Back even before they announced X-Men Origins: Wolverine, there was talk from the studio about an X-Men Origins: Magneto film.  They both got plenty of attention at the time, but Wolverine was the one the finally came together.  During filming, the producers claimed that if Wolverine was successful they'd have something more going into Magneto.

Now with all of the hype surrounding the new First Class, many fans have been left wondering "whatever happened to this movie?"  Lead producer of the X-Men series Lauren Shuler Donner has confirmed during an interview with Crave, that the film is dead.  When asked if the film was going to do anything she responded:

“No. You know, there’s internal discussions but probably not. It kind of got incorporated into this one, a lot of it.”

"This one" meaning First Class.  The move to merge the storyline into this new film makes a lot of sense.  Since the film showcases the early years of Professor X and Magneto, it's understandable that any Magneto movie would cover the exact same ground.  So fans will still be able to see more of how their favorite villain came to be, just not in the way they originally thought.

Personally I think this is the best option, because faith in the Origins series isn't very high. 

-Jordan