If you hold a beach ball underwater, you just might get smacked in the face when it surges through the surface.
London-listed silver miner Fresnillo attempted to hold joint-venture partner MAG Silver
Until last week, shares of MAG Silver remained anchored near the $4.54-per-share offer price, even as the broader sector enjoyed a phenomenal end-of-year rally. In fact, the entire precious metals mining sector had itself been pressed deep underwater by a combination of factors, including forced liquidations by hedge funds, a counterintuitive rally in the U.S. dollar, a deep correction in silver prices, and severe weakness among base metals like copper and zinc.
Thanks to the sectorwide recovery in recent weeks, gold miners like Kinross Gold
The beach ball bounces
All that changed last week, when a press release from MAG Silver indicating yet another discovery of excellent high-grade ore provided the catalyst for the ball to surge out of the water and effectively quash the hostile bid. Shares launched to almost $6 on Friday, or 30% above the bid price, before settling back down toward the $5 mark this week.
While I believe the current bid from Fresnillo is clearly doomed now that investors have cast their vote with their capital, I expect Fresnillo to follow up with a second bid. With some very rich ore-bearing veins right in Fresnillo's backyard, MAG Silver is too precious for Fresnillo to ignore. With leading silver miners like Pan American Silver
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Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Agnico-Eagle Mines, Coeur d'Alene Mines, Kinross Gold, MAG Silver, Pan American Silver, and Silver Wheaton. The Motley Fool has a disclosure policy.