Del Toro Mine Opening Brings First Majestic Closer to Senior Goal

Tuesday January 29, 2013, 4:15am PST

By Michelle Smith - Exclusive to Silver Investing News

Last week, First Majestic Silver (TSX:FR,NYSE:AG) announced initial production from its Del Toro mine in Zacatecas, Mexico. This year, the company projects production of 11.1 to 11.7 million ounces. Of that amount, Del Toro is expected to contribute about 2 million ounces. The opening of Del Toro is yet another step toward the company’s goal of becoming a senior producer.

First Majestic focuses on one metal — silver — in one country: Mexico.

The Del Toro silver mine was declared officially open in a special inauguration ceremony on January 23. On the 25, the company announced initial production. First Majestic now has five producing mines in its portfolio.

Del Toro is composed of four underground areas, including the historic San Juan mine, which some believe be the oldest mine in the Chalchihuites silver mining district, perhaps dating back 500 years. Perseverancia is also a historic mine and was a source of high-grade, silver-rich sulfide ore, First Majestic’s website notes.

Underground development at Del Toro has produced a stockpile of ore in excess of 97,000 metric tons (MT), according to the production announcement. This material is currently the source of feed for the processing plant.

The company expects commercialization of the 1,000-MT-per-day (tpd) floatation circuit by April 1. That will mark the conclusion of the the first part of its three-phase production plan.

During the first half of the year, work will be also be done to prepare Del Toro for phase two, which will include the addition of a 1,000-tpd cyanidation circuit that is expected to start up by July 1. The company expects that its dual-mill circuit will then be producing 2,000 tpd.

The final phase, slated for completion by Q3 2014, will aim to increase the capacity of the cyanidation and floatation circuits to a rate of 2,000 tpd each.

“The start-up of the Del Toro Silver Mine marks a very important milestone for First Majestic. This year, the Company will celebrate its 10 year anniversary by breaking through 10 million ounces of silver production as a result of Del Toro coming on stream,” said Keith Neumeyer, president and CEO of First Majestic, in the company’s press release.

First Majestic sees its newest mine becoming its largest operation. The company’s goal is to achieve annualized production of about 16 million ounces by 2014. Once phase three is completed, it anticipates that Del Toro will produce at an annualized rate of 6 million ounces of silver per year and “significant amounts” of lead and zinc, the press release notes.

In December, the company signed a $50-million forward-sale contract with Bank of America Merrill Lynch. In a press release, Neumeyer said the agreement would provide a sales outlet for a portion of the base metals from Del Toro and the La Parrilla mine.

Del Toro just the beginning

First Majestic’s aggressive strategy to achieve senior status involves keeping the ball rolling beyond its new mine.

Among other plans, First Majestic is expecting to acquire Orko Silver (TSXV:OK,OTC Pink:OKOFF) in the near future. The deal is valued at C$387 million and is expected to close in February. When that happens, First Majestic will have La Preciosa, an asset that the company describes as one of the world’s largest undeveloped primary silver deposits, in its portfolio.

First Majestic believes La Preciosa blends well with its organic growth structure. Start up is anticipated to follow both the ramp up at Del Toro and the company’s current efforts to increase capacity at La Guitarra.