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First Majestic Silver Corp.


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Chart 3 years

Purchase Date No. of Shares Purchase Price Cost (USD) Price Today Value Today
MAY 30, 2008 2'300 4.50 10'350.00    
Total 2'300 4.50 10'350.00 4.65 10'695.00
Profit         345.00
Profit (in %)         4%

73,782,410 / 90,142,650 CAD 338.7 Million
CAD 2.81 to 5.75 199,900 (200-day)


Business Summary

Management of First Majestic is committed to building a senior silver producing mining company based on an aggressive acquisition and development plan with a focus on Mexico.

First Majestic owns the La Parrilla Silver Mine located outside the city of Durango. First Majestic has completed construction of a new 800tpd mill at the La Parrilla Silver Mine. At that rate, production will reach 1.8 million ounces of Silver per year.

First Majestic's second operating mine, the San Martin Silver Mine, continues production at 800tpd, with an annualized production of approximately 1.8 million ounces of silver.

First Majestic's third operating mine; the La Encantada Silver Mine also has an 800 tpd mill and produced approximately 1,400,000 ounces of silver in 2007. Plans for 2008 included expanding the La Encanatada by adding a cyanidation circuit to the mill.


La Parrilla Silver Mine

La Parrilla Silver Mine is 100% owned and comprises a complete 800 tpd mill and underground mine which began operations in October 2004. In addition to the mine and mill, the land package consists of over 53,000 hectares.

The property is located 65km due southeast of the city of Durango in the western part of the Mexican Altiplano at 23 degrees 44' 16" North latitude and 104 degrees 06' 26" West longitude. The nearest towns are San Jose de La Parrilla, 1.5km to the north of the property, and the larger Vicente Guerrero, 16km to the southeast.

Excellent infrastructure exists in the area with the mine only 4 km away from the main highway which links Durango and Zacatecas.

Among the several large vein systems included within the La Parrilla property boundaries, the company is focusing on the La Rosa/Los Rosarios, San Marcos, San José, San Nicolás, Vacas, Quebradilla, La Luz and Recuerdo structures. Most of the silver ore presently being mined comes from Los Rosarios, La Rosa, San Jose, and San Marcos mines. The figure below illustrates the geographical layout of First Majestic's Land package.

In early 2006, it was determined that sufficient ore was being developed to justify the construction of a new mill with a capacity of 800 tpd. Construction began in March 2006 and was completed in December. Two 400 tpd circuits; one to handle oxide ore, and the other to handle sulphide ore were included in the mill design. At this level of production, the La Parrilla Silver Mine will be producing approximately 1,800,000 ounces of silver per year.

San Martin Silver Mine

The San Martín Silver Mine is 100% owned and includes an 800 tpd cyanide mill and a land package consisting of 7840 hectares of which First Majestic owns 1482 hectares of the surface rights. The area has never been explored using modern exploration techniques. The mine has been in continuous production since 1983 and produces approximately 1.5 million ounces of silver per year. First Majestic is focused on increasing its silver resources while at the same time maintaining production at present levels through 2007 and increasing production in 2008.

The San Martín is located 250 km north of Guadalajara in Jalisco State, Mexico. Pincock Allen & Holt ("PAH"), the Company's Qualified Person, has completed a NI 43-101 compliant technical report on the San Martín. In addition to calculating a large silver Resource, PAH also stated that the exploration potential for developing additional Resources at the San Martín appears to be very promising.

First Majestic took control of operations of the San Martín in June 2006 by purchasing a majority stake in First Silver Reserve Inc. In September 2006, First Majestic purchased the remaining shares of First Silver resulting in 100% ownership.

The San Martín Silver Mine suffered from a lack of reinvestment for several years. The opportunity which First Majestic identified was to make the necessary investments in development, exploration and mill improvements to not only increase the 43-101 compliant silver Resources, but also increase silver production from current levels.

La Encantada Silver Mine

The La Encantada Silver Mine is located in the "Sierra Madre Oriental" physiographic province of México. The mine is in the state of Coahuila and the access is through the road from Muzquiz to Boquillas del Cármen, Coah., through a 165 kilometres paved road and a branch of 45 kilometres dirty road, covering the distance in 2.5 hours.

The mining activity in this district began in a low scale in 1950 up to 1969 and at the beginning of the 1970's until the year 2003 with Grupo Peñoles/Lacana Corp. exploiting the ore-bodies of; La Prieta, 660, Ojuelas, Escondida, San Javier Breccia, Milagros and some of the irregular veins in the San Javier zone. It is estimated that around 6.0 million tons with a grade of 418 g/ton silver and 9.83% lead have been extracted (P. Trejo and E. Chico).


Historically, the strategy was to obtain greater grades of silver while maintaining low tonnage. Mining is taking place mainly in the San Javier area, of "mantos" 314 and the Ojitos structure, between levels 635 to 680.

The flotation plant with a capacity of 800 tons per day is presently being operated at 75% of its capacity. In recent years, very little reinvestment was made to open new areas up within the mine to take advantage of higher mill capacity. Annual production in 2004 & 2005 was approximately 800,000 ounces and in 2006 after First Majestic took over operations, silver production increased to 950,000 ounce.

First Majestic plans to improve the technologies within the mill to increase recoveries, while at the same time developing the underground mine in order to access additional ore to sustain higher daily tonnages thus increasing silver production.

Chalchihuites Properties

Strategically located only 60 km to the southeast from La Parrilla Silver Mine, First Majestic optioned to acquire 487 hectares of a contiguous land package comprising three claim groups containing 4 previously operated mines. The Perseverancia Silver Mine (6 claims), the San Juan Mine (8 claims) La Esmeralda Mine (7 claims), and the Magistral Mine (1 Claim) are located in the Chalchihuites mining district located at the Western portion of Zacatecas State in the municipality of Chalchihuites, and 150 km to the northwest from Zacatecas City.

A total of eight agreements were entered into to secure the land package. The properties host silver, copper, lead and zinc mineralization with a potential for near term silver production which could be processed at the La Parrilla. The properties have history of silver-lead-zinc and copper-gold production with extensive underground workings. The properties host potential for manto style silver-lead-zinc replacement type ore bodies, chimney type gold-silver-lead-zinc-copper ore bodies and silver vein type ore bodies and represent significant exploration potential.

Access to the properties is easily achieved due to the close proximity to the Interstate 45 highway and the state roads which connect the Chalchihuites Town and several country and trail roads connect most of the claims. Local infrastructure, including electricity, water and telephones are all presently available. Basic facilities, restaurants, hotels and gas stations can be found in Chalchihuites Town. Major services, banks, repair shops, etc, can be found in Vicente Guerrero Town and in Sombrerete town located both just 50 km away. The climate is moderate to semi-dry. Rainfalls are much more common in summer than in winter. Vegetation is scarce because of the semi-dry weather conditions; in the lower parts cactuses, grasslands and farm lands are common while in the heights, pine and oak forests occur.

Although there are no records of production, at least four mines have been worked in intermittent way and it is estimated the tonnage and grade exploited due to the size and sampling of the stopes as follows; the Perseverancia (±100,000 tonnes grading 500-1,500 gr/ton Ag, and 10-35% combined Pb and Zn); the San Juan (± 100,000 tonnes, 300-500 gr/ton Ag), La Esmeralda (± 80,000 tonnes, 2-6% Cu), the Magistral (± 50,000 tonnes, 2-6% Cu and 2-8 gr/ton Au). Also, some other small mines, pits and ditches are spread out all over the properties such as Tayoltita, El Zinc, La Nueva India, Las Cotorras, La Verdiosa, Cármen, etc.

Candamena Mining District

The Candameña property covers an area of 5,215 hectares and is located in a remote area of the Barranca section of the NW Sierra Madre Occidental in the State of Chihuahua close to the border with Sonora. The property can be reached from either Hermosillo or Chihuahua via Highway 16 that connects both cities. The Candameña contains several expressions of mineralization that range from anomalous alteration zones with little to no exploration to mineralized areas that were the target of more intense exploration work and historic mining. The area within this large land package of special interest and thus the focus of the present program is the La Verde Silver Mine. Mapping and surveying in this area is underway. Road construction will begin in June to allow for access of drilling aquipment which is anticpiated to commence drilling in July 2006.

Recent News: Fri May 16, 2008: Record First Quarter Financial Results

FIRST MAJESTIC SILVER CORP. announced the unaudited financial results for the Company's first quarter ending March 31, 2008.

Keith Neumeyer, President and CEO commented: "We've had an outstanding start to 2008. Some challenges still exist and several improvements are either underway or planned for 2008. However, the momentum underway at each of the Company's three producing silver mines is extremely encouraging. This first quarter marks the best quarter in the Company's history and is the first quarter that a bottom line earnings per share has been achieved."

First Quarter Highlights
Total Revenue increased by 28% to $12.96 million
  Earnings from mine operations increased to $4.7 million
  Net Income for the quarter $1.0 million
  Operating Cash Flow for the quarter increased to $4.8 million
  Total Equivalent Silver increased by 5% over the prior quarter to 1,061,720 ounces
  Total Cash Costs per Silver Ounce for the quarter US$6.51
  Total Mining Costs per Tonne for the quarter US$45.83
  Cash in Treasury at March 31, 2008 $52.8 million
- Cash costs and mining costs per tonne are non-GAAP measures.
- Financial information in this news release is based on Canadian GAAP.

Fundamental Considerations

First Majestic projects to produce 7.5 million ounces of silver in 2009. With what market capitalization should the market value this production?

In comparison: Pan American Silver produced 17.1 million ounces in 2007, an increase of 35% over 2006. The market capitalization of Pan American Silver is $ 2.7 billion or $ 157 per ounce of silver produced.

Applying the same yard stick to First Majestic, the market capitalization could rise to $ 1.175 billion which would mean a share price of $ 13 per fully diluted share.

Reserves and Resource

How should the market value a silver equivalent resource of 300 million ounces?

Pan American Silver had proven and probable silver reserves of 228 million ounces a the end of 2007 and a market capitalisation of $ 2.7 billion at present or $$ 11.84 per ounce of silver.

Should First Majestic reach its target of having 300 million ounces of silver reserves (not only resource), then its market capitalization could also exceed the $ 1 billion mark.

Earnings estimates

These have to be viewed with some caution as it is hard to predict what the average silver price may be in 2009 or what impact rising energy costs may have. Nevertheless, based on the estimates available from analysts, First Majestic and Pan American trade at a PE of 14 estimated 2009 earnings.

Such earnings estimates are usually based on a silver price which is substantially less than the present market price. Earnings, for this reason, could prove to be one the cautious side.

Technical Considerations


THE TIMELESS PRECIOUS METAL FUND is a shareholder in the Company and will benefit from any increase in the company's share price.

Disclosure: The author has not been paid to write this article nor has he received any other inducement to do so. The author is a shareholder in the company and will benefit from any increase in the company's share price.

Disclaimer: The author's objective in writing this article is to invoke an interest on the part of potential investors in this stock to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell this stock. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions in the stock.


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