La Parrilla Mill Expansion to 2,000 tpd Completed: Del Toro Construction Update

First Majestic Silver Corp.’s new La Parrilla flotation/cyanidation plant was inaugurated in a ceremony at the La Parrilla silver mine in the state of Durango, Mexico, on Jan. 19, 2012, at which approximately 150 people attended including several Mexican federal, state and municipal authorities. The federal government was represented by Jimena Valverde Valdez, General Co-ordinator of Mining for the Secretary of the Economy, while the state of Durango was represented by Hector Vela Valenzuela, Ing, Secretary General of the Governor of Durango, both of whom declared the new plant as officially open.

The new La Parrilla dual processing plant has a total capacity of 2,000 tonnes per day (1,000 tonnes per day in the flotation circuit and 1,000 tonnes per day in the cyanidation circuit) and is anticipated to be operating at full capacity in February, 2012. Currently the mill is operating at 1,500 tonnes per day (1,000 tonnes per day in flotation and 500 tonnes per day in cyanidation).

The final components of the plant to be installed are the tailings filters, which will allow for the recirculation and recovery of 80 per cent of the water used in the process. These filters are expected to be fully operational by the end of February, 2012. Also, the dust collection system and new induction furnaces are expected to be fully operational by the end of January, 2012.

As previously announced in September, 2011, the flotation circuit has been operating since Sept. 1, 2011, and reached commercial production of 1,000 tonnes per day on Oct. 1, 2011. The new 1,000-tonne-per-day cyanidation circuit was slightly delayed due to the late delivery of components and delays by the Mexican power authorities in hooking up the new 115,000-kilovolt power line which was eventually connected on Jan. 18, 2012. Once completed, annual production is estimated to be approximately 3.0 million ounces of pure silver, 6.0 million pounds of lead and 4.3 million pounds of zinc. The total investment to the end of 2011 was $35.0-million (U.S.) inclusive of mine development. The remaining balance of the $40.5-million (U.S.) budget is being expended in 2012.

This major expansion project was planned not to disrupt silver production during construction. Both circuits for flotation and cyanidation continued to operate during the entire construction process and will continue to operate while the final systems are installed for the new cyanidation circuit.

With this major construction project coming to an end, management can now focus on the many additional objectives planned for 2012 at the La Parrilla complex. The company has budgeted $20-million (U.S.) for the construction of a new 2,000-tonne-per-day shaft at Rosarios, near the mill, and the construction of an underground rail system that will connect the Rosarios, San Marcos, Vacas and Quebradillas mines. Upon completion, all underground mining areas will be connected by a new ore haulage level through an underground train system. The consolidation of the underground operations will significantly improve operating efficiencies and should have a positive impact overall on total cash costs.

In addition, the company’s exploration budget is $6.3-million (U.S.) at La Parrilla, which will include 25,000 metres of drilling. Included in this drilling program will be prospective areas defined by geophysics and geochemistry over the past year but never drilled before. In addition, a very aggressive development program consisting of 20,000 metres, including the new haulage level, is expected to be completed at La Parrilla in 2012. An updated NI 43-101 technical report is also expected to be released by the end of 2012.

Keith Neumeyer, president and chief executive officer, stated: “We are very pleased with the completion of this major new expansion at La Parrilla. Our Mexican construction team should be recognized for their hard work and tireless efforts and should be congratulated for completing the construction while keeping the older mill operating.”

Prior to the inaugural opening ceremony, the company hosted a visit of four mining analysts at the La Encantada silver mine and the Del Toro silver mine. At Del Toro, the analysts witnessed the major earthmoving project under way in advance of foundation laying and they also visited the new underground discovery called San Nicolas, which was discovered in November, 2011, during the construction of a development ramp to access the Persaverancia mine.

The preliminary economic assessment (PEA), planned to be released prior to the end of the first quarter, will include a new reserve and resource estimate and plans to construct a 4,000-tonne-per-day dual circuit mill rather than the previously planned 2,000-tonne-per-day mill. The PEA will outline a phased construction project whereby the new dual-purpose mill will reach 1,000 tonnes per day (500 tonnes per day in flotation and 500 tonnes per day in cyanidation) in the fourth quarter of 2012, 2,000 tonnes per day by the end of 2013, and 4,000 tonnes per day (2,000 tonnes per day in flotation and 2,000 tonnes per day in cyanidation) by the end of 2014. Full financial and production details will be contained in the PEA.

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