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First Majestic Silver (NYSE:AG) last week announced 2nd quarter production numbers with silver production rising by 16% over a year ago to 1.78 million ounces, with 1.392 million pounds of lead and 337 ounces of Gold.

In terms of silver equivalent ounces, production for the second quarter totaled 1.84 million ounces of silver. A back of the envelope calculation at $35 per ounce of silver yields approximately $64.5 million in revenue for the second quarter of 2011, more than doubling from the $28.9 million in the same quarter a year ago.

Mine operations at La Encantada, came in above target and three drill rigs continue to further enhance the ore body with the intention of translating Resources to Reserves.

Mine expansion work at La Parrilla, continues to move forward with upgraded equipment and technology allowing expansion to over 3 million ounces in 2012, from less than 2 million ounces last year.

The construction of the Del Toro Silver Mine, continues to move forward. The town of Chalchihuites, has given its approval for construction for a water treatment plant, which will supply water to the mill and treat raw sewage from the local town.

A new adjacent mining claim was purchased during the quarter from a local miner. The four hectare claim produced high grade ore and will be counted on to expand the Reserves and Resources of the Del Toro project.

First Majestic is well on its way to becoming a significant silver producer over the next 3 years as production is set to expand from 7 million ounces in 2010, to an estimated 7.5 million ounces this year, and 10 million ounces in 2012.

First Majestic should be the starting point for investors. Management’s focus on organic growth has turned the properties into strong cash generating machines. Currently, three mines are in production with a fourth under construction and a fifth in the planning stages.

Investing in silver mining stocks can be difficult for small investors as there are a number of variables to watch in addition to the price of silver bullion. Managements focused on delivering value for shareholders through production increases and bringing new mines online should be at the head of the class.

With production growing at double digit rates and the potential for an initial dividend early next year investors should make First Majestic a core holding in their portfolio.

Disclosure: I am long AG.

Source: First Majestic Silver: Solid on Strong Production Growth