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MAG Silver fires back as Fresnillo withdraws offer

Published: 03:27 24 Jun 2009 AEST

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A frustrated  MAG Silver (TSX: MAG, NYSE Amex: MVG) declared that Mexican silver king Fresnillo's decision to withdraw its "take-under" bid was, in fact, "motivated by much different considerations that Fresnillo has not been prepared to publicly acknowledge."

Six months after announcing its intention to make an offer to acquire all of the Vancouver junior, Fresnillo announced Monday its decision to withdraw the offer "as it is no longer in the best interest of Fresnillo shareholders.'

In a news release, Fresnillo said it decision "reflects the fact that even after this protracted period of time, it has not been possible to conclude the independent valuation of MAG required under applicable Canadian securities laws in order to permit the offer to proceed and it is not clear to Fresnillo when or if this will happen."

MAG responded that it has repeatedly been stonewalled by Fresnillo in the junior company's efforts to get the world's biggest silver miner to disclose how it intends to integrate the Juanicipio Property (in which MAG holds a 44% interest) into Fresnillo's "much touted Fresnillo II regional development plan."

MAG went to the Ontario Securities Commission, which last Thursday issued an order to compel Fresnillo to produce the documents to allow MAG's independent valuator TD Securities to complete its evaluation.

"In the view of MAG's Board and its Independent Committee, Fresnillo's unwillingness to provide the requested information was motivated by a desire to withhold from the independent valuator critical information that would readily demonstrate the serious financial inadequacy of Fresnillo's proposed cash offer price of US$4.54 per share," MAG claimed.

However, Fresnillo said, it "recognizes the efforts of the Ontario Securities Commission ("OSC") in order to expedite the bid process." Nevertheless, the company "considers that the document production order as issued by the OSC will require significant time, effort and money to be expended, without knowing even at this time (after more than 200 days since the Offer was announced) whether a valuation will ever be received or the Offer can ever be made."

Fresnillo relied on the advice of valuation experts such as Paradigm Capital and Scotia Capital which determined MAG could rely on the information that "Fresnillo was willing and able to produce."

Dan MacInnis, MAG's CEO, said, "This has been a challenging episode in the life of our company. Fresnillo bought almost 20% of our shares to give it a tactical advantage in making its offer, but then refused to comply with our good faith informational requests tied to the independent valuation that the law requires us to commission to safeguard the interest of MAG's minority shareholders."

"Fresnillo has put our board, our Independent Committee and our minority shareholders through the wringer and then walked away when ordered by the OSC to comply with our request for discovery relating to the critical missing information," he claimed. 

Nevertheless, MacInnis said, "We intend to commence discussion with Fresnillo regarding the best way to move forward with our jointly owned world class Fresnillo silver project. "

Fresnillo said that the company "highly regrets that it was unable to deliver what would essentially be a free option to MAG's shareholders for them to evaluate."

In February, MAG issued an indicated resource for the Juanicipio Property in the Municipio Fresnillo in the State of Zacatecas, Mexico. The total contained metals in the Indicated Resource are estimated at 83 million ounces of silver, 210,000 ounces of gold, 155 million pounds of lead and 269 million pounds of zinc. 

 

Mineweb is a web-based international mining publication focusing on mining financial and corporate news and comment.   

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