PROANO / FRESNILLO

Company global metallic content was affected by less production at the mine, as a result of the exploitation of zones with lower grade mineral in order to take advantage of the higher metal prices, especially silver.

Total company lead production increased 14.3% due to higher grade and higher recovery at the mine. In addition, company silver production increased 6.7% due to capacity expansions at the mine, which started up operations in September 2006. In the year the mine produced a record 33.9 million ounces of silver contents, accounting for 71.5% of Peñoles’s total silver production in the year. In addition, lead contents increased by 15.4% year over year to 9,932 tons. Ongoing operation of the tailings benefit plant built in 2000 boosted zinc production by 7.0% to a record 14,738 tons.

Total company silver production increased +8.4% due to capacity expansions at the mine. During the first quarter 2005, company total silver production was decreased in 5.8% due to exploitation of low grades areas, nevertheless preparation workings to feed the recently expanded capacity were being developed in order to increase a constant trend of silver production. During 2004, silver production decrease 1.2%, due to stoppages for expansion purposes, as well as a decline in overall ore grade, from 687 to 632 grams of silver per ton, resulting from the exploitation of lower ore grade areas. Also the reprocessing of the old tailings produced from decades of extraction was completed, a process that had started in 1999; a total of 5.2 million ounces of silver during the five years of reprocessing were recovered. In 2004, a programmed 10-day shutdown of the mining unit to interconnect equipment as part of a capacity expansion was concluded in September, which will raise silver production from 31.6 to an estimated 35.7 million ounces. In 2003, production was aided by process control optimization, resulting better silver recuperation. Additionally, a USD5.5 million investment for a tunneling machine was planned.