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Gold and silver are in a long-term bull market in my opinion as the upward trajectory of precious metals has been locked in by central bank action around the globe. Recently, after more turmoil in Europe, the U.S. election, and the realization that the U.S. "fiscal cliff" is approaching, the market has swung in both directions as investors have been considering how to best position for the fiscal cliff outcome. Gold and silver were hit a bit but are up in the past month. In the last month, the SPDR Gold Trust (NYSEARCA:GLD) and the iShares Silver Trust (NYSEARCA:SLV) are up 2.2% and 6.0%, currently trading at$169.43 and $33.01 respectively. However, they are off of their highs hit in early October and I think this pullback, while modest, represents an opportunity to begin establishing positions in the metals for those who have not done so, or to expand on existing positions. Given the seemingly endless stimulus from central banks and the historic gold-to-silver price ratio (historically gold trades 16 times the price of silver, currently it is trading 51 times the price of silver) I have suggested that silver could outperform gold over the next year, and thus recommended considering some of the larger players in that metal.

I've proposed that speculating in some of the smaller exploration-stage companies could be very profitable with the right company. One such company, whose stock recently got annihilated in response to an illegal eviction from a key property that I think is worth looking into further for a rebound in the stock and a long-term bet on silver appreciation, is Mag Silver (NYSEMKT:MVG). MVG is an exploration-stage silver company that could be a winner if it can execute its long-term growth plans successfully and work out some of the property issues it is facing. MVG is engaged in the mineral acquisition, exploration and development business with properties located throughout Mexico.

MVG's properties include the Juanicipio property, which covers over 19,000 acres and is located in Zacatecas State, Mexico. MVG's Cinco de Mayo property is located approximately 190 kilometers northwest of the city of Chihuahua, in northern Chihuahua Sate, Mexico. MVG's Mojina Property is located in northern Chihuahua State, five kilometers from the town of Ricardo Flores Magon and 40 kilometers south of the company's Cinco de Mayo property. MVG also has other smaller properties such as the Lorena claims, the Nuevo Mundo claims, the Guigui claim options, and the San Ramone claims.

I think a major positive sign for the company is that it recently had a massive inflow of private investment. Two months ago, MVG announced an offering of 3,526,210 common shares at a price of $9.40. The offering led to proceeds of approximately $33.1 million. The company intends to use the net proceeds from this offering to fund its share of the recently announced permitting and underground development program for the Juanicipio property. MVG will also use some of the funds for advancement of the project at Cinco de Mayo, as well as for general corporate purposes.

MVG recently announced a decent mineral find at its Cinco de Mayo site after drilling several holes approximately 60 meters deep. The company has confirmed deposits of silver, gold, copper, lead and zinc. Furthermore, increased production at this site was scheduled to commence later this year. At the Cinco de Mayo site, last month an independent analysis by Roscoe Postle Associates found a large number of inferred mineral resources at the site. The details of this find and analysis can be found here. Speaking about this mineral find, MVG CEO Dan MacInnis stated, "We are pleased, but not surprised, to see a significant resource begin to materialize" at the site. He further stated "Combined with Juanicipio, Cinco de Mayo now gives MAG two significant high-grade assets. Although we are still in the early stages, Cinco de Mayo is showing very strong potential for an increase to a substantial size."

There have been some recent developments at Cinco de Mayo which have halted all progress. Evidently, the landholders from Benito Juarez who control the property on which Cinco de Mayo is located, decided during an assembly meeting of the local community (known as the "Ejido") in the evening of Saturday, November 17th, to expel the company from its Cinco de Mayo property and establish a 100 year mining moratorium. This could have major implications for the company, but the manner in which it occurred is likely illegal and will probably be overturned by the state/federal authorities. Regardless, the stock dropped 11% on the news and is down 30% in just two weeks.

In their first news release on the matter, the company made it clear that it is 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. MAG is highly confident that the illegal resolutions will not be permitted to stand.

In its second news release and in the special conference call on the matter, reiterates its strong view that the November 17 assembly meeting was illegally called and orchestrated by a small group of radical agrarian activists, known as El Barzón, who are opposed to mining and industrial agricultural development in the region. MVG has been advised by several local sources that key signatures required to properly call the meeting were fraudulent. Significant concerns have also been expressed by local community members that the vote taken at the meeting was fraught with irregularities, including a significant number of votes being cast by unverified proxies and the exclusion from the meeting of voting members of the Ejido who are supportive of MVG's activities due to the economic benefit they bring to the region.

MVG also notes that the Ejido assembly has no ability at law to impose a ban on mining as mining is an activity that falls under federal jurisdiction. While permission of the Ejido assembly is required to obtain surface access, MAG believes that the El Barzón group and its supporters do not represent the will of the majority of the 421 voting members of the Ejido or the 12,000 other citizens in the project area. In fact, over the past two months, MVG has been working to have a properly constituted assembly of the Ejido called to vote on surface access permissions required for ongoing exploration at Cinco de Mayo. The meeting of November 17 appears to be an attempt by a small group of radicals to thwart a free and open vote in a properly sanctioned assembly.

MVG is in the process of pursuing legal remedies at State and Federal levels to have the November 17th meeting declared null and void. MAG remains highly confident that the illegal resolutions will not be permitted to stand. MVG will also concurrently ask government officials to oversee a new assembly meeting of the Ejido to ensure that the necessary procedural and governance rules are respected and the vote is properly conducted. MVG has every reason to believe that it has the support of a majority of the members of the Ejido and that the requisite authorizations will be obtained in due course at a properly constituted meeting. The outcome will likely favor MVG, but even if the company lost the property entirely it is not responsible for much of the company's revenues. However, it was a major investment of the last few quarters, thus MVG will likely devote great resources to ensuring the property is kept. Despite this temporary setback, MVG has progressed in other projects.

MVG inked an exploration and development deal with Canasil Resources (OTC:CNSUF). On September 4, 2012, Canasil announced that MVG has received the drill permit for the planned Phase 2 drill program at Canasil's La Esperanza silver-zinc-lead project in Durango and Zacatecas States, Mexico. MVG has also completed the required $150,000 option payment to Canasil for the third year of the option agreement and will:

"now be required to spend an additional $1,500,000 in exploration expenditures from Sept. 1, 2012, to Sept. 1, 2013, in order to maintain the agreement in good standing. A final option payment of $200,000 will be required on Sept. 1, 2013, together with additional exploration expenditures of $1,750,000 by Sept. 1, 2014, should MAG decide to continue and complete the earn-in of a 60% interest in the project under the agreement. MAG reported that drilling is expected to resume at La Esperanza during the third quarter 2012 to test the Fatima, San Pascual and Los Alamitos veins in the northwestern part of the project area."

Located in the Mexican Silver Belt, the La Esperanza project covers 68,954 hectares in northern Zacatecas and southern Durango Mexican States. This recognized world-class silver belt hosts a number of active mines such as Pan American Silver's (NASDAQ:PAAS) La Colorada and First Majestic Silver's (NYSE:AG) La Parrilla mines. The project covers multiple vein occurrences and alteration zones over a 20-kilometer strike length along a prospective SE-NW trend where the results of an airborne geophysical survey conducted by MVG indicate potential for hosting a very large mineralized system. Drilling conducted by MVG on the La Esperanza vein has confirmed a high-grade silver-zinc-lead mineralized panel along a strike distance of over 250 meters and to a depth of 300 meters, which is open in all directions, with mineralized vein intercepts of up to 10.3 meters.

MVG's Q2 quarterly results reflect its efforts to aggressively explore and expand. As of June 30, 2012, MVG had working capital of $13,039,336, including cash on hand of $14,653,919. Exploration and evaluation expenditures totaled $3.65 million in Q2. In light of these expenditures and labor costs, the company reported a loss of $1.8 million. In MVG's most recent quarter another loss was posted as expenditures related to development activities weighed. As of September 30, 2012, MVG had working capital of $43,685,026, including cash on hand of $44,081,885. The primary use of cash during the three months ended September 30, 2012 was for exploration and evaluation expenditures totaling $4,691,045, and an additional $824,936 for the Juanicipio property. Current liabilities as of September 30, 2012 amounted to $2,145,298 and are attributable primarily to accrued exploration and legal expenses. The net loss for the quarter amounted to $3,609,463 or $0.06 per share. The next quarterly report is due to be released on or around February 13th, 2013.

For 2013, the company is also expected to lose money ($0.15 per share), attributable to the exploration costs. Even though the company is losing money the potential returns that this company can deliver shareholders is high. Analysts agree, as the four analysts covering the company have one buy and three outperform ratings on the stock.

Considering the recent inflow of capital and the latest finds, the company seems poised for growth over the next few years. This is the primary reason analysts have buy ratings on the stock. I like MVG going forward until it is no longer finding mineral deposits, and I don't see that happening soon. As the price of silver climbs, I expect MVG's stock to climb. The stock will soar if there is a resolution to the dispute over Cinco de Mayo. The stock currently trades at $10.40 on average volume of 130,000 shares daily. The stock has a 52-week range of $5.95-$13.42.

Source: Mag Silver Badly Burned: The Facts You Need To Know

Additional disclosure: I may initiate a position in the next 72 hours in MVG, specifically if it dips below $10.