Perhaps we all feel a bit tight-pocketed this holiday season, but within the mining industry many pockets have been sewn shut as capital is carefully hoarded. Seeking to capitalize on tough times, the world's largest silver producer has offered to buy a joint venture partner for a cash pittance.
Fresnillo, which operates the prolific Fresnillo Mine in Mexico's Sierra Madre mountains, this week offered $4.54 per share in cash for shares of MAG Silver
Interestingly, these figures exclude the results of exploration in 2008, which encountered ore grades as high as 10,000 grams per tonne at Valdecanas, and more than 4,000 g/t in the nearby Juanicipio vein. High ore grades make for highly profitable mines, as the operating costs associated with processing ore into its metal components are significantly reduced.
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Accordingly, shareholders and analysts alike are dubbing Fresnillo's $4.54-per-share offer for MAG a "take-under" offer. In the words of MAG Silver CEO Dan MacInnis, "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."
I view the bid price as truly Scrooge-like. Worse yet, since Fresnillo doesn't trade on a U.S. exchange, it effectively bars many investors from following the asset forward. Bah, humbug, Fresnillo!
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Fool contributor Christopher Barker eats promising exploration companies for breakfast. He can be found blogging actively within the CAPS community under the username TMFSinchiruna. He owns shares of Coeur d'Alene Mines, Hecla Mining, MAG Silver, Pan American Silver, Silver Wheaton, and Yamana Gold. The Motley Fool has a disclosure policy.