First Majestic blocks out San Martin ore

A new reserve estimate shows a turnaround at the San Martin silver mine in northern Jalisco state, Mexico, under new owner First Majestic Silver (FR-V, FRMSF-O), will likely rest on bringing resources and exploration targets into the reserve base.

The mine has a reserve of 492,000 tonnes grading 290 grams silver per tonne, plus some gold and lead credits, with a significant measured and indicated resource not included in the reserve. Measured and indicated resources total 1.8 million tonnes grading 250 grams silver per tonne, and an inferred resource amounts to another 2.7 million tonnes grading 202 grams per tonne.

The new figure, calculated by outside consultants Pincock Allen & Holt, does not include new mineralization blocked out in underground development on the producing Zuloaga vein.

Three drills are in operation on the property and First Majestic hopes to line up another three for exploration on known vein systems, including Zuloaga and two other targets, Rosario and Condesa.

Production continues from the active parts of the mine at about 800 tonnes per day.

In February, First Majestic released a resource figure on its La Parilla project 75 km southeast of Durango. That project has 1.9 million tonnes, measured and indicated, grading 278 grams silver and 0.09 gram gold per tonne.

The company lost $3.1 million on revenue of $10.2 million in the first quarter of the year, for a loss per share of 6. In the first quarter of 2006, First Majestic saw a loss of $1 million on revenue of $671,000, although its expansion of operations since then means the two figures are not directly comparable.

First Majestic’s three mines, La Parrilla, La Encantada, and San Martin, produced 720,000 oz. silver, plus byproduct gold and lead; that was an increase of 31% over the previous quarter. Its overall production cost in the recent quarter was US$8.55 per oz., compared with US$12.03 per oz. during the last six months of 2006. It realized an average US$15 per oz. from silver sales, against US$13.70 per oz. in the last quarter of 2006.