First Majestic gains momentum in Mexico

VANCOUVER — Times are good for First Majestic Silver (FR-T, FRMSF-O). The company’s share price has climbed more than 55% in the last six months, it was recently upgraded to the Toronto Stock Exchange main board, and the mid-sized producer just closed a $45- million bought-deal financing to continue expanding its three operational silver mines and exploring its two advanced-stage projects in Mexico.

In terms of the financing, a group of underwriters are buying 8.5 million units from First Majestic at $5.35 apiece, with each unit consisting of one share and half a warrant. The warrants areexercisable for the next 24 months at a share price of $7. The underwriters, led by CIBC World Markets, have an option to purchase up to an additional 1.275 million units before the deal closes on March 25.

First Majestic likely needs the money as it moves ahead with its five projects, all of which have released news of late.

At the Chalchihuites group of properties, located 60 km southeast of the company’s flagship La Parilla silver mine, drill results released hours before news of the financing continue to indicate that the historic mining district still holds significant silver. Chalchihuites includes the past-producing Perseverancia and San Juan silver mines.

San Juan was mined to a depth of 150 metres on nine levels, but was last in operation in the 1950s. Results from the company’s initial surface drill program directed development of ramps and underground drilling stations, plus five crosscuts. The first underground drilling results are starting to define a deposit averaging 20 metres wide, 100 metres long, and 150 metres deep, still open along strike and at depth.

Hole 6 intersected 39.6 metres grading 199 grams silver per tonne, 3.92% lead and 4.02% zinc from 53 metres depth, including 9.5 metres of 509 grams silver, 6.37% lead and 4.76% zinc. Hole 2 returned 13.55 metres grading 333 grams silver, 4.58% lead and 3.33% zinc from 182 metres depth. And hole 4 cut 16.9 metres grading 124 grams silver, 1.42% lead and 1.44% zinc from 54 metres.

Assays are still pending for four underground drill holes and one crosscut.

At La Parilla, an underground silver- lead-zinc mine, First Majestic completed construction of a cyanidation and flotation processing plant with an 800-tonne-per-day capacity in May. The plant processes both oxide and sulphide ores in two separate, 400-tonne-per-day circuits. The mill is currently running at roughly 95% capacity. The company also developed a new tailings dam, completed in November, that gives La Parilla an additional 10 years of mine life.

The company is pursuing an aggressive development and exploration program at La Parilla and has six drill rigs turning on the property, with plans to complete 24,700 metres in 119 holes this year. Some 900 metres of drifting, crosscutting, and ramp development is also under way.

An October 2007 estimate pegged La Parilla’s proven and probable reserves at 553,394 tonnes grading 326 grams silver, 0.59% lead and 0.43% zinc. Measured and indicated resources currently stand at 2.67 million tonnes grading 0.13 gram gold per tonne, 287 grams silver, 1.95% lead and 2.48% zinc. Inferred resources add 4.16 million tonnes grading 0.13 gram gold, 230 grams silver, 1.45% lead and 1.57% zinc.

A new estimate at La Encantada, First Majestic’s second main silver mine located in northern Mexico, boosts proven and probable reserves by 48%, measured and indicated resources by 212%, and inferred resources by 30%. The deposit hosts 1.21 million proven and probable tonnes grading 312 grams silver, 1.77% lead and 0.81% zinc. Measured and indicated resources stand at 7.04 million tonnes grading 173 grams silver, 1.73% lead and 2.05% zinc, with inferred resources adding 1.97 million tonnes grading 200 grams silver, 0.5% lead and 0.5% zinc.

To further upgrade reserves and resources, First Majestic is planning to complete 8,200 metres of surface diamond drilling, 5,000 metres of underground diamond drilling, and 2,340 metres of underground drifting.

The 800-tonne-per-day mine at La Encantada is currently running at roughly 90% capacity, with feed split almost evenly between ore coming from the mine and from the reprocessing of waste dumps, using the newly installed screening plant. Last year, First Majestic installed a new 1,500-kilowatt power plant and upgraded the existing 2,000-kilowatt plant at the project.

And at San Martin, the company’s third main silver mine, construction of a 500-tonne-per-day flotation circuit to take advantage of the sulphide ore resource began in November. The 800-tonne-per-day mill is expected to produce 1.8 million oz. silver this year.

First Majestic produced 3.56 million oz. silver equivalent in 2007, a 176% increase over production in 2006. Management says it is pleased with the increase in production even though it still fell short of the target. Increased tonnage feed through the mills La Parilla and La Encantada resulted in several equipment failures; at the San Martin mine, tonnage rates were reduced in order to maintain optimal head grade during mine development.

News of the drill results from Chalchihuites pushed First Majestic up 33 or 6.2% to close at $5.65. The company has a 52-week trading range of $2.81-6.01 and has 63.1 million shares issued, excluding the recently announced financing.