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This undated photo shows the Milne Inlet near North Baffin Island at the Mary River iron ore deposit area in Nunavut.

Handout/Reuters

ArcelorMittal reducing its stake in Mary River, a massive iron ore project in the Canadian Arctic that will cost $4-billion to develop at a time when profits have been decimated at the world's largest steel maker.

Debt-embattled ArcelorMittal said on Thursday it agreed to cede part of its 70-per-cent stake in the project on Baffin Island to its partner Nunavut Iron Ore, making the companies equal partners in Baffinland Iron Mines Corporation, which owns the mine.

ArcelorMittal is struggling with a mountain of debt and weak steel prices, a combination that has seen it put key assets up for sale, including a stake in ArcelorMittal Mines Canada, which holds iron ore assets that include two large open-pit mines in Quebec.

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The Mary River mine, however, is not included in that plan.

"Now with these arrangements, we have secured additional shareholder support for the project," Baffinland president and chief executive Tom Paddon said.

ArcelorMittal and Nunavut Iron Ore acquired the project together a few years ago, at a time when iron ore prices were at near-record highs.

These days, ArcelorMittal is contending with a slowdown in global metals demand as economies from Europe to the United States sputter and even China, which drove the commodities super-cycle of the past decade, sees slower growth.

"ArcelorMittal and Nunavut Iron Ore Inc. … have agreed that Nunavut Iron Ore will increase its interest in Baffinland Iron Mines Corporation from 30 per cent to 50 per cent," ArcelorMittal said in a statement. "In consideration, Nunavut Iron Ore will increase its share of funding for development of Baffinland's Mary River iron ore project."

At 18 million tonnes in annual production and with a direct sea route to ship the commodity, Mary River would be capable of supplying all of Europe's needs, potentially displacing dominant iron ore producers such as BHP Billiton Ltd. and Vale SA.

The mine received federal government approval early last week and construction on the project could begin as early as next July. The mine could be in production as soon as 2017.

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Luxembourgh-based ArcelorMittal produces about 15 million tonnes of iron ore concentrate and more than nine million tonnes of iron oxide pellets annually out of Canada.

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