First Majestic to run La Encantada silver mine

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Friday, September 1, 2006

Vancouverite First Majestic Resource (TSX-V: FR) signed a letter agreement to acquire Mexican miner Desmin, operator of La Encantada silver mine in Mexico's Coahuila state, First Majestic president Keith Neumeyer said.

The deal will cost First Majestic a total of US$4.75mn, Neumeyer told BNamericas in an email.

Desmin, which has an exploitation contract with La Encantada's owner Industrias Peñoles (BMV: PE&OLES), said it would buy the mine from Peñoles for US$3.25mn, according to a First Majestic statement.

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La Encantada would be passed on to First Majestic once Desmin becomes a subsidiary of the Canadian company, which agreed to pay the Mexican US$1.5mn for all of Desmin's outstanding shares plus the cost to acquire the mine from Peñoles, Neumeyer said.

Due diligence on the acquisition is underway and set to wrap up October 3, First Majestic said.

La Encantada currently produces 800,000oz/y of silver with a throughput capacity of 800t/d. It processes 250t/d oxide ore grading 500g/t silver, representing 40% of the mine's total capacity, the statement said.

First Majestic also operates the Dios Padre and La Parrilla silver mines in Sonora and Durango states respectively.