Keith Neumeyer
President and CEO
First Majestic, Silver Corp
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View from the Top

First Majestic’s Aggressive Development and Acquisition Plan

Mon, 10/21/2013 - 11:47

Q: To what extent is Mexican territory underexplored when it comes to silver?

A: Mexican territory is extremely underexplored, not just in silver but also in other natural resources like oil and gas, uranium, gold, copper, lead, and zinc. The first wave of investment in Mexico from Canada came after NAFTA in 1993, but unfortunately it only lasted for a short period of time due to the 1997-1998 crash in the global mining sector, after which gold prices hit a low of US$250 per ounce and copper dropped below US$0.60 a pound. During this period of time investment in mining reduced significantly worldwide, causing mines to shut down and a shortage of trained personnel in the industry.

Q: Your founding of First Majestic Silver Corp. in 2002 reflects your belief in the silver market and the potential of silver mining in Mexico. What is this belief based on?

A: From my point of view there are two metals that are essential for humans in their daily lives: one is silver and the other is copper. In my opinion, if silver disappeared from our lives today, our lives would change for the worse. 80% of mined silver is used commercially, such as in photography, batteries, and cell phones, among many other uses, and as the human race becomes more reliant on technology it becomes more reliant on silver. However, as above-ground supply for silver is rapidly depleting production is not matching the increasing demand. 90% of all of the silver that has ever been mined has gone into waste dumps, and generally has not been recycled because the silver price is not high enough to make the recycling process profitable. There will come a point in the future when recycling these products makes economic sense, but the price of silver will have to be around US$100 to US$150 per ounce for that to happen. These numbers are achievable and in my view we will see prices like that within the next five years.

Q: What does First Majestic’s portfolio currently look like, and which would you say is your flagship property?

A: Our strategy has been to acquire good assets that we believe in, and we have proved very successful in buying underperforming assets that lacked money. We currently have 11 projects in total, with five producing mines, two of which will be expanded dramatically over the next three years. Del Toro is the biggest investment in our company’s history, at US$124 million, and it is also going to be our biggest mine, with anticipated annual production of 6 million ounces of pure silver. That is easily our biggest mine and our biggest investment in Mexico, and currently the most important property in our portfolio.

Q: What is the main challenge that you are facing at your operating mines?

A: The biggest factor for us has been water; we had some problems in 2012 with our other operations because of the drought that hit Mexico. We built very large filter presses in the La Encantada mine, which filter and recirculate the water back into the system to be reused. This is more environmentally friendly, because the end product is a dry tailings paste that is free of water or cyanide, and water consumption on that operation is 80% lower following the construction of these presses. We have also installed them at the La Parrilla mine. Even though this entails a big initial investment of around US$5 million, it takes a huge pressure off the community. At our San Martín operation in the state of Jalisco, the Bolaños River dried up for the first time in known history in the summer of 2012. As a result our production mill had to be shut down, because obviously the town takes priority over the mine for water provision. As a solution, First Majestic built a 13km pipeline from a distant water source in the mountains and transported water from there to the town. A decision was also made to invest in a sewage treatment facility in the town in order to treat all of the sewage that is currently going into the river. This new facility will not only clean up the environment, but its wastewater can also be used in the milling operation. As part of our current Del Toro construction project in the state of Zacatecas, we are installing the same types of water preservation systems. We are very proud of these initiatives and believe that all mining companies should adopt similar practices.