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

EX-99.1 2 exhibit99-1.htm CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 2011 First Majestic Silver Corp.: Exhibit 99.1 - Filed by newsfilecorp.com

CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(UNAUDITED)

MANAGEMENT’S COMMENTS ON
UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited interim financial statements of the Company have been prepared by and are the
responsibility of the Company’s management.

925 West Georgia Street, Suite 1805, Vancouver, B.C. Canada V6C 3L2

Phone: 604.688.3033 | Fax: 604.639.8873 | Toll Free: 1.866.529.2807 | Email: info@firstmajestic.com

www.firstmajestic.com

First Majestic Silver Corp.

CONSOLIDATED INTERIM STATEMENTS OF INCOME

FOR THE PERIODS ENDED JUNE 30, 2011 AND 2010

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

			Three Months Ended June 30,						Six Months Ended June 30,
	Note		2011			2010			2011			2010

Revenues	6	$	68,040		$	27,456		$	123,306		$	45,202
Cost of sales			18,112			12,324			34,931			20,953
Gross margin			49,928			15,132			88,375			24,249
Depletion, depreciation and amortization			3,134			2,483			5,938			4,433
Mine operating earnings			46,794			12,649			82,437			19,816

General and administrative expense			3,638			2,143			7,528			4,013
Share-based payments			1,772			828			3,661			1,686
Accretion of decommissioning liabilities			112			123			231			182
Foreign exchange loss (gain)			284			(1,616	)		309			1,567
Other (income) expenses			(292	)		731			10			1,064
Operating earnings			41,280			10,440			70,698			11,304

Investment and other income	7		381			620			3,856			654
Finance costs			(388	)		(88	)		(506	)		(396	)
Earnings before income taxes			41,273			10,972			74,048			11,562
Income taxes
Current income tax expense			9,445			43			13,668			61
Deferred income tax expense (recovery)			1,235			(49	)		5,917			81
			10,680			(6	)		19,585			142
Net earnings for the period attributable to equity holders of the Company		$	30,593		$	10,978		$	54,463		$	11,420

Earnings per common share
Basic		$	0.30		$	0.12		$	0.54		$	0.12
Diluted		$	0.29		$	0.12		$	0.51		$	0.12

Weighted average shares outstanding
Basic	8		103,396,753			92,804,715			101,633,552			92,758,113
Diluted	8		107,279,976			95,076,336			106,528,441			94,421,176

APPROVED BY THE BOARD OF DIRECTORS

Keith Neumeyer (signed)

Director

Douglas Penrose (signed)

Director

The accompanying notes are an integral part of the consolidated interim financial statements

First Majestic Silver Corp.

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

FOR THE PERIODS ENDED JUNE 30, 2011 AND 2010

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

		Three Months Ended June 30,					Six Months Ended June 30,
		2011		2010			2011		2010

Net earnings for the period attributable to equity holders of the Company	$	30,593	$	10,978		$	54,463	$	11,420

Other comprehensive income
Available for sale investments:
Unrealized gain (loss) in fair value of investments		1,721		(78	)		1,634		112
Currency translation gain		226		24			719		675
Other comprehensive income		1,947		(54	)		2,353		787
Comprehensive income for the period	$	32,540	$	10,924		$	56,816	$	12,207

The accompanying notes are an integral part of the consolidated interim financial statements

First Majestic Silver Corp.

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW

FOR THE PERIODS ENDED JUNE 30, 2011 AND 2010

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

			Three Months Ended June 30,						Six Months Ended June 30,
	Note		2011			2010			2011			2010

OPERATING ACTIVITIES
Net earnings for the period		$	30,593		$	10,978		$	54,463		$	11,420
Adjustments for:
Share-based payments			1,772			828			3,661			1,686
Depletion, depreciation and amortization			3,134			2,483			5,938			4,433
Accretion of decommissioning liabilities			112			123			231			182
Investment income from derivative financial instruments			(320	)		(201	)		(3,545	)		(626	)
Deferred taxes			1,235			(49	)		5,917			81
Finance costs			388			160			506			395
Unrealized foreign exchange loss (gain) and other			7			(1,566	)		523			1,464
Operating cash flows before movements in working capital			36,921			12,756			67,694			19,035
Net change in non-cash working capital items	24		1,028			(1,382	)		4,678			(1,359	)
Cash generated by operating activities			37,949			11,374			72,372			17,676

INVESTING ACTIVITIES
Expenditures on mineral property interests (net of accruals)			(6,355	)		(3,323	)		(11,582	)		(5,359	)
Acquisition of property, plant, and equipment (net of accruals)			(12,360	)		(1,106	)		(16,815	)		(2,774	)
Realized gain on derivative financial instruments			186			201			3,411			626
Decrease (increase) in deposits on long-term assets			(6,657	)		(13	)		(10,418	)		(415	)
Proceeds from disposal of marketable securities			-			38			-			66
Investment in marketable securities			-			-			-			(24	)
Cash used in investing activities			(25,186	)		(4,203	)		(35,404	)		(7,880	)

FINANCING ACTIVITIES
Proceeds from exercise of stock options and share warrants			4,974			516			22,911			681
Proceeds from lease financing			-			-			2,474			-
Payment of lease obligations			(566	)		(404	)		(892	)		(1,038	)
Payment of other long-term liabilities			(39	)		-			(76	)		-
Finance costs paid			(388	)		(160	)		(506	)		(395	)
Prepayment facility, net of repayments			2,280			(414	)		2,280			305
Cash generated by financing activities			6,261			(462	)		26,191			(447	)

Increase in cash and cash equivalents			19,024			6,709			63,159			9,349
Effect of exchange rate on cash held in foreign currency			330			(45	)		656			(13	)
Cash and cash equivalents, beginning of period	9		85,624			8,281			41,163			5,609
Cash and cash equivalents, end of period	9	$	104,978		$	14,945		$	104,978		$	14,945

Supplemental cash flow information	24

The accompanying notes are an integral part of the consolidated interim financial statements

First Majestic Silver Corp.

CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

AS AT JUNE 30, 2011 AND DECEMBER 31, 2010

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

	Note		June 30, 2011		December 31, 2010
Assets					(Note 27)
Current assets
Cash and cash equivalents	9	$	104,978	$	41,163
Trade and other receivables	10		10,534		8,354
Inventories	11		10,161		8,651
Other financial assets	12		8,335		357
Prepaid expenses and other	13		2,782		1,572
Total current assets			136,790		60,097

Non-current assets
Mining interests	14		131,350		119,660
Property, plant and equipment	15		92,109		72,383
Deferred tax asset			1,163		3,065
Deposits on long-term assets	16		10,418		2,426
Total assets		$	371,830	$	257,631

Liabilities and Equity
Current liabilities
Trade payables and accrued liabilities	17	$	21,815	$	12,400
Current portion of debt facilities	18		2,280		-
Current portion of lease obligations	19		2,654		1,160
Taxes payable			9,120		440
Total current liabilities			35,869		14,000

Non-current liabilities
Lease obligations	19		6,705		2,417
Decommissioning liabilities			7,358		6,795
Other long term liabilities			945		893
Deferred tax liabilities			26,110		22,071
Total liabilities			76,987		46,176

Equity
Shareholders' equity
Share capital	20		265,923		239,770
Equity reserves	21		28,581		25,809
Retained earnings (Accumulated deficit)	22		339		(54,124	)
Total equity			294,843		211,455
Total liabilities and equity		$	371,830	$	257,631

Contingent liabilities (Note 25)
Subsequent events (Note 26)

The accompanying notes are an integral part of the consolidated interim financial statements

First Majestic Silver Corp.

CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

FOR THE PERIODS ENDED JUNE 30, 2011 AND 2010

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

	Share Capital							Equity Reserves
																			Retained
											Available for			Foreign					earnings
								Share-based			sale			currency		Total equity			(Accumulated
	Shares		Amount		To be issued			payment			revaluation			translation		reserves			deficit)			Total equity

Balance at January 1, 2010	92,648,744	$	218,608	$	247		$	24,971		$	(55	)	$	-	$	24,916		$	(89,255	)	$	154,516
Net earnings	-		-		-			-			-			-		-			11,420			11,420
Share-based payment	-		-		-			1,686			-			-		1,686			-			1,686
Other comprehensive income	-		-		-			-			112			675		787			-			787
Shares issued for:																-						-
Exercise of options	277,500		602		-			-			-			-		-			-			602
Exercise of warrants	25,000		78		-			-			-			-		-			-			78
Transfer of equity reserve upon exercise of options and warrants	-		221		-			(221	)		-			-		(221	)		-			-
Balance at June 30, 2010	92,951,244	$	219,509	$	247		$	26,436		$	57		$	675	$	27,168		$	(77,835	)	$	169,089

Balance at December 31, 2010	97,560,417	$	239,525	$	245		$	25,170		$	18		$	621	$	25,809		$	(54,124	)	$	211,455
Net earnings	-		-		-			-			-			-		-			54,463			54,463
Share-based payment	-		-		-			3,661			-			-		3,661			-			3,661
Other comprehensive income	-		-		-			-			1,634			719		2,353			-			2,353
Shares issued for:																-						-
Exercise of options	1,540,800		6,017		-			-			-			-		-			-			6,017
Exercise of warrants	4,806,593		16,894		-			-			-			-		-			-			16,894
Conversion of shares to be issued	2,500		12		(12	)		-			-			-		-			-			-
Transfer of equity reserve upon exercise of options and warrants	-		3,242		-			(3,242	)		-			-		(3,242	)		-			-
Balance at June 30, 2011	103,910,310	$	265,690	$	233		$	25,589		$	1,652		$	1,340	$	28,581		$	339		$	294,843

The accompanying notes are an integral part of the consolidated interim financial statements

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

1.	NATURE OF OPERATIONS

	First Majestic Silver Corp. (the “Company” or “First Majestic”) is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of British Columbia. The Company is in the business of silver production, development, exploration, and acquisition of mineral properties with a focus on silver production in Mexico. The Company’s shares trade on the New York Stock Exchange under the symbol “AG” and on the Toronto Stock Exchange under the symbol “FR”.

	The Company’s head office, principal address and registered and records office are located at 925 West Georgia Street, Suite 1805, Vancouver, British Columbia, Canada, V6C 3L2.

2.	BASIS OF PREPARATION AND FIRST-TIME ADOPTION OF IFRS

	Statement of Compliance

	These consolidated financial statements, including comparatives, have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) and using the accounting policies the Company expects to adopt in its consolidated financial statements as at and for the year ending December 31, 2011.

	These consolidated interim financial statements should be read in conjunction with the Company’s 2010 GAAP annual financial statements, the consolidated interim financial statements as at and for the three months ended March 31, 2011, and in consideration of the disclosures regarding the transition from Canadian GAAP to IFRS are included in note 27. Certain disclosures that are required to be included in annual financial statements prepared in accordance with IFRS are not included in these interim financial statements nor in the Company’s most current annual GAAP financial statements.

	Basis of Consolidation and Presentation

	The consolidated financial statements have been prepared on a historical cost basis except for certain items that are measured at fair value including derivative financial instruments and available for sale investments. All dollar amounts presented are in United States dollars unless otherwise specified. The accounting policies in Note 3 of the consolidated interim financial statements for the three months ended March 31, 2011 have been applied in preparing these consolidated interim financial statements.

	These consolidated financial statements incorporate the financial statements of the Company and its controlled subsidiaries. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The consolidated financial statements include the accounts of the Company and its direct wholly-owned subsidiaries: Corporación First Majestic, S.A. de C.V. (“CFM”), First Silver Reserve Inc. (“First Silver”) and Normabec Mining Resources Ltd. (“Normabec”) as well as its indirect wholly-owned subsidiaries: First Majestic Plata, S.A. de C.V. (“First Majestic Plata”), Minera El Pilon, S.A. de C.V. (“El Pilon”), Minera La Encantada, S.A. de C.V. (“La Encantada”), Majestic Services S.A. de C.V. (“Majestic Services”), Minera Real Bonanza, S.A. de C.V. (“MRB”) and Servicios Minero-Metalurgicos e Industriales, S.A. de C.V. (“Servicios”). First Silver underwent a wind up and distribution of its assets and liabilities to the Company in December 2007 but First Silver has not been dissolved for legal purposes pending the outcome of litigation. Intercompany balances and transactions are eliminated on consolidation.

Notes Page 1

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

3.	SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS

	The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

	Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates.

	The most significant accounts that require estimates as the basis for determining the stated amounts include: recoverability of accounts receivable, valuation of inventories, valuation and depreciation of property, plant and equipment and mining interests, valuation of share-based payments, recognition of deferred income tax amounts and provision for restoration, rehabilitation and environmental costs.

	There are also significant judgments exercised in order to arrive at the stated amounts. Depreciation and depletion of property, plant and equipment is determined based on estimates of useful lives and reserves, both of which require significant judgment. The assessment of impairment of any property, plant and equipment assets depends on estimates of recoverable amounts, which takes into account factors requiring significant judgment including reserves, economic and market conditions and the useful lives of assets. The evaluation of mining interests and determination of commissioning date, determination of functional currency, provision for restoration, rehabilitation and environmental costs are dependent on various judgments, including the nature, estimate of future cost and timing of the work to be completed, which may change based on changes in future costs and environmental laws and regulations.

4.	RECENT ACCOUNTING PRONOUNCEMENTS

	Financial instruments disclosure

	In October 2010, the IASB issued amendments to IFRS 7 – Financial Instruments: Disclosures that improve the disclosure requirements in relation to transferred financial assets. The amendments are effective for annual periods beginning on or after July 1, 2011, with earlier adoption permitted. The Company does not anticipate this amendment to have a significant impact on its consolidated financial statements.

	Financial instruments

	The IASB intends to replace IAS 39 – Financial Instruments: Recognition and Measurement (“IAS 39”) in its entirety with IFRS 9 – Financial Instruments (“IFRS 9”) in three main phases. IFRS 9 will be the new standard for the financial reporting of financial instruments that is principles-based and less complex than IAS 39, and is effective for annual periods beginning on or after January 1, 2013, with earlier adoption permitted. In November 2009 and October 2010, phase 1 of IFRS 9 was issued and amended, respectively, which addressed the classification and measurement of financial assets and financial liabilities. IFRS 9 requires that all financial assets be classified as subsequently measured at amortized cost or at fair value based on the Company’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. Financial liabilities are classified as subsequently measured at amortized cost except for financial liabilities classified as at FVTPL, financial guarantees and certain other exceptions. The IASB has issued exposure drafts addressing impairment of financial instruments, hedge accounting and the offsetting of financial assets and liabilities. The complete IFRS 9 is anticipated to be issued during the second half of 2011. The Company will evaluate the impact the final standard will have on its consolidated financial statements when issued.

Notes Page 2

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

4.	RECENT ACCOUNTING PRONOUNCEMENTS (continued)

	Consolidated Financial Statements

	In May 2011, the IASB issued IFRS 10 - Consolidated Financial Statements (“IFRS 10”) and IFRS 12 - Disclosure of Interests in Other Entities (“IFRS 12”). IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. This IFRS defines the principle of control and establishes control as the basis for determining which entities are consolidated in an entity’s consolidated financial statements. IFRS 12 outlines the disclosure requirements for interests in subsidiaries and other entities to enable users to evaluate the risks associated with interests in other entities and the effects of those interests on an entity’s financial position, financial performance and cash flows. IFRS 10 and IFRS 12 supersede IAS 27, Consolidated and Separate Financial Statements and SIC-12, Consolidation – Special Purpose Entities.

	IFRS 10 and IFRS 12 are effective for annual periods beginning on or after January 1, 2013, with earlier application permitted if adopted along with IFRS 11, IFRS 12, IAS 27 (revised) and IAS 28 (revised). The Company is evaluating the impact of these new standards on its consolidated financial statements.

	Joint Arrangements

	In May 2011, the IASB issued IFRS 11 - Joint Arrangements (“IFRS 11”), which provides guidance on accounting for joint arrangements. If an arrangement has joint control, IFRS 11 classifies joint arrangements as either joint operations or joint ventures, depending on the rights and obligations of the parties involved. A joint operation is an arrangement where the jointly controlling parties have rights to the assets and obligations in respect of the liabilities relating to the arrangement. An entity accounts for a joint operation by recognizing its portion of the assets, liabilities, revenues and expenses. A joint venture is an arrangement where the jointly controlling parties have rights to the net assets of the arrangement. A joint venture is accounted for using the equity method and proportionate consolidation is no longer permitted.

	This standard is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. The Company does not anticipate these new standards to have a significant impact on its consolidated financial statements.

	Fair Value Measurement

	In May 2011, the IASB issued IFRS 13 - Fair Value Measurement (“IFRS 13”). This standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. IFRS 13 sets out a single IFRS framework for measuring fair value and outlines disclosure requirements about fair value measurements. IFRS 13 does not determine when an asset, a liability or an entity’s own equity instrument is measured at fair value. Rather, the measurement and disclosure requirements of IFRS 13 apply when another IFRS requires or permits the item to be measured at fair value.

	IFRS 13 is effective for annual periods on or after January 1, 2013, with earlier application permitted. This IFRS is to be applied prospectively as of the beginning of the annual period in which it is initially applied and the disclosure requirements do not need to be applied in comparative periods before initial application. The Company is currently assessing the impact of this standard on its financial statements.

	Items of Other Comprehensive Income

	In June 2011, the IASB issued an amendment to IAS 1 – Presentation of Items of Other Comprehensive Income (“amendments to IAS1”). The amendments to IAS1 are the result of a joint project with the US Finanical Accounting Standards Board and provide guidance on presentation of items contained in other comprehensive income (“OCI”) and their classification within OCI. The amendments to IAS1 require items of OCI, along with their tax effects, to be grouped into those that will and will not subsequently be reclassified to profit or loss. The measurement and recognition of items of profit or loss and OCI are not affected by the amendments. This amendment is effective for annual periods beginning on or after July 1, 2012 with earlier application permitted. The Company does not anticipate this amendment to have a significant impact on its consolidated financial statements.

Notes Page 3

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

4.	RECENT ACCOUNTING PRONOUNCEMENTS (continued)

	The IASB is expected to publish new IFRSs on the following topics during 2012. The Company will assess the impact of these new standards on the Company’s operations as they are published:

		Leases
		Revenue recognition
		Stripping costs

5.	SEGMENTED INFORMATION

	The Company has three operating segments located in Mexico, one retail market segment in Canada and one corporate segment with locations in Canada and Mexico. The San Martin operations consist of the San Martin Silver Mine, the San Martin property and the Jalisco Group of Properties. The La Parrilla operations consist of the La Parrilla Silver Mine, the Del Toro Silver Mine, the La Parrilla properties and the Del Toro properties. The La Encantada operations consist of the La Encantada Silver Mine and the La Encantada property. All of the Company’s operations are within the mining industry and its major products are silver doré and silver concentrate.

	An operating segment is defined as a component of the Company that:

		engages in business activities from which it may earn revenues and incur expenses;
		whose operating results are reviewed regularly by the entity’s chief operating decision maker; and for which discrete financial information is available.

	Transfer prices between business segments are set on an arms-length basis in a manner similar to transactions with third parties.

	Significant information relating to the Company’s reporting operating segments are summarized in the table below:

		Mexico											Canada										Consolidated
								Corporate and									Corporate and
		San Martin		La Parrilla		La Encantada		Other									Other
		operations		operations		operations		Eliminations			Total		Coin Sales		Dore Sales		Eliminations			Total			Total
Three Months Ended June 30, 2011
Revenue	$	9,780	$	15,994	$	42,926	$	-		$	68,700	$	2,635	$	6,465	$	(9,760	)	$	(660	)	$	68,040
Cost of sales		3,473		4,173		10,569		(8	)		18,207		2,244		6,200		(8,539	)		(95	)		18,112
Depletion, depreciation and amortization		480		982		1,379		33			2,874		-		-		260			260			3,134
Mine operating earnings (loss)		5,827		10,839		30,978		(25	)		47,619		390		266		(1,480	)		(824	)		46,794
Finance cost		80		114		208		-			402		-		-		(14	)		(14	)		388
Capital expenditures		5,693		17,664		5,457		845			29,659		-		-		70			70			29,729

Three Months Ended June 30, 2010
Revenue	$	4,973	$	6,701	$	15,063	$	-		$	26,737	$	1,606	$	-	$	(887	)	$	719		$	27,456
Cost of sales		2,999		2,928		6,342		-			12,269		1,261		-		(1,206	)		55			12,324
Depletion, depreciation and amortization		337		556		1,002		199			2,094		-		-		389			389			2,483
Mine operating earnings (loss)		1,637		3,217		7,718		(199	)		12,374		345		-		(69	)		276			12,649
Finance cost		24		24		155		(115	)		88		-		-		-			-			88
Capital expenditures		746		1,088		3,512		-			5,346		-		-		205			205			5,551

		Mexico											Canada										Consolidated
								Corporate and									Corporate and
		San Martin		La Parrilla		La Encantada		Other									Other
		operations		operations		operations		Eliminations			Total		Coin Sales		Dore Sales		Eliminations			Total			Total
Six Months Ended June 30, 2011
Revenue	$	19,316	$	26,041	$	77,016	$	-		$	122,373	$	5,232	$	13,216	$	(17,515	)	$	933		$	123,306
Cost of sales		6,782		7,490		20,604		(5	)		34,871		4,354		12,302		(16,596	)		60			34,931
Depletion, depreciation and amortization		826		1,836		2,763		33			5,458		-		-		480			480			5,938
Mine operating earnings (loss)		11,708		16,715		53,649		(28	)		82,044		878		914		(1,399	)		393			82,437
Finance cost		92		144		245		-			481		-		-		25			25			506
Capital expenditures		7,496		23,060		9,335		1,155			41,046		-		-		107			107			41,153

Six Months Ended June 30, 2010
Revenue	$	10,359	$	12,742	$	22,070	$	-		$	45,171	$	2,881	$	-	$	(2,850	)	$	31		$	45,202
Cost of sales		5,837		5,922		9,584		(6	)		21,337		2,472		-		(2,856	)		(384	)		20,953
Depletion, depreciation and amortization		786		1,162		1,237		391			3,576		-		-		857			857			4,433
Mine operating earnings (loss)		3,736		5,658		11,249		(385	)		20,258		409		-		(851	)		(442	)		19,816
Finance cost		41		44		311		-			396		-		-		-			-			396
Capital expenditures		1,353		2,421		8,467		-			12,241		-		-		309			309			12,550

Notes Page 4

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

5.	SEGMENTED INFORMATION (continued)

		Mexico										Canada								Consolidated
								Corporate and								Corporate and
		San Martin		La Parrilla		La Encantada		Other								Other
		operations		operations		operations		Eliminations		Total		Coin Sales		Coin Sales		Eliminations		Total		Total
June 30, 2011
Total assets	$	69,407	$	101,434	$	106,363	$	40,793	$	317,997	$	-	$	-	$	53,833	$	53,833	$	371,830
Total liabilities		18,800		15,648		13,117		20,778		68,343		-		-		8,644		8,644		76,987
December 31, 2010
Total assets	$	53,325	$	68,070	$	76,198	$	36,765	$	234,358	$	-	$	-	$	23,273	$	23,273	$	257,631
Total liabilities		16,118		6,643		15,373		1,885		40,019		-		-		6,157		6,157		46,176

6.	REVENUES

		Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
		June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010
Gross revenue from payable ounces of silver equivalents	$	69,741		$	29,277		$	126,668		$	49,702
Less: refining, smelting, net of intercompany eliminations		(1,701	)		(1,821	)		(3,362	)		(4,500	)
Revenues	$	68,040		$	27,456		$	123,306		$	45,202

7.	INVESTMENT AND OTHER INCOME

The Company’s investment and other income is comprised of the following:

		Three Months Ended		Three Months Ended			Six Months Ended		Six Months Ended
		June 30, 2011		June 30, 2010			June 30, 2011		June 30, 2010
Gain from investment in derivative investments	$	320	$	622		$	3,545	$	649
Interest income and other		61		(2	)		311		5
	$	381	$	620		$	3,856	$	654

8.	EARNINGS PER SHARE

	The calculations of basic and diluted earnings per share for the three and six months ended June 30, 2011 and 2010 are based on the following:

		Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
		June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Net income for the period attributable to shareholders	$	30,593	$	10,978	$	54,463	$	11,420
Weighted average number of shares on issue - basic		103,396,753		92,804,715		101,633,552		92,758,113
Adjustments for:
Share options		3,806,350		1,593,195		3,677,569		1,224,044
Warrants		76,873		678,426		1,217,320		439,019
Weighted average number of shares on issue - diluted		107,279,976		95,076,336		106,528,441		94,421,176

9.	CASH AND CASH EQUIVALENTS

	Cash and cash equivalents of the Company are comprised of bank balances and short-term investments, which are convertible to cash, with a term of 90 days or less as follows:

		June 30, 2011		December 31, 2010
Cash	$	104,891	$	34,951
Short-term investments		87		6,212
	$	104,978	$	41,163

Notes Page 5

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

10.	TRADE AND OTHER RECEIVABLES

	Trade and other receivables of the Company are comprised of:

		June 30, 2011		December 31, 2010
Trade receivables	$	4,511	$	2,748
Value added taxes recoverable		4,850		4,001
Other taxes and value added taxes on accounts payable		570		1,299
Loan receivable from supplier and other		603		306
	$	10,534	$	8,354

The Company does not hold any collateral for any receivable amounts outstanding at June 30, 2011. The Company expects full recovery of the amounts outstanding and therefore no impairment has been recorded against these receivables.

11.

INVENTORIES

		June 30, 2011		December 31, 2010
Silver coins and bullion including in process shipments	$	772	$	396
Finished product - doré and concentrates		45		1,823
Work in process		3,052		1,233
Stockpile		1,148		959
Materials and supplies		5,144		4,240
	$	10,161	$	8,651

	The amount of inventories recognized as an expense during the period is equivalent to cost of sales for the period and no inventory write-downs were recorded or reversed during the periods presented.

12.	OTHER FINANCIAL ASSETS

	Other financial assets of the Company are comprised of:

		June 30, 2011		December 31, 2010
Marketable securities	$	5,399	$	357
Derivative financial instruments		2,936		-
	$	8,335	$	357

13.	PREPAID EXPENSES AND OTHER

	Prepaid expenses and other of the Company are comprised of:

		June 30, 2011		December 31, 2010
Prepayments to suppliers and contractors	$	2,466	$	1,336
Deposits		316		236
	$	2,782	$	1,572

Notes Page 6

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

14.

MINING INTERESTS

The Company’s mining interest is composed of the following:

		June 30, 2011		December 31, 2010
Producing properties	$	69,189	$	62,741
Exploration properties (non-depletable)		62,161		56,919
	$	131,350	$	119,660

Producing properties are allocated as follows:

		La Encantada			La Parrilla			San Martin
Producing properties		Silver Mine			Silver Mine			Silver Mine			Total
Cost
At January 1, 2010	$	12,423		$	21,286		$	37,016		$	70,725
Additions		4,601			5,396			1,053			11,050
Change in decommissioning liabilities		488			770			268			1,526
At December 31, 2010	$	17,512		$	27,452		$	38,337		$	83,301
Additions		3,343			4,011			1,343			8,697
At June 30, 2011	$	20,855		$	31,463		$	39,680		$	91,998

Accumulated depletion and amortization
At January 1, 2010	$	(2,747	)	$	(2,863	)	$	(10,742	)	$	(16,352	)
Depletion and amortization		(1,453	)		(966	)		(1,789	)		(4,208	)
At December 31, 2010	$	(4,200	)	$	(3,829	)	$	(12,531	)	$	(20,560	)
Depletion and amortization		(792	)		(732	)		(725	)		(2,249	)
At June 30, 2011	$	(4,992	)	$	(4,561	)	$	(13,256	)	$	(22,809	)

Carrying value
At December 31, 2010	$	13,312		$	23,623		$	25,806		$	62,741
At June 30, 2011	$	15,863		$	26,902		$	26,424		$	69,189

Exploration properties are allocated as follows:

		La Encantada		La Parrilla		San Martin			Del Toro		La Luz
Exploration properties		Silver Mine		Silver Mine		Silver Mine			Silver Mine		Silver Project		Total
Cost
At January 1, 2010	$	2,383	$	7,465	$	13,863		$	11,280	$	16,479	$	51,470
Exploration and evaluation expenditures		552		325		1,569			360		2,107		4,913
Change in decommissioning liabilities		-		-		-			-		536		536
At December 31, 2010	$	2,935	$	7,790	$	15,432		$	11,640	$	19,122	$	56,919
Exploration and evaluation expenditures		744		2,886		895			3,520		597		8,642
Proceeds from option payment (c)		-		-		(3,400	)		-		-		(3,400	)
At June 30, 2011	$	3,679	$	10,676	$	12,927		$	15,160	$	19,719	$	62,161

Notes Page 7

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

14.	MINING INTERESTS (continued)

	(a)	La Encantada Silver Mine, Coahuila State

		The La Encantada Silver Mine is a producing underground mine located in Northern Mexico accessible via a 1.5 hour flight from Torreon, Coahuila. The La Encantada Silver Mine consists of a 3,750 tonnes per day cyanidation plant, a 1,000 tonnes per day flotation plant (currently in care-and-maintenance), an airstrip, and a village with 180 houses as well as administrative offices and infrastructure required for such an operation. The mine is comprised of 4,076 hectares of mining rights and surface land ownership of 1,343 hectares. The closest town, Muzquiz, is 225 km away via mostly paved road. The Company owns 100% of the La Encantada Silver Mine. On April 1, 2010, the mill expansion project achieved commercial stage production and all revenues and costs from that date are recorded in the mine operating earnings.

	(b)	La Parrilla Silver Mine, Durango State

		The La Parrilla Silver Mine is a system of connected underground producing mines consisting of the La Rosa/Rosarios/La Blanca, the San Marcos mine and the Quebradillas mine. La Parrilla is located approximately 65 km southeast of the city of Durango, in the State of Durango, Mexico. Located at the mine are: an 850 tonnes per day milling facility consisting of a 425 tpd cyanidation circuit and a 425 tpd flotation circuit, mining equipment, buildings and infrastructure related to the operation and mining concessions covering an area of 69,867 hectares. The Company owns 100% of the La Parrilla Silver Mine. The Company owns 45 hectares and leases an additional 69 hectares of surface rights. During 2010, the Company staked an additional 16,630 hectares of mining rights at Quebradillas, which created a 69,867 hectare contiguous block of mining rights surrounding the La Parrilla mining operations.

		There is a net smelter royalty (“NSR”) agreement of 1.5% of sales revenue associated with the Quebradillas Mine, with a maximum payable of $2.5 million. The Company has an option to purchase the NSR at any time for an amount of $2.0 million. For the three and six months ended June 30, 2011, the Company paid royalties of $44,000 (June 30, 2010 - $21,000) and $71,000 (June 30, 2010 - $65,000), respectively. As at June 30, 2011, the sum of total royalties paid to date for the Quebradillas NSR is $392,000.

	(c)	San Martin Silver Mine, Jalisco State

		The San Martin Silver Mine is a producing underground mine located adjacent to the town of San Martin de Bolaños in Northern Jalisco State, Mexico. The operation consists of a 900 tonne per day cyanidation mill, flotation circuit, mine buildings, administrative offices and all related infrastructure. The mine is comprised of approximately 7,841 hectares of mineral rights, approximately 1,300 hectares of surface rights surrounding the mine, and another 104 hectares of surface rights where the mill is located. The Company owns 100% of the San Martin Silver Mine.

		The Company also owns the Jalisco Group of Properties which consist of 5,240 hectares of mining claims in Jalisco State, Mexico. On April 15, 2011, a definitive agreement was entered into with Sonora Resources Corp. (the “Optionee”) whereby the Optionee has an option to acquire up to 90% in the Jalisco Group of Properties (the “Properties”) located in the Jalisco State, Mexico. The Optionee is to issue 10 million shares of common stock with a fair value of $3.4 million to the Company and is committed to spend $3 million over the first three years to earn a 50% interest and $5 million over five years to earn a 70% interest. In order to obtain a 90% interest, the Optionee is required to complete a bankable feasibility study within seven years. First Majestic will retain a 10% free carried interest and a 2.375% NSR. The fair value of common shares received from the Optionee was recorded with a corresponding reduction in the carrying value of the Minera El Pilon mining interests during the period.

Notes Page 8

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

14.	MINING INTERESTS (continued)

	(d)	Del Toro Silver Mine, Zacatecas State

		The Del Toro Silver Mine is located 60 km to the southeast of the Company’s La Parrilla Silver Mine and consists of 393 contiguous hectares of mining claims and 129 hectares of surface rights covering the area surrounding the San Juan mine. The Del Toro Silver Mine consists of two old silver mines, the San Juan and Perseverancia mines, which are approximately one kilometre apart. The Company owns 100% of the Del Toro Silver Mine. In July 2008, the Company acquired 46 hectares of mining rights (“Fatima”) for $387,500 in option payments due between 2008 and 2010. During 2010, the Company completed the acquisition by paying the remaining $225,000 in option payments.

	(e)	La Luz Silver Project (formerly called “Real de Catorce Silver Project”), San Luis Potosi State

		The La Luz Silver Project is located 25 km west of the town of Matehuala in San Luis Potosi State, Mexico. The La Luz property consists of 35 mining concessions covering 5,738 hectares. The Company owns 100% of the La Luz Silver Project. In November 2010, the Company agreed to acquire the 3% NSR, the surface rights of the property, the buildings located thereon covering the location of the previous mining operations, and all technical and geological information collected pertaining to the area, in consideration for $3.0 million. Consideration for the purchase consisted of a cash payment of $1.05 million and $1.5 million in shares of the Company in November 2010, and a cash payment of $0.45 million which was paid by January 31, 2011.

15.	PROPERTY, PLANT AND EQUIPMENT

	Property, plant and equipment is composed of the following:

		Land and			Machinery and			Assets under			Corporate
		buildings			equipment			construction			assets			Total
Cost
At January 1, 2010	$	7,827		$	25,387		$	32,113		$	1,415		$	66,742
Additions		641			11,741			7,007			663			20,052
Transfers		6,485			29,904			(36,389	)		-			-
At December 31, 2010	$	14,953		$	67,032		$	2,731		$	2,078		$	86,794
Additions		832			10,603			11,760			380			23,575
At June 30, 2011	$	15,785		$	77,635		$	14,491		$	2,458		$	110,369

Accumulated depreciation and amortization
At January 1, 2010	$	(2,566	)	$	(5,177	)	$	-		$	(892	)	$	(8,635	)
Depreciation and amortization		(919	)		(4,624	)		-			(233	)		(5,776	)
At December 31, 2010	$	(3,485	)	$	(9,801	)	$	-		$	(1,125	)	$	(14,411	)
Depreciation and amortization		(634	)		(2,231	)		-			(984	)		(3,849	)
At June 30, 2011	$	(4,119	)	$	(12,032	)	$	-		$	(2,109	)	$	(18,260	)

Carrying value
At December 31, 2010	$	11,468		$	57,231		$	2,731		$	953		$	72,383
At June 30, 2011	$	11,666		$	65,603		$	14,491		$	349		$	92,109

Notes Page 9

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

15.	PROPERTY, PLANT AND EQUIPMENT (continued)

	Mining assets, including land and buildings, machinery and equipments, assets under construction and corporate assets above are allocated as follow:

		La Encantada			La Parrilla Silver			San Martin			Del Toro		La Luz			Corporate			Total
		Silver Mine			Mine			Silver Mine			Silver Mine		Silver Project
Cost
At January 1, 2010	$	40,118		$	16,161		$	9,331		$	324	$	60		$	748		$	66,742
Additions		11,658			3,011			2,124			1,620		1,297			342			20,052
Transfers		12			374			(387	)		-		-			1			-
At December 31, 2010	$	51,788		$	19,546		$	11,068		$	1,944	$	1,357		$	1,091		$	86,794
Additions		5,252			12,092			5,258			296		434			243			23,575
At June 30, 2011	$	57,040		$	31,638		$	16,326		$	2,240	$	1,791		$	1,334		$	110,369

Accumulated depreciation and amortization
At January 1, 2010	$	(1,854	)	$	(3,629	)	$	(2,765	)	$	-	$	(25	)		$(362	)	$	(8,635	)
Depreciation and amortization		(2,370	)		(1,910	)		(1,241	)		-		(12	)		(243	)		(5,776	)
At December 31, 2010	$	(4,224	)	$	(5,539	)	$	(4,006	)	$	-	$	(37	)	$	(605	)	$	(14,411	)
Depreciation and amortization		(2,140	)		(1,150	)		(388	)		-		(20	)		(151	)		(3,849	)
At June 30, 2011	$	(6,364	)	$	(6,689	)	$	(4,394	)	$	-	$	(57	)	$	(756	)	$	(18,260	)

Carrying value
At December 31, 2010	$	47,564		$	14,007		$	7,062		$	1,944	$	1,320		$	486		$	72,383
At June 30, 2011	$	50,676		$	24,949		$	11,932		$	2,240	$	1,734		$	578		$	92,109

No items of property, plant and equipment have been pledged as security for liabilities. Certain components of property, plant and equipment in the comparative periods have been reclassified to conform to current presentation.

16.

DEPOSITS ON LONG-TERM ASSETS

The Company’s deposits on long-term assets are comprised of the following:

		June 30, 2011		December 31, 2010
Deposits on equipment	$	9,830	$	2,056
Deposits on services		588		370
	$	10,418	$	2,426

17.	TRADE PAYABLES AND ACCRUED LIABILITIES

	The Company’s trade payables and accrued liabilities are primarily comprised of amounts outstanding for purchases relating to mining operations, exploration and evaluation activities and corporate office expenses. The usual credit period for trade purchases is between 30 to 90 days.

	Trade payables and accrued liabilities are comprised of the following items:

		June 30, 2011		December 31, 2010
Trade payables	$	6,502	$	6,023
Accrued liabilities		15,214		6,279
Unearned revenue		99		98
	$	21,815	$	12,400

Notes Page 10

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

18.	DEBT FACILITIES

	In April 2011, the Company entered into an agreement for a six-month pre-payment facility for advances on the sale of lead in its concentrate production. Under the terms of the agreement, $3.0 million was advanced against the Company’s lead concentrate production from the La Parrilla Silver Mine for a period of twelve months. Interest accrues at an annualized floating rate of one-month LIBOR plus 5%. Interest is payable monthly and the principal amount is repayable based on the volume of lead concentrate shipped with minimum monthly quotas valued at US$250,000. As at June 30, 2011, after delivering monthly quotas of lead concentrates and payments of interest charges, the Company had a remaining balance payable on the pre-payment facility of $2,280,000 (December 31, 2010 - $nil).

19.	LEASE OBLIGATIONS

	The Company has entered into leases for various mining and plant equipment. These leases have terms of 36 to 48 months with interest rates ranging between 7.9% to 12.5%.

	The following is a schedule of future minimum lease payments under the capital leases:

		Minimum Lease Payments
		June 30, 2011			December 31, 2010
Less than one year	$	3,326		$	1,409
More than one year but not more than five years		7,481			2,687
		10,807			4,096
Less: future finance charges		(1,448	)		(519	)
Present value of minimum lease payments	$	9,359		$	3,577

Included in the financial statements as:
Current portion of lease obligations		2,654			1,160
Lease obligations		6,705			2,417
Present value of minimum lease payments	$	9,359		$	3,577

Notes Page 11

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

20.

SHARE CAPITAL

(a)

Authorized and issued capital

The Company has unlimited authorized common shares with no par value. The movement in the Company’s issued and outstanding capital during the period is as follows:

					Shares
	Shares		Amount		to be issued			Total

Balance at January 1, 2010	92,648,744	$	218,608	$	247		$	218,855
Shares issued for:
Exercise of options	277,500		602		-			602
Exercise of warrants	25,000		78		-			78
Transfer of equity reserve upon exercise of options and warrants	-		221		-			221
Balance at June 30, 2010	92,951,244	$	219,509	$	247		$	219,756

Balance at December 31, 2010	97,560,417	$	239,525	$	245		$	239,770
Shares issued for:
Exercise of options	1,540,800		6,017		-			6,017
Exercise of warrants	4,806,593		16,894		-			16,894
Conversion of shares to be issued	2,500		12		(12	)		-
Transfer of equity reserve upon exercise of options and warrants	-		3,242		-			3,242
Balance at June 30, 2011	103,910,310	$	265,690	$	233		$	265,923

	(b)	Stock options

		Under the terms of the Company’s Stock Option Plan, the maximum number of shares reserved for issuance under the Plan is 10% of the issued shares on a rolling basis. Options may be exercisable over periods of up to five years as determined by the board of directors of the Company and the exercise price shall not be less than the closing price of the shares on the day preceding the award date, subject to regulatory approval. All stock options granted prior to May 19, 2011 are subject to vesting with 25% vesting upon issuance and 25% vesting each six months thereafter. All stock options granted thereafter are subject to vesting with 25% vesting on first anniversary from the date of grant, and 25% vesting each six months thereafter.

		The following table summarizes the information about stock options outstanding and exercisable as at June 30, 2011:

	Options Outstanding			Options Exercisable
		Weighted	Weighted		Weighted	Weighted
		Average	Average		Average	Average
	Number of	Exercise Price	Remaining Life	Number of	Exercise Price	Remaining Life
Exercise prices (CAD$)	Options	(CAD$/Share)	(Years)	Options	(CAD$/Share)	(Years)

2.01 - 3.00	601,250	2.07	1.56	601,250	2.07	1.56
3.01 - 4.00	1,543,125	3.64	1.69	1,490,625	3.63	1.68
4.01 - 5.00	1,363,800	4.37	1.13	1,301,300	4.38	1.09
10.01 - 20.03	1,443,400	12.64	3.10	695,025	12.52	3.10
	4,951,575	6.27	1.93	4,088,200	5.15	1.72

Notes Page 12

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

20.

SHARE CAPITAL (continued)

(b)

Stock options (continued)

As of June 30, 2011, incentive stock options represent 5% (December 31, 2010 - 7%) of issued and outstanding common capital. The aggregate intrinsic values of vested share options (the market value less the exercise value) at June 30, 2011 and December 31, 2010 were $53.8 million (CAD$51.9 million) and $47.6 million (CAD$47.4 million), respectively.

The changes in stock options issued during the period ended June 30, 2011 and the year ended December 31, 2010 are as follows:

	Six Months Ended			Year Ended
	June 30, 2011			December 31, 2010
			Weighted Average			Weighted Average
			Exercise Price			Exercise Price
	Number of Options		(CAD$/Share)	Number of Options		(CAD$/Share)
Balance, beginning of the period	6,464,875		5.61	8,603,750		3.50
Granted	42,500		19.26	2,003,000		10.03
Exercised	(1,540,800	)	3.80	(3,573,125	)	3.16
Expired	(15,000	)	12.44	(568,750	)	4.63
Balance, end of the period	4,951,575		6.27	6,464,875		5.61

During the six months ended June 30, 2011, 1,540,800 (June 30, 2010 – 277,500) stock options were exercised. The weighted average closing share price at date of exercise for the six months ended June 30, 2011 was CAD$18.21 (June 30, 2010 - CAD$4.13) .

During the six months ended June 30, 2011, 42,500 (June 30, 2010 – 460,000) stock options were granted for an aggregate fair value of CAD$394,000 (June 30, 2010 – CAD$740,000).

The fair value of stock options granted is estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions:

	Six Months Ended June 30,
	2011	2010

Weighted average fair value at grant date ($)	9.28	1.61
Expected dividend yield (%)	-	-
Average risk-free interest rate (%)	1.77	1.56
Expected life (years)	2.99	1.88
Expected volatility (%)	77.54	84.40
Forfeiture rate (%)	5.00	5.00

The expected volatility assumption is based on the historical and implied volatility of the Company’s Canadian dollar common share price on the Toronto Stock Exchange. The risk-free interest rate assumption is based on yield curves on Canadian government zero-coupon bonds with a remaining term equal to the stock options’ expected life.

Notes Page 13

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

20.

SHARE CAPITAL (continued)

(c)

Share purchase warrants

The following table summarizes the information about share purchase warrants outstanding:

	Warrants Outstanding
		Weighted Average	Weighted Average
	Number of	Exercise Price	Remaining Life
Exercise prices (C$)	Warrants	(CAD$/Share)	(Years)
3.30	224,000	3.30	0.14
3.30	87,500	3.30	0.21
	311,500	3.30	0.16

The changes in share purchase warrants during the periods ended June 30, 2011 and the year ended December 31, 2010 are as follows:

	Six Months Ended			Year Ended
	June 30, 2011			December 31, 2010
			Weighted Average			Weighted Average
	Number of		Exercise Price	Number of		Exercise Price
	Warrants		(CAD$/Share)	Warrants		(CAD$/Share)
Balance, beginning of the period	5,142,277		3.44	11,357,465		5.04
Exercised	(4,806,593	)	3.45	(1,185,250	)	3.41
Cancelled or expired	(24,184	)	3.50	(5,029,938	)	7.06
Balance, end of the period	311,500		3.30	5,142,277		3.44

	(d)	Share capital to be issued

		On June 5, 2006, pursuant to the acquisition of First Silver Reserve Inc. and the San Martin mine, First Majestic and First Silver entered into a business combination agreement whereby First Majestic acquired the 36.25% remaining minority interest in securities of First Silver resulting in First Silver becoming a wholly owned subsidiary of First Majestic.

		At June 30, 2011, the prior shareholders of First Silver had yet to exchange 110,754 shares (December 31, 2010 – 113,254 shares) of First Silver, exchangeable for 56,627 shares (December 31, 2010 – 56,627 shares) of First Majestic resulting in a remaining value of shares to be issued of $233,000 (December 31, 2010 - $245,000). During the six months ended June 30, 2011, a total of 2,500 shares were redeemed by prior shareholders of First Silver. An additional 1,500 shares were redeemed subsequent to June 30, 2011.

		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 any 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.

Notes Page 14

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

21.

EQUITY RESERVES

		Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
		June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010

Available for sale revaluation reserve (a)
Balance at beginning of period	$	(69	)	$	135		$	18		$	(55	)
Gain (loss) on available for sale securities		1,721			(78	)		1,634			112
Balance at end of period		1,652			57			1,652			57

Share-based payments reserve (b)
Balance at beginning of period		25,532			25,787			25,170			24,971
Share-based payments recognized in profit and loss		1,772			828			3,661			1,686
Reclassed to share capital for exercise of stock options and warrants		(1,715	)		(179	)		(3,242	)		(221	)
Balance at end of period		25,589			26,436			25,589			26,436

Foreign currency translation reserve (c)
Balance at beginning of period		1,114			651			621			-
Currency translation gain		226			24			719			675
Balance at end of period		1,340			675			1,340			675

Total equity reserves per statement of financial position	$	28,581		$	27,168		$	28,581		$	27,168

	(a)	The available for sale reserve principally records the fair value gains or losses related to available-for-sale financial instruments.

	(b)	The share-based payments reserve records the cumulative amount recognized under IFRS 2 in respect of options granted but not exercised to acquire shares of the Company.

	(c)	The foreign currency translation reserve represents exchange differences arising on the translation of non-US dollar functional currency operations within the Company into the US dollar presentation currency.

22.	RETAINED EARNINGS / ACCUMULATED DEFICIT

	At June 30, 2011, the Company has retained earnings of $339,000 (December 31, 2010 – accumulated deficit of $54,124,000).

	No dividends have been paid or declared by the Company since its inception.

23.	FINANCIAL RISK MANAGEMENT

	There are no significant changes in financial risk management compared to the Company’s 2010 annual financial statements except for the following:

	(a)	Liquidity 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 to support its expansion plans. As at June 30, 2011, the Company has outstanding trade payables of $6.5 million (December 31, 2010 - $6.0 million) which are generally payable in 90 days or less and accrued liabilities of $15.2 million (December 31, 2010 - $6.3 million) which are generally payable within 12 months.

		The Company believes it has sufficient cash on hand to meet operating requirements as they arise for at least the next twelve months.

Notes Page 15

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

23.

FINANCIAL RISK MANAGEMENT

	(a)	Liquidity Risk (continued)

		The Company’s liabilities and commitments have maturities which are summarized below:

		Payments Due By Period
Balances in USD$'000		Total		Less than		1 to 3		4 to 5		After 5
				1 year		years		years		years
Finance Lease Obligations	$	9,359	$	2,654	$	5,021	$	1,684	$	-
Purchase Obligations		24,391		24,391		-		-		-
Decommissioning liabilities		7,358		-		-		-		7,358
Trade payables and accrued liabilities		21,815		21,815		-		-		-
Total Obligations	$	62,923	$	48,860	$	5,021	$	1,684	$	7,358

	(b)	Currency Risk

		Financial instruments that impact the Company’s net earnings or other comprehensive income due to currency fluctuations include Canadian dollar and Mexican peso denominated assets and liabilities. The sensitivity of the Company’s net earnings and other comprehensive income due to changes in the exchange rate between the Canadian dollar and the Mexican peso against the U.S. dollar is included in the table below:

												June 30, 2011			December 31, 2010
Balances in USD$'000						Trade payables			Net assets						Net assets
		Cash and cash		Trade and		and accrued			(liabilities)			Effect of +/- 10%			(liabilities)			Effect of +/- 10%
		equivalents		other receivable		liabilities			exposure			change in currency			exposure			change in currency
Canadian dollar	$	67,493	$	110	$	(2,596	)	$	65,007		$	6,501		$	8,174		$	817
Mexican peso		3,708		4,022		(17,164	)		(9,434	)		(943	)		(10,726	)		(1,073	)
	$	71,201	$	4,132	$	(19,760	)	$	55,573		$	5,558		$	(2,552	)	$	(256	)

24.

SUPPLEMENTAL CASH FLOW INFORMATION

		Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
		June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010

Net change in non-cash working capital items:
Decrease (increase) in trade and other receivables	$	(297	)	$	435		$	(2,180	)	$	(113	)
Increase in inventories		(1,166	)		(1,569	)		(1,510	)		(1,892	)
Increase in prepaid expenses and other		(3,318	)		(198	)		(4,010	)		(667	)
Increase (decrease) in trade payables and
accrued liabilities		1,832			(133	)		3,699			1,180
Increase (decrease) in taxes payable		3,977			83			8,679			133
	$	1,028		$	(1,382	)	$	4,678		$	(1,359	)

Non-cash investing and financing activities:
Transfer of contributed surplus upon exercise of options and warrants	$	1,713		$	184		$	3,242		$	225
Assets acquired by capital lease		(1,726	)		-			(4,200	)		-

Cash payments for interest and taxes:
Interests paid	$	388		$	160		$	506		$	395
Taxes paid		5,458			-			5,802			-

Notes Page 16

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

25.	CONTINGENT LIABILITIES

	Due to the size, complexity and nature of the Company’s operations, various legal and tax matters arise in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, these matters will not have a material effect on the consolidated financial statements of the Company.

26.	SUBSEQUENT EVENTS

	From July 1, 2011 to August 10, 2011:

	(a)	503,750 options and 150,000 warrants were exercised for gross proceeds of CAD$2,676,000;

	(b)	10,000 options were granted with an exercise price of CAD$17.80 and expire in five years from the grant date;

	(c)	1,500 options expired unexercised; and

	(d)	1,500 shares were issued in connection with the First Silver Reserve Inc. acquisition (see note 20(d)).

27.	FIRST TIME ADOPTION OF IFRS

	The Company adopted IFRS on January 1, 2011 with a transition date of January 1, 2010. The accounting policies set out in Note 3 of the consolidated interim financial statements as at and for the three months ended March 31, 2011 have been applied in preparing te consolidated interim financial statements for the three and six months ended June 30, 2011. In note 24 of the March 31, 2011 consolidated interim financial statements, the Company reported the impact of the transition to IFRS at January 1, 2010 and December 31, 2010. There were no changes to the reconciliations as previously reported.

	The Company applied the following exemptions to its opening statement of financial position dated January 1, 2010 in accordance with IFRS 1, “First-time adoption of International Financial Reporting Standards”, provides guidance for the initial adoption of IFRS. IFRS 1 requires retrospective application of the standards in the transition statement of financial position, with all adjustments to assets and liabilities taken to accumulated deficit unless certain exemptions are applied:

	(a)	Business combinations

		The Company has elected to not apply IFRS 3 to business combinations that occurred before the date of transition to IFRS. IFRS 3 has been applied by the Company to business combinations that occurred on or after January 1, 2010.

	(b)	Cumulative translation differences

		As permitted by the IFRS 1 election for cumulative translation differences, the Company has deemed cumulative translation differences for foreign operations to be zero at the date of transition. Any gains and losses on subsequent disposal of foreign operations will not be impacted by translation differences that arose prior to the date of transition.

	(c)	Decommissioning liabilities included in the cost of property, plant and equipment

		The Company has elected to apply the exemption related to decommissioning liabilities included in the cost of property, plant and equipment. This exemption allows a first-time adopter to apply the requirements of IFRIC 1, dealing with changes in decommissioning liabilities, on a prospective basis from the date of transition.

Notes Page 17

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

27.	FIRST TIME ADOPTION OF IFRS (continued)

	(d)	Share-based payment

		IFRS 1 encourages, but does not require, first-time adopters to apply IFRS 2 Share-based Payment to equity instruments that were granted on or before November 7, 2002, or equity instruments that were granted subsequent to November 7, 2002 and vested before the date of transition to IFRS. The Company has elected not to apply IFRS 2 to awards which had vested at the date of transition.

	(e)	Fair value as deemed cost

		IFRS 1 allows an entity to measure individual items of mining interests and property, plant and equipment at fair value as deemed cost at the date of transition. The Company has elected to apply this exemption to the carrying value of mining interest for the San Martin mine at the date of transition. As a result, an adjustment of $48,945,000, net of deferred income tax recovery of $13,705,000, was recorded to accumulated deficit to adjust the aggregate carrying value of mining interests under previous GAAP to its fair value at January 1, 2010.

	(f)	Estimates

		IFRS 1 requires that an entity’s estimates under IFRS at the date of transition to IFRS must be consistent with estimates made for the same date under the entity’s previous GAAP, unless there is objective evidence that those estimates were in error. The Company’s IFRS estimates as of January 1, 2010 are consistent with its Canadian GAAP estimates for the same date.

		IFRS employs a conceptual framework that is similar to Canadian GAAP. However, significant differences exist in certain matters of recognition, measurement and disclosure. While adoption of IFRS has not changed the Company’s actual cash flows, it has resulted in changes to the Company’s reported financial position and results of operations. In order to allow the users of the financial statements to better understand these changes, the Company’s Canadian GAAP statements of income and statements of financial position for the six months ended June 30, 2010 and year ended December 31, 2010 have been reconciled to IFRS, with the resulting differences explained below.

		The adoption of IFRS does not have a significant impact on the statement of cash flows for the six months ended June 30, 2010 and the year ended December 31, 2010. Therefore, no reconciliation is presented in these consolidated interim financial statements.

Notes Page 18

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

27.

FIRST TIME ADOPTION OF IFRS (continued)

The June 30, 2010 Canadian GAAP statement of financial position has been reconciled to IFRS as follows:

		Canadian			Canadian				Effect of
		GAAP			GAAP				Transition to IFRS			IFRS
		June 30, 2010			June 30, 2010				June 30, 2010			June 30, 2010
		CAD$			USD$		Note		USD$			USD$

ASSETS
Current assets
Cash and cash equivalents	$	15,850		$	14,945			$	-		$	14,945
Trade and other receivables		9,152			8,627				-			8,627
Inventories		5,801			5,470				-			5,470
Prepaid expenses and other		2,250			2,122				-			2,122
Total current assets		33,053			31,164				-			31,164

Non-current assets
Mining interests		174,085			161,625		(v)(vi)		(52,804	)		108,821
Property, plant and equipment		68,304			63,398		(i)		(193	)		63,205
Deposits on long-term assets		1,972			1,859				-			1,859
Total assets	$	277,414		$	258,046			$	(52,997	)	$	205,049

LIABILITIES AND EQUITY
Current liabilities
Trade payables and accrued liabilities	$	14,940		$	14,018			$	-		$	14,018
Current portion of debt facilities		2,045			1,929				-			1,929
Current portion of lease obligations		1,373			1,294				-			1,294
Taxes payable		264			249				-			249
Total current liabilities		18,622			17,490				-			17,490

Non-current liabilities
Debt facilities		2,881			2,716				-			2,716
Lease obligations		369			348				-			348
Decommissioning liabilities		4,661			4,392				-			4,392
Other long-term liabilities		775			731				-			731
Deferred tax liabilities		31,969			28,827		(v)(vi)		(18,544	)		10,283
Total liabilities		59,277			54,504				(18,544	)		35,960

Equity
Shareholders' Equity
Share capital		245,455			219,756				-			219,756
Equity reserves		28,932			26,158		(iii)		278			26,436
Accumulated other comprehensive income (loss)		(34,985	)		(25,593	)	(ii)		26,325			732
Accumulated deficit		(21,265	)		(16,779	)	(i)(ii)(iii)(v)(vi)		(61,056	)		(77,835	)
Total liabilities and equity	$	277,414		$	258,046			$	(52,997	)	$	205,049

Notes Page 19

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

27.	FIRST TIME ADOPTION OF IFRS (continued)

	The Company’s Canadian GAAP income statement and consolidated statement of income for the three months ended June 30, 2010 have been reconciled to IFRS as follows:

		Three Months Ended June 30, 2010
									Effect of
		Canadian			Canadian				Transition to
		GAAP			GAAP		Note		IFRS			IFRS
		CAD$			USD$				USD$			USD$

Revenues	$	28,963		$	27,456			$	-		$	27,456
Cost of sales		13,435			12,324				-			12,324
Gross margin		15,528			15,132				-			15,132
Depletion, depreciation and amortization		2,380			2,284		(i)		199			2,483
Mine operating earnings		13,148			12,848				(199	)		12,649

General and administration expense		2,407			2,143				-			2,143
Share-based payments		644			624		(iii)		204			828
Accretion of decommissioning liabilities		94			123				-			123
Foreign exchange gain		(344	)		(1,616	)			-			(1,616	)
Other expenses		570			731				-			731
Operating earnings		9,777			10,843				(403	)		10,440

Investment and other income		640			620				-			620
Finance costs		(118	)		(88	)			-			(88	)
Earnings before income taxes		10,299			11,375				(403	)		10,972

Current income tax expense		45			43				-			43
Deferred income tax expense (recovery)		1,367			1,266		(vi)		(1,315	)		(49	)
		1,412			1,309				(1,315	)		(6	)
Net earnings for the period	$	8,887		$	10,066			$	912		$	10,978


EARNINGS PER COMMON SHARE
BASIC	$	0.10									$	0.12
DILUTED	$	0.09									$	0.12

Notes Page 20

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

27.	FIRST TIME ADOPTION OF IFRS (continued)

	The Company’s Canadian GAAP income statement and consolidated statement of income for the six months ended June 30, 2010 have been reconciled to IFRS as follows:

		Six Months Ended June 30, 2010
									Effect of
		Canadian			Canadian				Transition to
		GAAP			GAAP		Note		IFRS			IFRS
		CAD$			USD$				USD$			USD$

Revenues	$	47,181		$	45,202			$	-		$	45,202
Cost of sales		22,409			20,953				-			20,953
Gross margin		24,772			24,249				-			24,249
Depletion, depreciation and amortization		4,178			4,041		(i)		392			4,433
Mine operating earnings		20,594			20,208				(392	)		19,816

General and administration expense		4,394			4,013				-			4,013
Share-based payments		1,344			1,294		(iii)		392			1,686
Accretion of decommissioning liabilities		188			182				-			182
Foreign exchange loss (gain)		(416	)		1,567				-			1,567
Other expenses		885			1,064				-			1,064
Operating earnings		14,199			12,088				(784	)		11,304

Investment and other income		672			654				-			654
Finance costs		(410	)		(396	)			-			(396	)
Earnings before income taxes		14,461			12,346				(784	)		11,562

Current income tax expense		64			61				-			61
Deferred income tax expense (recovery)		2,494			2,376		(vi)		(2,295	)		81
		2,558			2,437				(2,295	)		142
Net earnings for the period	$	11,903		$	9,909			$	1,511		$	11,420


EARNINGS PER COMMON SHARE
BASIC	$	0.13									$	0.12
DILUTED	$	0.13									$	0.12

Notes Page 21

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

27.	FIRST TIME ADOPTION OF IFRS (continued)

	(i)	Change in functional currency

		Effective January 1, 2010, the Company has changed its presentation currency from the Canadian dollar to US dollar. The Company has determined that the functional currency of its Mexican subsidiaries is the U.S. dollar effective January 1, 2010. Previously, the Company’s subsidiaries had a functional currency of the Mexican peso. The Company has accounted for this change in functional currency on a prospective basis in accordance with the requirements of IAS21, “The Effects of Changes in Foreign Exchange Rates”. With the successful expansion of the La Encantada plant, the Company has achieved consistent profitability in 2010 and the need to access additional financing from the Canadian public markets has been significantly reduced. Also, a substantial portion of the Company’s revenue stream and a significant portion of expenditures are now incurred in U.S. dollars.

	(ii)	Cumulative translation differences

		As permitted by the IFRS 1 election for cumulative translation differences, the Company has deemed cumulative translation differences for foreign operations to be zero at the date of transition. Cumulative translation loss at January 1, 2010 was re-allocated from accumulated other comprehensive loss to accumulated deficit.

	(iii)	Share-based payments

		IFRS requires each tranche of a share-based award with different vesting dates to be considered a separate grant for purpose of fair value calculation, and the resulting fair value is amortized over the vesting period of the respective tranches. Furthermore, forfeiture estimates are recognized in the period they are estimated.

		Under Canadian GAAP, the fair value of share-based awards with graded vesting was calculated as one single grant and the resulting fair value was recognized on a straight-line basis over the longest vesting period. Forfeitures of awards were only recognized in the period the forfeiture occurred.

	(iv)	Decommissioning liabilities

		IFRS requires provision for decommissioning liabilities to be estimated based on constructive cash flow discounted based on liability specific risk-free discount rate. The discount rate should be updated periodically at each period end date. Under Canadian GAAP, provision for decommissioning liabilities was estimated based on legal cash flow and discounted based on a risk-adjusted discount rate.

		Historical net book value of costs of the related mining properties when the first decommissioning liabilities first arose was adjusted to reflect historical difference in the decommissioning liabilities.

	(v)	Fair value as deemed cost

		IFRS 1 allows an entity to measure individual items of property, plant and equipment at fair value at the date of transition. The Company has elected to apply the IFRS 1 exemption to measure its mining interest for the San Martin mine at fair value as deemed cost at January 1, 2010 using a discounted cash flow model under IFRS compared to Canadian GAAP which determines fair value based on undiscounted cash flows. Based on silver prices ranging from $14.50 to $19.30 per ounce and a discount rate of 14.75% used in the discounted cash flow model, an adjustment of $48,945,000, net of future income tax recovery of $13,705,000, was recorded to accumulated deficit to adjust the aggregate carrying value of mining interests under previous Canadian GAAP to its aggregate fair value at January 1, 2010.

Notes Page 22

First Majestic Silver Corp.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(tabular amounts are expressed in thousands of United States dollars, except share and per share amounts - unaudited)

27.	FIRST TIME ADOPTION OF IFRS (continued)

	(vi)	Deferred tax liabilities

		IFRS does not allow recognition of deferred taxes for acquisition of assets that do not qualify as a business combination. There is no similar prohibition under Canadian GAAP. As a result, deferred tax liabilities related to the Company’s previous asset acquisitions that did not qualify as business combination were derecognized at transition.

		As part of the transition to IFRS, the carrying value of the Company’s property, plant and equipment and mining interests were changed without a change in their respective tax value. Deferred taxes were updated to reflect the change in temporary differences between the carrying value and tax value of these assets.

28.	APPROVAL OF FINANCIAL STATEMENTS

	The Consolidated Interim Financial Statements of First Majestic Silver Corp. for the period ended June 30, 2011 were approved and authorized for issue by the Board of Directors on August 10, 2011.

Notes Page 23