First Majestic Silver Corp. Keith Neumeyer's Interview With Minesite.com by 24hgold

Title: First Majestic Silver Corp. - Keith Neumeyer's Interview With Minesite.com

First Majestic Silver Dodges The Mexican Drought To Deliver Another Quarter Of Production Growth

While other miners in Mexico felt the heat earlier this year as extreme drought conditions led to water shortages and production shortfalls, First Majestic Silver was largely unaffected, as a result of proactive water management practices dating back to 2009.

Underground at La Parrilla
In fact, the company was able to produce just over 2.1 million silver equivalent ounces in the second quarter, representing a 14 per cent increase over production in the corresponding quarter in 2011.

For Keith Neumeyer, president and chief executive of First Majestic, it's another milestone on the road to becoming the next senior silver producer in the world, a goal he says the company is now closing in on.

"We're the fastest growing silver producer in the world," he says. "At current levels, we'll be at nine million ounces this year and by 2014 we'll be over 16 million ounces and there's still growth after that."

So how has the company managed to keep operations running so smoothly, when others have faltered? "When we bought La Encantada back in 2009 we made a conscious decision at that time to build a water collection system, whereby the tailings produced are dry stack tailings" explains Keith. "What that means is that dry stack tailings have virtually no environmental impact and it also saves water for the operations. We've found we are re-circulating 84 per cent of the water."

Three years down the line, the C$5 million investment has saved countless liters of water and allowed the mill to operate through conditions which have brought other operations to a standstill.

The same system is employed at the La Parrilla mill and again during the recent drought there were no production interruption.

The only place where First Majestic was caught off guard was at its smallest mine, San Mart�n. There, production was impeded while the team constructed a water pipeline, which also saved the town, since the municipality had run completely dry, and which has been left in place as an insurance measure for the community.

But there are other pressures on the company besides the elements. Cost inflation and lower silver prices, resulted in a 19 per cent drop in First Majestic's revenue in the second quarter to just under C$55 million. Keith argues that actually, given the 27 per cent decrease in the price of silver, that result was "pretty darn good".

The rise in production has gone a long way to mitigating the worst effects of the weak silver price. "It tells you we can grow", says Keith. What's more, a lot of work is going into the cost control side of the equation as well. Equipment, chemicals, and labour costs are all on the rise.

Despite this, there are areas where Keith and his team can optimize production and cut costs. "From our perspective, the ways of keeping costs down are increasing throughput, modernizing the mills by eliminating old equipment, and using new technologies. We've been very focused on that and we're always upgrading and always improving the mills and looking for places to cut costs."

At La Parrilla, says Keith, "there's five separate mines within a 3 kilometre radius of the mill and currently the ore gets brought to surface and trucked to the mill. The ore is handled several times so as the operation has grown to the size it is, it now makes sense to make the C$20 million investment to build a whole underground infrastructure."

The new system at La Parrilla will connect the five mines with an underground transportation system which will haul ore by rail to a main shaft which will in turn feed the mill. This is expected significantly to decrease costs by increasing operational, and the replacement of dump trucks and loaders with an electric underground system should significantly lower fossil fuel use and therefore environmental impact.

"As we become larger, it's our responsibility to make our mines more environmentally sustainable because we are a leader in the business," says Keith.

In fact, the operating costs reported by First Majestic are quite impressive across the board. In the second quarter overall operating costs per tonne came in at C$26.97, a 10 per cent reduction when set against the second quarter of 2011.

The one mine which stands out as a high cost producer is the recently acquired La Guitarra silver mine which was part of the Silvermex Resources deal announced earlier in the year. But Keith points out that there has already been significant progress. "When we bought this mine, they were producing at C$105 per tonne. We've got it down in just a couple of months to the mid eighties and our objective is to bring this cost down to C$60 by the end of the year."

Though costs are the immediate focus for the team at La Guitarra, starting in 2014 Keith expects to embark on a program to increase production there too. While it's too far out for specific guidance, the 40,000 hectare asset has hosted many mines historically.

"I'm a big believer that where there's an ancient mine, there's more metal. That's been our business plan right from the beginning when we put First Majestic together in 2003", says Keith. "I'm pretty certain that when we go in there and develop or do proper exploration this will be an exciting asset for our shareholders." He predicts that five years from now there will be more than one mine and mill on La Guitarra.

In the more immediate term, the company is now closing in on first production at the Del Toro mine, which has already been the subject of two NI43-101 updates this year. "In an asset like Del Toro, where you have six rigs drilling 24/7, you're always changing things. Between December [the data cut-off date for the first report] and the time the report came out, there were a lot of developments. With the grade increase and other improvements we felt it was important enough to advise our shareholders."

Del Toro, which First Majestic expects will become its largest mine yet, now boasts a measured and indicated resource of 76.5 million ounces, as well as an inferred resource of 81.8 million ounces. What's more, the average measured and indicated silver grade increased by 20 per cent to 175 grams per tonne in the latest report.

With the final permits in hand, Keith expects, "some production, in a modest way, out of Del Toro by the end of the year." Mine commissioning is never predicable, but First Majestic has historically taken about three months to reach commercial production following commissioning.

If that's any guide, First Majestic may just have a fifth mine in commercial production by April 2013. "The plan is to have it at 1,000 tonnes per day in sulfides by the end of the year and then by the third quarter of 2013 to have it up to 2,000 tonnes per day, 1,000 through flotation and 1,000 through cyanidation so it should be producing dor� by the end of 2013," says Keith. By the end of 2014, Del Toro is expected to finish its ramp up and be operating at 4,000 tonnes per day.

Copyright � 2012 FIRST MAJESTIC SILVER CORP. (TSX: FR) All rights reserved. For more information visit our website at http://www.firstmajestic.com/ or send email to investor@firstmajestic.com ..
Message sent on Thu Sep 6, 2012 at 2:03:53 PM Pacific Time

Legends
	Production
	Mine development
	Discovery
	Exploration
	Past producer
On Google Earth, click on the button, to show property information, and access to project page or company page.