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12/4/08

Mag Silver: dead meat already

An interesting press release from Mag Silver (MVG) (MAG.to) this morning concerning the Fresnillo buyout offer. Here's the link, and here's the main comment from Mag's CEO:

Dan MacInnis, CEO of MAG, commented, "This may be the first time in history that a hostile bidder has announced a bid at a price lower than the closing market price of the target's shares on the trading day prior to announcement. Analysts and a number of shareholders are now calling this a "take-under" offer. We are a little mystified by Fresnillo's actions, but our Board understands its fiduciary and other obligations and will respond more formally in due course. In the meantime, our shareholders have no need to do anything to respond to the Fresnillo announcement."

As this chart points out......

CEO MacInnis is stretching the truth with his argument today. Check this Reuters report dated December 1st for more evidence. This means just one thing; the MVG position is weak, and all the rhetoric in the world won't cover that fact up. And it all boils down to one, simple point: Nobody else will buy Mag Silver. The company has two choices;

1) Accept the Fresnillo offer
2) Watch the stock price fall to where its silver peers are trading.

The only reason that MVG has held up better than peers was the expectation of this FRES.L offer. If it's rejected, nobody else will buy MVG. Take that to the bank. And the result will be the wholesale dumping of its share price.

Be clear; Fresnillo has played this offer very smartly and has MVG over a barrel, the weak counterarguments shown by the MVG CEO today are testimony to that. He may be pissed that this offer means his options are out the money, but that's kapitalism, komrade.