First Majestic Silver Corp.: Exhibit 99.1 - Filed by newsfilecorp.com

Unless otherwise indicated, all information contained in this Annual Information Form (“AIF”) of First Majestic Silver Corp. (“First Majestic” or the “Company”) is as of March 31, 2011.

All financial information in this AIF is prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”).

Certain statements contained in this AIF constitute forward-looking information or forward-looking statements under applicable securities laws (collectively, “forward-looking statements”). These statements relate to future events or the Company’s future performance, business prospects or opportunities. Forward-looking statements include, but are not limited to, statements with respect to the Company’s business strategy, commercial mining operations, anticipated mineral recoveries, projected quantities of future mineral production, interpretation of drill results, anticipated production rates and mine life, the estimated cost and timing of development of the Company’s development projects, the timing of completion of exploration programs and preparation of technical reports, operating efficiencies, capital budgets, costs and expenditures and conversion of mineral resources to proven and probable mineral reserves, analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. All statements other than statements of historical fact may be forward-looking statements. Statements concerning proven and probable mineral reserves and mineral resource estimates may also be deemed to constitute forward-looking statements to the extent that they involve estimates of the mineralization that will be encountered as and if the property is developed, and in the case of mineral resources or proven and probable mineral reserves, such statements reflect the conclusion based on certain assumptions that the mineral deposit can be economically exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect, “may”, “will”, “project”, “predict”, “forecast”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions) are not statements of historical fact and may be “forward-looking statements”.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These forward-looking statements involve risks and uncertainties relating to, among other things, global economic conditions, changes in commodity prices and, particularly, silver prices, changes in exchange rates, access to skilled mining development and mill production personnel, labour relations, costs of labour, results of exploration and development activities, accuracy of resource estimates, uninsured risks, defects in title, availability and costs of materials and equipment, inability to meet future financing needs on acceptable terms, changes in national or local governments, changes in applicable legislation or application thereof, timeliness of government approvals, actual performance of facilities, equipment, and processes relative to specifications and expectations and unanticipated environmental impacts on operations. Additional factors that could cause actual results to differ materially include, but are not limited to, the risk factors incorporated by reference herein. See “Risk Factors”. The Company

believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in, or incorporated by reference into, this short form prospectus should not be unduly relied upon. These statements speak only as of the date of this short form prospectus or as of the date specified in the documents incorporated by reference into this short form prospectus, as the case may be. The Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable laws. Actual results may differ materially from those expressed or implied by such forward-looking statements.

Cautionary Notes to U.S. Investors Concerning Reserve and Resource Estimates

The definitions of Proven and Probable Reserves used in National Instrument 43-101 (“NI 43-101”) differ from the definitions in the Industry Guide 7. Under SEC Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three year history average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.

In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and normally are not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian securities laws, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Additionally, disclosure of “contained ounces” in a resource is permitted disclosure under Canadian securities laws, however the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in place tonnage and grade without reference to unit measurements.

Accordingly, information contained in this AIF containing descriptions of our mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements of United States federal securities laws and the rules and regulations thereunder.

All dollar amounts in this AIF are expressed in Canadian dollars unless otherwise indicated.

First Majestic was incorporated under the Company Act (British Columbia) (the “Company Act”) on September 26, 1979 by registration of its Memorandum and Articles, under the name Brandy Resources Inc.

On September 5, 1984, the Company changed its name to Vital Pacific Resources Ltd. and consolidated its share capital on a two for one basis.

On May 26, 1987 the Company continued out of British Columbia and was continued as a federal company pursuant to the Canada Business Corporations Act.

On August 27, 1987, the Company was extra provincially registered under the Company Act.

On August 21, 1998, the Company continued out of Canada and was continued into the jurisdiction of the Commonwealth of the Bahamas under the Companies Act (Bahamas).

On January 2, 2002, the Company continued out of the Commonwealth of the Bahamas under the Companies Act (Bahamas) and was continued to the Yukon Territory pursuant to the Business Corporations Act (Yukon). On January 3, 2002, the Company completed a consolidation of its share capital on a 1 new for 10 old basis and changed its name to First Majestic Resource Corp.

On January 17, 2005, the Company continued out of the Yukon Territory and was continued to British Columbia pursuant to the Business Corporations Act (British Columbia).

On November 22, 2006, the Company changed its name to First Majestic Silver Corp.

The Company’s head office is located at Suite 1805 – 925 W. Georgia Street, Vancouver, British Columbia, Canada, V6C 3L2 and its registered office is located at #2610 – 1066 West Hastings Street, Vancouver, British Columbia, V6E 3X1.

The Company is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador.

The chart set out below illustrates the corporate structure of the Company and its material subsidiaries, their respective jurisdictions of incorporation, the percentage of voting securities held and their respective interests in various mineral projects and mining properties.

Since inception, First Majestic has been in the business of acquisition, development and exploration of mineral properties. During the fiscal year ended June 30, 2004, the Company became focused on the acquisition, development and exploration of mineral properties in México with an emphasis on silver projects.

On January 12, 2004, the Company entered into an agreement to purchase the La Parrilla Silver Mine located approximately 65 kilometres south-east of the city of Durango, México. The purchase price of US$3 million (paid) included all properties, assets and equipment and all mining concessions consisting of 280 hectares. See “Mineral Projects – La Parrilla Silver Mine, México”. The La Parrilla Silver Mine was operated from 1956 to 1999 by the previous owners when it was put on a care and maintenance program in 1999 due to low silver prices. Total tonnage mined during that period is estimated at approximately 700,000 tonnes with an average grade of 300 grams per tonne (“g/t”) silver, 1.5% lead and 1.5% zinc.

Between March 2004 and August 2005, the Company entered into a number of agreements to acquire mining concessions located in Chalchihuites, Zacatecas, México which are located approximately 45 kilometres southeast of the La Parrilla Silver Mine. During the period ended December 31, 2006 and the year ended June 30, 2006, the Company relinquished its options relating to certain of the Chalchihuites Group of Properties and wrote off acquisition and exploration costs relating to those options totalling $688,766 and $384,930, respectively. The remaining properties are now referred to as the Del Toro Silver Mine. The Company paid an aggregate of US$5,825,000 over a four-year period to complete the remaining options.

First Majestic entered into an irrevocable share purchase agreement dated for reference April 3, 2006 to purchase approximately 63% of the issued and outstanding shares of First Silver Reserve Inc. (“First Silver”) from the major shareholder of First Silver (the “Shareholder”). First Silver’s primary business was silver mining and the acquisition, exploration and development of mineral claims with a primary focus on silver properties in México. First Silver’s wholly owned subsidiary, El Pilon, is the sole owner of the San Martín Silver Mine in Jalisco State, México.

First Majestic purchased 24,649,200 common shares of First Silver (the “Acquisition”) at a price of $2.165 per share for an aggregate purchase price of $53,365,519 payable to the Shareholder in three instalments.

The first instalment of $26,682,759 represented 50% of the purchase price and was paid on closing of the Acquisition on May 30, 2006. A second instalment of $13,341,380, representing 25% of the purchase price, was paid on May 30, 2007. A final instalment of $13,341,380 was payable on May 30, 2008. An interest amount of 6% per annum was payable quarterly on the outstanding payment. Pending the outcome of the litigation referred to in the section entitled “Legal Proceedings” of this Annual Information Form, the Company withheld payment of quarterly instalments of interest due on November 30, 2007, February 29, 2008 and May 30, 2008. The Company also withheld payment of the final instalment of $13,341,380 due May 30, 2008 and the above interest payments, an amount totalling $13,940,237.

On July 16, 2009, an Order was granted by the Court, with the consent of all parties, under which the Defendant obtained a judgment in the amount of $14,881,912. The Company agreed to pay out $14,258,332 to the Defendant’s lawyers trust account (the “Trust Funds”) in partial payment of the judgment. The consent order requires that the Trust Funds be held in trust pending the outcome of the litigation. If the trial has not commenced by May 30, 2012, the Trust Funds can be released on that date to the Defendant, unless otherwise ordered by the Court. At present time, the trial is scheduled to commence in the Supreme Court of British Columbia, Vancouver, British Columbia in April, 2012. The Consent Order does not affect the standing of the Company’s claims for relief against the Defendant in the Action.

On June 5, 2006, First Majestic and First Silver entered into a letter agreement whereby the parties agreed to enter into a business combination such that First Majestic would acquire all of the outstanding securities of First Silver and First Silver would become a wholly owned subsidiary of First Majestic. The business combination was structured as a plan of arrangement (the “Arrangement”) which was formalized in a combination agreement with the parties dated August 9, 2006. On September 14, 2006, First Majestic acquired all of the issued and outstanding First Silver shares which it did not already own for an aggregate of 6,712,159 common shares of First Majestic and an aggregate cash payment of $777,672 paid at closing and $388,836 due on each of September 14, 2007 (which was paid) and September 14, 2008 (which was paid), with interest payable quarterly and compounded annually at 6.0% per annum on the unpaid balances from the closing of the Arrangement.

In addition, upon closing of the Arrangement, 12,500 stock options exercisable at a price of $3.28 per share expiring on June 13, 2009 and 550,000 stock options exercisable at a price of $4.30 per share expiring on June 19, 2011 were granted by the Company in exchange for 25,000 stock options of First Silver exercisable at a price of $1.64 per share expiring on June 13, 2009 and 1,100,000 stock options of First Silver exercisable at a price of $2.15 per share expiring on June 19, 2011. The common shares of First Silver were delisted from the Toronto Stock Exchange at the close of business on September 18, 2006.

Any certificate formerly representing First Silver shares not duly surrendered on or prior to September 14, 2012 shall cease to represent a claim or interest of any kind or nature, including a claim for dividends or other distributions against First Majestic or First Silver by a former First Silver shareholder. After such date, all First Majestic shares to which the former First Silver shareholder was entitled shall be deemed to have been cancelled.

In August 2006, the Company entered into three agreements to acquire the Quebradillas and Viboras mines and a contiguous land package of 3,126 hectares of mining concessions located in the La Parrilla Mining District in Durango State, México, which now forms part of the Company’s La Parrilla Silver Mine. The Company acquired the right to purchase all the mining concessions, the mines, the data of past diamond drill programs and the assets located within the mine areas for a total purchase price of US$3,000,000 which was paid in full by December 31, 2009. There is a net smelter royalty of 1.5% (“NSR”) of sales revenue to a maximum of US$2,500,000 and the Company has the option to purchase the NSR at any time for US$2,000,000. For the year ended December 31, 2010, the Company paid US$119,707 (December 31, 2009 – US$135,363) relating to annual royalties.

In August 2006, the Company entered into a letter agreement pursuant to which the Company acquired 100% of the issued and outstanding shares of Desmin S.A. de C. V. (“Desmin”), a privately held Mexican mining company for the purchase price of US$1.5 million (the final payment having been made on April 30, 2007), resulting in Desmin becoming a wholly owned subsidiary of the Company. Desmin’s primary asset was an exploitation contract which entitled Desmin to operate the La Encantada Silver Mine located in Coahuila State in Northern México. The exploitation contract provided Desmin an option to acquire all properties within the 697 hectare land package, including the operations of the mine and mill and all the auxiliary installations and associated equipment at the La Encantada Silver Mine. The Company purchased the operations of Desmin effective November 1, 2006 and took over the operations of the La Encantada Silver Mine.

In January 2007, the Company completed the acquisition of the San Juan silver mine which forms part of the Del Toro Silver Mine (formerly referred to as the Chalchihuites Group of Properties) by making the final payments of US$500,000 and US$150,000 due January 7, 2007 and July 7, 2007, respectively, pursuant to the agreement. In connection therewith, a finder’s fee in the amount of $77,808 (US$68,422) was paid to a director of the Company.

In March 2007, the Company acquired all of the issued and outstanding shares of Minera La Encantada S.A. de C.V. (“Minera La Encantada”), a Mexican mining company owned by Industrias Peñoles, S.A. de C.V. (“Peñoles”) for a total purchase price of US$3,250,000 and an NSR of 4%. The Company also acquired the underlying 4% NSR through the issuance of 382,582 shares and 191,291 warrants, each warrant entitling Peñoles to purchase one additional share at a price of $6.81 which expired on March 20, 2009. As a result of the Company’s purchase of Minera La Encantada, all royalties were cancelled at closing on March 20, 2007. On January 1, 2008, Desmin amalgamated with Minera La Encantada S.A. de C.V.

On July 31, 2007, the Company incorporated a new wholly owned Mexican subsidiary, Corporación First Majestic, S.A. de C.V., (“CFM”) and effected a corporate restructuring of Desmin, La Encantada and First Majestic Plata, on August 14, 2007, such that Desmin and La Encantada were amalgamated and the Company now holds the shares of FM Plata, Minera El Pilon and La Encantada, through CFM, which became a Mexican holding company for Mexican tax consolidation purposes.

The Company’s common shares and warrants were listed and commenced trading on the Toronto Stock Exchange effective January 15, 2008.

On March 25, 2008, the Company completed a public offering with a syndicate of underwriters led by CIBC World Markets Inc. and including Blackmont Capital Inc., Cormark Securities Inc. and GMP Securities L.P., who purchased 8,500,000 units of the Company at a price of $5.35 per unit. Each unit consisted of one common share in the capital of the Company and one-half of one common share purchase warrant. Each whole common share purchase warrant entitled the holder to acquire one additional common share at a price of $7.00 for a period of 24 months from the closing of the offering. The underwriters also received an over-allotment option, exercisable up until 30 days following the closing of the offering to purchase up to an additional 1,275,000 common shares at a price of $5.07 per share and up to an additional 637,500 share purchase warrants at a price of $0.56 per warrant. On April 4, 2008, the Company completed the issuance of an aggregate of 637,500 warrants pursuant to the exercise of the over-allotment option.

On July 6, 2008, the Company entered into an agreement to acquire the Fatima mining concession consisting of 46 hectares of mining concessions located in the Zacatecas State, México which forms part of the Del Toro Silver Mine. The Company has the right to purchase all the mining concessions, for a total purchase price of US$387,500, which was fully paid as of December 31, 2010.

On March 5, 2009, the Company completed a public offering with a syndicate of underwriters led by CIBC World Markets Inc. and including Blackmont Capital Inc., GMP Securities L.P. and Thomas Weisel Partners, who purchased 8,487,576 units of the Company at a price of $2.50 per unit for gross proceeds to the Company of $21,218,940. Each unit consisted of one common share in the capital of the Company and one-half of one common share purchase warrant. Each whole common share purchase warrant entitles the holder to acquire one additional common share at a price of $3.50 for a period of 24 months from the closing of the offering.

On August 20, 2009, the Company completed the first tranche of a non-brokered private placement consisting of 3,499,000 units at a price of $2.30 per unit for gross proceeds of $8,047,700. Each unit consisted of one common share and one-half of one common share purchase warrant, with each full warrant entitling the holder to purchase one additional common share of the Company at an exercise price of $3.30 per warrant share for a period of two years after the closing of the offering. A finder’s fee in the amount of $101,016 cash and 50,000 finder’s warrants were paid in respect to a portion of this private placement. The finder’s warrants were subject to the same terms and conditions as those issued to the subscribers.

On August 20, 2009, the Company also settled certain current liabilities amounting to $822,053 by the issuance of 357,414 common shares of the Company at a deemed price of $2.30 per common share.

On September 16, 2009, the Company completed the second and final tranche of the non-brokered private placement consisting of 668,478 units at a price of $2.30 per unit for gross proceeds of $1,537,500. Each unit consisted of one common share and one-half of one common share purchase warrant, with each full warrant entitling the holder to purchase one additional common share of the Company at an exercise price of $3.30 per warrant share for a period of two years after the closing of the offering.

On September 18, 2009, the Company settled certain current liabilities amounting to $1,919,209 by the issuance of 834,438 common shares of the Company at a deemed price of $2.30 per common share.

On November 13, 2009, the Company completed a plan of arrangement (the “Normabec Arrangement”) to acquire all of the issued and outstanding shares of Normabec Mining Resources Ltd. (“Normabec”) a publicly traded mining company listed on the TSX Venture Exchange in exchange for the issuance of 4,652,778 common shares of the Company. In addition, the Company issued warrants to purchase an aggregate of 260,965 common shares of the Company in exchange for all outstanding share purchase warrants of Normabec, all of which expired by January 2, 2010. Normabec’s primary asset is the Real de Catorce Silver Project located 25 km west of the town of Matehuala in San Luis Potosi State, Mexico. The Real de Catorce property consists of 22 mining concessions covering 6,327 hectares. Real de Catorce is an historic mining region, with estimated historical production of 230 million ounces between the years 1773 and 1990.

Concurrent with the completion of the Normabec Arrangement, the non-Mexican assets of Normabec were divested to a newly formed entity named Brionor Resources Inc. (“Brionor”). Holders of Normabec shares also received 0.25 Brionor shares for each Normabec common share. The Company also purchased, via private placement, 2,115,195 common shares of Brionor for an aggregate purchase price of $300,000, representing a price per share of approximately $0.1418. These shares represented 9.9% of the total issued and outstanding shares of Brionor upon completion of the transaction at November 13, 2009. Brionor is a public company listed on the TSX Venture Exchange.

Through the acquisition of Normabec and its wholly owned subsidiary, Minera Real de Bonanza SA de CV, the Company acquired 100% of the Real de Catorce Silver Project. Upon commencement of commercial production on the property, the Company has agreed to pay an amount of US$200,000. The property is subject to a 3% net smelter return royalty, of which 1.75% may be acquired in increments of 0.25% for a price of US$250,000 per increment for the first five years from the date of the first payment and at a price of US$300,000 per increment for the following five years.

In November 2010, the Company acquired all the real estate interests including the original mill and infrastructure and underlying royalties and bonuses (including the NSR referred to above) which were associated with the Real de Catorce Silver Project in San Luis Potosi State, Mexico. The total purchase price of US$3,000,000 consisted of US$1,500,000 cash and the issuance of US$1,500,000 in common shares of First Majestic equaling 152,798 shares at a deemed price of $9.91 per share. The package included title to all of the land underlying the Santa Ana Hacienda located within the Real de Catorce property, together with all associated buildings and certain historic geological and proprietary mining information relating to the project.

Pursuant to an option dated November 25, 2004 with Consorcio Minero Latinamericano, SA de CV, a private Mexican company owned by a former director of First Silver, the Company had the right to purchase a 100% interest in seven mining claims referred to as the Cuitaboca Silver Project covering 3,718 hectares located in the State of Sinaloa, México. To purchase the claims, the Company was required to pay a total of US$2,500,000 in staged cash payments through November 25, 2010. Subsequent to acquiring Normabec and during the year ended December 31, 2009, the Company elected not to proceed with the acquisition of the Cuitaboca Silver Project. Accordingly, the historical investment including exploration totalling $2,589,824 was written off during the year ended December 31, 2009.

The Company’s common shares were listed and commenced trading on the New York Stock Exchange effective December 15, 2010 under the trading symbol “AG”.

The Company is in the business of the production, development, exploration and acquisition of mineral properties focusing on silver in México. The common shares of the Company trade on the Toronto Stock Exchange under the symbol “FR” and the common shares of the Company trade on the New York Stock Exchange under the symbol “AG”. The common shares are also quoted on the Frankfurt, Berlin, Munich and Stuttgart Stock Exchanges under the symbol “FMV”.

The Company has ownership of three producing properties in México: the La Encantada Silver Mine in Coahuila State, the La Parrilla Silver Mine in Durango State, and the San Martin Silver Mine in Jalisco State. The Company also owns two advanced stage development silver projects, the Del Toro Silver Mine and the Real de Catorce Silver Project in San Luis Potosi State, and has an interest in certain exploration properties in Jalisco State, México. As such, all of the Company’s business is dependent on foreign operations.

The Company’s business is not materially affected by intangibles such as licences, patents and trademarks, nor is it affected by seasonal changes. The Company is not aware of any aspect of its business which may be affected in the current financial year by renegotiation or termination of contracts.

At December 31, 2010, the Company had 12 employees based in its Vancouver corporate office, one employee in the United Kingdom and approximately 1,628 employees, contractors and other personnel in México. Additional consultants are also retained from time to time for specific corporate activities, development and exploration programs.

Silver is a precious metal that is desirable as a precious metal, as jewellery, as well as an industrial commodity. Silver has a unique combination of durability, malleability, ductility, reflectivity and antibacterial properties, which makes it valuable in numerous industrial applications including: circuit boards, electrical wiring, superconductors, brazing and soldering, mirror and window coatings, electroplating, chemical catalysts, pharmaceuticals, filtration systems, solar panels, batteries, televisions, household appliances, automobiles, etc.

Silver as a global commodity is predominantly traded on the London Bullion Market (LBM) and Comex in New York. The LBM is the global hub of Over-The-Counter trading in silver and it is the metal’s main physical market. Here, a bidding process generates a daily reference price known as the fix. Comex, in contrast, is a futures and options exchange. It is here that most fund activity is focused. Silver is quoted in US dollars per troy ounce.

Mine production remains by far the largest component of silver supply, normally accounting for around two-thirds of the total annual supply of silver (last year was higher at 80%). The supply of silver from the Company’s mine sites is supplied in two forms, either in solid form as doré bars containing 90% to 95% silver content, or in the form of a concentrate which consists of silver bound together with other base metals of lead or zinc. In 2009 the Company supplied, on a revenue basis, 46% of its revenue in silver concentrate form and 41% of its revenue in doré form, whereas in 2010, due to a shift in production facilities and capacities, silver revenue produced in doré form increased to 73% while 20% of revenue was in concentrate form. The balance of revenues are produced in the form of gold, lead and zinc as byproducts which combine to account for 100% of revenues from the total equivalent ounces of silver in both years.

Silver can be supplied as a primary product from mining silver, or as a by-product from the mining of gold or other base metals. The Company is a primary silver producer with 93% of its revenue in 2010 coming from the production of silver. The major producers of gold, for example Barrick or Goldcorp, also produce a large amount of silver. The market for primary silver producers is a relatively small market with a significant number of small suppliers producing less than three million ounces each year, some moderate size producers producing between five and ten million ounces each year and only a few producers producing more than ten million ounces each year. First Majestic is an intermediate producer that is rapidly trending toward becoming a senior producer. In the intermediate category alongside the Company are Silvercorp and Silver Standard. In the senior category are Pan American Silver, Coeur d’Alene and Hecla Mining.

The Company also maintains an e-commerce website from which it sells approximately 5% of its production direct to retail buyers (B to C) over the internet.

The Company, and thus the securities of the Company, should be considered a speculative investment and investors should carefully consider all of the information disclosed in this AIF prior to making an investment in the Company. In addition to the other information presented in this AIF, the following risk factors should be given special consideration when evaluating an investment in the Company’s securities:

The operation and development of a mine or mineral property involves many risks which a combination of experience, knowledge and careful evaluation may not be able to overcome. These risks include:

These occurrences could result in environmental damage and liabilities, work stoppages and delayed production, increased production costs, damage to, or destruction of, mineral properties or production facilities, personal injury or death, asset write downs, monetary losses and other liabilities.

Liabilities that First Majestic incurs may exceed the policy limits of its insurance coverage, may not be insurable, or may be liabilities against which First Majestic has elected not to insure due to high premium costs or other reasons. In any such event, First Majestic could incur significant costs that could adversely impact its business, operations or profitability.

Uncertainty in the Calculation of Mineral Reserves, Resources and Silver Recovery

There is a degree of uncertainty attributable to the calculation of mineral Reserves and mineral Resources. Until mineral Reserves or mineral Resources are actually mined and processed, the quantity of minerals and grades must be considered estimates only. In addition, the quantity of mineral Reserves and mineral Resources may vary depending on, among other things, metal prices. Any material change in the quantity of mineral Reserves, mineral Resources, grade or minimum mining widths may affect the economic viability of First Majestic’s properties. In addition, there can be no assurance that silver recoveries or other metal recoveries in small scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production, or that the existing known and experienced recoveries will continue.

Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important determinants, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect the Company’s business.

The Company has prepared estimates of the capital costs for the La Parrilla and Del Toro Silver Mine expansions. There can be no assurance that such cost estimates will prove to be accurate. Actual costs may vary from the estimates depending on a variety of factors, many of which are not within the Company’s control. These factors include the risks outlined above under “Operating Hazards and Risks”, as well as the following:

Failure to achieve cost estimates or material increases in costs could have a material adverse impact on the Company’s future cash flows, profitability, results of operations and financial condition.

Exploration and development of mineral properties involves significant financial risks which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to establish Reserves by drilling, constructing mining and processing facilities at a site, developing metallurgical processes and extracting precious metals from ore. The Company cannot ensure that its current exploration and development programs will result in profitable commercial mining operations. Also, substantial expenses may be incurred on exploration projects which are subsequently abandoned due to poor exploration results or the inability to define Reserves which can be mined economically.

The economic feasibility of development projects is based upon many factors, including the accuracy of Reserve estimates, metal recoveries, capital and operating costs, government regulations relating to prices, taxes, royalties, land tenure, land use, importing, exporting and environmental protection, and precious metal prices, which are highly volatile. Development projects are also subject to the successful completion of economic evaluations or feasibility studies, issuance of necessary governmental permits and availability of adequate financing. Further, material changes in ore Reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project.

Development projects have no operating history upon which to base estimates of future cash flow. Estimates of Proven and Probable Reserves and Measured, Indicated and Inferred Resources are, to a large extent, based upon detailed geological and engineering analysis. Further, Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Due to the uncertainty of Inferred Mineral Resources, there is no assurance that Inferred Mineral Resources will be upgraded to Proven or Probable Mineral Reserves as a result of continued exploration.

Because mines have limited lives based primarily on Proven and Probable Mineral Reserves, the Company must continually replace and expand its Mineral Reserves as the Company’s mines produce metals. The life-of-mine estimates for the Company’s mines may not be correct. The ability of the Company to maintain or increase its annual production of metals and the Company’s future growth and productivity will be dependent in significant part on its ability to identify and acquire additional commercially mineable mineral rights, to bring new mines into production, to expand Mineral Reserves at existing mines and on the costs and results of continued exploration and potential development programs.

The Company’s mining, exploration and development projects are located in México and are subject to extensive laws and regulations governing various matters including, but not limited to, exploration, development, production, price controls, exports, taxes, mining royalties, labour standards, expropriation of property, maintenance of claims, land use, land claims of local people, water use, waste disposal, protection and remediation of the environment, reclamation, historic and cultural resource preservation, mine safety, occupational health, and the management and use of toxic substances and explosives, including handling, storage and transportation of hazardous substances.

Such laws and regulations may require the Company to obtain licenses and permits from various governmental authorities. Failure to comply with applicable laws and regulations, including licensing and permitting requirements, may result in civil or criminal fines, penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining or curtailing operations, requiring corrective measures, requiring the installation of additional equipment, requiring remedial actions or imposing additional local or foreign parties as joint venture partners, any of which could result in significant expenditures or loss of income by the Company. The Company may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations, licensing requirements or permitting requirements.

The Company’s mining, exploration and development projects could be adversely affected by amendments to such laws and regulations, by future laws and regulations, by more stringent enforcement of current laws and regulations, by changes in policies of México and Canada affecting foreign trade, investment, mining and repatriation of financial assets, by shifts in political attitudes in México and by exchange controls and currency fluctuations. The effect, if any, of these factors cannot be accurately predicted. Further, there can be no assurance that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to carry out exploration, development and mining operations at its projects.

The costs of discovering, evaluating, planning, designing, developing, constructing, operating and closing the Company’s mining, exploration and development activities and operations in compliance with such laws and regulations are significant. It is possible that the costs and delays associated with compliance with such laws and regulations could become such that the Company would not proceed with mining, exploration and development. Moreover, it is possible that future regulatory developments, such as increasingly strict environmental protection laws, regulations and enforcement policies thereunder, and claims for damages to property and persons resulting from the Company’s mining, exploration and development projects could result in substantial costs and liabilities for the Company such that they would not proceed with mining, exploration and development.

Metal prices have historically fluctuated widely and are affected by numerous factors beyond the Company’s control including international economic and political trends, expectations for inflation, currency exchange fluctuations, interest rates, global or regional consumption patterns, speculative activities and worldwide production levels. Movements in the price of metal, such as movements in the spot price of silver, have a direct and immediate impact on the Company’s income and may affect the marketability of minerals already discovered and any future minerals to be discovered. The Company does not use derivative instruments to hedge its silver commodity price risk, but the Company forward sells its lead production between one and six months ahead. The effect of these price variation factors cannot accurately be predicted.

Further, the relative strength of metal prices in recent years has encouraged increases in mining exploration, development and construction activities around the world, which has resulted in increased demand for, and cost of, exploration, development and construction services and equipment. Increased demand for services and equipment could result in delays if services or equipment cannot be obtained in a timely manner due to inadequate availability and may cause scheduling difficulties due to the need to coordinate the availability of services or equipment, any of which could materially increase project exploration, development and/or construction costs.

The Company enters into sales contracts to sell its products, including lead and zinc concentrates, silver doré and silver precipitates, to metal traders, smelting companies and refining companies. In addition to these commercial sales, the Company also markets a small portion of its silver production to retail purchasers directly through its corporate e-commerce website. There is no assurance that the Company will be successful in entering into or re-negotiating sales contracts with metal traders, smelting companies, refining companies and retail purchasers on acceptable terms, if at all. If the Company is not successful in entering into or re-negotiating such sales contracts, the Company may be forced to sell all of its products, or greater volumes of its products than it may desire, in the spot market, or the Company may not have a market for its products.

In addition, should any counterparty to any sales contract entered into not honour such contract, or should any of such counterparties become insolvent, the Company may incur losses for products already shipped, may be forced to sell greater volumes of products than intended on the spot market or may not have a market for its products. The Company’s future operating results may be materially adversely impacted as a result. Moreover, there can be no assurance that the Company’s products will meet the qualitative requirements under future sales contracts or the requirements of buyers.

During the year ended December 31, 2010, the Company reassessed its reclamation obligations at each of its mines based on updated mine life estimates, rehabilitation and closure plans. The total undiscounted amount of estimated cash flows required to settle the Company’s estimated obligations is $7.8 million, which has been discounted using a credit adjusted risk free rate of 8.5%, of which $2.1 million of the reclamation obligation relates to the La Parrilla Silver Mine, $2.2 million of the obligation relates to the San Martin Silver Mine, $2.7 million relates to the La Encantada Silver Mine and $0.8 million relates to the Real de Catorce Project. The present value of the reclamation liabilities may be subject to change based on management’s current estimates, changes in the remediation technology or changes to applicable laws and regulations. Such changes will be recorded in the accounts of the Company as they occur.

The costs of performing the decommissioning and reclamation must be funded by the Company’s operations. These costs can be significant and are subject to change. The Company cannot predict what level of decommissioning and reclamation may be required in the future by regulators. If the Company is required to comply with significant additional regulations or if the actual cost of future decommissioning and reclamation is significantly higher than current estimates, this could have an adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition.

The further development and exploration of mineral properties in which the Company holds interests or which the Company acquires may depend upon its ability to obtain financing through debt financing, equity financing, joint ventures or other means. There is no assurance that the Company will be successful in obtaining required financing as and when needed. Volatile precious metals markets may make it difficult or impossible for the Company to obtain financing on favourable terms or at all.

The Company currently has $80.0 million of cash in treasury. As a result of the Company’s ability to earn cash flow from its ongoing operations, the Company considers that it has sufficient capital to support its current operating requirements provided it can continue to generate cash from its operations and that costs of its capital projects are not materially greater than the Company’s projections. There is a risk that commodity prices decline and that the Company is unable to continue generating sufficient cash flow from operations or that the Company requires significant additional cash to fund expansions and potential acquisitions. Failure to obtain additional financing on a timely basis may cause the Company to postpone acquisitions, major expansion, development and exploration plans.

Recruiting and retaining qualified personnel is critical to the Company’s success. The number of persons skilled in mining, exploration and development of mining properties is limited and competition for such persons is intense. As the Company’s business activity grows, the Company will require additional key financial, administrative and mining personnel as well as additional operations staff. Although the Company believes it will be successful in attracting, training and retaining qualified personnel, there can be no assurance of such success. If the Company is not successful in attracting and training qualified personnel, the efficiency of the Company’s operations could be affected, which could have an adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition.

There are also a number of factors beyond the Company’s control. These factors include government regulation, high levels of volatility in market prices, availability of markets, availability of adequate transportation and smelting facilities and the imposition of new or amendments to existing taxes and royalties. The effects of these factors cannot be accurately predicted.

Recent events in global financial markets, and the resulting increased volatility of financial conditions, have had a profound impact on the global economy. Many industries, including the mining sector, have been impacted by these market conditions. Some of the key impacts of the recent financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metal markets and a lack of market liquidity. Numerous financial institutions have either gone into bankruptcy or have had to be rescued by government authorities. Access to financing has been negatively impacted by liquidity crises throughout the world. These factors may impact the ability of the Company to obtain equity or debt financing and, if available, to obtain such financing on terms favorable to the Company.

If these increased levels of volatility and market turmoil continue, the Company’s operations and planned growth could be adversely impacted and the trading price of the securities of the Company may be adversely affected.

The Company carries on its primary business activity outside of Canada. Accordingly, it is subject to the risks associated with fluctuation of the rate of exchange of other foreign currencies, in particular the Mexican peso, the currency in which much of the Company’s costs are paid, and the United States dollar, the currency for calculating the Company’s sales of silver based on the world’s commodity markets. Financial instruments that impact the Company’s net earnings or other comprehensive income due to currency fluctuations include: Mexican peso denominated cash and cash equivalents, accounts receivable, accounts payable, and investments in mining interests. Such currency fluctuations may materially affect the Company’s financial position and results of operations.

Although the Company has obtained title opinions with respect to certain of its properties and has taken reasonable measures to ensure proper title to its properties, there is no guarantee that title to any of its properties will not be challenged or impugned. Such properties may be subject to prior unregistered liens, agreements, transfers or claims and title may be affected by, among other things, undetected defects. Third parties may have valid claims underlying portions of the Company’s interest.

The Company’s profitability is also affected by the market prices of commodities which are consumed or otherwise used in connection with the Company’s operations, such as diesel fuel, natural gas, electricity , chemicals, steel and cement. Prices of such commodities are also subject to volatile price movements over short periods of time and are affected by factors that are beyond the Company’s control.

The mining industry is highly competitive in all its phases. The Company competes with a number of companies which are more mature or in later stages of production. These companies may possess greater financial resources, more significant investments in capital equipment and mining infrastructure for the ongoing development, exploration and acquisition of mineral interests, as well as for the recruitment and retention of qualified employees.

As part of the Company’s business strategy, it has sought and will continue to seek new exploration, mining and development opportunities in the resource industry. As a result, the Company may from time to time acquire additional mineral properties or securities of issuers which hold mineral properties. In pursuit of such opportunities, the Company may fail to select appropriate acquisition candidates or negotiate acceptable arrangements, including arrangements to finance acquisitions or integrate the acquired businesses and their personnel into the Company. The Company cannot assure that it can complete any acquisition or business arrangement that it pursues, or is pursuing, on favourable terms, or that any acquisitions or business arrangements completed will ultimately benefit the Company.

The Company’s operations are subject to environmental legislation promulgated by government agencies from time to time. Environmental legislation provides for restrictions on, and the prohibition of, spills, release and emission of various substances related to mining industry operations which could result in environmental pollution. Further, a number of governments have introduced or are moving to introduce climate change legislation.

A breach of any such legislation may result in the imposition of fines and penalties. Environmental legislation is evolving in a manner resulting in stricter standards and the enforcement of, and fines and penalties for, non-compliance are becoming more stringent. In addition, certain types of operations require submissions of, and approval of, environmental impact assessments. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees.

Some of the costs associated with reducing emissions can be offset by increased energy efficiency and technological innovation. However, the cost of compliance with environmental legislation and changes in environmental legislation have the potential to result in increased cost of operations, reducing the profitability of the Company’s operations.

The Company intends to fully comply with all environmental regulations. On February 25, 2009, the Mexican Environmental Authority PROFEPA (Procuradoria Federal Proteccion al Ambiente) awarded a CLEAN INDUSTRY CERTIFICATE to one of the Company's wholly owned subsidiaries, First Majestic Plata, SA de CV., regarding its activities at the La Parrilla Silver Mine.

Certain directors of the Company are also directors, officers or shareholders of other companies that are similarly engaged in the business of acquiring, developing and exploiting natural resource properties. Such associations may give rise to conflicts of interest from time to time. The directors of the Company are required by law and the Company’s policies to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the board of directors, any director in a conflict is required to disclose his interest and abstain from voting on such matter. In determining whether or not the Company will participate in any project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at that time.

The Company has a history of losses including a net loss of $5,144,784 for the year ended December 31, 2008. However, for the year ended December 31, 2009, the Company had a net income of $6,310,225 and for the year ended December 31, 2010, the Company had a net income of $36,104,945. At December 31, 2010, the Company had retained earnings of $2,938,287.

There are stock options and share purchase warrants of the Company outstanding pursuant to which common shares may be issued in the future. Pursuant to the Arrangement between First Majestic and First Silver, shares of First Silver may be tendered for shares of First Majestic until September 14, 2012. Options and share purchase warrants are likely to be exercised when the market price of the Company’s common shares exceeds the exercise price of such options or warrants. The exercise of such options or warrants and the subsequent resale of such common shares in the public market could adversely affect the prevailing market price and the Company’s ability to raise equity capital in the future at a time and price which it deems appropriate. The Company may also enter into commitments in the future which would require the issuance of additional common shares and the Company may grant additional share purchase warrants and stock options. Any share issuances from the Company’s treasury will result in immediate dilution to existing shareholders.

The price of the shares of resource companies tends to be volatile. Fluctuations in the world price of precious metals and many other elements beyond the control of the Company could materially affect the market price of the Company’s common shares.

Credit risk is the risk of financial loss if a customer or counterparty fails to meet its contractual obligations. The Company’s credit risk relates primarily to cash and cash equivalents, trade receivables in the ordinary course of business and value added tax refunds and other receivables. The Company sells and receives payment upon delivery of its silver doré and its by-products primarily through two international organizations. Additionally, lead concentrates and related base metal by-products are sold primarily through one international organization with a good credit rating. Payments of receivables are scheduled, routine and received within sixty days of submission; therefore, the balance of overdue trade receivables owed to the Company in the ordinary course of business is not significant. The Company has a Mexican value added tax receivable of $4.6 million as at December 31, 2010, a portion of which is past due. The Company is proceeding through a review process with Mexican tax authorities. However, the Company expects to fully recover this amount and no allowance has been recorded. The carrying amount of financial assets recorded in the financial statements represents the Company’s maximum exposure to credit risk.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they arise. The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis and its expansion plans. As at December 31, 2010, the Company has outstanding accounts payable and accrued liabilities of approximately $12.1 million which are generally payable in 90 days or less. As at December 31, 2010, the Company has no outstanding debt except for capital leases secured by purchased equipment in the amount of approximately $3.5 million.

Although the Company does not have a long-term history of operating profits, the Company believes it has sufficient cash on hand to meet operating requirements as they arise for at least the next twelve months.

The Company is exposed to interest rate risk on its short-term investments. The Company monitors its exposure to interest rates and has not entered into any derivative contracts to manage this risk.

The Company’s interest-bearing financial assets comprise of cash and cash equivalents, which bear interest at a mixture of variable and fixed rates for pre-set periods of time. As at December 31, 2010, with the exception of capital leases, which have fixed interest rates, the Company has no interest bearing financial liabilities.

The Company is organized under the laws of, and headquartered in, British Columbia, Canada and a majority of its directors and officers are not citizens or residents of the United States. In addition, a substantial part of the Company’s assets are located outside of Canada and the United States. As a result, it may be difficult or impossible for an investor to: (i) enforce in courts outside of the United States judgments against the Company and its directors and officers obtained in United States courts based upon the civil liability provisions of United States federal securities laws; or (ii) bring in courts outside of the United States an original action against the Company and its directors and officers to enforce liabilities based upon such United States securities laws.

Pursuant to National Instrument 51-102 - Continuous Disclosure Obligations (“NI 51-102”), the following properties and projects have been identified by First Majestic as being material: the La Encantada Silver Mine, the La Parrilla Silver Mine, the San Martin Silver Mine and the Del Toro Silver Mine.

The following table shows the total tonnage mined from each of the Company’s three producing properties during 2010, including total ounces of silver and silver equivalent ounces produced from each property and the tonnage mined from delineated Reserves and Resources at each such property.

		La Encantada	La Parrilla	San Martin	Total
TONNES OF ORE PROCESSED	TONNES	1,074,538	303,869	264,450	1,642,857
OUNCES OF SILVER PRODUCED	OZ	3,854,979	1,548,832	1,125,514	6,529,325
OUNCES OF SILVER EQ PRODUCED	OZ EQ	125,250	264,956	104,523	494,729
TOTAL OZ OF SILVER EQ PRODUCED	OZ EQ	3,980,229	1,813,788	1,230,037	7,024,054
TONNES MINED FROM 43-101	TONNES	876,152	217,465	145,703	1,239,320
TONNES MINED OUTSIDE OF 43-101	TONNES	198,386	86,404	118,747	403,537

Unless otherwise stated, the information on the La Encantada Silver Mine is based on the technical report entitled “Technical Report for the Encantada Silver Mine, Coahuila State, México” prepared by Richard Addison, P.E. and Leonel Lopez, C.P.G. of PAH and dated January 12, 2009, as amended and restated on February 26, 2009 (in this section, the “Current Technical Report”). Mr. Addison and Mr. Lopez are independent Qualified Persons for the purposes of NI 43-101. The Current Technical Report has been filed with securities regulatory authorities in each province of Canada. Portions of the following information are based in assumptions, qualifications and procedures which are not fully described herein.

Reference should be made to the full text of the Current Technical Report which is available for review on SEDAR located at www.sedar.com.

Additional information since the date of the Current Technical Report has been prepared by the Company under the supervision of Ramon Davila, who is a Qualified Person for the purposes of NI 43-101.

La Encantada Silver Mine is an underground producing silver mine and processing facility located in the state of Coahuila, Mexico. The mine is wholly owned and operated by Minera La Encantada, S.A. de C.V. (“Minera La Encantada”), a wholly-owned indirect subsidiary of the Company through its Mexican holding company, Corporación First Majestic, S.A. de C.V. La Encantada mine consists of two main silver / lead underground mines, the La Encantada and the El Plomo mines which have been consolidated into one operation and an industrial complex that includes a new 3,750 tpd cyanidation mill and an old 1,000 tpd flotation plant (currently in care-and-maintenance except for the crushing area, which remains in operation), all necessary buildings and mine infrastructure, two schools, recreational facilities, mess hall, church, hospital, housing facilities, water wells and pipeline and air strip located in the municipality of Ocampo, Coahuila State, México.

La Encantada consists of 22 mining concessions, which provide mineral rights over an area of 4,076 hectares (10,072 acres). Mineral rights expire for the earliest titled concessions in the year 2015 (Encantada claim), and most other claims have expiration dates to the year 2050; these however, may be renewed for another 50 years. First Majestic has purchased the land surface rights under expropriation procedures from Ejido Tenochtitlán, where the camp, water wells, mine and plant installations are located to better manage the property.

La Encantada is located within an isolated mining district in the north western portion of the State of Coahuila. It is located in the municipality of Ocampo, approximately 120 kilometres from the city of Múzquiz and approximately 120 kilometres from the city of Ocampo, Coahuila.

Access to the mine is primarily by charter airplane from the city of Durango (about 2:15 hours flying time), or from city of Torreón (about 1:15 hours flying time). The Company operates a private airstrip at the La Encantada mine. The airstrip is paved, 1,200 metres long by 17 metres wide and located at 1,300 metres above sea level.

Driving time from the city of Múzquiz is approximately 2.5 hours and about four to five hours from the city of Ocampo. A new highway is projected to be constructed during 2011, which is expected to provide easier access to La Encantada from major population centers.

La Encantada’s remote location has required the construction of substantial infrastructure, which has been developed during a long period of active operation by the mine’s previous owners, Peñoles and Minera Los Angeles. La Encantada housing consists of 180 houses for employees, and an office, warehouses, club, restaurants, guest house, church, hospital, an airstrip and other community facilities.

Power supply to the camp is diesel generated and provided by First Majestic. Drinkable water supply is also provided by First Majestic. First Majestic has installed a satellite system with internet communications that include two telephone lines. Hand held radios are carried by all supervisors, managers and all vehicle operators for ground level communications. Most of the supplies and labour required for the operation are brought in from the city of Múzquiz, Coahuila.

La Encantada is located in the northern part of the Sierra Madre Oriental, within the Bravo-Conchos region. This physiographic province presents elevations that vary, in the lower parts from 1,000 metres to 1,800 metres above sea level, while mountain ranges in the area present elevations that may reach over 3,500 metres above sea level. These are generally oriented in a north-west direction. Surface rains are estimated to be only 10 millimetres to 20 millimetres per year.

Exploration activities in La Encantada area were initiated in 1956 by the Mexican company Compañía Minera Los Angeles, S.A. de C.V. The San José, Guadalupe, La Escondida and San Francisco deposits located to the north of the La Escondida breccia pipe deposit were discovered and developed from the period of 1956 to 1963. In 1963 the La Prieta deposit was discovered within the area. In 1967 Peñoles and Tormex established a joint venture partnership (Minera La Encantada) to acquire and develop La Encantada project. In July 2004 Peñoles awarded a contract to operate La Encantada mine, processing plant, and all included installed facilities to a junior company, Desmín, S.A. de C.V (“Desmin”). Desmín operated the mine and processing plant at a 25 percent capacity until November 1, 2006 when First Majestic purchased all of the outstanding shares of Desmín. Subsequently First Majestic reached an agreement to acquire all of the outstanding shares of Minera La Encantada from Peñoles. The terms of the agreement between First Majestic and Peñoles had included royalty payments to Peñoles of up to 11 percent on the net smelter return, except for production from the concessions of San Javier and Las Rositas. In 2007, First Majestic purchased these royalty rights from Peñoles. First Majestic is now the sole owner of La Encantada Silver Mine and all its assets, including mineral rights, surface rights position, water rights, processing plant and ancillary facilities.

La Encantada mining district consists of skarn deposits with concentrations of silver, lead, iron and zinc in oxidized mineralization enclosed by calcareous sedimentary formations of Cretaceous age. These mineral concentrations present variable morphology from vein and bedded deposits, that generally occur in the upper part of the sedimentary sequence, to breccia pipe deposits (mineralized chimneys), bedded and stockwork areas in the intermediate zone, and metasomatic deposits with hornfels and skarn in bedded and stockwork zones in the lower portion of the sequence near granodiorite to diorite composition intrusive stocks.

La Encantada mining district is located within the Sierra Madre Oriental. It is located in the eastern flank on a regional anticline. This consists of a complex, folded and predominantly NW-SE faulted sequence of Mezozoic calcareous rocks. The sedimentary rocks comprise limestone, dolomites and argillaceous rocks that range in age from the upper part of Lower Cretaceous to the upper part of Upper Cretaceous age. These rocks are enclosed by the sedimentary formations of Cupido (oldest), La Peña, Aurora, Cuesta del Cura, Georgetown, Del Río and Buda.

This sedimentary sequence was affected by intrusive stocks of dioritic to granodioritic composition, which branched out into the calcareous formations as dikes, sills and stocks. Metamorphic rocks were then created by the associated alteration, such as marble, skarn and hornfels.

Cupido Formation (Hauterivian to Barremian, Lower Cretaceous age) has been identified in the lower parts of La Encantada mine, at the underground level 535, as well as in some drill hole intercepts adjoining the La Morena deposit. Its upper contact is gradational into the La Peña Formation. The Cupido Formation hosts sulfide mineralization in other regions in Coahuila State, such as Lampazos and Ocampo, as appears to be the case in the lower parts of La Encantada mine.

La Peña Formation (Aptian – Lower Albian, Lower to Middle Cretaceous age) consists of a 60 metres thick sequence of calcareous shales intercalated with thin bedded limestones and dolomites. At La Encantada it occurs as a thin bedded sequence of black and carbonaceous shales which appear to have been deposited in a reducing environment. La Peña formation appears to have acted as a seal for mineralizing fluids.

Aurora Formation (Lower to Middle Albian, Lower Cretaceous age) hosts most of the mineral concentrations at La Encantada. It consists of a sequence of thick to massive beds of intercalated limestones and dolomites. Thickness of this formation at the mine is estimated to be about 500 metres.

The Aurora Formation appears to represent favourable physical - chemical characteristics for deposition of mineral concentrations. These are indicated by intercalated limestones and dolomites with intense fracturing in areas of fault intersections or in brecciated zones that appear to be related to deep-seated intrusive stocks, sills or dikes.

At La Encantada mine workings, rocks of the Cupido, La Peña and Aurora formations have been identified, as well as some aphanitic dikes of apparent basic composition, and coarse-grained dikes and stocks of dioritic to granodioritic composition. No outcroppings of the intrusive stocks have been identified in La Encantada area.

The most important mineral concentrations developed at La Encantada consist of mineralized breccia zones that appear to be related to and originated by deep-seated intrusive stocks. A halo of metasomatic rocks occur associated with the intrusive stocks, from marble in the outer parts to skarn with garnets (grossularite and andradite) as well as hornfels facies in proximity to the intrusive.

The La Encantada mine is located on a mountain range that corresponds to a symmetrical anticline. The La Encantada mountain range presents an extension in a NW-SE direction of about 45 kilometres, with elevations that vary from about 1,500 metres to over 2,400 metres. This mountain range is affected by a regional fault zone (La Encantada – Norias fault) that puts in contact the Aurora (Albian) and the Georgetown (Upper Albian) Formations. The anticline is affected by a series of normal secondary faults, as well as by a system of faults and fractures of regional behaviour that generally occur in a NE-SW direction.

The La Encantada property has been subjected to exploration programs from its discovery in the 1950s, by prospectors in the early stages and by Peñoles from the late 1960s to 2003.

First Majestic’s exploration programs carried out during the second half of 2007 through 2008 were primarily focused on proving and developing additional Reserves and Resources for La Encantada mine. These resulted in a significant increment of both resources and reserves. Major efforts were developed in the areas of Breccia Milagros, Bonanza, San Francisco, Intrusivo Milagros, Azul y Oro, and Cuerpo de Zinc at mine level N-1535 and in the sampling of the old dumps. A long term exploration program was initiated to investigate the promising target at the La Escalera breccia zone. A new exploration target was identified during the course of explorations to define the Azul y Oro mineralized zone. The newly discovered zone, denominated Buenos Aires, is located between the Azul y Oro and the La Escalera breccia zones.

Sampling of old dumps was also advanced and about 150,000 tonnes of screened material was measured, sampled and indicated during the period, in addition to screening and processing about 42,000 tonnes. Screening recovery of the dumps is about 40 percent in tonnage and grade enrichment from about 120 grams per tonne Ag to about 160 grams per tonne Ag.

First Majestic’s program of underground exploration was designed to investigate the Milagros and San Javier breccia zones, as well as the San Francisco bedded deposits and the Bonanza area where numerous veins occur associated with the Bonanza dike. The La Escalera breccia zone appears to be a significant target for exploration.

As outlined in the Current Technical Report (which has a cut-off date of September 30, 2008), during the period of September 2007, to September 30, 2008, a total of 6,660 metres of core drilling was completed. During the period of January to June, 2008 underground workings for exploration purposes were developed at the La Encantada mine, including 1,490 metres of access ramps, drifts, and crosscuts, and about 850 metres of exploration tunnelling for drill sites access. This development resulted in a significant increment of resources and reserves at the various mine levels of the La Encantada Silver Mine, within the Stope 141, Stope 325, Breccia Milagros, Bonanza, Dique San Francisco, San Francisco, Jorobada, San Javier Extensión and Alto del Dique La Escondida areas. Since this cut-off date to December 31, 2010 an additional 11,761 metres have been drilled from underground sites, which has assisted the geological team on-site to focus on additional areas for future resource definitions in possible future technical reports and for mining activities. Also, this drilling detected potential economic mineralization in Buenos Aires, Azul y Oro, and Ojuelas ore bodies. Underground development during the same period of time totalled 22,302 metres.

First Majestic designed an extensive 2008 geophysical program of to investigate the various identified anomaly areas, and to confirm other indicated potential zones. This program was completed during the period of January to October, 2008, and included about 50 kilometres of lines measured by Natural Source Audio-Frequency Magneto Telluric methods (NSAMT). Readings were carried out along lines at 100 metres and 50 metres spacing according to geologic conditions, at 25 metres and 50 metres stations along the lines. This geophysical method takes reading of resistivity and conductivity parametres. The survey was conducted by Zonge Engineering and Research Organization from Tucson, Arizona. The Report identified and confirmed several exploration targets for future drilling. First Majestic has defined, based on potential and size, that the priority targets to explore are the Plomo area, Anomaly A and Anomaly B

Mineralization at La Encantada is a typical assemblage of metasomatic deposits with a high content of silver and lead. This mineral assemblage has been affected by a long process of oxidation and secondary enrichment. Most mining activity at La Encantada has been developed within these oxidized mineral deposits and only some drilling and limited underground access has occurred in the primary sulphides mineral concentrations (La Morena deposit).

The mineralization consists of unconsolidated massive concentrations of oxides including hematite, limonite and other iron oxides as well as carbonates and sulfates, including the minor presence of zinc oxides. Silver and lead represent the main economic minerals within the oxidized deposits at La Encantada. Silver mineralization occurs as argentite and native silver. Lead mineralization is present as carbonates (cerrussite) and sulfates (anglesite) and other oxides. The La Encantada mineral assemblage occurs within a range of about 435 metres in vertical extension (2035 metres to 1600 metres above sea level). Below the 1600 meter elevation, at the La Morena deposit in the south west portion of La Encantada area, primary sulphide mineralization has been identified. This mineralization includes primarily sphalerite, galena and pyrite.

According to historical records from Peñoles, the typical mineralization in the oxidized deposits contains about 400 grams per tonne Ag, 5% Pb, and 20% Fe. In some parts of La Encantada area, within oxide concentrations and in some bedded replacement zones, the economic minerals may reach grades of about 1,150 grams per tonne Ag, 20% Pb and 30% Fe (Mantos at underground levels 710 and 720).

Primary sulphides at the Milagros stockwork zone show typical grades of 4.5% Zn, 1.0% Pb and 50 grams per tonne Ag.

Drilling programs at La Encantada have been limited since the best exploration results may have been obtained through underground development. Additionally, topographic conditions at the mine and irregular morphology of mineral concentrations make it difficult to plan for drilling. Therefore, drilling from underground sites and mine workings has proven to be the most effective combination for exploration at La Encantada.

During the period from September, 2007 to September 30, 2008 (the period covered by the Current Technical Report, the drilling completed from underground sites totalled 6,660 metres to investigate continuity and depth of the Azul y Oro, Breccia San Javier, and La Escalera mineralized structures. These drill holes resulted in discovery of the Buenos Aires mineralized zone, extension and confirmation of some of San Francisco and Azul y Oro mineralized zones. Since this time an extensive development program was launched in order to gain access to Buenos Aires area which is now in production.

Additional drilling was developed at the old Peñoles tailings dams to determine volume and grade of the two tailings dams. Metallurgical test work was carried out in some of the drilled tailings. Grade, tonnage and metallurgical recovery estimates have resulted in additional resources for the La Encantada Silver Mine, since some of the silver contained by the tailings may be suitable for economic recovery by cyanide leaching processing methods. The tailings drilling program included 15 drill holes totalling 168 metres at the Tailings Dam No. 1, and 34 drill holes for a total drilled depth of 576 metres in Tailings Dam No. 2. Trenches and surveying delimited additional tailings volume at the Tailings Dam No. 3.

The drill program from the cut-off date of September 30, 2008 to December 31, 2010 amounted to 11,761 metres over 65 holes which was all drilled from underground drill sites.

Underground development from the purchase date of November 1, 2006 to the cut-off date of September 30, 2008 amounted to 11,685 metres and development from cut-off to December 31, 2010 amounted to 22,302 metres. This development program is part of the ongoing mining activities and is required to maintain current production levels.

La Encantada’s current sampling team consists of two sampling crews with three employees each. Channel samples are taken with chisel and hammer, collected in a canvas tarp and deposited in numbered bags for transportation to the laboratory. No core samples are taken at this time at La Encantada.

Exploration sampling for reserve delineation at La Encantada mine is conducted by drifting along the mineralized zones so that channel samples can be taken. Channel samples are the primary means of sampling in the mine and are taken perpendicular to the vein structures, across the back of the drift and across the drifts and workings in breccia zones. Sampling crews take line channel samples at regular intervals of 3 metres, typically with one or several samples along every sampling channel on new openings (drifts, crosscuts, ramps, stopes, etc.) and every day from stope development muck piles. Channel samples are taken in consecutive lengths of 1 meter or less, along the channel, depending on geologic features.

A channel “line” typically consists of two or more individual samples taken to reflect changes in geology and/or mineralogy across the structural zone. Each sample weighs approximately 4 kilograms. Locally, the drift is completely enclosed by the structural zone, and the full thickness of the vein is not sampled. All channels for sampling are painted by the geologist and numbered on the drift’s walls for proper orientation and identification.

Historical drill hole data provided by Peñoles is locally included in the resource/reserve calculations, and is conservatively applied by First Majestic. Drilling results are applied in the grade calculations giving more weight to the larger-size channel sample data.

The samples are brought into the La Encantada laboratory for preparation and assaying. To evaluate sample quality control La Encantada personnel perform periodic check analyses on samples. The pulp samples mineral content range includes assays that vary from 432 to 1,492 grams per tonne Ag. Average correlation coefficient of the silver grades is excellent for the set of samples, at 97%. The channel samples reproducibility for silver assays is at a correlation coefficient of 87%, with high variable differences of the silver grade. Most sample checks resulted in conservative assays for La Encantada lab.

First Majestic has established a systematic procedure to verify data and quality control. Assay data and information generated by the operation is transmitted manually; however, the entire paper trail is accessible and available for inspection.

First Majestic uses conventional, manual methods, assisted by computer databases, to calculate the tonnage and average grades of the mineral resources and reserves at La Encantada. First Majestic has compiled all data to incorporate it into a database and created a geologic model in SURPAC and GIS software. First Majestic has reviewed and calculated resources and reserves for La Encantada to assess the current status of the property and to use it as a basis for future updated estimates.

The reserve blocks estimated by La Encantada are exclusive of the resource blocks. Estimated Proven and Probable Reserves and Measured and Indicated Resources for La Encantada, as of September 30, 2008, are presented in Table 5. No further external resource or reserve calculations have been conducted since such date. It should be noted that since the cut-off date, to December 31, 2010, 1,472,399 tonnes have been mined from the La Encantada of which 1,192,643 tonnes where mined from the delineated Reserves and 279,756 tonnes where mined from areas that were not included in any previous estimates.

CATEGORY	METRIC TONNES	WIDTH	GRADE			METAL CONTAINED (2)
	Tonnes	Metres	Silver g/tonne	Lead, %	Zinc, %	Silver (Only) oz.	Silver (Eq) oz.
Total Reserves Proven plus Probable (3)
Proven	683,992	Over 2.00	354	2.23	0.92	7,777,602	8,261,401
Probable	4,511,686	Over 2.00	186	2.45	2.54	26,936,651	27,287,462
Total Reserves Proven + Probable (3)	5,195,677	Over 2.00	208	2.42	2.33	34,714,253	35,548,863
Total Resources Measured plus Indicated (3)
Measured	445,650	Over 2.00	399	4.15	0.65	5,710,055	6,025,271
Indicated (5)(6)(7)	4,931,103	Over 2.00	156	1.15	0.87	24,774,263	27,082,017
Total Resources Measured + Indicated (3)	5,376,753	Over 2.00	176	1.40	0.85	30,484,318	33,107,288
TOTAL PROVEN AND PROBABLE RESERVES PLUS MEASURED AND INDICATED RESOURCES (8)
	10,572,000	Over 2.00	192	1.90	1.58	65,199,000	68,700,000
Total Inferred Resources (1)(2)(3)
Inferred (8)	2,557,000	Over 2.00	220	1.00	1.00	18,226,765	20,034,145

Since the date of the mineral reserve and resource estimate contained in Table 5 to December 31, 2010, approximately 5,910,942 ounces of silver equivalent have been extracted from the La Encantada Silver Mine.

From the period of the cut off of September 30, 2008 to December 31, 2010, First Majestic mined and processed 1,472,399 tonnes of ore from La Encantada at an average grade of 246 grams per tonne (7.91 ounces per tonne) Ag, for a total of 11,645,318 contained ounces. Production during this period amounted to 1,472,399 tonnes of ore processed at an average grade of 246 grams per tonne Ag and 2.3% Pb which resulted in 5,656,112 silver ounces being produced and 5,864,956 pounds of lead. Throughput in 2010 amounted to 1,074,538 tonnes of ore.

In July 2008, construction commenced on a new 3,750 tonnes per day cyanidation mill. This mill was inaugurated on November 18, 2009. Commissioning of this new facility commenced at that time resulting in commercial production being achieved on April 1, 2010. Full production capacity was reached in the fourth quarter of 2010. Total ore throughput in 2010 for the two plants was of 1,074,538 tonnes grading 234 gr/t Ag and 1.2 % Pb.

From November 2006 to June 2010 La Encantada operated a 1,000 tpd flotation plant which was upgraded after purchase to achieve those levels. All production from the flotation plant was in the form of a lead-silver concentrate. Commencing in November 2009, the new cyanidation mill began producing precipitates and silver doré bars. The flotation mill (except for the crushing area, which remains in operation) was placed in care-and-maintenance in June 2010 and since that time the La Encantada operation has been producing only doré bars.

La Encantada mine has largely been developed below ore zones indicated from surface exploration work within a block about four kilometres long, 700 metres wide and 500 metres in height. The mine was initially developed from shafts as a conventional operation with rail haulage levels, and utilizing standard rail-bound loading and hauling equipment. Subsequently, La Encantada was converted to a mainly trackless operation, although rail haulage is still used on a few levels of the mine. The mine has been developed to the northeast of the shafts over a vertical range of about 400 metres from the surface (2,035 metres above sea level) to about the 1525 level (1,525 metres above sea level), where the water table has been encountered. The mine has not been developed into the large prospective area to the southwest of the developed mine area.

The principal mining method employed at La Encantada is overhand mechanized cut-and-fill utilizing development waste for fill. Ramps are driven in the ore bodies and stopes are developed from sill drifts driven in the ore zones and slashed out the full width of the ore. Stopes are drilled with jacklegs, and the main blasting agent is a commercial ammonium nitrate product, which is initiated with sausages of water-gel explosive primed with cap and fuse. Rounds are fired with Ignitacord (B-cord) as the fuse initiator. Stopes are mucked with rubber-tired 1.0 to 3.5 yd Load-Haul-Dump (“LHD”) machines, which also tram the broken ore to ore passes or remuck stations. Completed stope cuts are backfilled with development waste, which is passed through raises into the stope or trammed into the stope with the LHD units.

A modification of overhand cut and fill stoping that has been adopted for extraction of some breccia pipes and chimney ore bodies is post pillar stoping, which is essentially a room and pillar method, but on multiple horizons. Post-pillar stopes in La Encantada mine are backfilled with waste, and are mined overhand progressing from the sill level to the next level above. Most development ramps for post pillar stoping are developed in waste outside the ore body. All other parametres for stoping the post pillar areas are the same as for a standard mechanized overhand cut and fill stope.

The old flotation plant was constructed in 1973 and at that time incorporated magnetic separation. In 1977 the plant was modified to convert it to flotation separation. Current ore being processed is from two sources: from the underground mine and from old mine dumps and tailings. The tailing and dump rock is screened ahead of the plant which results in cleaning debris from the tailings and upgrading the dump rock to about twice the grade of unscreened material. The mine ore and tailings are blended at a ratio of 1,000 tpd from the mine and 2,750 tpd from the tailings and then processed through the mill. The dump material is not mixed with the mine ore and instead, is campaign processed through the plant.

As a result of the addition of the new 3,750 tonnes per day cyanidation plant, the only area operating at the old flotation plant is the crushing area for mine ore. Crushing takes place in using two stages of crushing closed on the second stage, and the ore is milled in a single ball mill closed with a cyclone. The mill is rubber lined and is charged with 2-1/2-inch diameter grinding balls.

Once crushed, the silver-rich fresh ore is ground, cyanide is then added and then sent to the old 125’ thickener. The resulting pulp and solution are then sent by pipe to the new 3750 tonnes per day cyanidation plant for processing in order to obtain silver precipitates allowing for the production of silver doré bars.

Since the date of the mineral Reserve and Resource estimated in the last NI 43-101 (September 2008) to December 31, 2010, approximately 5,910,942 ounces of silver equivalent (including lead) have been extracted from the La Encantada Silver Mine of which 4,787,863 was depleted from the Reserves/Resources.

The average head grade at the mill for 2010 was 234 grams per tonne Ag. This grade was a result of blending the old tailings with fresh mine ore. Combined recoveries from the old tailings feed and the fresh ore in the cyanidation plant was 48% resulting in a total of 3,854,979 ounces of silver in 2010 including pre-commercial and commercial production. During the first half of 2010 a total of 2,124,060 pound of lead were produced.

Certain of the information on the La Parrilla Silver Mine is based on the technical report prepared by Richard Addison, P.E. and Leonel Lopez, C.P.G. of Pincock Allen & Holt (“PAH”) entitled, “Technical Report for the La Parrilla Silver Mine, Durango State, Mexico” dated February 16, 2009, as amended and restated on February 26, 2009 (in this section, the “Current Technical Report”). Mr. Addison and Mr. Lopez are independent Qualified Persons for the purposes of NI 43-101. The Current Technical Report has been filed with securities regulatory authorities in each province of Canada. Portions of the following information are based in assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full text of the Current Technical Report which is available for review on SEDAR located at www.sedar.com.

Additional information since the date of the Current Technical Report has been prepared by the Company under the supervision of Ramon Davila, who is a Qualified Person for the purposes of NI 43-101.

La Parrilla Silver Mine is a producing underground silver mine and processing facility in Durango State, Mexico. The mine is wholly owned and operated by First Majestic Plata, S.A. de C.V. (“FM Plata”) a wholly-owned indirect subsidiary of the Company through its Mexican holding company, Corporación First Majestic, S.A. de C.V.

La Parrilla consists of 40 contiguous mining concessions in the La Parrilla mining district of Durango State which provides mineral rights which cover an area of 69,451 hectares (171,617 acres). All of these mining concessions convey exploitation rights for 50 years from the date of registration.

Certain of the La Parrilla claims were purchased from Grupo México and include a net smelter return of 1.5% payable to Grupo México. This net smelter return may be acquired by FM Plata for a total payment of US$2,000,000. In the event that FM Plata does not acquire the net smelter royalty, the royalties payable thereunder will be capped at US$2,500,000. To date a total of US$229,233 had been paid by the Company under the net smelter royalty. There are no other encumbrances on La Parrilla mining concessions.

The La Parrilla area is located partly within Ejido San José de la Parrilla and partly within private property. The Comisión de Fomento Minero (the “CFM”) executed a lease agreement on the surface rights from Ejido San José de la Parrilla to permit the use of surface rights for development of projects that are of general economic interest, including mining operations. In 1990 the Gamiz Family acquired the surface rights and mill from CFM and reconfirmed the lease agreement with the Ejido. Subsequently, First Majestic acquired the surface rights and the mill from the Gamiz Family. First Majestic updated the lease agreement with the Ejido and negotiated a lease to extend the surface rights to a total of 100 hectares where the second tailings dam has been built and is now operating; this includes a yearly payment to the Ejido San José de La Parrilla. First Majestic also has a lease agreement for 100 hectares with a private land owner where the Quebradillas, and San Marcos mines are located. First Majestic also owns surface land of 38 hectares which was acquired from Grupo México where the Vacas mine is located. During 2010 First Majestic acquired an additional 15 hectares of surface rights in the Quebradilla area.

The La Parrilla Silver Mine is located in the south-eastern part of the state of Durango, about 60 kilometres from the capital city of Durango. The La Parrilla mine is connected to various communities within distances of 10 kilometres to 20 kilometres, such as Nombre de Dios and Vicente Guerrero. Most of La Parrilla’s workers are transported from these towns to work at the mine. To access more specialized resources such as universities and private and public hospitals the cities of Durango and Zacatecas are within easy driving distances from La Parrilla. International flights by commercial airlines to cities in the United States and to most major cities in Mexico are available from Durango and/or Zacatecas.

Access to the La Parrilla mine is by Federal Highway No. 45 from Durango to Zacatecas. A four kilometre detour at the 75 kilometre marker leads to La Parrilla and the mine and plant through the village of San José de la Parrilla. La Parrilla is connected to the San José de la Parrilla village by a one kilometre dirt road.

Power supply to the camp is provided by the national power grid. Potable water supply is provided from a water well, and from the Quebradillas shaft. Telephone communications at the mine are integrated into the national telecommunications grid. Satellite and ISDN copper connections provide internet communications capabilities to the La Parrilla. Hand held radios are carried by all supervisors, managers and all vehicle operators for local ground communications. Most of the suppliers and labourers required for the operation are brought in from the cities of La Parrilla, Vicente Guerrero, Durango and Zacatecas.

The climate at La Parrilla is semi-dry with annual average temperatures that vary from 12º Celsius to 26º Celsius, with an annual average of about 18º Celsius. The annual average rainfall is about 580 millimetres with most of the rain occurring during the summer months, with only occasional rains during the winter months. Occasional rain storms may partially interrupt the La Parrilla operations.

Vegetation in the area consists of desert bush and shrub, including small mesquite, cacti, and grasses. At higher elevations there are pine, cedar and oak trees. Farming is mostly developed in the areas neighbouring the population centers in the Mesa Central flatlands, and the principal crops are corn, beans and some wheat. Apple and peach trees are also grown in the region.

The La Parrilla area is located within the physiographic sub-province of Sierras y Llanuras de Durango, which borders between the Sierra Madre Occidental and the Mesa Central in north-western México. This physiographic sub-province presents elevations of about 1,600 metres above sea level in the Mesa Central and up to 3,000 metres above sea level in the mountain peaks of the Sierra Madre Occidental. Topography in the La Parrilla area is dominated by either isolated mountains or north-west oriented mountain chains, all surrounded by the plateaus and flat lands of the Mesa Central. The main La Parrilla (San José) mine portal is located at an elevation of 2,100 metres above sea level.

Mining activity in La Parrilla mining district began during colonial times. La Parrilla consists of underground silver-gold-lead mines with a processing facility that was originally constructed in 1956. In 1960, the mining claims were acquired by Minera Los Rosarios, S.A. de C.V. (“Minera Los Rosarios”) who operated the mine until 1999 when operations were shut down due to low silver prices. The CFM, a Mexican federal entity responsible for promoting and supporting mining, constructed a 180 tonnes per day flotation plant at La Parrilla, which operated as a custom mill, processing ores from nearby areas, such as Chalchihuites, Sombrerete and Zacatecas. This plant was purchased in 1990 by Minera Los Rosarios from CFM.

In 2004, First Majestic acquired the mining rights and the plant from Minera Los Rosarios and, in 2006, successfully negotiated the acquisition of the mineral rights held by Grupo México which surrounded the original La Parrilla mine. Today First Majestic has consolidated ownership of the plant and all the mining rights of the land surrounding La Parrilla, where numerous mineral occurrences and mineral deposits are being investigated.

La Parrilla mining district is located in the border zone between the physiographic provinces of the Sierra Madre Occidental and the Mesa Central, within the sub-province of Sierras y Llanuras de Durango. La Parrilla is located in the northern side of a contact zone between a dioritic intrusive stock and a sequence of Cretaceous sedimentary rocks.

La Parrilla’s mineral deposits are associated to geologic structures, which appear related to the intrusive stock, dikes and sills. Structural intersections have also originated breccia zones that caused favourable conditions for mineralization emplacement as stockwork zones. The contact zone between the intrusive stock and sedimentary rocks has also originated metasomatic deposits.

The most important known deposits at La Parrilla occur as vein deposits that pinch and swell along strike as well as downdip. These are enclosed by three main systems within the mining district. The first structural system may be related in orientation to the regional intrusive stock. Its general strike is north east 60º south west, dipping nearly vertical. It cuts through all regional rock units and it does not appear to represent economic significance.

The second structural system occurs with a general orientation of north 45º - 75º west dipping approximately 50º to 85º to the north east. It cuts through limestone, diorite and skarn zones. It encloses several mineral deposits in the area including Los Rosarios, El Cármen, San Cayetano and San José.

The third regional structural system is oriented north-south and dips to the east from 45º top vertical. It is generally concordant with the stratification and it encloses mineral concentrations, such as San Marcos, Quebradillas, Vacas and San Nicolas.

La Parrilla was discovered in colonial times and developed from outcroppings by following mineralization along the structures until high grade ore shoots were discovered and depleted. Common practice in these districts’ development was to mine out high grade ores, for the most part, without exploration efforts.

The Company carried out geophysical investigations during the period of April to June, 2007 to confirm previous studies within the areas of Quebradillas, Sacramento, Las Vacas, and Santa Paula (formerly Los Perros). These investigations have confirmed the presence of Induced Polarization (“IP”) and Resistivity anomalies which may be further investigated by direct methods, such as drilling and underground access where possible.

This survey consisting of measuring electric resistivity and induced polarization was completed in the following areas:

The geophysical survey resulted in prospective anomalous zones showing high resistivity and high chargeability. Drill sites were recommended to further investigate the most outstanding anomalies. Some of these sites are being scheduled into the 2011 exploration program.

The Company's planned exploration program for La Parrilla during 2011 consists of 8,200 metres of surface diamond drill holes with the main objective to explore the extensions of the already known ore-bodies in the three producing mines on the property. In addition the Company plans 3,900 metres of underground diamond drill focused to explore the deeper part of the 3 ore-shoots of the La Rosa vein. The Company also obtained from the Mexican government a new interpretation of the aero-magnetometry data relating to the area covered by the Company's mineral claims and has used this information to define new targets to drill in the future.

Drilling programs at La Parrilla have been limited by past operations, since the best exploration results have been obtained through underground development. However, FM Plata has obtained positive results by increasing drilling to define and evaluate new mineralized zones as well as to investigate continuity of ore shoots for development. The Company initiated a drilling program to explore the various areas of interest within La Parrilla in 2005. The drill program covered by the Current Technical Report, covering the entire period up to September 30, 2008, consisted of 310 diamond drill holes completed by the Company for a total drilled depth of 72,084 metres at an average depth of 233 meter per drill hole. The FM Plata drilling program was developed to investigate 13 areas within the mining district. In addition to this drill program an extensive underground development program commenced in 2004 and to September 30, 2008 consisted of 9,157 metres of which approximately 50% was mining exploration and 50% mine development to access and connect the different mines of La Rosa, Rosarios, San Marcos and Quebradillas.

Since the Current Technical Report, mining activities have continued and have required the continuation of ongoing drilling and development programs. Since September 30, 2008, an additional 4,931 metres have been drilled from underground. Furthermore, an additional 16,876 metres of underground development was completed to the end of December 31, 2010. This continuous program has not materially affected the total defined NI 43-101 Resources as its purpose was to access previously defined Resources for mining.

FM Plata’s drill hole database is compiled in electronic format, which contains collar, assay intervals, lithology, and assay information with gold/silver/lead/zinc values. Most of the holes are drilled at an angle to intersect vein or mineralized structures that generally dip at near vertical angles. Based on geologic interpretations, no apparent deviation has been detected in drill holes. FM Plata has established a surveying procedure which is performed during the drilling due to the fact that most of the holes are now longer than 150 metres. Deviation is defined with one survey reading at the bottom for holes of 150 metres in depth and two survey readings for holes longer than 150 metres; one reading at the middle and one reading at the bottom of the hole.

Logging is performed by the project geologist in each of the areas being investigated. The project geologist also determines the sample intervals. Trained assistants are in charge of core splitting and sampling as per the project geologist’s indications.

Mineralization at La Parrilla is a typical assemblage of metasomatic deposit and hydrothermal vein deposits with a high content of silver. These mineral assemblages have been affected by processes of oxidation and secondary enrichment. The primarily minerals consist of pyrite, sphalerite, galena, some chalcopyrite, argentite and other silver sulfosalts (pyrargyrite, stephanite) associated with calcite and quartz as gangue minerals. Oxidation and secondary enrichment of these sulfides makes up the mineral concentrations in the upper parts of the deposits, which consist of halides (ceragyrite), carbonates (cerussite, hydrozincite), sulfates (anglesite), silicates (willemite, hemimorfite) and iron oxides (hematite, limonite).

The La Parrilla mineralization occurs along a vertical range of about 600 metres in vertical extension (2,300 metres to 1,700 metres above sea level). This extension is known through underground development and drill holes and it is still open to depth. Known longitudinal extensions vary from about 3,000 metres at the Los Rosarios system, 500 metres at the San Marcos vein system, and about 400 metres at the Quebradillas area; however, some of these systems may be continuous, such as Los Rosarios System, San Marcos, and Vacas.

The La Rosarios/La Rosa, and La Blanca areas are currently joined underground. San Marcos, Quebradillas and Las Vacas areas are accessible via dirt roads and are between 1 to 2 kilometres apart.

First Majestic has delineated an area of approximately 200 metres by 200 metres for possible open pit mining. Preliminary estimates based on 33 drill holes with a total depth of 2,905 metres has indicated 3.3 million metric tonnes at an average grade of 100 gram per tonne Ag in oxides mineralization.

Exploration, mine development, production, and plant samples are sent to First Majestic’s on-site laboratory for chemical analysis of silver/gold/lead/zinc and copper. Silver and gold assays are carried out by fire assaying methods, while the rest of the elements are assayed by atomic absorption.

A typical channel sample received by the laboratory, weighing approximately four kilograms, is passed through a jaw crusher to reduce it to a 1.3 -centimeter (1/2”) size. A 500 gram split is taken and passed through gyratory or disk crushers to reduce it to a 10-mesh (1/8”) size. A 200 to 300 gram split is taken and placed in a drying oven at 120 degrees Celsius. After drying, the material is put into two pulverizers, one disk pulverizer and one ring pulverizer, to grind the rock to minus 100 mesh. The resulting pulp is homogenized and ten grams taken for fire assay analysis of silver and gold for geology samples and for concentrates; 20 grams are taken for head samples; and one gram is required for precipitate samples.

The ten gram pulps are placed in fusion crucibles and placed into an electric furnace for fusion into lead buttons. The lead buttons are placed in cupellation cupels and placed into an electric furnace for cupellation into a silver-gold bead. The bead is weighed and then put into nitric acid to dissolve away the silver and then the remaining gold bead is weighed again. The microbalance used has a sensitivity of + 1 per 10,000 (equivalent to an actual grade of +0.1 gram per tonne), while the gold beads commonly range in weight from 100 milligrams down to less than 1 milligram. As a result, the determination of the smaller bead weight is at or below the detection limits of the microbalance.

To evaluate sample quality control, First Majestic performs periodic check analyses on samples. For the period to September 30, 2008, First Majestic sent 119 samples to BSI Inspectorate Laboratories, an independent commercial laboratory in Reno, Nevada for duplicate analysis. All core samples are sent to the BSI Inspectorate lab for assaying; therefore, the assay check was also performed by the same lab. This procedure is continuing as a FMSC policy of QC-QA.

No gold assays are performed at First Majestic’s lab. The correlation for silver assays of core samples is excellent at 99 percent while the pulp duplicates correlation is acceptable at 91 percent. The correlation for assays of lead is 97 percent and 81 percent respectively. The correlation for zinc assays is 97 percent for duplicate samples and 40 percent for pulp sample duplicates. The poor correlation for zinc pulp samples is probably due to presence of oxidizes within the mineralization. The range of silver values is from 0 to 1,137 grams per tonne, with an average grade of 119 gram per tonne, while the range for lead is 0 to 22 percent with an average of 2.44 percent and for zinc is 0 to 19 percent with an average grade of 4.12 percent.

Channel sample checks are performed by analyzing random sample pulps at the La Parrilla lab with assay checking by the SGS de México lab at Durango. The assays include silver, lead and zinc.

The Company’s quality control procedure consists of sending mine samples and/or pulps to an outside laboratory, usually BSI-Inspectorate Labs in Reno, Nevada. Samples of concentrates are regularly sent to Peñoles for check assays. The laboratory duplicates pulp assays at one sample for every 20. Drill samples are duplicated as one sample for every twenty regular samples. The standard samples are analyzed at the SGS Laboratory located in Durango, Mexico.

The La Parrilla mine has estimated mineable reserves for the following deposits:

As of the effective date of the Current Technical Report (September 2008), the total “in situ” diluted Proven and Probable Reserves at a minimum mining width of two metres, is 0.50 million tonnes of oxides and sulfides averaging 295 grams per tonne silver, 1.40 percent lead and 1.01 percent zinc, for a total of 4.8 million contained ounces of silver only; or 5.2 million ounces of silver equivalent with gold and lead credits.

The proven ore category has been projected up to 20 metres from the drift sample data, while the probable ore category is projected another 20 metres beyond the proven ore. Measured and Indicated Resources are projected beyond the Probable Reserves, considering geologic features and evidences of mineralization continuity. Resource estimates are projected at 25m from the drill intercepts. Inferred Resources are estimated by projecting up to 50 metres beyond the indicated resource block boundaries along mineralized structures, La Parrilla mineral resource estimates were applied mostly to diamond drilling intercepts, as well as to some adjacent blocks from the estimated reserves. The grade for these blocks is determined from the grade estimated for the drill hole intercepted grade and from the adjacent reserve blocks, and sampling in mine workings and drill holes located within the block area.

Table 1 presents a summary of La Parrilla Proven and Probable Reserves and Measured and Indicated Resources, as at September 30, 2008 in addition to Inferred Resources at the bottom of the table, all as reported in the Current Technical Report. No further external Resource or Reserve estimates have been conducted since such date. It should be noted that since the cutoff date of September 30, 2008, 648,181 tonnes grading 211 grams per tonne Ag have been mined from La Parrilla’s various deposits of which 466,690 tonnes where mined from the Reserves and 181,491 tonnes where mined from areas that were not included in any previous NI 43-101 estimates.

TABLE 1
La Parrilla Silver Mine
Mineral Reserves and Resources as of September 30, 2008

CATEGORY	Mineralization	Metric	Width	Au	Ag	Pb	Zn	Contained Metal
CATEGORY	Type	Tonnes	Metres	g/tonne	g/tonne	%	%	Ag (only) oz	Ag eq oz
MINERAL RESERVES
Total Proven	Oxides	127,778	3.09		301			1,235,695	1,260,344
Total Proven	Sulfides	160,690	2.72		302	1.36	0.93	1,561,792	1,804,608
PROVEN	Oxides plus Sulfides	288,468	2.88		302	1.36	0.93	2,797,487	3,064,952
Total Probable	Oxides	112,391	3.11		283			1,023,170	1,044,851
Total Probable	Sulfides	104,669	2.78		291	1.45	1.12	978,988	1,137,152
PROBABLE	Oxides plus Sulfides	217,060	2.95		287	1.45	1.12	2,002,158	2,182,002

PROVEN PLUS PROBABLE	Oxides plus Sulfides	505,528	2.91		295	1.40	1.01	4,799,645	5,246,954

Since the date of the mineral Reserve and Resource estimate contained in Table 1, approximately 3,816,846 ounces of silver equivalent have been extracted from the La Parrilla Silver Mine.

The Company operates three mines in La Parrilla area: the La Rosa/Rosario/La Blanca, the San Marcos, and Quebradillas operations. All are separate mines within an area of about 10 square kilometres. The production from the mines during 2010 was approximately 303,869 tonnes at an average grade of 209 grams per tonne silver. This production includes about 57,580 tonnes of ore extracted from development workings. Oxide ore mined was about 148,943 tonnes, while sulphide ore mined was about 154,926 tonnes. Silver production for 2010 was 1,813,788 equivalent ounces of silver. The Company’s five year plan requires improvements in production rates, ore head grades and mill recoveries to achieve up to 3.0 million ounces of silver equivalent annually.

At the underground mines some drilling is done with two, one boom electro-hydraulic drill jumbos, most development and production drilling is accomplished with hand-held jackleg drills. The principal stoping method for the near-vertical veins of La Parrilla is overhand cut and fill, with backfill mainly obtained from development waste. However, the operators are currently experimenting with long-hole open stoping. Drifting and ramping is all trackless, and at times old drifts and other workings that are used in the modern La Parrilla operations are slashed out to accommodate the trackless equipment. Raising is mainly done conventionally as “bald-headed raises,” but some major raises, ventilation, ore-passes, etc, are done with contracted raise boring equipment.

The mines are dry and very little water handling is required. Ventilation is primarily by natural flow, and the operators are in the process of boring exhaust ventilation raises for the mines. Compressed air is provided from surface compressor stations in all three operations.

The ore processing plant at La Parrilla was extensively expanded and modified in 2006 and now processes both oxide and sulphide ores in two separate parallel circuits. In addition to the plant, power and water supply systems that were upgraded, a new tailing containment area with 10 years of life was built in 2006. Since September 30, 2008 additional improvements were made at the La Parrilla mill which consisted of the addition of new filter presses at the Merrill Crow circuit, also an additional leaching tank was added in the cyanidation circuit resulting in a 2- 3 % increase in silver recoveries. In the Flotation circuit a change in the flow sheet was executed which resulted in increasing the recoveries in the lead concentrate for both silver and lead to the 80% range. As a result of these improvements the total capacity of the mill is now 850 tonnes per day. The oxide circuit has a process capacity of 425 tonnes per day of which during 2010 an average of 425 tonnes per day were processed containing 197 grams per tonne of silver. The oxide circuit recoveries for 2010 were 68% of the contained silver. The sulphide circuit has a 425 tonnes per day capacity of which during 2010 operated at a higher capacity due to some changes made on the grinding pumping system an average of 442 tonnes per day were processed containing 221 grams per tonne silver and 1.6 percent lead. The recoveries were 82.3% for the silver and 79% for the lead which resulted in a concentrate containing an average of 4 kilograms per tonne silver and 35% lead.

Since the date of the mineral Reserve and Resource estimated in the last NI 43-101 (September 2008) to December 31, 2010, approximately 3,816,846 ounces of silver equivalent (including gold & lead) have been extracted from the La Parrilla Silver Mine of which 2,748,129 was depleted from the Reserves/Resources.

The mine operations are partially contracted to outside contractors, and surface ore and waste haulage is also contracted. The administration, beneficiation plant and ancillary functions are all conducted by Company personnel. The total personnel on site at the end of December, 2010 totalled 554 people of which 278 were contractors, including the personnel working in the expansion of the mill. The overall efficiencies achieved to date in 2010 were about 1.8 tonnes per man-shift.

During the past three years the La Parrilla mine has undergone extensive development to prepare the mine for higher production levels. During the past six months this expansion plan has been assessed and defined to optimize the La Parrilla operation into the future. The Company launched a major expansion of La Parrilla’s mill capacity in December 2010. Once the proposed US$35 million expansion project is completed, the La Parrilla mine will have mill capacity of 1,600 tpd (up from the current 850 tpd) and will effectively double the current potential output of the La Parrilla operation from approximately 1.5 million ounces to 3.0 million ounces of silver equivalent annually.

Plant equipment and construction costs	US$24.8 million
Additions to the underground fleet	US$2.3 million
Underground mine development and associated infrastructure	US$4.2 million
Contingencies, administration and working capital	US$3.6 million
Total	$34.9 million

All required capital for this expansion project will be funded internally from cash flows.

Once in full operation at the newly expanded rate of 1,600 tpd, the La Parrilla Silver Mine will be capable of producing 3.0 million silver equivalent ounces annually consisting of 2.3 million ounces silver and 0.7 million ounces of silver equivalents in the form of lead and zinc.

Mining will continue with mechanized trackless loading and hauling and a new area will be mined with open cast methods. Longer term plans call for joining the underground areas of Quebradillas, San Marcos & Las Vacas with the La Rosarios/La Rosa system, building a shaft and underground rail system.

The Company has not yet completed a formal economic analysis of the proposed expansion. The Company is in the process of commissioning a new technical report on La Parrilla which is expected to include a feasibility study and an economic analysis of the proposed expansion. The technical report is expected to be completed by summer 2011.

Certain of the information in this section is based on the technical report entitled “Technical Report for the San Martín Silver Mine, State of Jalisco, México” prepared by Richard Addison, P.E. and Leonel Lopez, C.P.G. of PAH dated January 15, 2009, as amended and restated on February 26, 2009 (in this section, the “Current Technical Report”). The Current Technical Report has been filed with securities regulatory authorities in each province of Canada. Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full text of the Current Technical Report which is available for review on SEDAR located at www.sedar.com.

Additional information since the date of the Current Technical Report has been prepared by the Company under the supervision of Ramon Davila, who is a Qualified Person for the purposes of NI 43-101.

The San Martín Silver Mine consists of a predominantly silver mine and processing plant located near the town of San Martin de Bolaños in Jalisco State, Mexico. The mine is wholly owned and operated by First Majestic through Minera El Pilón, S.A. de C.V. (“El Pilón”), a wholly-owned indirect subsidiary of the Company through its Mexican holding company, Corporación First Majestic, S.A. de C.V.

El Pilón holds 30 contiguous mining concessions in the San Martín de Bolaños mining district that cover mineral rights for 7,841 hectares. These include 30 mining concessions with exploitation rights. Mineral rights for the earliest titled concessions are due in the year 2035, and most other claims have expiration dates in the 2050s; these however, may be renewed for another 50 years. No royalties or any other encumbrances are due on any of the San Martin mining concessions.

The surface rights to the San Martín mine are mostly owned by El Pilón. A portion of the access roads to the mine are located on land owned by private owners. El Pilón has negotiated surface rights agreements with some individual owners for parts of the access road.

The San Martín mine is located at the coordinates 21° 45’ north latitude, and 103° 45’ west longitude, in the Bolaños river valley. Climate in this area is generally warm and semi-wet with rain in the summer season. Annual freezing temperatures in the region are recorded mostly during the month of February, from 0 to 20 days, while hail occurs during the rainy season for less than five days per year.

Climate and topographical conditions in the San Martín de Bolaños area support farming and cattle by the river valley; however, in the surrounding areas, only sparse to moderately dense desert vegetation of bushes and shrubs cover the hill slopes. The mine area is within a transition zone that changes from desert grasses in the lower elevations to evergreens, pines and oaks and other types of trees at higher elevations.

The San Martín operation is 150 kilometres by air or 250 kilometres by paved road north from Guadalajara. Driving time is four to five hours and flying time is about 45 minutes by charter plane. The town of San Martín de Bolaños constitutes the commercial center for the immediately surrounding region. Major facilities, including international airports, are located in the cities of Guadalajara, Zacatecas and Aguascalientes.

The municipality of San Martín de Bolaños has approximately 3,000 people. The town is connected to the national power grid and it has standard telephone lines and satellite communications. Water for the town inhabitants’ consumption is pumped from wells. Most of the people living in the area depend on small scale farming, raising livestock, and growing fruit.

The San Martín mine is connected to the national power grid through a substation located about 20 kilometres to the north at the neighbouring Bolaños mine. Power is supplied by the grid at 33 kva and 60 cycle. Two 1,000-volt transformers supply power to the plant. Diesel generators are located at the plant for emergency and stand-by power in case of power interruptions. Air compressors are located at the plant to supply low-pressure air to the leach tanks. The water source for the processing plant is the Bolaños River, which supplies a permanent flow. Mine and plant installations, including camp facilities, tailings storage and waste disposal areas required for the mining and milling operation of San Martín, are located on land owned by El Pilón.

The infrastructure on-site includes the support facilities for the operations, which are located near the plant and include the main administrative offices, warehouse, assay laboratory, tailings facilities, maintenance buildings, cafeteria and other employee housing.

In 1981, Mr. Héctor Dávila Santos purchased the San Martín property, developed the mine, constructed the process plant, and then began production in 1983. In 1997 First Silver Reserve, Inc. (“FSR”) by way of reverse takeover, acquired all the shares of El Pilón, owner and operator of the San Martín Silver Mine.

In April 2006 the Company entered into an irrevocable share purchase agreement to acquire a majority share interest of FSR from Mr. Dávila Santos. The Company took control of FSR and the San Martin mine in June 2006 and subsequently acquired the remaining shares of FSR pursuant to a business combination which closed on September 14, 2006. Please see the section entitled “General Development of the Business” for further information.

The project area lies in the southern part of the Sierra Madre Occidental, an extensive volcanic terrain starting near the United States-Mexican border and trending southeast into the states of Zacatecas and Jalisco. The terrain is characterized by Tertiary age volcanic rocks that have been divided into a lower andesitic sequence of early Tertiary age (40 to 70 million years) and an upper rhyolitic sequence of middle Tertiary age (20 to 40 million years). In the project region, the stratigraphy is represented by a thick sequence of upper volcanics consisting of approximately 1,000 metres of alternating ash-flow tuffs and lava flows. The composition of these rocks is predominantly rhyolitic with lesser amounts of andesite and rare occurrences of basalts. Volcanism, structural development and mineralization in the San Martín area occurred during late Miocene, resulting in a complex geologic framework. Two distinct features have been recognized by different authors, the pre and post mineralization rock formations, and the indicator Guásima Formation.

At San Martin, exploration programs have been primarily based on direct development workings and complemented with limited drilling. This allows for mine preparation at the same time as the exploration advances along the mineralized structures. Topographic characteristics in the mine area do not permit easy drilling from surface access due to the vein’s strike and dip into the mountain range. However, in recent years, and particularly since 2002, a more extensive program has been carried out consisting of exploration based on diamond drilling, both from underground accesses and surface sites.

As at the cut-off date of the Current Technical Report, being September 30, 2008, drilling totalled 570 diamond drill holes for a total depth of 61,132 metres, at an average depth per hole of about 107.3 metres. All of the drill core has been kept after logging and sampling. Since the cut-off date and up to December 31, 2010 drilling has continued to assist in ongoing mining activities and has included a total of 12,282 metres over 158 holes, 11 drilled from surface and 147 from underground The results of those programs upgraded resources to reserves and opened other areas for further exploration and development, such as the Cymoid zone of the Zuloaga vein at the La Escondida mine Level 5900, at the Ballenas mine Level 5550, at the La Blanca vein Stope 5735 and at the San Pablo Stope 5920, where sampling and development works have shown high grade silver mineralization.

A total of 31,064 metres of underground development has occurred at San Martin between the acquisition completion date of September 14, 2006 and December 31, 2010. This ongoing development program has been focused on the Cangrejos, San Pedro, Ballenas and Escondida levels on the Zuloaga and Rosarios/Condesa veins.

First Majestic’s geological staff at San Martin includes 4 active and experienced geologists and other Company geologists active throughout First Majestic’s other operations within Mexico with full support from management, to carry out and supervise the exploration efforts in addition to 19 samplers and contractors for field work.

The San Martin drill program from January 1, 2007 to September 30, 2008 (the period covered by the Current Technical Report) included 127 drill holes with a total depth of 19,619 metres of core, in addition, about 3,906 metres of underground development for drill sites and access preparations. Estimated cost for this program was $4.9 million. Since this cut-off date 158 holes covering a total of 12,268 metres were drilled with the intent of defining new economic mining areas and new adjacent mineralized zones in the Zuloaga vein.

Even though exploration activities at San Martin were reduced due to the market environment in 2008 and 2009, an underground drilling program continued in 2009 and 2010. This program consisted of 135 drill holes with 8,029 metres being drilled, which were focused on investigating deep targets and parallel veins to the Zuloaga vein. The total estimated cost for the exploration program was about $2.50 million. This program has detected parallel veins to the Zuloaga vein (San Pedro Type) which may warrant further investigation.

The current underground drilling at San Martín is carried out with Company owned equipment. This includes electric powered drilling machines for underground operations, such as a Diamec 232 and a CP-55. Deep underground drilling is normally assigned to independent contractors as well as the surface programs.

Core drilling is incorporated in the regular mining operations to test the vertical vein projections and both walls for mine planning as well as for geologic investigations. First Majestic’s geology staff reports core recoveries of about 90 percent with exceptions in brecciated rock where it may drop to 50 percent. Core diameter used at San Martín is generally BQ for short underground drill holes and NQ diameter for long underground and surface drilling. The core is then logged by the geology staff and sampled.

San Martin’s current sampling team consists of four sampling crews with three employees each. Channel samples are taken with chisel and hammer, collected in a canvas tarp and deposited in numbered bags for transportation to the laboratory. Core samples are taken at the camp facilities after the core logging has been completed.

Exploration sampling for reserve delineation in the San Martín mine is conducted by drifting along the mineralized zone so that channel samples can be taken and diamond drilling can be conducted. Channel samples are the primary means of sampling in the mine and are taken perpendicular to the vein structure, across the back of the drift. Sampling crews take line channel samples at regular intervals, typically with one line every 3.0 metres along new openings (drifts, crosscuts, ramps, stopes, etc.) and every day from stope development muck piles.

Channel samples consist of shallow chips broken off the back of the drift. A channel “line” typically consists of two or more individual samples taken to reflect changes in geology and/or mineralogy across the structural zone. Each sample weighs approximately 4 kilograms. Locally, the drift is completely enclosed by the structural zone and the full thickness of the vein is not sampled.

Core drilling is conducted locally to test the upward and downward projections of the structural zone at a distance from the drifts. Core samples are BQ and NQ sizes in diameter, and holes are of generally good recovery (90 percent). . Drill-hole data are locally included in the reserve calculations, but given the relatively small size of the core sample, it is conservatively applied. Drilling results are applied in the grade calculations giving more weight to the larger-size channel sample data.

Channel, exploration, mine development and production, and plant samples are sent to San Martin’s onsite laboratory for chemical analysis of silver and gold. In more recent years additional analyses by atomic absorption for lead and zinc in geology samples have become routine. A typical channel sample received by the laboratory, weighing approximately 4 kilograms, is passed through a jaw crusher to reduce it to a 1.3 -centimetre (1/2”) size. A 500-gram split is taken and passed through a gyratory crusher to reduce it to a 10-mesh (1/8”) size. A 200 to 300 gram split is taken and placed in a drying oven at 150°C. After drying, the material is put into two pulverizers, one disk pulverizer and one ring pulverizer, to control the metallic minerals, and to ground the rock to minus 100 mesh. The resulting pulp is homogenized and 10 grams taken for fire assay analysis of silver and gold for geology samples and concentrates; 20 grams for head samples and 1 gram for precipitate samples.

The 10-gram pulps are placed in fusion crucibles and placed into a diesel-fired furnace for fusion into a lead button. The diesel furnace does not have any temperature control and as a result temperatures fluctuate to a certain extent. The lead buttons are placed in cupellation cupels and placed into an electric furnace for cupellation into a silver-gold bead. The bead is weighed and then put into nitric acid to dissolve away the silver and then the remaining gold bead is weighed again. The final gold bead weight is the gold content, while the difference in weight is the silver content for the samples. The microbalance used has a sensitivity of +1 milligram (equivalent to an actual grade of +1 gram per tonne), while the gold beads commonly range in weight from 100 milligrams down to less than 1 milligram. As a result, the determination of the smaller bead weight is at or below the detection limits of the microbalance.

To evaluate sample quality control, First Majestic performs periodic check analyses on samples. Since 2004, 10 to 30 samples have been sent each month to Chemex Laboratories, to SGS Laboratory, to Met Mex Peñoles laboratory, and to Laboratorio Industrial Metalúrgica Herrera, for duplicate samples and duplicate pulp samples analysis.

PAH reviewed assays of duplicated samples from 2007 and 2008 sent to SGS Laboratory and Chemex Laboratories in connection with the preparation of the Current Technical Report. The samples mineral content range includes assays that vary from 3 to 3,870 grams per tonne Ag. Average correlation of the results is 92 percent for the duplicate samples silver assays within a broad range, while the pulp duplicates show results close to 100 percent. High discrepancies occur in the gold assays. PAH reported that the reproducibility of silver grades is acceptable and somewhat conservative, considering that the reported values from the San Martin laboratory tend to be lower, but within acceptable industry practices. Gold assays present high variations. Because the gold beads are so small, the assayer is forced to estimate the bead weight in the measurement gold grades in the tenths of a gram per tonne range. PAH reported that the reproducibility of gold grades is reasonable, with some of the variability between samples pairs due to the relatively small quantity of pulp (10 grams) used for the assays. Since the gold values are not used in the determination of the reserve block delineation and stope layouts, PAH concluded this was not a significant issue.

First Majestic uses conventional, manual methods, assisted by computer databases, to calculate the tonnage and average grades of the mineable reserves.

Table 2 shows a summary of mineral Reserves and Resources for the San Martín Silver Mine to September 30, 2008. No further external resource estimates have been conducted since this cut-off date. It should be noted that since the cutoff date, 625,559 tonnes have been mined from San Martin of which 344,057 tonnes were mined from the Reserves and 281,502 tonnes where mined from areas that were not included in any previous NI 43-101 estimates.

TABLE 2 - San Martín Silver Mine
Mineral Reserves and Resources as of September 30, 2008

The resource calculations contained in Table 2 are based on projections of the mineralized zones of 50 metres beyond the areas of the reserves for the measured resources, and another 50 metres beyond the boundaries of the measured resources for the blocks of indicated resources. The grade for these blocks is determined from the grade estimated for the adjacent reserve blocks, and sampling in mine workings and drill holes located within the block area.

The Company’s estimated resource blocks do not include the estimated reserve blocks since these have been projected at distances that are adjacent and beyond the reserve blocks boundaries. Mineral resources do not include development details for underground mine accessibility and mine planning.

Since the date of the mineral Reserve and Resource estimate contained in Table 2 to December 31, 2010 approximately 2,689,588 ounces of silver equivalent (including gold & lead) have been extracted from the San Martin Silver Mine of which 1,479,273 ounces were depleted from the Reserves/Resources set in Table 2.

The San Martín Silver Mine includes underground workings that have opened six main drifts with levels at an approximate 35 meter vertical separation. Each one of the drifts has been developed to a maximum extension of approximately 3,000 metres, with interconnecting ramps between levels, and all have surface access to the Cerro Colorado hillside. Since 1983, when El Pilón initiated operations in the area, to the September 2008 cut-off date, over 4.3 million tonnes of silver ore have been extracted and processed, for sales of approximately 33.6 million ounces of silver, including some gold and lead. Since this cut-off date, to December 31, 2010 an additional 625,559 tonnes of ore have been mined with an average grade of 158 grams per tonne Ag, 0.13 grams per tonne Au and 0.08 % Pb, resulting in 2,434,893 ounces of silver being produced, 3,781 ounces of gold and 4,463 pounds of lead.

The mine has been developed on the Zuloaga vein, which has by far been the most extensively developed vein in the district, having accounted for about one-half of the silver production in the district. The mining operation on the Zuloaga vein consists of six main levels and partial development in another three levels (Pinolea, San Carlos, La Escondida) spanning a vertical interval of approximately 350 metres. Main access levels are San José, Santa María, Ballenas, Cangrejos, San Pablo, San Juan and San Carlos, all with access from surface adits and various interconnecting ramps, from elevations of 1080 to 1600 metres above sea level. Production also occurs from the La Blanca vein, a vertical split off the Zuloaga vein. The Zuloaga vein occurs along an east-west trending normal fault zone that dips an average 75 degrees to the north, with the hanging wall of the fault down-dropped 100 to 200 metres relative to the footwall.

Mine production has come from stopes located on La Escondida, San José, Ballenas, Congrejos, San Pablo, San Juan, Santa Elena, and San Carlos levels. Underground drilling is performed using jackleg drills, and blasting is accomplished with ANFO explosives. Opening sizes are driven at 4.0 metres by 3.5 metres. Ramp inclinations are generally limited to about 12 percent. Typically, the total advance for drifting, ramping and raising is about 650 metres per month. The average productivity in headings is 0.7 metres per man shift, which is in the normal range for this type of development

Mechanized cut and fill stopes account for 100 percent of production, and these are developed either directly on the vein or by first driving a drift on the vein and then driving a parallel drift about 8 metres away, leaving a pillar between the drifts. Crosscuts are then driven about every 10 metres from the parallel drift through the pillar to the vein for ore extraction. Raises are driven as needed to provide access, services and ventilation. During the last two years a long hole drill has been operating to recover some ore that was left in the pillars.

Underground loading and haulage is performed with 2 cubic yard, 3 cubic yard and 5 cubic yard Load-Haul-Dump machines (Scooptrams) and 10 to 13 tonne-capacity trucks. Ore is trammed to the surface and stockpiled at surface dump sites. On the surface, the ore is loaded from stockpiles into 22-tonne trucks and transported to the mill some 13 kilometres away over a gravel road. The ore haulage from the mine to the mill is performed by a contractor.

The San Martín processing plant has been in operation since 1983 at an increasing capacity that reached 750 tonnes per day in 2008. Since September 30, 2008, several improvements have been made at the mill in order to improve efficiencies, costs and throughput. These changes included; rebuilding of leaching tanks, replacing electric motors, rehabilitating crushers, and the installation of a new thickener. These changes have resulted in increasing the current mill throughput to 900 tonnes per day. Silver ore is processed by conventional cyanidation, using agitation in tanks, counter-current decantation (CCD) thickening, and precipitation of the dissolved silver and gold by cementation with zinc dust in the Merrill-Crow process. The precipitate is then smelted to produce silver doré for shipment to commercial refineries. In addition to the cyanidation system, the plant can produce a gravity concentrate and there is also a flotation circuit which is presently in care and maintenance pending further capital investment and improved and sustained prices of lead and zinc. The average daily throughput in 2010 was 920 tonnes per day all of which was through the cyanidation circuit for the production of silver doré.

Production for 2010 amounted to 264,449 tonnes grading 168 grams per tonne Ag and 0.21 grams per tonne Au resulting in total silver production of 1,125,514 ounces plus 1,665 ounces of gold production for a total eqivalent Ag ounces of 1,230,037. 145,703 tonnes of ore came out of the current delineated Reserve/Resource while 118,747 tonnes where mined from areas that were not included in any previous delineated estimates.

Since September 30, 2008, the average grades have improved from 151 grams per tonne Ag to the current 158 grams per tonne Ag. The average head grade at the mill for 2010 was 168 grams per tonne while the average grade for the entire period of October 1, 2008 to December 31, 2010 was 158 grams per tonne Ag. Gold values had been in the range of 0.2 grams per tonne.

Certain of the information on the Del Toro Silver Mine is based on the technical report titled “Technical Report for the Del Toro Silver Mine, Zacatecas State, México” (in this section, the “Current Technical Report”) prepared by Leonel Lopez, C.P.G. of PAH and dated October 9, 2008. Mr. Lopez is an independent Qualified Person for the purposes of NI 43-101. The Current Technical Report has been filed with securities regulatory authorities in each province of Canada. Portions of the following information are based in assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full text of the Current Technical Report which is available for review on SEDAR located at www.sedar.com.

Additional information since the date of the Current Technical Report has been prepared by the Company under the supervision of Ramon Davila, who is a Qualified Person for the purposes of NI 43-101.

The Del Toro Silver Mine is a development project located near the municipality of Chalchihuites, in the northwestern part of the State of Zacatecas, México. The property is wholly owned and operated by FMPlata, a wholly-owned indirect subsidiary of the Company through its Mexican holding company, Corporación First Majestic, S.A. de C.V.

The project’s area is located at elevations from 2,300 to 2,900 metres above sea level. The Del Toro Silver Mine consists of 21 contiguous mining concessions in the Chalchihuites mining district that cover mineral rights for 368 hectares ( 909 acres). All these mining concessions include exploitation rights. Mexican mining concessions include mineral rights for a renewable period of 50 years from the date of the title. The earliest date of renewal of the Del Toro concessions is for the La Encarnación concession which has a January 16, 2019 renewal date. FMPlata owns all mineral rights within those concessions. There are no other encumbrances on the Del Toro mining concessions.

Surface rights in México are either owned by communities (“Ejidos”) or by private owners. Chalchihuites mining district land is mainly owned by private owners and by “ejidatarios”. In either case the mining concessions include “right of way” rights, although in many cases it is necessary to negotiate access to the land. At Del Toro the access to San Juan, Perseverancia and most other mining prospects is opened due to historical works and developments. The Mexican mining laws include provisions to facilitate purchasing the land required for mining activities, installations and development. FMPlata has recently acquired 100 hectares (247 acres) around the San Juan area and has made a lease agreement for 25 hectares (61.75 acres) at the Perseverancia area from private owners for future installations and project requirements.

Del Toro is located in the northwestern part of the state of Zacatecas, about 40 kilometres to the southeast of First Majestic’s La Parrilla Silver Mine and approximately 120 kilometres to the southeast of the capital city of Durango. It is situated within the municipality of Chalchihuites, about 1 kilometer to the east of the village of Chalchihuites.

The Chalchihuites mining district is situated in the bordering zone between the Sierra Madre Occidental and Mesa Central provinces. Del Toro is located at elevations of 2,300 metres to 2,900 metres above sea level, while the Sierra Negra and Sierra Chalchihuites reach elevations of 3,000 metres above sea level.

The Chalchihuites climate is moderate with an average annual temperature of 16Ú Celsius to 18Ú Celsius and total rainfall of 600 millimetres to 700 millimetres. Most of the annual precipitation in the Chalchihuites area occurs during the rainy season months of July to October.

Vegetation in the area consists of xerophile plants in the lower elevations, including cactuses and grasslands, while in the higher elevations the predominant vegetation consists of coniferous or evergreen oak forests (pine and oak trees). Most farming (corn, beans, chiles, wheat and some fruit trees) in the area takes place in the valleys and lower elevation zones.

The Del Toro area is accessible by paved highways from the cities of Zacatecas and Durango. Driving time to Chalchihuites from Zacatecas is about three hours and from Durango is about 2.5 hours. Local roads connect the mining district to various population centers within the region. The project is located about one kilometer to the east of the village of Chalchihuites by all-weather dirt roads. The labour force, including miners, is available from these population centers.

Electric power is provided by the national grid. Potable water is available to all the towns from water wells. The Walterio railroad station is located 5 kilometres from Chalchihuites with connections throughout the country. All basic facilities are available in most major population centers within the region. Airports with service for international flights are available in the cities of Durango and Zacatecas.

The Del Toro Silver Mine is located within the Chalchihuites mining district and contains mineral deposits which have been exploited by underground silver/gold/lead/copper mines. The Company commenced exploration in the area in late 2004 under option agreements. The Company subsequently exercised options to acquire Perseverancia and the San Juan groups of claims in 2006 and 2007 respectively. Del Toro comprises numerous small mine developments located around a regional granodioritic intrusive within metasomatic rocks at the contact with Cretaceous limestones. These are enclosed by mineralized structures, vein-type, manto replacement and breccia pipe deposits. Most mine workings are superficial developments with the exception of the San Juan area where a 90 meter deep shaft was developed to extract some of the high grade silver minerals, and at the Perseverancia area where two shafts were developed following two adjacent breccia pipe deposits to a depth of about 200 metres. No official records exist of mineral production from these Del Toro mines, however, estimates by volume suggest that approximately 100,000 tonnes of ores were extracted from each of the San Juan and Perseverancia mines. The Perseverancia mine was operated by Mr. Raúl Mazatán for a period of 23 years until 1997. He shipped approximately 150 to 300 hand-sorted ore tonnes per month to the Peñoles smelter in the city of Torreón. The ore was reported to contain 1,500 to 3,000 grams per tonne silver and 20 to 40 percent lead in massive sulfides.

The project is located in the border zone between the physiographic provinces of the Sierra Madre Occidental and the Mesa Central, in the northwestern part of México, within the sub province of Sierras y Llanuras de Durango. It is located on the western side of a regional contact zone between a granodioritic intrusive stock and a sequence of Cretaceous sedimentary rocks.

The exploration area is located on the northwestern flank of the Chalchihuites anticline, while Panamerican Silver Corp.’s La Colorada mine is located on the southeastern flank of the same regional structure. The Del Toro mineral deposits geology consists of mineralized structures enclosed by skarn and granodiorite within the contact zone between the intrusive stock and sedimentary rocks of the Indidura and Cuesta del Cura formations.

The Chalchihuites mining district was discovered in colonial times and only developed from outcroppings by following mineralization along the structures, until high grade ore shoots were discovered and depleted. Common practice was to mine out high grade ores, in particular mineralization in oxides that required simple processing.

First Majestic developed an exploration program at Del Toro that included geologic mapping, geochemical and geophysical investigations, channel sampling and mapping of underground workings, diamond drilling and underground development such as access ramps, drifting and cross-cutting into the working areas of the old San Juan and Perseverancia mines.

First Majestic focused its exploration efforts on large volume targets such as the San Juan area, while test mining small to medium size volume of high grade mineral concentrations that were left within blocks and accessible areas along the workings such as within the Perseverancia area.

First Majestic also carried out geophysical investigations to confirm previous studies within the Del Toro area. These investigations confirmed the presence of IP, Resistivity and Magnetic anomalies and were then followed up with geochemical investigations. This program consisted of a total of 254 rock chip samples to confirm or evaluate some of the areas of interest. The anomalous areas were further investigated by geophysical methods. This preliminary exploration program was completed in 2005 and was later followed up with a drilling program beginning in November 2005.

The geochemical program included 7 lines at 250 meter intervals with samples at 50 metres along these lines. The lengths of the lines were from 2,500 metres to 1,200 metres for a total sampled length of 13,000 metres. Each sampling site was located by GPS and UTM coordinates. Each sample was collected from an area of 2 metres by 2 metres, and consisted of 3 kilograms to 5 kilograms of rock chips. The samples were shipped to GM LACME Labs in Guadalajara for pulp preparation and sent to ACME Analytical Laboratories Ltd. in Vancouver, BC. All geochemical samples were analyzed by ICP, including determination of 22 elements in addition to gold/silver by fire assay. The Company did not include duplicate samples.

The most significant geochemical anomalies resulting from this survey were defined for lead, zinc, copper and silver.

The lead anomalies cover the San Juan, Huitrón, Mina de la Paz, Perseverancia, San Nicolás and part of Las Cotorras areas. Anomalous values were determined by statistical analysis and resulted in up to 220 parts per million for threshold range and low anomalies above 220 parts per million. The highest lead value reported was 29,300 parts per million, equivalent to 2.93 percent.

The zinc anomalies are more localized around the known area of interest. The zinc anomalies appear to outline closer areas near the known mineral deposits of Perseverancia, San Nicolás and Las Cotorras, and in the southern part of the lines in the Perseverancia area. Zinc values included assays from 50 parts per million to 11,300 parts per million with threshold defined at 999 parts per million. Low anomalies were determined from above 999 parts per million.

Localized copper anomalies were defined in the San Juan and Perseverancia areas. A widespread copper anomaly was determined along the northern part of the survey area. The geochemical copper threshold was defined at 160 parts per million. The geochemical copper assays range in values from 5 parts per million to 3,160 parts per million.

The geochemical and geophysical anomalies are coincident and show particular strength within the Perseverancia area. These anomalies also appear to show a NE-SW trend at the middle section of the district, in the areas of San Nicolás to Las Cotorras. The geochemical anomalies are strong at the San Juan area, while the geophysical anomaly appears to be deep-seated in this area. The anomalies appear to be related to previously known mineral outcroppings, to old workings or to known mineral deposits. The Company is proposing to follow up its investigations with direct methods to determine the significance of these anomalies.

Up to July 31, 2008, the cut-off date of the current NI 43-101 technical report, 1,212 metres of development was completed to access underground areas of old workings and to develop and test mine areas for preparation for future mining activities by the Company. Since July 31, 2008 to December 31, 2010, an additional 1,142 metres of underground development has been completed in order to gain access to lower levels, as this development is going to be required for any potential future operations and for further exploration.

A very aggressive exploration program has been launched at Del Toro with the following objectives:

Mineralization at Del Toro is a typical assemblage of metasomatic deposits and hydrothermal vein deposits with a high content of silver. These mineral assemblages have been affected by processes of oxidation and secondary enrichment. The assemblages mainly consist of pyrite, sphalerite, galena, some chalcopyrite, argentite and other silver sulfosalts associated with calcite and quartz as gangue minerals. Oxidation and secondary enrichment of these sulfides make up the mineral concentrations in the upper parts of the deposits, such as the Cuerpo Uno at San Juan, which consists of sulfosalts (ceragyrite, pyrargyrite, stephanite) carbonates (cerussite, hydrozincite, hemimorphite, malachite, azurite), sulfates (anglesite, willemite), and iron oxides, hematite, limonite, etc. See “Geological Setting” for further information.

First Majestic began drilling at Del Toro in November 2005. The Company’s exploration drilling program to July 31, 2008 included a total of 56 holes completed for a total depth of 11,716 metres distributed for exploration within the following areas: San Juan surface, San Juan underground, Perseverancia surface and Perseverancia underground. Since July 31, 2008 to December 31, 2010, the Company has drilled 5,951 metres in 11 holes, to further reconfirm the extent of the mineralization and in order to compile data for a newly updated NI 43-101 Report.

The Company’s drill hole database is compiled in electronic format, which contains collar, assay intervals, lithology, and assay information with gold, silver, lead and zinc values. Most of the holes are drilled at an angle to intersect vein or mineralized structures that generally dip at near vertical angles. Based on geologic interpretations, no apparent deviation has been detected in drill holes. Because most of the holes are now longer than 150 metres, deviation is defined with one survey reading at the bottom for holes of up to 150 metres in depth and two survey readings for holes longer than 150 metres; one reading at the middle and one reading at the bottom of the hole.

In November 2010 the Company decided to reinitiate development of the main ramp which at that time had a total of 690 metres, since then an additional 410 metres had been developed in the ramp. Also, a cross cut of 110 metres was made with the purpose of installing a diamond drill rig with a program of infill drilling of 3,000 metres of which to date 650 metres have been completed. Assay results are expected in the near future.

Del Toro’s current sampling team consists of three sampling crews with three employees each for underground and channel sampling, one sampler for drill core, and one sampling supervisor. This process is managed by the two project geologists.

Exploration sampling for resource delineation at Del Toro is conducted by drifting, cross-cutting and access ramp construction to the mineralized zones so that channel samples can be taken. Channel samples are the primary means of sampling in the old mine workings and are taken perpendicular to the vein structures, across the backs of drifts, generally from the footwall towards the hanging wall of the mineralized structure. Sampling crews take channel samples at regular intervals of 2 metres to 3 metres, typically with several samples along every sampling channel on new openings (drifts, crosscuts, ramps, stopes, etc.). Channel samples are taken in consecutive lengths of less than 1.5 metres along the channel, depending on geologic features. Channel samples are taken with chisel and hammer, collected in a canvas tarp and deposited in numbered bags for transportation to the laboratory.

A channel “line” typically consists of two or more individual samples taken to reflect changes in geology and/or mineralogy across a structural zone. Each sample weighs approximately 4 kilograms. All channels for sampling are painted by the geologist and numbered on the drift walls for proper orientation and identification.

The Del Toro sampling quality control program consists of checking the assays of one duplicate sample for about every 20 regular samples, including pulp samples.

All samples are assayed at the Company’s La Parrilla lab, while duplicate samples are sent to BSI-Inspectorate laboratory, a US lab located in Reno, Nevada with representation and sampling preparation facilities in Durango, México.

Exploration drilling was performed in the first stage by contractors based in the city of Gómez Palacio, Durango State, and in the current stage by contractors based in the city of Fresnillo, Zacatecas State.

Sampling of the drill core is done after the core has been logged by the project geologists. The geologist marks the core on the basis of geologic and mineralization features. Then the sampling crew splits the core with a diamond saw, as indicated by the geologist and one half of the core is placed in a numbered bag and sent to Inspectorate lab in Durango. Generally the samples represent core lengths of less than 1.5 metres. All the core samples are sent for assaying by Inspectorate. The core samples are crushed and pulverized at BSI-Inspectorate in Durango and 250 gram pulp samples are sent to Reno, Nevada for assaying.

Exploration and underground channel samples are sent to the Company’s on-site laboratory at La Parrilla Silver Mine for chemical analysis of silver, gold, lead, zinc and copper. Silver and gold assays are carried out by fire assaying methods, while the rest of the elements are assayed by atomic absorption (AA). First Majestic’s sample preparation techniques and procedures are similar in all its mining and exploration properties.

The QA/QC procedure consists of sending exploration and mine samples and/or pulps to an outside laboratory, usually BSI-Inspectorate Labs in Reno, Nevada or other certificated labs. The laboratory duplicates pulp assays at one sample for every twenty. First Majestic has established a QA/QC procedure by checking assays. Drill samples are duplicated as one sample for every twenty regular samples. Standard samples and blank samples also be included in the duplicate sampling. The standard sample was analyzed in the SGS Laboratory in Durango, Mexico.

Channel sample checks are performed by analyzing random sample pulps at La Parrilla lab with assay checking by the BSI Inspectorate Lab in Reno, Nevada or other certificated labs. The assays include silver, lead and zinc.

The Company has established a systematic procedure of data verification and quality control, which has proven effective and accurate in other Company operations and exploration properties. Assay data and information generated by the operation is transmitted manually; however, the entire paper trail is accessible and available for inspection.

Only mineral resources have been determined for Del Toro as of July 31, 2008. The results from the Del Toro exploration and development project are not yet extensive enough to estimate reserves. The Measured and Indicated silver resources, including oxides and sulfides mineralization, consist of 1.4 million tonnes averaging 269 grams per tonne silver, 4.7 percent lead and 4.8 percent zinc for a total content of 21 million ounces of silver equivalent including silver only for oxides and credit for lead and zinc for sulfides. The resource grade has been estimated in silver equivalent content based on the following prices: silver - $12.70 per ounce, lead - $0.90 per pound and zing - $0.85 per pound. To report equivalent ounces of silver an estimated metallurgical recovery for lead and zinc in sulfides was estimated as follows: lead – 85% and zinc – 80%, while silver recovery in oxides is estimated at 65%.

The Company has estimated additional silver Inferred Resources at a distance beyond the Measured and Indicated Resources. These Inferred Resources are estimated at 1.8 million tonnes at an average grade of 306 grams per tonne Ag, representing a content of about 36 million ounces of silver contained as silver equivalent including lead and zinc recoveries from sulfides mineralization. These additional resources are based on projections of presumed vein continuity ahead, above, and below current mining, or are based on widely-spaced drill holes, surface sampling or old surface workings.

TABLE 6
Del Toro Silver Mine
Summary of Resources, San Juan and Perseverancia Mines

The Company has conducted a test-stoping program at the old San Juan mine, which was done concurrently with the surface and underground exploration and development programs. The Company also conducted an underground mine development and exploration program at the Perseverancia mine, but no test-stoping had been undertaken at this mine to date. Some recovery of direct-shipping ore from the old Perseverancia mine and old dumps has been done by the Company.

Both areas have been explored and developed through trackless declines to explore the mantos and chimneys of the San Juan ore deposit and the chimneys of the Perseverancia deposit. Any ore extracted in the development programs and San Juan test stoping was trucked to the Company’s La Parrilla plant for milling, metallurgical studies and processing testworks.

In preparation for a definitive investment decision, the Company commenced a permitting process for the construction of a 1,000 tonnes per day flotation plant. At the time of this report, all permits including: environmental, change of land use and explosives use have been received.

Commencing in late 2010, an extensive development program was launched at the property, consisting of 1650 metres of ramp and crosscuts. This development program is designed for three purposes; 1) to gain access to each of the three defined ore bodies to upgrade the current NI 43-101 Resources to Reserves, 2) to prepare the ore bodies for mining, and 3) to build multiple underground drilling stations to drill the ore bodies at depth to define additional resources.

Currently, the ramp is 1,100 metres in length and 186 metres in vertical distance from surface. A cross-cut was made at the 7th level (176 metres from surface) where a drill rig was installed in February 2011. Two holes have been completed to date, both of which have intersected the ore bodies as expected.

Considering the work completed to date and the impressive results received, the Company has decided to continue with the following actions to advance this project:

Management of the Company has prepared the following initial capital expenditure budget relating to the development of the Del Toro Silver Mine. This budget is preliminary only and is expected to change upon completion of the economic assessment/pre-feasibility study including final metallurgical testing and final plant

designs, all of which are expected to be included in the technical report the Company is expecting to commission following completion of the current underground drilling and development program:

Summary of Initial Capital Costs	Amount (US$ Millions)
Mill Processing Plant &Tailings Area	11.0
Power Line & Substation	7.5
Buildings & Heavy Equipment	4.3
Mine Equipment	6.1
Additional Diamond Drilling and Mine Development	4.1
Water Plant &Piping	1.5
Road Work and Other	2.0
SUB TOTAL	36.5
Contingency (20%)	7.3
TOTAL INITIAL CAPITAL COSTS	43.8

The Company does not require external funding for these initial capital expenditures as the current cash flows are sufficient to fund this project. The Company also now has more than $80 million cash and cash equivalents in its treasury.

Ground breaking in the area of the planned mill site will commence in April 2011. Foundations are expected to be laid during May and June and construction of the plant facilities is anticipated shortly thereafter.

No detailed operating cost estimates are yet available. No manpower or equipment requirements for possible future operations have been developed, and likewise, no long-range production planning is available for public dissemination. These items will be addressed when all economic factors are better defined and will be released in the form of a NI 43-101 Technical Report in the coming months.

During the construction phase, the final economic parameters will be determined and released in the form of a NI 43-101 Technical Report. It is anticipated this work will be completed early in the third quarter of 2011 and will be released at that time.

Current plans call for production to commence in the second quarter of 2012 with commercial production being reached in the third quarter of 2012. These estimates are preliminary and until the Pre-Feasibility Study is completed may not be relied upon.

The Real de Catorce property is located approximately 25 km west of the town of Matehuala in the San Luis Potosí state of México which lies about 259 km to the south of the industrial city of Saltillo and about 170 km north of the city of San Luis Potosí. Access to Matehuala from the major cities is via the north-south Highway 57 which connects Mexico City to the United States.

Real de Catorce is an old mining district with an estimated historic production, between 1773 and 1990, of 230 million ounces of recovered silver. The majority of production (150 million ounces) occurred from 1773 to 1776 with the remainder occurring after 1851. A former operator estimated that the average grade of all production over the life of the mines was about 1,350 g/t silver (Grace, 1997).

The property was acquired by First Majestic in November 2009 as a result of the purchase of all the issued and outstanding shares of Normabec Mining Resources Ltd. The property consists of 22 mining concessions covering 6,327 hectares.

No current plans exist for exploration or development of this property, however, due to the historic nature of this region, the Company’s plans will be designed to maintain and improve the area.

Silver is sold by the Company using a small number of international metal brokers who buy from the Company and act as intermediaries with the London Bullion Market and the Comex. The physical silver is delivered to two refineries/smelters where the doré silver is refined to better than 99.9% pure bars, and the concentrates are smelted to separate the base metal by-products and the silver, again to a pure form for delivery to the global buyers of silver. The metal refineries and smelters charge the Company for their refining and smelting services. Refining of doré bars is a fraction of the cost of smelting concentrates of silver. As the Company has made a conscious shift towards doré production, the combined average of smelting and refining costs have decreased from $2.88 per ounce in 2009 to $1.77 in fiscal 2010.

The Company delivers its production via a combination of private aircrafts and armoured cars to a number of refineries and smelters who then, once refined or smelted to better than 99.9% purity, transfer the silver and byproducts to the physical market for the consumption of the silver. The Company transfers ownership at the time it delivers its doré and concentrates to the refineries and smelters, and receives payment from its brokers usually within two days of delivering the doré or concentrates. As concentrates can vary in grade and quality from shipment to shipment, there is a final settlement process to settle any variances based on the turn-out of the smelted metals, usually 60 days after physical transfer of the concentrates. Likewise, but to a lesser extent, doré is turned out usually within 25 days and any final variances in assays is settled at that time through the refiner assigning any differences to the metal brokers. The Company receives 95% of the value of its sales of doré on delivery to the refinery, and 90% of the value of concentrates on delivery to the smelter, with final settlements of the remaining 5% or 10% upon turn-out of the smelted or refined metals.

As the Company has a number of metal brokers and refineries and smelters with which it does business, the Company is not economically dependent on any one of its brokers or smelters.

First Majestic’s senior management in Vancouver and Mexico negotiate sales contracts for First Majestic operations. Contracts with smelting and refining companies as well as metals traders are entered into and renegotiated as required. The Company sells its silver doré and its by-products through two international brokerage organizations. Additionally, silver concentrates and related base metal by-products are sold primarily through one international organization with a good credit rating, with an alternate available to prevent any dependency on the existing smelter of our silver, lead and zinc concentrates.

First Majestic is continually reviewing its cost structures and relationships with smelting and refining companies and metal traders in order to maintain the most competitive pricing possible while not remaining completely dependent on any single smelter, refiner or trader.

In addition to these commercial sales, First Majestic also markets a small portion of its silver production to retail purchasers directly over its corporate e-commerce web site. Approximately 5% of the Company’s production was sold in retail transactions during 2010. Products sold included one ounce rounds, five ounce ingots, 10 ounce ingots, one kilogram bars and 50 ounce poured bars. In 2010, an 18 ounce custom coin set was released and is presently being sold on the Company’s e-commerce site.

The Company has not implemented a formal social responsibility policy, however, the Company believes that it holds itself to the highest possible standard in corporate citizenship. From the beginning, social responsibility has been at the foundation of the Company’s core values and the Company is committed to growing in a sustainable manner that supports the well-being of local communities.

The Company’s ongoing goal is to make meaningful contributions to every community in which it is active and to build long term relationships within these communities. The Company engages the local workforce, strives to provide new opportunities and continually looks for ways to better the lives of its employees and their families.

Beyond the economic benefits of the Company’s mining operations, the Company assists local populations in many other key areas. The Company strives to maintain the health of local communities by providing healthcare services and supporting local doctors, paramedics and ambulance services.

The Company has been recognized for three consecutive years with the prestigious Socially Responsible Business Distinction Award by Centro Mexicana para la Filantropia (Mexican Center of Philanthropy). This honour from within the Mexican community recognizes excellence in corporate ethics, quality of work, community citizenship and environmental responsibility.

The Company has implemented an environmental policy and the general objectives of the policy are:

Responsibility for each activity of the environmental programs is assigned to a person responsible for the monitoring, although the head of the environmental department will be directly responsible to ensure compliance with plans and programs for the proper functioning of the system of environmental management.

The Company fully complies with all applicable environmental regulations. On February 25, 2009, the Mexican Environmental Authority PROFEPA (Procuradoria Federal Proteccion al Ambiente) awarded a CLEAN INDUSTRY CERTIFICATE to one of the Company's wholly owned subsidiaries, First Majestic Plata, SA de CV., regarding its activities at the La Parrilla Silver Mine.

The taxation of corporations in Mexico is often complex and is assessed via overlapping layers of taxation on a number of various tax bases, with credits or offsets permitted in certain cases between various tax liabilities. The explanation below is not intended to be a detailed and conclusive description of all of the many forms of Mexican corporate taxes, but is a current summary of the most relevant and material forms of corporate taxes impacting mining companies operating in Mexico.

Taxes in Mexico are levied in the normal course of business and are levied in the form of: (i) Corporate Income Taxes (referred to as ISR), (ii) Alternative Minimum Taxes based on Cashflow (referred to as IETU), (iii) Value Added Taxes (referred to as IVA), (iv) Profit sharing taxes (referred to as PTU), and (v) Mining Rights Taxes. There are presently no mining royalty taxes or capital taxes applicable to mining businesses in Mexico. All of these taxes are administered at the federal level by Servicio de Administration Tributaria (SAT) often referred to as “Hacienda”, and the proceeds are shared with the various states of Mexico.

Corporations which are resident in Mexico are taxed on their worldwide income. The applicable tax rates and related tax bases are as follows:

Dividends received by a Mexican resident from another Mexican resident are exempt from corporate taxes. Mexican entities have no preferred treatment for capital gains and in some cases capital losses are restricted. A ten year loss carry forward period exists, subject to inflation adjustment. OECD rules apply to Transfer Pricing matters crossing country borders. Thin capitalization rules are based on a 3:1 debt to equity limitation for foreign companies investing in Mexican mining companies.

In the past, Mexico allowed corporations at their option to consolidate tax filings, effectively enabling the profits of taxable entities to be offset by tax losses in other companies within the consolidated group. Effective January 2010, Mexico introduced tax reforms, which allow consolidation to continue, but which require consolidated corporations to recapture the historical tax benefits of consolidation after a period of five years subsequent to receiving the benefit. Effectively, corporations will receive a six year deferral and then will be required to recapture into taxable income 25% of the benefit in the sixth year, followed by 25%, 20%, 15% and 15% in each subsequent year. For example, First Majestic’s first benefit from tax consolidation was realized in 2008, and as such the benefit of tax consolidation will be recaptured into taxable income and be subject to taxation from 2014 through 2018. Numerous companies in Mexico are challenging the legality of these regressive tax reforms. It is unlikely that the outcome of these challenges will be determinable for several years.

The Company has not paid any dividends since incorporation and it has no plans to pay dividends for the foreseeable future. The directors of the Company will determine if and when dividends should be declared and paid in the future based on the Company’s financial position at the relevant time. All of the common shares of the Company are entitled to an equal share of any dividends declared and paid.

The Company’s authorized capital consists of an unlimited number of common shares without par value. A total of 102,513, 210 common shares of the Company were issued and outstanding as at the date of this AIF.

Each common share of the Company ranks equally with all other common shares of the Company with respect to dissolution, liquidation or winding-up of the Company and payment of dividends. The holders of common shares of the Company are entitled to one vote for each share of record on all matters to be voted on by such holders and are entitled to receive pro rata such dividends as may be declared by the board of directors of the Company out of funds legally available therefore and to receive pro rata the remaining property of the Company on dissolution. The holders of common shares of the Company have no pre-emptive or conversion rights. The rights attaching to the common shares of the Company can only be modified by the affirmative vote of at least two-thirds of the votes cast at a meeting of shareholders called for that purpose.

The common shares of the Company are listed and posted for trading on the Toronto Stock Exchange under the trading symbol “FR”. The following table sets forth the high and low trading prices and trading volume of the common shares of the Company as reported by the Toronto Stock Exchange for the periods indicated:

Period	High $	Low $	Volume
December 2010	14.56	11.48	25,270,426
November 2010	12.20	7.83	22,885,998
October 2010	7.85	6.53	11,934,815
September 2010	7.12	4.83	14,910,253
August 2010	4.99	3.84	5,267,859
July 2010	4.15	3.69	2,948,288
June 2010	4.58	3.66	8,130,714
May 2010	4.17	3.47	7,197,942
April 2010	3.81	3.20	6,428,555
March 2010	3.63	3.04	7,435,005
February 2010	3.73	3.09	4,243,497
January 2010	4.52	3.27	6,237,937

The common shares of the Company are also listed and posted for trading on the New York Stock Exchange under the trading symbol “AG” and quoted on the Frankfurt, Berlin, Munich and Stuttgart Stock Exchanges under the symbol “FMV”.

The warrants of the Company which were issued pursuant to the offering which closed on March 5, 2009 were listed and posted for trading on the Toronto Stock Exchange under the trading symbol “FR.WT.B”. These warrants were exercisable at $3.50 per share and expired on March 5, 2011. The following table sets forth the

high and low trading prices and trading volume of these warrants as reported by the Toronto Stock Exchange for the periods indicated:

Period	High $	Low $	Volume
December 2010	10.90	8.50	5,307,900
November 2010	8.99	4.47	4,206,934
October 2010	4.38	3.00	2,115,626
September 2010	3.63	1.51	2,109,037
August 2010	1.70	0.97	584,905
July 2010	1.17	0.90	104,144
June 2010	1.39	0.96	701,868
May 2010	1.50	1.01	180,663
April 2010	1.54	1.05	258,282
March 2010	1.29	0.96	471,124
February 2010	1.30	0.99	175,585
January 2010	1.74	1.02	426,222

The following table sets out the names of the current directors and officers of the Company, provinces or states and countries of residence, positions with the Company, principal occupations within the five preceding years, periods during which each director has served as a director and the number of each class of securities of the Company and percentage of such class beneficially owned, directly or indirectly, or subject to control or direction by that person.

The term of each of the current directors of the Company will expire at the next Annual General Meeting unless his office is earlier vacated in accordance with the Articles of the Company or he becomes disqualified to act as a Director. The Company is not required to have an executive committee but it has an Audit Committee, a Human Resources, Compensation and Nominating Committee, and a Corporate Governance Committee as indicated below.

The aggregate number of common shares of the Company which the directors and senior officers of the Company beneficially own, directly or indirectly, or over which control or direction is exercised, is 4,188,696 common shares of the Company or approximately 4.08% of the common shares of the Company issued and outstanding as of the date of this AIF.

Pursuant to the provisions of National Instrument 52-110 Audit Committees (“NI 52-110”) the Company is required to provide the following disclosure with respect to its Audit Committee.

The text of the Audit Committee’s Mandate is attached as Appendix “A” to this AIF.

Members of the Audit Committee are Douglas Penrose, Tony Pezzotti and Robert McCallum. All three members are independent and all three members are considered financially literate.

Douglas Penrose received his Bachelor of Commerce degree from the University of Toronto. He has been a member of the Institute of Chartered Accountants of Ontario since 1974 and the Institute of Chartered Accountants of British Columbia since 1978. He brings over 20 years of experience in leadership positions in corporate finance, including the position of Chief Financial Officer and was most recently the Vice President of Finance and Corporate Services at the British Columbia Lottery Corporation.

Tony Pezzotti, currently retired, is a seasoned board member who has served on several public company boards, including OSI Geospatial Inc., First Quantum Minerals Ltd., and Kensington Resources Ltd. He also served as a member of the Audit Committees of those companies and was General Manager and co-owner of a privately held steel fabrication company. Mr. Pezzotti also currently serves on the board of Pan Terra Industries Inc.

Robert McCallum graduated in 1959 from the University of Witwatersrand, South Africa with a Bachelor of Science (Mining) followed in 1971 by completing the Program for Management Development at Harvard Graduate School of Business, Boston, Massachusetts. He was most recently President and C.E.O. of Kensington Resources Ltd. prior to its merger with Shore Gold Inc. in 2005 and now sits on the board of Shore Gold.

Since the commencement of the Company’s most recently completed financial year, the Company has not relied on:

The Company’s Board of Directors adopted all recommendations by the Audit Committee with respect to the nomination and compensation of the external auditor.

The Audit Committee has adopted specific policies for the engagement of non-audit services to be provided to the Company by the external auditor which require the auditors to submit to the Audit Committee a proposal for services to be provided and cost estimates for approval.

The following table sets out the fees billed to the Company by Deloitte & Touche LLP, Chartered Accountants, and its affiliates for professional services in each of the years ended December 31, 2010 and December 31, 2009, respectively.

To the knowledge of the Company, no director or executive officer of the Company nor a shareholder holding a sufficient number of common shares of the Company to materially affect the control of the Company, nor a personal holding company of any of them,

To the knowledge of the Company, no director or executive officer of the Company, nor a shareholder holding a sufficient number of common shares of the Company to affect materially the control of the Company, nor a personal holding company of any of them, has been subject to:

Certain directors of the Company are also directors or officers or shareholders of other companies that are similarly engaged in the business of acquiring, developing and exploiting mineral properties. Such associations may give rise to conflicts of interest from time to time. The directors of the Company are required by law and by the Company’s policies to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest, which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the board of directors, any director in a conflict is required to disclose his interest and abstain from voting on such matter. In determining whether or not the Company will participate in any project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at that time. See “Interest of Management and Others in Material Transactions”.

In November 2007, an action was commenced by the Company and First Silver against Hector Davila Santos and Minera Arroyo Del Agua, S.A. de C.V. in the British Columbia Supreme Court (the “Court”) whereby the Company and First Silver allege that while holding the positions of director, President and Chief Executive Officer and Chairman of the Board of First Silver, Mr. Davila Santos engaged in a course of deceitful and dishonest conduct in breach of his fiduciary and statutory duties owed to First Silver, which resulted in First Silver not acquiring the Bolaños Mine from Grupo México. Management believes that there are substantial grounds to this claim; however, the outcome of this litigation is not presently determinable.

As disclosed above under “General Development of the Business – History”, pursuant to a share purchase agreement dated April 3, 2006, the Company purchased 24,649,200 common shares of First Silver from Hector Davila Santos at a price of $2.165 per share for an aggregate purchase price of $53,365,519 payable in cash to Mr. Davila Santos in three installments. The first installment of $26,682,757 represented 50% of the purchase price and was paid on May 30, 2006. An additional installment of $13,341,380, representing 25% of the purchase price was paid on May 30, 2007. A final installment of $13,341,380 was payable on May 30, 2008. Simple interest at 6% per annum was payable quarterly on the outstanding installment.

On March 14, 2008, the Defendant filed a Counterclaim in the action against the Company in which he claimed for unpaid amounts and interest arising out of the agreement between the Company and the Defendant under which the Company acquired the Defendant’s shares (approximately 24,649,200 shares) in First Silver. As of July 16, 2009, the claimed unpaid amount together with the contractual interest rate of 6% amounted to $14,881,912. This amount was partly secured by a Letter of Credit posted in Court by First Majestic in the sum of $14,485,760.

On July 16, 2009, an Order was granted by the Court, with the consent of all parties, under which the Defendant obtained a judgment in the amount of $14,881,912. The Company agreed to pay out $14,258,332 from the Letter of Credit to the Defendant’s lawyer’s trust account (the “Trust Funds”) in partial payment of the Judgment. The remaining $227,420 from the Letter of Credit was paid out to the Company. The Consent Order requires that the Trust Funds be held pending the outcome of the action. If the trial has not commenced by May 30, 2012, the Trust Funds can be released on that date to the Defendant, unless otherwise ordered by the court. At the present time, the trial is scheduled to commence in the Supreme Court of British Columbia, Vancouver, British Columbia on April 17, 2012. The Consent Order does not affect the standing of the Company’s claims for relief against the Defendant in the action.

No penalties or sanctions were imposed against the Company by a court relating to securities legislation or by a securities regulatory authority during the year ended December 31, 2010.

No penalties or sanctions were imposed by a court or regulatory body against the Company that would likely be considered important to a reasonable investor in making an investment decision.

The Company did not enter into any settlement agreements with a court relating to securities legislation or with a securities regulatory authority during the year ended December 31, 2010.

No director, senior officer, principal holder of securities or any associate or affiliate thereof of the Company has any interest, directly or indirectly, in material transactions with the Company within the three most recently completed financial years or during the current financial year that has materially affected or will materially affect the Company.

The Company’s transfer agent and registrar is Computershare Trust Company of Canada (“Computershare”). Computershare’s register of transfers for the common shares of the Company is located at 510 Burrard Street, Second Floor, Vancouver, British Columbia, Canada, V6C 3B9.

The Company is not at present party to any material contracts, other than material contracts entered into in the ordinary course of business and upon which the Company’s business is not substantially dependent.

Deloitte & Touche LLP is the auditor of the Company and is independent within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of British Columbia.

Richard Addison, P.E. and Leonel Lopez, C.P.G. of Pincock Allen & Holt prepared technical reports on the Company’s mining properties. To management’s knowledge, Mr. Addison and Mr. Lopez do not have any registered or beneficial interests, direct or indirect, in any securities or other property of the Company (or of any of its associates or affiliates).

Mr. Ramon Davila supervised the preparation of certain technical information set forth herein relating to the Company's mineral properties. Mr. Davila is a director and Chief Operating Officer of the Company and holds securities of the Company as set forth under the heading "Directors and Officers" above.

Additional information relating to the Company may be found on SEDAR at www.sedar.com.

Additional information including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities, and securities authorized for issuance under equity compensation plans, as applicable, is contained in the Company’s information circular for its most recent annual general meeting.

Additional financial information is provided in the Company’s audited financial statements and MD&A for the year ended December 31, 2010 which may be obtained upon request from First Majestic’s head office, or may be viewed on the Company’s website (www.firstmajestic.com) or on the SEDAR website (www.sedar.com).

The primary mandate of the audit committee (the “Audit Committee”) of the Board of Directors (the “Board”) of the Company is to assist the Board in overseeing the Company’s financial reporting and disclosure. This oversight includes:

The Audit Committee shall establish a procedure for the receipt, retention and follow-up of complaints received by the Company regarding accounting, internal controls, financial reporting, or auditing matters.

The Audit Committee shall ensure that any procedure for receiving complaints regarding accounting, internal controls, financial reporting, or auditing matters will allow the confidential and anonymous submission of concerns by employees, consultants and/or contractors.

PRELIMINARY NOTES	1
Date of Information	1
Financial Information	1
Forward-looking Information	1
Cautionary Notes to U.S. Investors Concerning Reserve and Resource Estimates	2
Currency	2
CORPORATE STRUCTURE	3
Name, Address and Incorporation	3
Intercorporate Relationships	3
GENERAL DEVELOPMENT OF THE BUSINESS	4
History	4
Past Three Years	7
DESCRIPTION OF BUSINESS	9
General	9
Principal Markets for Silver	9
Social and Environmental Policies	57
Risk Factors	10
Mineral Projects	19
Product Marketing and Sales	56
Taxation	58
DIVIDENDS	59
CAPITAL STRUCTURE	59
MARKET FOR SECURITIES	59
Trading Price and Volume	59
DIRECTORS AND OFFICERS	60
Name, Occupation and Security Holding	60
Audit Committee Information	62
Audit Committee Mandate	62
Composition of the Audit Committee	62
Relevant Education and Experience	62
Reliance on Certain Exemptions	63
Audit Committee Oversight	63
Pre-Approval Policy	63
External Auditor Service Fees	63
Cease Trade Orders, Bankruptcies, Penalties or Sanctions	64
Conflicts of Interest	64
LEGAL PROCEEDINGS AND REGULATORY ACTIONS	65
Legal Proceedings	65
Regulatory Actions	65
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS	66
TRANSFER AGENT AND REGISTRAR	66
MATERIAL CONTRACTS	66
INTERESTS OF EXPERTS	66
ADDITIONAL INFORMATION	66
APPENDIX “A”	A

(1)	Cut-Off Grade estimated as 250 g/tonne Ag eq net of Pb credit. Estimated Reserves are exclusive of Resources.
(2)	Silver equivalent includes Pb credit, at prices US$12.00/oz-AG, $0.75/lb Pb. Pb credit + 22 g/tonne AG.
(3)	Mining dilution is not included at over 2.00 m width. Estimates do not include mining recovery.
(4)	Zinc is not recovered.
(5)	Dump stockpile is considered as a measured resources because the average grade is below COG- 203 g/tonne Ag only and 186 g/tonne Ag eq., however with pre-screening may be processed. It requires additional testing.
(6)	La Morena sulphide deposit requires additional metallurgical testwork to prove its economic recovery. La Encantada mill does not have an operating zinc circuit at this time.
(7)	Tailings are included within Indicated Resources due to required additional testwork and grade below Cutoff Grade – 111 g/tonne Ag.
(8)	Rounded figures.

MINERAL RESOURCES
Total Measured	Oxides	554,630	4.42	0.15	320			5,702,839	5,809,830
Total Measured	Sulfides	1,640,818	6.58	0.08	245	2.59	4.54	12,934,778	16,996,798
MEASURED	Oxides plus Sulfides	2,195,448	6.04	0.10	264	2.59	4.54	18,637,618	22,806,628
Total Indicated	Oxides	428,445	3.06	0.22	298			4,107,289	4,189,938
Total Indicated	Sulfides	433,043	4.59	0.05	192	3.46	6.07	2,678,396	3,750,441
INDICATED	Oxides plus Sulfides	861,488	3.83	0.13	245	3.46	6.07	6,785,685	7,940,379

MEASURED PLUS INDICATED (8)	Oxides plus Sulfides	3,100,000	5.41	0.11	255	2.84	4.97	25,400,000	30,700,000

INFERRED RESOURCES
Total Inferred (6)	Oxides	4,600,000	3.37	0.03	162	0.01	0.00	23,900,000	24,800,000
Total Inferred	Sulfides	3,400,000	4.86	0.12	179	2.05	3.51	20,000,000	28,000,000
INFERRED RESOURCES (8)	Oxides plus Sulfides	8,000,000	4.00	0.07	169	0.87	1.49	43,900,000	52,800,000

(1)	Estimates based on Minimum Mining Width >2.00m. No mine recovery included.
(2)	Silver equivalent based on sales. Prices used for evaluation: Ag - $12/oz; Au - $708/oz; Pb - $0.75/lb; Zn - $0.75/lb.
(3)	Oxides Ag equivalent includes gold credit based on FMPlata sales. Au Credit = 6 g/tonne Ag.
(4)	Sulfides Ag equivalent includes Pb credit = 47 g/tonne Ag. Zinc is considered at 70% met. recovery = 30 g/tonne Ag.
(5)	Cut-Off Grade estimated as 184 g/tonne Ag net of Au credit in oxide ores; and 246 g/tonne Ag net of Pb credit in sulfide ores. Zinc not considered in COG estimates.
(6)	Preliminary Quebradillas Block Model estimate at COG>50 g/tonne Ag.
(7)	Reserves and Resources in this report are exclusive of each other.
(8)	Rounded figures.

(1)	Estimated Reserves are exclusive of Resources.
(2)	Cut-Off estimates as 146 g/tonne Ag for mined oxides, and 87 g/tonne Ag for dump recovered oxides; Ageq=Au/Pb credits = 10g/tonne Ag.
(3)	Metal prices at $708/oz-Au, $12.00/oz-Ag, $0.75/lb-Pb, $0.50/lb-Zn.
(4)	Mine dilution is included at a minimum mining width of 2.00m. Estimates do not include mining recovery.
(5)	Base metals, Lead and Zinc are not recovered due to low market prices.

Inferred Resources
Inferred Resources
TOTAL (6)	Oxides plus Sulfides	8,200,000	5.34	185	1.40	1.60	48,900,000	50,000,000

(1)	Estimated Reserves are exclusive of Resources.
(2)	Inferred Resources are speculative in nature and may not become Reserves.
(3)	Metal prices at $708/oz-Au, $12.00/oz-Ag, $0.75/lb-Pb, $0.50/lb-Zn.
(4)	Mine dilution is included at a minimum mining width of 2.00m. Estimates do not include mining recovery.
(5)	Base metals, Lead and Zinc are not recovered due to low market prices.
(6)	Rounded figures.

1.	Underground drilling is currently underway in the San Juan area to upgrade the current NI 43-101 Resources and potentially add additional resources. Approximately 10 holes will be fan drilled from this underground station.

2.	To complete the construction of an underground crosscut in the Perseverancia area in order to drill from underground to depth to test for the continuation of the Perseverancia chimney.

3.	Later in the year, a Surface Diamond Drilling program is planned to commence at the Cotorras and San Nicolas areas to define whether previously tested surface mineralization extends to depth.

Mineral Resource Estimates Prepared by FMS , Reviewed by PAH . As of July 31, 2008 (1)(2)(3)(4)
Mine	Mineralization	Resource	Metric	Width	Ag (g/t)	Pb (%)	Zn (%)	Silver Only	Silver Equivalent (oz)	Silver (oz)
		Category	Tonnes	(m)				(oz) (5)	(Pb-Zn) (5)	(oz) (5)
San Juan	Oxides	Measured	269,739	20.92	166	1.50	1.53	937,000		937,000
San Juan	Oxides	Indicated	458,705		210	3.01	3.40	2,010,000		2,010,000
SUB-TOTAL	Oxides	Measured+Indicated	728,444		194	2.45	2.71	2,947,000	0	2,947,000
Perseverancia	Sulfides	Measured	18,928	>2.5	381	10.01	4.74	197,000	359,000	556,000
Perseverancia	Sulfides	Indicated	45,982	2.00	350	9.00	3.58	439,000	746,000	1,185,000
San Juan	Sulfides	Indicated	584,618	69.66	353	6.97	7.50	5,633,000	10,622,000	16,255,000
SUB-TOTAL	Sulfides	Measured+Indicated	649,528		353	7.20	7.14	6,269,000	11,727,000	17,996,000
TOTAL SJ + P	Sulf. + Oxid.	Measured+Indicated	1,377,972		269	4.69	4.80	9,216,000	11,727,000	20,943,000

San Juan	Oxides	Inferred	656,778	11.56	214	3.35	3.20	2,935,000		2,935,000
San Juan	Sulfides	Inferred	1,141,210	71.33	359	7.07	7.59	11,193,000	21,011,000	32,204,000
Perseverancia	Sulfides	Inferred	33,750		332	8.66	3.40	306,000	525,000	831,000
TOTAL SJ + P	Sulfides	Inferred	1,831,738		306	5.77	5.94	14,434,000	21,536,000	35,970,000

(1)	Resource estimated "in situ".
(2)	Price considerations $12.70/tr.oz-Ag, $0.90/lb-Pb, $0.85/lb-Zn.
(3)	Mill recovey estimates: Oxides - Ag-65%; Sulfides - Ag-85%, Pb-85% and Zn-80%.
(4)	Minimum mining width - 2.00m.
(5)	Rounded figures.

	(i)	Corporate Income taxes (ISR) – 30% on a corporation’s taxable income in 2010, 2011 and 2012, reducing to 29% in 2013, and 28% in 2014 and later years. Normal business expenses may be deducted in computing a corporation’s taxable income, including inflationary accounting for certain concepts of revenue and expenses;

	(ii)	Alternative Minimum Tax, or the Flat Tax on Cashflow (IETU), effective January 1, 2008, a 17.5% tax was introduced on a modified Cashflow method, creditable against income taxes on an annual basis;

	(iii)	Value Added Taxes (IVA) – 16% payable monthly on taxable receipts from the sales of goods and services in Mexico and zero % on exports, creditable against the IVA paid on deductible services, expenses and imports;

	(iv)	Profit sharing taxes (PTU) – 10% on a corporation’s taxable income, creditable against corporate taxes payable and payable to the workers in the corporation, and

	(v)	Mining Rights Taxes – a nominal rate charged on a per hectare basis on a corporation’s mining rights.

			No. and Class	Percentage
Name, Position and City,	Principal Occupation or	Period as a	of Securities	of Class ⁽²⁾
Province and Country of	Employment for Past 5 Years ⁽¹⁾	Director of the
Residence		Company

ROBERT A. McCALLUM,	Professional consulting engineer	December 15,	Common	Less than
B.Sc., P.Eng ⁽³⁾⁽⁵⁾	and President of Robert A.	2005 to present.	141,500	1.0%
Chairman and Director	McCallum Inc. from 1999 to
North Vancouver, British	present; Director of Shore Gold		Stock Options
Columbia, Canada	Inc. from October 28, 2005 to		200,000
	present.

KEITH NEUMEYER	President of the Company from	December 5, 1998	Common	2.94%
CEO, President and Director	November 3, 2001 to present;	to present.	2,936,000
London, England	Director of the Company since
	December 5, 1998.		Stock Options
			700,000

(1)	The information as to principal occupation and shares beneficially owned has been furnished by the respective individuals.
(2)	Based upon the 102,513,210 common shares of the Company issued and outstanding as of the date of this AIF.
(3)	Member of the Audit Committee.
(4)	Member of the Human Resources, Compensation and Nominating Committee.
(5)	Member of the Corporate Governance Committee.

a)	the exemption in section 2.4 (De Minimis Non-Audit Services) of NI 52-110;

b)	the exemption is section 3.2 (Initial Public Offerings) of NI 52-110

c)	the exemption is section 3.4 (Events Outside the Control of the Member) of NI 52-110;

d)	the exemption in section 3.5 (Death, Disability or Resignation of Audit Committee Member) of NI 52- 110; or

e)	an exemption from the Instrument in whole or in part, granted under Part 8 of NI 52-110.

CATEGORY	Mineralization	Metric	Width	Ag	Pb	Zn	METAL CONTAINED
Proven Reserves	Type	Tonnes	m	g/tonne	%	%	Silver (Only) oz.	Siver eq. oz.
SUBTOTAL - 1	Oxides	527,373	2.72	273			4,636,211	4,805,765
Probable Reserves
SUBTOTAL - 2	Oxides	243,091	2.56	276			2,154,571	2,232,727
Proven and Probable Reserves							6,790,782
TOTAL	Oxides	770,464	2.67	274			6,790,782	7,038,492
Mineral Resources
Measured Resources
SUBTOTAL - 3	Oxides	122,404	4.95	233			915,774	955,128
SUBTOTAL - 4	Sulfides	415,771	3.23	97	0.87	2.07	1,292,213	1,292,213
Indicated Resources
SUBTOTAL - 5	Oxides	294,361	4.49	288			2,729,201	2,823,840
SUBTOTAL - 6	Sulfides	670,684	4.95	116	0.94	1.64	2,498,639	2,498,639
Measured and Indicated Resources
TOTAL	Oxides plus Sulfides	1,503,220	4.38	154	0.91	1.80	7,435,827	7,569,820
Proven and Probable Reserves plus Measured and Indicated Resources.
TOTAL RESERVES AND RESOURCES	Oxides plus Sulfides	2,273,684	3.80	195	0.91	1.80	14,226,609	14,608,312

Category	Year ended December 31, 2010	Year ended December 31, 2009
Audit Fees	$419,500	$417,895
Audit-Related Fees	-	-
Tax Fees	$31,250	$145,910
All Other Fees	-	-

(a)	is, at the date of this AIF or has been within the 10 years before the date of the AIF, a director or executive officer of the company (including the Company), that while that person was acting in that capacity,

	(i)	was the subject of a cease trade order or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days;

	(ii)	was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities registration, for a period of more than 30 consecutive days; or

	(iii)	within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement, or compromise with creditors, or had a receiver, receiver manager, or trustee appointed to hold its assets; or

(b)	has, within the 10 years before the date of this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or comprise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, officer or shareholder.

(a)	any penalties or sanctions imposed by the court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or

(b)	any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

	a.	reviewing the financial statements and financial disclosure that is provided to shareholders and disseminated to the public;

	b.	ascertaining that management has implemented the systems of internal controls to ensure integrity in the financial reporting of the Company; and

	c.	monitoring the independence and performance of the Company’s external auditors and reporting directly to the Board on the work of the external auditors.

	a.	The Audit Committee must have at least three directors.

	b.	The majority of the Audit Committee members must be independent. A member of the Audit Committee is independent if the member has no direct or indirect material relationship with an issuer. A material relationship means a relationship which could, in the view of the issuer’s board of directors, reasonably interfere with the exercise of a member’s independent judgment.

	c.	Every Audit Committee member must be financially literate. Financial literacy is the ability to read and understand a set of financial statements that present a breath and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements.

	d.	The Board will appoint from themselves the members of the Audit Committee on an annual basis for one year terms. Members may serve for consecutive terms.

	e.	The Board will also appoint a chair of the Audit Committee (the “Chair of the Audit Committee”) for a one year term. The Chair of the Audit Committee may serve as the chair of the committee for any number of consecutive terms.

	f.	A member of the Audit Committee may be removed or replaced at any time by the Board. The Board will fill any vacancies in the Audit Committee by appointment from among members of the Board.

	a.	The Audit Committee will meet at least four (4) times per year. Special meetings may be called by the Chair of the Audit Committee as required.

	b.	Quorum for a meeting of the Audit Committee will be two (2) members in attendance.

	c.	Members may attend meetings of the Audit Committee by teleconference, videoconference, or by similar communication equipment by means of which all persons participating in the meeting can communicate with each other.

	d.	The Audit Committee Chair will set the agenda for each meeting, after consulting with management and the external auditor. Agenda materials such as draft financial statements must be circulated to Audit Committee members for members to have a reasonable time to review the materials prior to the meeting.

	e.	Minutes of the Audit Committee meetings will be accurately recorded, with such minutes recording the decisions reached by the committee. Minutes of each meeting must be distributed to members of the Board, the Chief Executive Officer, the Chief Financial Officer and the external auditor.

	a.	select, evaluate and recommend to the Board, for shareholder approval, the external auditor to examine the Company’s accounts, controls and financial statements;

	b.	evaluate, prior to the annual audit by external auditors, the scope and general extent of their review, including their engagement letter, and the compensation to be paid to the external auditors and recommend such payment to the Board;

	c.	obtain written confirmation from the external auditor that it is objective and independent within the meaning of the Rules of Professional Conduct/Code of Ethics adopted by the provincial institute or order of Chartered Accountants to which it belongs;

	d.	recommend to the Board, if necessary, the replacement of the external auditor;

	e.	meet at least annually with the external auditors, independent of management, and report to the Board on such meetings;

	f.	pre-approve any non-audit services to be provided to the Company by the external auditor and the fees for those services;

	a.	review and discuss with management and the external auditor the annual audited financial statements of the Company and recommend their approval by the Board;

	b.	review and discuss with management, the quarterly financial statements and recommend their approval by the Board;

	c.	review and recommend to the Board for approval the financial content of the annual report;

	d.	review the process for the certification of financial statements by the Chief Executive Officer and Chief Financial Officer; review the Company’s management discussion and analysis, annual and interim earnings or financial disclosure press releases, and audit committee reports before the Company publicly discloses this information;

	e.	review annually with external auditors, the Company’s accounting principles and the reasonableness of managements judgments and estimates as applied in its financial reporting;

	f.	review and consider any significant reports and recommendations issued by the external auditor, together with management’s response, and the extent to which recommendations made by the external auditors have been implemented;

	g.	review with the external auditors and with management, the general policies and procedures used by the Company with respect to internal accounting and financial controls;

	h.	review adequacy of security of information, information systems and recovery plans (this should include reference to the backups in place for the computers, locks on cabinets, etc.);

	i.	review management plans regarding any changes in accounting practices or policies and the financial impact thereof;

	j.	review with the external auditors and, if necessary, legal counsel, any litigation, claim or contingency, including tax assessments, that could have a material effect upon the financial position of the Company and the manner in which these matters are being disclosed in the financial statements;

	k.	discuss with management and the external auditor correspondence with regulators, employee complaints, or published reports that raise material issues regarding the Company’s financial statements or disclosure;

	l.	assisting management to identify the Company’s principal business risks;

	m.	review the Company’s insurance, including directors’ and officers’ coverage, and provide recommendations to the Board;

	n.	conduct special reviews and/or other assignments from time to time as requested by the Board or the Chief Executive Officer.

5.	PROCESS FOR HANDLING COMPLAINTS REGARDING FINANCIAL MATTERS

	a.	the external auditor’s independence;

	b.	the performance of the external auditor and the Audit Committee’s recommendations;

	c.	regarding the reappointment or termination of the external auditor;

	d.	the adequacy of the Company’s internal controls and disclosure controls;

	e.	the Audit Committee’s review of the annual and interim financial statements;

	f.	the Audit Committee’s review of the annual and interim management discussion and analysis;

	g.	the Company’s compliance with legal and regulatory matters to the extent they affect the financial statements of the Company; and

7.	AUTHORITY OF THE COMMITTEE

	a.	The Audit Committee will have the resources and authority appropriate to discharge its duties and responsibilities. The Audit Committee may at any time retain outside financial, legal or other advisors at the expense of the Company without approval of management.

	b.	The external auditor will report directly to the Audit Committee.