VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 12, 2011) - MAG Silver Corp.
(TSX:MAG)(NYSE Amex:MVG) ("MAG" or
the "Company") - On May 5, 2011, MAG announced that it had
received the favourable unanimous ruling of a
three member arbitral panel of the International Court of Arbitration
of the International Chamber of Commerce ("ICC") with respect
to the arbitration proceedings commenced in Mexico against its joint
venture partner, Fresnillo plc ("Fresnillo"). MAG has now received a complete
translation of the ICC award and wishes to provide the following
further details.
On May 9, 2011, Fresnillo issued a news
release asserting that the ICC denied MAG's two principal claims and
upheld "certain other MAG claims" including MAG's claims
related to Fresnillo's December 2008
announcement and subsequent pursuit of an illegal hostile take-under
bid for MAG. Fresnillo's news release
mischaracterizes the rulings issued by the ICC in a manner that
suggests that Fresnillo won the arbitration.
In fact, Fresnillo lost the most important
claim advanced by MAG in the arbitration proceedings and had its two
principal defences soundly rejected by the
ICC. This press release corrects the inaccuracies disseminated by Fresnillo.
Fresnillo's news release fails to recognize
that MAG initiated the arbitration in April 2009 as a direct result of Fresnillo's refusal to comply with the standstill
provision in the shareholders agreement governing the Minera Juanicipio Joint
Venture (the "Shareholders Agreement"). At that time, MAG
sought, first and foremost, to have the Fresnillo
take-under bid (announced at US$4.54 per share which was a 4.5%
discount to the market price on the day prior to announcement) declared
a violation of the Shareholders Agreement. As the Fresnillo
release confirms, the ICC upheld MAG's interpretation that Fresnillo breached the standstill provision in the
Shareholders Agreement and, in accordance with Mexican law, awarded MAG
US$1.86 million in damages. The damage award represents MAG's direct
costs of defending Fresnillo's improper
take-under bid in late 2008 and 2009. More importantly, by upholding
the standstill provision, the ICC has confirmed that MAG and its
shareholders are protected from a further lowball and opportunistic
take-under bid by Fresnillo.
As is customary in proceedings of this nature, MAG also advanced a
number of ancillary claims. These ancillary claims related to Fresnillo's actions as operator under the
Shareholders Agreement and the ICC found that Fresnillo's
actions resulted in numerous breaches and violations of the
Shareholders Agreement. In particular, MAG alleged that Fresnillo failed to abide by the terms of the
Shareholders Agreement by, among other things, taking unilateral action
regarding the development of the Juanicipio
Joint Venture and by intentionally delaying the advancement of the
joint venture in a veiled attempt to depress MAG's share price, thereby
facilitating the completion of its lowball take-under bid for MAG.
With respect to MAG's claim that Fresnillo
breached the agreement by taking unilateral action regarding the
development of the Juanicipio Joint Venture,
the ICC award states that:
"... including the Valdecanas vein in Fresnillo II, as such is described in the (Fresnillo IPO) Prospectus, without the authorization
of the Mining Company and without previously following the process and
consideration of plans, programs or authorizations applicable under the
Agreement (clauses 7.1 and 7.2), constitutes a violation of the same by
Fresnillo..." (Translation)
Similarly, Fresnillo's assertion that the
"Arbitration Panel rejected MAG's claims that Fresnillo
was deficient in the execution pace or performance of drilling at the
project" is at best misleading in light of the finding by the ICC
that:
"Fresnillo violated the (Shareholders)
Agreement with its conduct which had the effect of delaying the
Feasibility Study under the Agreement." (Translation)
While the ICC agreed with several of MAG's claims and held that Fresnillo unequivocally breached the provisions of
the Agreement and delayed the advancement of the Juanicipio
property towards a feasibility study, the ICC did not award additional
damages for these breaches, holding that the damages caused by the
delay were too uncertain to quantify under Mexico law.
It is also notable that the ICC soundly rejected Fresnillo's
two principal defences: (i)
that the Shareholders Agreement no longer governed the Minera Juanicipio joint
venture and (ii) that the ICC lacked jurisdiction to hear MAG's
complaint.
Dan MacInnis, MAG's President and Chief
Executive Officer said: "The purpose of the ICC arbitration has
always been about protecting MAG's interest in the Juanicipio
property and ensuring that Fresnillo respects
MAG's rights and acts in the best interests of the joint venture. While
we believe that awarding damages would have been entirely appropriate,
we are nonetheless extremely satisfied with the outcome of the
arbitration". He added "Fresnillo
tried to convince the ICC that it is not bound by the Shareholders
Agreement and was wholly unsuccessful in that endeavour.
With this arbitration finally behind us and the protections afforded to
MAG under the Shareholders Agreement now confirmed by the ICC, we are
hopeful that Fresnillo will avoid future
breaches of the Shareholders Agreement so that the Juanicipio
property can be developed in accordance with industry best practice and
without further delay or diversion."
Speaking about the ICC's key determination that Fresnillo's
take-under bid was illegal and contravened the standstill provision of
the Shareholders Agreement, Mr MacInnis said "The standstill provision was
included in the Shareholders Agreement to prevent exactly the kind of
conduct Fresnillo has engaged in - trying to
snatch away our shareholders' interest in one of the most promising
silver projects in the world at grossly inadequate value. MAG's
position has always been clear - if Fresnillo
wants to consolidate its interest in this terrific project in order to
take advantage of the very substantial infrastructure and other
synergies such a consolidation would generate, it will not be permitted
to do so with a low-ball bid. Fresnillo has
now been told in clear terms that it is bound by our Shareholders
Agreement. MAG will simply not permit Fresnillo
to continue to treat the Juanicipio property
as if it already owns it. The protections afforded by the ICC decision
will be significant in protecting MAG's shareholders from further
opportunistic actions."
About MAG Silver Corp. (www.magsilver.com )
MAG is focused on district scale projects located within the Mexican
Silver Belt. Our mission is to become one of the premier companies in
the silver mining industry. MAG is conducting ongoing exploration of
its portfolio of 100% owned properties in Mexico including a silver,
lead and zinc discovery and a moly-gold
discovery at its 100% owned Cinco de Mayo
property in Chihuahua State. MAG and Fresnillo
plc are jointly developing the Valdecanas
Deposit on the Juanicipio Joint Venture in
Zacatecas State. MAG is based in Vancouver, British Columbia, Canada.
Its common shares trade on the TSX under the symbol MAG and on the NYSE
Alternext under the symbol MVG.
On behalf of the Board of MAG SILVER CORP.
Dan MacInnis, President and CEO
This release includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of the US
Private Securities Litigation Reform Act of 1995. All statements in
this release, other than statements of historical facts are forward
looking statements, including statements that address future mineral
production, reserve potential, exploration drilling, exploitation
activities and events or developments. Forward-looking statements are
often, but not always, identified by the use of words such as
"seek", "anticipate", "plan",
"continue", "estimate", "expect",
"may", "will", "project",
"predict", "potential", "targeting",
"intend", "could", "might",
"should", "believe" and similar expressions. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking statements. Although MAG
believes the expectations expressed in such forward-looking statements are
based on reasonable assumptions, such statements are not guarantees of
future performance and actual results or developments may differ
materially from those in the forward-looking statements. Factors that
could cause actual results to differ materially from those in
forward-looking statements include, but are not limited to, changes in
commodities prices, changes in mineral production performance,
exploitation and exploration successes, continued availability of
capital and financing, and general economic, market or business
conditions, political risk, currency risk and capital cost inflation.
In addition, forward-looking statements are subject to various risks,
including that data is incomplete and considerable additional work will
be required to complete further evaluation, including but not limited
to drilling, engineering and socio-economic studies and investment. The
reader is referred to the Company's filings with the SEC and Canadian
securities regulators for disclosure regarding these and other risk
factors. There is no certainty that any forward looking statement will
come to pass and investors should not place undue reliance upon
forward-looking statements.
Please Note:
Investors are urged to consider closely the disclosures in MAG's annual
and quarterly reports and other public filings, accessible through the
Internet at www.sedar.com and
www.sec.gov/edgar/searchedgar/companysearch.html
Neither the Toronto Stock Exchange nor the New York Stock Exchange Alternext US LLC has reviewed or accepted
responsibility for the accuracy or adequacy of this press release,
which has been prepared by management.
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