Vancouver - Mexican major Fresnillo (FNLPF-O, FRES-L) sold it as fair value. Canadian junior Mag Silver (MAG-T, MVG-X) swore it was a take-under bid.
But for now the wrangling over how much Mag and its 44% stake in the Juanicipio silver project in Mexico is worth, of which Fresnillo owns the other 56%, is over.
Fresnillo has announced it is dropping its US$182 million intention to buy the 80% of Mag that it didn't already own, saying it is no longer willing to take part in a valuation process of Mag which found both companies appealing to the Ontario Securities Commission (OSC) over each other's tactics.
"Fresnillo highly regrets that it was unable to deliver what would essentially be a free option to MAG's shareholders for them to evaluate," Fresnillo stated.
In a press release Mag president and CEO Dan MacInnis said Mag was surprised with Fresnillo's move.
"For many months we have told Fresnillo that our Board would be happy to recommend to our shareholders an offer that represents fair value for our shareholders," he stated.
The imbroglio between Fresnillo and Mag began Dec. 1, 2008, when Fresnillo announced it would offer US$4.54 a share for the 80% or so of Mag's shares it and its affiliates didn't already own.
While Fresnillo noted that the offer represented a 12.4% premium over the 20-day volume weighted share price of Mag, it was less than Mag's share price the day before Fresnillo made its bid known.
As a result Mag fired off a press release describing the US$4.54 a share as a "taken-under offer" and MacInnis told shareholders not to take any action, saying Mag was "a little mystified by Fresnillo's actions".
The offer by an insider, Fresnillo, set off a valuation process under OSC regulations whereby Fresnillo was required to pay for a study of Mag's Juanicipio asset.
That process quickly led to the two companies locking horns over just exactly what Fresnillo planned for the Juanicipio joint-venture property.
Mag alleged Fresnillo was withholding information about its intent to make Juanicipio part of its Fresnillo II development, a project that will complement its flagship Fresnillo mine and for which work has already begun, and was instead limiting valuation documents to those pertaining specifically to the joint-venture property.
Viewing that position as an effort to stymie a true valuation of the Juanicipio joint venture, Mag suspended the valuation process this winter.
Calling the suspension an "inappropriate delaying tactic", however, Fresnillo launched a complaint with the OSC compelling it to force the issue of the valuation based on the information it had already provided Mag.
But in an apparent repudiation of Fresnillo's position, on June 19, according to both Fresnillo and Mag's latest press releases, the OSC told Fresnillo to provide further documents about its development intentions beyond the Juanicipio joint venture.
That request seems to be the deal killer.
Fresnillo signaled in a press release that not only is it unwilling to comply with the OSC order but that its desire not to provide further information about its Juanicipio plans is strong enough to overwhelm its appetite for Mag at US$4.54 a share.
"Fresnillo 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 announced June 22.
While Fresnillo's bid for Mag is now dead, future talks are inevitable. In that regard MacInnis already says Mag will pursue discussions with Fresnillo about the future development of the Juanicipio project.
All told the joint-venture has so far pegged Juanicipio's resource estimate at 2.95 million indicated tonnes grading 879 grams silver, 2.22 grams gold, 2.39% lead and 4.15% zinc.
On news of the dropped bid Mag's share price fell 23¢ to close at $5.32 in Toronto. Mag has 49.3 million shares outstanding.
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