First Majestic: Bulk of $25M financing to fund La Encantada expansion

Vancouver – With its share price on the rebound and solid silver production in 2008 First Majestic Silver (FR-T, FRMSF-O) is raising $25 million through a private placement led by CIBC World Markets.

Each of the undetermined number of units will consist of a common share and half a share purchase warrant. Each warrant will entitle holders to buy one share over two years following the financing’s closing date which is expected to be around Mar. 5.

First Majestic is also extending a 15% overallotment to the underwriters.

First Majestic says it will use $15.5 million of the proceeds to finish construction of a mill and mine expansion at its La Encantada silver mine in the state of Coahuila, Mexico.

The expansion from 1,000-tonnes-per day to 3,500-tonnes-per day is now more than ever at the heart of First Majestic’s plans to boost production.

It had previously intended to expand its two other silver mines in Mexico, La Parilla and San Martin, but in fall it put those plans on hold citing difficult market conditions.

When the mill and mine expansion at La Encantada are complete it will about double the company’s silver production.

In 2008 First Majestic churned out 4.2 million ounces of silver equivalent, an 18% increase over 2007. Silver proper accounted for over 90% of that.

Year-to-date ending Sept. 30, 2008, First Majestic had a net income of $394,122 and not including smelting costs produced silver at a cash cost of US$5.70 per oz. at its three mines.

During that year long period it milled 542,691 tonnes grading 282 grams silver per tonne.

Recovery in the third and fourth quarters was 67% and 65% respectively.

Since November First Majestic’s share price has significantly improved. It has gone from trading either side of $1.50, to its most recent closing price of $2.80.

First Majestic has about 73.4 million shares outstanding.