March 28, 2007
First Majestic Silver Looks To Top Up The Till
By Our Canadian Correspondent
Armed with a new 800 tonne per day mill and an updated resource on its flagship La Parrilla mine project in Mexico, Keith Neumeyer and his team at First Majestic Silver are on their way to completing a C$40 plus million financing.
View of La Parrilla mill operations at night
Sprott Securities and CIBC World Markets led a group of underwriters that agreed to purchase 8 million First Majestic units at a price of C$5 each. A unit holds one share and half a warrant with each full warrant exercisable at C$6.50 for 18 months. The well known resource underwriters get a 5.5 per cent commission and also have the option to purchase an additional 15 per cent of the offering at any time prior to the closing date, which is expected around April 12.
The timing of the offering is interesting because First Majestic recently tabled a measured and indicated resource of 15.08 million ounces of silver at a grade of 278 grams silver per tonne at La Parrilla. This, combined with the fact that the construction of the new mill, which began construction last May, is now complete, makes 2007 a pivotal year for the emerging silver miner.
The La Parrilla project is favourable located only four kms off the main highway some 75 kms southeast of Durango. The 3,400 hectare land package hosts several large vein systems, of which First Majestic is targeting the La Rosa/Los Rosarios, San Marcos, San José, San Nicolás, Vacas, Quebradilla, La Luz and Recuerdo structures with six rigs turning. Based on the results to date, one would expect to see the La Parrilla resource grow during the course of the year. In fact, First Majestic has already staked an additional 18,466 hectare block of land encircling the original land package, plus an adjacent land block comprising a further 31,347 hectares.
Almost as a side note, the company reported that it has purchased the San Juan silver mine, which lies 50 km from la Parrilla as is part of the land package previously known as part of the Chalchihuites property. Here drilling and development has been ongoing since early 2006. The 204 hectare property was picked up through a 2004 option agreement with the final payment of $650,000 handed over in January. At last report, five drill holes and the development of a 168 meter ramp and 76 meters of direct drifting have been completed on the property, plus 2000 tonnes of sulphide ore has been stockpiled for the purpose of mixing at the La Parrilla mill, which now has two different circuits; a 400 tonne per day cyanidation circuit and a 400 tonne per day flotation circuit. In a nut shell, La Parrilla is expected to produce around 1.8 million ounces of silver this year for First Majestic at a cost of around US$5.5 per ounce.
But First Majestic has a lot more on the go than just La Parrilla. At its La Encantada project in the prolific Sierra Madre Oriental of Mexico, where 945,000 ounces of silver were produced in 2006, output is expected to hit 1.2 million ounces in 2007 at costs of around US$4.25 per ounce and at its San Martin mine in Jalisco State, output for 2007 is anticipated to be around 2 million ounces of silver at costs of US$5 per ounce. All tallied, First Majestic could well reach 5 million ounces of silver output in 2007, propelling the upstart into the big leagues of silver miners with good exploration upside.
This brings me back to the financing front. First Majestic does have aggressive development plans in place for its existing projects with 7.6 kms of mine development and 5000 meters of diamond drilling slated for La Encantada in 2007, while some US$8 million in earmarked to upgrade the mill at San Martin, but still one has to wonder if Keith and his team have their eyes on yet another silver acquisition in Mexico. If the past is any indication of the future, I would not be surprised to see significant purchase once the C$40 million financing is closed.
Listen to First Majestic President and CEO, Keith Neumeyer on Commodity Watch Radio
AI
