First Majestic and First Silver to merge Mexican assets

Vancouver The recent completion of a $28-million financing has set the stage for First Majestic Resource (FR-V, FMJRF-O) to acquire the remaining shares of First Silver Reserve (FSR-T) through a merger proposal aimed at creating a Mexican-focused “pure-play” silver producer.

The core assets of the “new” First Majestic would be the predecessor company’s wholly owned La Parrilla silver mine in Jalisco State, and First Silver’s wholly owned San Martin silver mine in Durango State.

Under the proposed business combination, First Majestic plans to acquire all the issued and outstanding shares of First Silver on the basis of one First Majestic common share for every two common shares of First Silver Reserve. This valuation reflects a 5.43% premium to the 10-day trading average of First Silver, which closed at $2.38 on June 5. Alternatively, shareholders can elect to receive cash consideration of $2.165 per share, with 50% payable upon completion of the merger, and the balance payable (with interest) over the next two years.

First Majestic owns 63% of First Silver and assuming the merger closes as expected in late August or early September, the board of First Majestic would consist of Keith Neumeyer, Ramon Davila, Robert McCallum, David Shaw, Bernard Fahy, Robert Young and Tony Pezzotti. The merger proposal is subject to necessary shareholder and regulatory approvals, and a due diligence period.

First Majestic President Keith Neumeyer stated that the combination of the two companies “will bring together synergies that will result in a very efficient team of mining, development and exploration professionals that will result in one of the most dynamic pure silver producing companies in the world.”

The La Parrilla silver mine is expected to reach a throughput rate of 800 tonnes per day by August, which would boost production to an annual rate of 2 million oz. silver annually. First Majestic is also developing the Dios Padre silver mine and La Verde silver mine in the Candamena mining district. In late 2005, First Silver reported that its San Martin mine had produced 1.28 million oz. silver and 2,918 oz. gold during the nine-month period ended Sept. 30.