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MAG Silver's Mexico woes

Our guest on Commodities this morning -- MAG Silver Corp. CEO Dan MacInnis - joins BNN against a tragic backdrop.

The company (MAG-T), which is developing potential mines in Mexico, told investors on Monday that local Mexican media were reporting that landholders decided during a Benito Juarez community meeting "to expel MAG from its Cinco de Mayo property and establish a 100 year mining moratorium."

The stock slid 12 percent on Monday to trade at $9.96.

The company said it was "strongly of the view that the assembly meeting was called and conducted illegally as a result of the efforts of a concentrated group of radical activists opposed to mining in the region. MAG is in the process of pursuing legal remedies at both the state and federal levels to have the meeting and all resolutions passed at the meeting declared null and void."

Canaccord reckons that Cinco de Mayo, which is in violence-plagued Chihuahua States, represented 13 percent of MAG's total value… in line with the decline of Monday's share drop.

The brokerage says MAG's flagship's asset is a 44% stake in Minera Juanicipio S.A de CV, which owns Juanicipio property in Zacatecas State which contains silver, gold, lead and zinc. The other 56% is owned by silver giant Fresnillo.

The mining moratorium occurs amid a backdrop involving the deaths of two locals. On Oct. 30, activists including MiningWatch in Canada issued a news release saying Ismael Solorio Urrutia and his wife Manuela Martha Solís Contreras of Benito Juárez were shot dead as they drove their pick-up truck along a main highway to a medical appointment.

The news release included an allegation that "Ismael and his son were assaulted on October 13, 2012 by a group of employees paid by the El Cascabel mining company. In addition to being key activists opposed to the installation of a mine, they had also been denouncing the drilling of illegal wells in the Carmen river basin."

The release also says that "El Cascabel is a closely related entity to Vancouver-based mining company MAG Silver and a central player in the development of MAG Silver's 100% owned Cinco de Mayo mine project, adding that many residents "opposed the mine, given concerns about the heavy use of groundwater in this arid region."

But, MAG calls the allegations "vicious lies."

On Oct. 25, MAG said it had been informed of the killings and said the company "has had a long-standing and collegial business relationship with Mr. Solorio going back to 2010, in his capacity as a representative for one of the local ranches on which MAG successfully negotiated drilling rights and as a member of the local Ejido Benito Juarez with which MAG has had ongoing negotiations over the years. The board and management of MAG wish to express their sincere condolences to the family and friends of Mr. Solorio and his wife. MAG also wishes to make clear that the vicious lies that have been circulating that MAG was somehow involved in these heinous acts are entirely false."

Watch the interview for more on this story.


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