While every cloud may have a silver lining, every market slump may also have its lining of silver; as of late, it has come in the form of First Majestic Silver Corp. (TSE: FR.TO), a junior silver miner that has been unearthing profits for investors.

This Vancouver, B.C.-based company has a slew of positive factors on its side, including growing revenue and production and falling operating costs, a stellar management crew, demand for silver that analysts predict will outperform gold in 2008, and current and future mines nested in the fertile underground of Mexico.

First Majestic is clearly advancing in its goal of becoming a senior silver producer in Mexico through the development of existing assets and the acquisition of others’ assets. The firm presently owns and operates three silver mines south of the border: La Parrilla, San Martin and La Encantada.

The Mexico mines are proving to be priceless. The United States’ neighbors to the south provide a desirable mining environment with a stable government, favorable mining laws, reasonably developed infrastructure and low labor expenses.

For the fourth quarter ended Dec. 31, 2007, production increased to a record 1 million equivalent ounces of silver representing a 7% increase over the prior quarter production and an increase of 76% over the same quarter in the prior year.

Total silver production from the three Mexican mines in 2007 increased by 176% to 3.6 million ounces from 1.3 million in the previous year. Keith Neumeyer, the company’s president & CEO, attributes the triple-digit growth to vast improvements made at the silver mines and a beefing-up of management, and expects a target of 5.5 million ounces of silver production in 2008.

Neumeyer and COO Ramon Davila, have a proven track record for building bullish mining companies. Neumeyer has held key operating posts in Mexico's largest silver mining companies, including president of a subsidiary of Pan American Silver Corp. His responsibilities included being in charge of all aspects of production, exploration and administration of Pan American's Mexican operations.

Recent legislation allows foreign companies to now own 100% of Mexican mining assets. A total of 11 operations (including First Majestic’s trio) are located in Mexico. The favorable foreign direct investment environment fostered by the Mexican government, in conjunction with soaring commodities prices, bodes well for First Majestic’s future.
 
One factor that is likely contributing to elevated silver prices could be investment by the Barclays silver ETF (SLV). In launching its silver ETF in April of 2006, Barclay’s had to “securitize” each share issued with 10 ounces of the precious metal, or at the time, 1.5 million ounces for its 150,000 shares outstanding. As of Dec. 31, 2007, the ETF had grown to 15,200,000 shares outstanding, which can be translated into ownership of 152 million ounces of silver. This represents a sizeable percentage of the supply of silver that stood at 911 million ounces in 2000. When factoring industrial demand alongside the voracious appetites of commodities ETFs such as Barclays’ (SLV), silver can been seen as being in short supply.

While there is expected to a slight surplus of silver in 2008, a small hiccup in production could send the surplus tumbling. Investors seem acutely aware of the heightened demand and constrained supply. In just two months in 2008, silver has risen 35% and broke through the $20 mark on Monday.

Also adding to silver’s boon is the weak U.S. dollar, the poor health of the economy, geo-political tensions and the over $100 per barrel price of oil. The six-year long current commodities boom worked in First Majestic’s favor: its stock price in January 2002 was a mere $0.16; at close on Wednesday, shares closed at $5.65, a 3,431% rise. First Majestic currently has a $357 million market capitalization and sits on cash reserves of $36.9 million.

Despite its amazing creation of shareholder wealth, the firm isn’t resting on its laurels. The firm continues to aggressively grow its existing mines and resources. Furthermore, its competent management and the opportunity for consolidation of Mexican silver juniors gives First Majestic upside from here.

The 2008 exploration and development program for the La Encantada Silver Mine, for example, is planning to consist of a minimum of 8,200 meters of surface diamond drilling, 5,000 meters of diamond drilling from underground sites and 2,340 meters of underground drifting. In terms of the the firm’s cost cutting, it’s estimated that First Majestic’s cash costs will decline to approximately $6 per ounce by 2010 as operating efficiencies and replacement of old equipment progresses.

Blackmont Capital says it expects First Majestic (FR.TO) to emerge as a growth stock in 2008, pointing to increases in reserves, resources and production at all three of its operations as highlights for a pivotal 2008.