Mexico is a country rich in history and in silver. During the European conquest of the Americas, silver was discovered in Mexico in 1546 in what is now the state of Zacatecas. Vast amounts of the shiny white metal were brought into the possession of the crowns of Europe from the area. The Fresnillo mine in Zacatecas, owned by the Mexican silver producer that bares its name, is considered to be one of the world’s largest primary silver mines and it has been in near continuous operation since 1550. And today, Mexico is the world’s #1 producer of silver.

An early mover into silver-rich Mexico has proven to be a good strategy for First Majestic Silver. The company has three producing mines in three different states including Durango, Jalisco and Coahulia. First Majestic’s soon-to-be fourth producing asset, the Del Toro Silver Mine, is located in the state of Zacatecas. But the company faced some challenges along the way. In late 2008, during the height of the financial crisis, the company’s shares traded down to a low of $0.88. But since then First Majestic’s comeback has been nothing short of amazing. The company now trades on the NYSE, and its shares are being exchanged of late for $20.00. Today, the  company has a market capitalization of over $2 billion.

On May 13th, 2011 First Majestic Silver reported revenue of $55.3 million for the first quarter of 2011, an increase of 211% compared to $17.7 million in the first quarter of 2010 and an increase of 38% or $15.2 million compared to the fourth quarter of 2010. These results were spurred on by a 95% increase in the average realized price of silver, combined with a 13% increase in production. The appreciation in the price of silver went straight to the company’s bottom line. The company, which is considered to be the purist mid-tier silver producer, generated net earnings of $23.9 million for the first quarter of 2011 compared to net earnings of $0.4 million in the first quarter of 2010 and net earnings of $13.7 million in the fourth quarter of 2010. First Majestic Silver currently reports a cash balance of $97.1 million and the company doesn’t carry any long term debt.

With an income statement that might make the most conservative accountant crack a smile and a balance sheet that could even make Jim Flaherty blush we connected with the President & CEO of First Majestic Silver, Keith Neumeyer, to find out what’s on the horizon for the company. 

First Majestic is focused entirely on Mexico. What are some of the strategic benefits of doing business in Mexico and are you looking at additional opportunities within Mexico and/or elsewhere?

Mexico has a long history of being a top producing silver country due to its abundant skilled labour workforce, politically stable environment and modern communications and transportation infrastructure. After NAFTA was signed in 1993 allowing foreign investment in Mexico, there was a surge of acquisitions by Canadian companies for exploration properties. We were lucky enough to have secured our assets back when silver prices were much lower than what we see today. However, we are always looking for additional opportunities within and outside of Mexico in order to grow our business. Management is determined to expand First Majestic’s asset base and thus continues to investigate other interesting advanced stage silver projects in Mexico.

The company has 3 operating mines and 2 development projects, what is your collective NI 43-101 resource estimate?  Also, what is your exploration budget for the next 12 months and what milestones do you hope to reach during the period?

First Majestic has a total resource of 346 million ounces silver equivalent (NI 43-101 complaint) and plans to have an updated resource estimate on all five of the assets later this year. First Majestic is investing a total of $12 million dollars on exploration drilling in 2011. Our goal is to drill 36,500 meters and continue to develop ounces in the ground. Previous exploration drilling has been within only a few kilometers from each of the mill sites so there is definately serious exploration upside. A perfect example of this exploration upside can be found at the La Parrilla silver mine where the current land package stretches across 70,000 hectares (approx. 170,000 acres) and we have allocated $2 million for regional exploration drilling within this large land package for 2011.

First majestic is operating in the black, in general terms, can you tell us about the nature of your deposits and what makes them economical?

First Majestic’s strategy from the very beginning was to focus on pure, high-grade silver deposits in Mexico.  To date, 85% of the metal defined in the ground is pure silver with average grades of over 200+ grams of silver per tonne. Focusing on pure silver deposits has enabled First Majestic to be deemed the purest silver company in the world.

You are forecasting 7.5 million ounces of silver production for 2011. What are your projected costs of production and what operational percentile does this put First Majestic in relationship to other silver produces?

In 2010, our “direct” cash costs were US$5.85/oz and “total” cash costs were $7.94/oz. We like to publish both of these numbers. The direct cash cost includes all costs associated with mining and milling activities within the gates of the operation. The total cash cost will include direct cash costs plus other costs such as smelter charges, refining charges, transportation, insurance, etc.

You might notice that some US miners publish a $0/oz, and in some cases, even a negative cash cost per ounce because production includes a large percentage of base metals of which the revenues are then added back into the costs of goods sold. This number is often misleading. Since First Majestic is the purest silver producer in the world, our mining costs are less likely to be skewed due to other sources of production. In fact in 2010, 93% of our revenue came from the sale of silver. This compares to US based Hecla at approximately 45% and Coeur d’Alene Mines at 65%.

This interview appeared in 10 Most Interesting Silver Stocks – Part 1 – CLICK HERE – for the article.