First Majestic - Silver Corp.

View of the La Parrilla mill operations at night looking to the west.

INTRODUCTION

La Parrilla Silver Mine is 100% owned and comprises of a 2,000 tpd dual circuit flotation/cyanidation mill and underground mine complex which began operations in October 2004. In addition to the mine and mill the land package consists of over of 69,440 hectares.

The property is located 65km due southeast of the city of Durango in the western part of the Mexican Altiplano at 23 degrees 44' 16" North latitude and 104 degrees 06'26" West longitude. The nearest towns are San Jose de La Parrilla, 1.5km to the north of the property, and the larger Vicente Guerrero, 16km to the southeast.

Excellent infrastructure exists in the area with the mine only 4 km away from the main highway which links Durango and Zacatecas.

69,440 hectares land package

The La Parrilla is a complex of five mines surrounding the mill. Among the several large vein systems included within the La Parrilla property boundaries, the company is focusing exploration on the Quebradillas, Vacas, San Marcos, La Blanca mines and the Cerro Santiago, Víboras, San Nicolás, Sacramento areas. Most of the silver ore presently being mined comes from Los Rosarios, La Rosa, San Jose, Quebradillas and San Marcos mines. The figure to the right illustrates the geographical layout of First Majestic's land package.
Development and exploration drilling recommenced in 2010 with a focus on resource definition and exploration of the strike and depth of the known structures.

Residual Magnetic Field

The recent work completed from January 2010 to June 2011 amounted to 37 diamond drill holes consisting of 6,373 metres and 3,080 metres of underground mine development. Currently, five drill rigs are operating at La Parrilla. A total of 20,000 metres of drilling is planned for the remainder of 2011 and 2012 representing the continuation of an aggressive investment at La Parrilla. Since June 30, 2011, an additional 9 holes have been drilled equaling 3,334 metres.

Known structures currently being developed/explored

Longitudinal section of the Los Rosarios and La Rosa structures

As can be seen from the cross section above, a key component of mine planning is the consolidation of all the mine operations by the construction of a large shaft and connecting all the mines with an underground rail system. The shaft construction will be at Rosario, being closest to the mill, to Level 11. Upon completion, all underground mining areas will be connected and ore haulage will be via underground trains, which will tram the ore from ore passes to a new shaft, now under construction. The ore haulage system will ultimately extend under the San Marcos, Quebradillas and Vacas mine areas, as well as under the Rosa Rosarios and La Blanca San José areas. The principal advantage is the consolidation of all underground operations to one main hoisting shaft which will dramatically improve efficiencies and have a positive impact on costs.


Milling Operations

In December 2010, First Majestic began a major expansion project at La Parrilla to expand the mill to 2,000 tpd from the previous 850 tpd due to the significant increase in silver reserves. The expanded mill consists of two1,000 tpd circuits; one to handle oxide ore, and the other to handle sulphide ore. Production at the La Parrilla Silver Mine consists of approximately 34% silver dore bars and 66% lead and zinc concentrates which also contains silver. Pure silver production from these two circuits is expected to reach 3.0 million ounces in 2012.

LOCAL GEOLOGY, MINERALIZATION & ORE TYPES

La Parrilla lies near the western edge of the Mexican Altiplano, an extensive volcanic plateau characterized by narrow, northwest trending, fault controlled ranges separated by wide, flat-floored basins. In the Durango area these basins sit at 1900 m to 2100 m above sea level, with the surrounding peaks rising up to 3000 m. This region is cool and dry in the win- ter months, with a distinct summer rainy season from June to September.

The mining district of La Parrilla is underlain by Mid Cretaceous sedimentary rocks, including limestone, shale, and mudstone. The silver-lead-zinc mineralization in the various sectors of the property is hosted in vein fault zones, breccias and replacement bodies. These occur within the porphyritic diorite intrusive rocks and in the adjacent limestone, skarn, and hornfels rocks. La Parrilla was originally operated from 1956 to 1999 and was shut down due to low silver prices. La Parrilla is an industrial complex made up of several known mines which surround the mill facility. It is anticipated that several similar ore shoots are present along the intersecting structures of over a length of at least 4kms.


The region surrounding Durango and Zacatecas, is historically known for its world class silver deposits, hence the name Mexico Silver Belt but large tonnages of lead, zinc, copper and gold have also been mined in the region. Many of the smaller districts and prospects remain under explored. There are a variety of deposit types in the area. Large quartz veins were mined in the Zacatecas District and are now being developed in the Fresnillo District. In addition, bulk tonnage, intrusion related deposits in stockworks, skarns, chimneys, and mantos have also been identified and remain prospective exploration targets. Currently, exploration is active in this region, as several junior and major companies have staked large claim blocks. The mineralized structures at La Parrilla are thought to have similarities to intrusion-related mineralization in the Fresnillo, Sombrerete, and Chalchihuites districts in Zacatecas.

The nearest large operating mine complex is San Martin/Sabinas, located in Sombrerete, Zacatecas, 35 km southeast of La Parrilla. The San Martin/Sabinas complex is one of the oldest mining districts in Mexico and largest underground mine in Mexico. The San Martin/Sabinas mining unit has a combined throughput capacity of approximately 8,000 tonnes per day (Grupo Mexico, 2010; Penoles, 2010). Sabinas ore grades around 4% Zn, 1% Cu, 120 g/t Ag and 0.5% Pb while the San Martin mine has had a historical average grade of around 5% Zn, 1% Cu, 150 g/t Ag and 0.5% Pb.

The nearby Fresnillo silver mining district in neighbouring Zacatecas State contains many silver vein deposits. One of the larger, classic veins of this camp is the Santo Niño vein. This mineralized vein is not well exposed at surface; instead, there is a small stockwork of small veins and veinlets that define the vein at depth. The Santo Niño vein was discovered by drilling at a depth of 300m below the surface and has now been traced for 2.5 km in length and 500m in depth with a width varying from 0.1 - 4.0 m. The initial discovery hole in 1975 intersected 1,087 g/t silver, 1.62 g/t gold 0.4% lead and 0.7% zinc over a true width of 3.0 m. This vein has become thelargest silver producer in Mexico and is owned by Penoles.

For more detailed geological information, readers are encouraged to review the Company's most recent NI 43-101 report (PDF, 20.45 Mb).

Surrounding Mining Districts

1 of 3 operating ball mills at La Parrilla

Fully automated control systems

Ore conveyer belt