorMittal for control of the junior miner and its vast undeveloped iron ore deposit in Canada's Arctic.

Nunavut Iron -- backed by U.S. private equity firm Energy & Minerals Group and formed solely to bid for Baffinland -- raised its offer by 5 Canadian cents a share to C$1.45 a share, valuing the company at about C$570 million ($570 million). But it is still seeking to buy just 60 percent of its common shares.

Luxembourg-based ArcelorMittal on Friday sweetened its offer for Baffinland to C$1.40 per share for all of the company, valuing it at about C$550 million.

Baffinland shares rose 3.6 percent to C$1.43 on Friday, as some traders correctly bet a higher offer might be in the works.

ArcelorMittal has plenty of ammunition if the contest heats up further, with cash and cash equivalents of $3.5 billion as of the end of September.

A successful bid would give the steelmaker, which wants to be about 80 percent self-sufficient in iron ore supply, more direct access to the key raw material at a time when miners like BHP Billiton hold a strong hand in supply negotiations.

Before the latest increase in Nunavut Iron's offer, Baffinland's board recommended on Friday that investors accept ArcelorMittal's sweetened bid.

Nunavut started the takeover battle in September, offering 80 Canadian cents a share. ArcelorMittal initially countered with an offer of C$1.10 a share, later raising it to C$1.25.

This increase means our Offer remains the clearly superior choice for Baffinland shareholders, Bruce Walter, chairman of Nunavut Iron, said in a statement released just before midnight on December 31.

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.

Nunavut Iron said its offer is valid until 11:59 p.m. EST on January 10. This is also when ArcelorMittal's offer expires.

HUGE IRON ORE DEPOSIT

The takeover battle revolves around Baffinland's huge iron ore deposit on Baffin Island in the northern Canadian territory of Nunavut. The deposit is thought to be large enough to meet all of Europe's needs for many years, although developing the Mary River mine will be a major logistical and environmental challenge.

For ArcelorMittal, iron ore access is a significant issue given tight global supplies and healthy demand from Chinese steel mills. That demand has given major producers such as Rio Tinto and Vale more clout in supply negotiations with steelmakers.

($1=$1.00 Canadian)

(Editing by Eric Beech)

Canada