Santa Elena Project Bolstering Growth

Q: Which of First Majestic’s achievements over the past decade are you proudest of, and in which ways have they shaped the company?

A: Over the past decade, each year has been unique in terms of the successes they have brought to the company. First Majestic Silver is the second largest producer in Mexico and it has taken many variables to achieve this leadership position. It has all come down to exceptional human capital, trained teams, profitable assets, shareholders, and the strategy the company has put forth to raise capital and deploy it, ultimately benefitting the shareholders. As a mining company focused on silver production in Mexico, the manner in which we could benchmark our performance to other silver producers would be determined by how we save costs. Nevertheless, it is difficult to compare our performance on only that variable because we are the leaders in pure silver production. First Majestic strives to develop its existing mineral property assets and presently it owns and operates six silver producing mines, La Parrilla, San Martin, La Encantada, La Guitarra, Del Toro, and the newly acquired Santa Elena.

Q: How have First Majestic’s operational practices contributed to the increase in silver equivalent production?

A: The combined effort of the six operating mines has enabled First Majestic to reach these production levels, and 2016 is poised to become an equally promising year. The acquisition of the Santa Elena silver mine has certainly bolstered our growth, as it is a 5 million ounce producer. This acquisition enabled the company to finish the year on a strong note, and the final quarter saw an all-time production record. The Santa Elena mine is comprised of concessions stretching across 51,172 hectares. It combines ore processing from the remaining reserves in the open pit with updated reserves from the underground development, in addition to the reprocessing of spent ore from the existing heap leach pad. Currently, we are mining on three stopes in order to reach underground production levels of 1,500t/d. The weakening peso and the addition of Santa Elena in the fourth quarter had a positive impact on our all-in sustaining costs (AISC) in 2015. In addition, the US$14 million spent on the expansion at La Encantada to increase the crushing capacity to 3,000t/d was completed in June 2015, reducing AISC by approximately 20 percent.

Q: Which measures to reduce operating costs have been most effective in your efforts to optimize financial performance?

A: Three years ago, we decided to transform the company and treat it like a manufacturing business. We are now able to identify inefficiencies and deploy technologies within it. We have embraced the automation trend and we have automated the laboratory processes, meaning the access to the mineral is faster and we can control variables like temperature, cyanide, chemical, and pH levels in ore processing, which positively affect the throughput. There are dozens of alternatives we have implemented that have impacted our operation costs. First Majestic has been one of the first to ride the technology wave and we have seen that it has benefitted the sector both in terms of competitiveness and environmental responsibility. Mines in the US and Canada have been forced, over time, to change and in many ways they are decades beyond mines in Mexico.

Q: What is First Majestic’s plan for the development of the Santa Elena mine?

A: The company’s total CAPEX in 2016 is US$64 million, of which US$45 million is earmarked for sustaining and US$19 million is earmarked for expansion. Production will remain in the 5 million ounce range and the main focus will be to extend the lifetime of the mine. Production levels in 2015 reached approximately 16 million ounces and this will increase to 19 million, with this growth stemming from the Santa Elena mine. The cost per ounce ranges between US$11-13 and we hope to either sustain it or reduce it even further but this will depend on the Mexican peso and the current commodity prices. There is a sizeable land package with interesting geology that is now being mapped. The previous owners did little on that front so we plan to define drilling targets over the coming years. It is one of our lowest cost mines because of its gold credits. There are many factors that make it a low cost operation, which include a good mill, a well-developed mine, and top quality planning thanks to a wealth of mapped resources.