INTERIM CONSOLIDATED FINANCIAL STATEMENTS

     FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2010 (UNAUDITED)

MANAGEMENT’S COMMENTS ON
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

CONTINGENT LIABILITIES (Note 17)
COMMITMENTS (Note 18)

APPROVED BY THE BOARD OF DIRECTORS

The accompanying notes are an integral part of these consolidated financial statements

The accompanying notes are an integral part of these consolidated financial statements

The accompanying notes are an integral part of these consolidated financial statements

The accompanying notes are an integral part of these consolidated financial statements

1.    DESCRIPTION OF BUSINESS

First Majestic Silver Corp. (the “Company” or “First Majestic”) is in the business of production, development, exploration, and acquisition of mineral properties with a focus on silver in Mexico. The Company’s shares and warrants trade on the Toronto Stock Exchange under the symbols “FR” and “FR.WT.B”, respectively.

2.    BASIS OF PRESENTATION

The consolidated financial statements of the Company have been prepared by management in accordance with Canadian generally accepted accounting principles (“GAAP”). These interim financial statements do not contain all the information required by GAAP for annual financial statements and should be read in conjunction with the Company’s latest audited consolidated financial statements for the year ended December 31, 2009.

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 described in Note 8. Intercompany balances and transactions are eliminated on consolidation.

3.    SIGNIFICANT CHANGES IN ACCOUNTING POLICIES

Change in Accounting Policy and Future Accounting Pronouncements

Business Combinations, Consolidations and Non-controlling interests
The CICA has approved new Handbook Section 1582, “Business Combinations”, Section 1601 “Consolidations” and Section 1602 “Non-controlling Interests” to harmonize with International Financial Reporting Standards (“IFRS”). These new sections will be effective for years beginning on or after January 1, 2011, with early adoption permitted. Section 1582 specifies a number of changes including: an expanded definition of a business, a requirement to measure all business acquisitions at fair value, a requirement to measure non-controlling interests at fair value, and a requirement to recognize acquisition related costs as expenses. Section 1601 establishes the standards for preparing consolidated financial statements. Section 1602 specifies that non-controlling interests be treated as a separate component of equity, not as a liability or other item outside of equity. The Company has adopted these new standards effective January 1, 2010 and it has not had a material impact on the Company.

International Financial Reporting Standards (“IFRS”)
In 2006, the Canadian Accounting Standards Board (“AcSB”) published a strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines convergence of Canadian GAAP with IFRS over an expected five-year transitional period. In February 2008, the AcSB announced that 2011 is the changeover date for public companies to commence using IFRS, replacing Canada’s own GAAP. The transition date is January 1, 2011, and relates to interim and annual financial statements on or after January 1, 2011. The transition will require the restatement for comparative purposes of amounts reported by the Company for all reporting periods beginning after January 1, 2010.

4.    OTHER RECEIVABLES

Details of the components of other receivables are as follows:

5.    INVENTORIES

Inventories consist of the following:

The amounts of inventory recognized as expenses during the period are equivalent to the cost of sales for the respective periods.

6.    PREPAID EXPENSES AND OTHER

Details of prepaid expenses and other are as follows:

7.     MINING INTERESTS AND PLANT AND EQUIPMENT

Mining interests and plant and equipment, net of accumulated depreciation, depletion and amortization, are as follows:

A summary of the net book value of mining properties is as follows:

7.     MINING INTERESTS AND PLANT AND EQUIPMENT (continued)

A summary of plant and equipment is as follows:

Details of plant and equipment and corporate office equipment by specific assets are as follows:

(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 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 La Encantada Silver Mine consists of a 3,500 tonnes per day cyanidation plant, a 1,000 tonnes per day flotation plant, an airstrip, and a village with 180 houses as well as administrative offices. 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.

7.     MINING INTERESTS AND PLANT AND EQUIPMENT (continued)

(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: mining equipment, a 425 tonnes per day cyanidation plant, a 425 tonnes per day flotation plant and mining concessions covering an area of 53,000 hectares. The Company owns 100% of the La Parrilla Silver Mine. In September 2010, the Company entered into an agreement to acquire an additional 15 hectare of surface rights at Quebradillas for total consideration of $348,710 (4.2 million Mexican pesos). At September 30, 2010, the Company had paid $39,277 (476,000 Mexican pesos). The remaining balance of $309,433 (3.8 million Mexican pesos) will be paid in 25 monthly instalments of $12,377 (150,000 Mexican pesos). 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 US$2.5 million. The Company has an option to purchase the NSR at any time for an amount of US$2.0 million. For the quarter ended September 30, 2010, the Company paid royalties of $18,254 (US$17,568) ($40,917 or US$37,285 for the quarter ended September 30, 2009). For the nine months ended September 30, 2010, the Company paid royalties of $85,641 or US$82,699 ($119,489 or US$102,131 for nine months ended September 30, 2009). The sum of total royalties paid to date for the Quebradillas NSR is presently US$287,063.

(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 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 900 tonne per day cyanidation mill, flotation circuit, mine buildings and administrative offices are located. The Company owns 100% of the San Martin Silver Mine.

(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 San Juan and Perseverancia mines.

In July 2008, the Company acquired 46 hectares of mining rights (“Fatima”) for US$387,500 in option payments due between 2008 and 2010. The Company paid US$62,500 in July 2010 bringing the total paid to US$225,000. The remaining US$162,500 of option payments are due by December 2010. All other option payments have been made.

(e)       Real de Catorce Silver Project, San Luis Potosi State

The Real de Catorce Silver Project is 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. The Company owns 100% of the Real de Catorce Silver Project. Upon commencement of commercial production on the property, the Company agreed to pay an amount of US$200,000 to a previous owner. The property is subject to a 3% net smelter royalty (“3% NSR”), of which 1.75% may be acquired for a price of US$250,000 per each 0.25% increment, if paid prior to March 15, 2014. If paid between March 16, 2014 and March 15, 2019, the option price would be US$300,000 per each 0.25% increment.

7.      MINING INTERESTS AND PLANT AND EQUIPMENT (continued)

(e)     Real de Catorce Silver Project, San Luis Potosi State (continued)

In addition, the Company has agreed to acquire the surface rights forming part of the property, including the buildings located thereon and covering the location of the previous mining operations, in consideration for a single payment of US$1.0 million to be made in December 2010.

The Company has also agreed to make a payment of US$200,000 on December 10, 2010 for all technical and geological information collected over the area.

(f)     Future Mineral Property Options

Future mineral property options are due as follows:

8.     VENDOR LIABILITY AND INTEREST AND RESTRICTED CASH

In May 2006, First Majestic acquired control of First Silver Reserve Inc. (“First Silver”) for $53.4 million. The purchase price was payable in three instalments (50%, 25% and 25%) to the then majority interest shareholder of First Silver (the “Majority Shareholder”). The first instalment was paid upon closing on May 30, 2006. The second instalment was paid on May 30, 2007. The third and final instalment of $13.3 million due on May 30, 2008 was withheld by the Company.

In November 2007, an action was commenced by the Company and its acquired subsidiary First Silver against the Majority Shareholder (the “Defendant”) who was previously a director, President and Chief Executive Officer of First Silver. The Company and First Silver allege in their action that, while holding the positions of director, President and Chief Executive Officer, the Majority Shareholder engaged in a course of deceitful and dishonest conduct in breach of his fiduciary and statutory duties owed to First Silver, which resulted in the Majority Shareholder acquiring a mine which was First Silver’s right to acquire. Management believes that there are substantial grounds to this claim, however, the outcome of this litigation is not presently determinable. At the present time, the trial is scheduled to commence in the Supreme Court of British Columbia on February 21, 2011.

In March 2008, the Defendant filed a Counterclaim against the Company for unpaid amounts and interest of $14.9 million, and this action was secured by a $14.5 million Letter of Credit posted in Court by First Majestic. The Company recorded these amounts as Restricted Cash as at March 31, 2009. In July 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 $14.9 million. The Company agreed to pay out $14.3 million from the posted Letter of Credit to the Defendant’s lawyer’s trust account (the “Trust Funds”) in partial payment of the Judgment. The remaining funds from the Letter of Credit were paid out to the Company. The Consent Order requires that the Trust Funds be held in trust pending the outcome of the Company’s action. If the trial has not commenced by June 30, 2011, the Trust Funds can be released to the Defendant, unless otherwise ordered by the court. These funds would be accessible to the Company in the event of a favourable outcome to the litigation.

9.      DEBT FACILITIES

(a)    Pre-Payment Facility

In August 2009, a subsidiary of the parent 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, US$1.5 million was advanced against the Company’s lead concentrate production from the La Parrilla Silver Mine for a period of six months. Interest accrues at an annualized floating rate of one-month LIBOR plus 5%. Interest is payable monthly and the principal amount is repayable in lead concentrate shipments with minimum monthly instalments of US$250,000. The repayment of the credit facility is guaranteed by the parent company.

During 2010, the pre-payment facility was extended for two consecutive six-month periods. As at September 30, 2010, after delivering monthly quotas of lead concentrates and payment of interest charges, the Company had a remaining balance payable on the pre-payment facility of $1,302,089 (US$1,250,000).

(b)     FIFOMI Loan Facilities

In October 2009, the Company entered into an agreement with the Mexican Mining Development Trust - Fideicomiso de Fomento Minero (FIFOMI) for two loan facilities, a capital asset loan and a working capital loan, totalling $4.3 million (53.8 million Mexican pesos). Funds from these loans were used for the completion of the 3,500 tonnes per day cyanidation plant at the La Encantada Silver Mine and for working capital purposes. The capital asset loan, for up to $3.7 million (47.1 million Mexican pesos), had interest at the Mexican interbank rate (4.5%) plus 7.51% per annum and was repayable over a 60-month period. The working capital loan, for up to $0.6 million (6.7 million Mexican pesos), had interest at the Mexican interbank rate plus 7.31% per annum and was a 90-day revolving loan. The loans were secured against real property, land, buildings, facilities, machinery and equipment at the La Encantada Silver Mine.

During the quarter ended September 2010, the Company repaid $2.7 million of the capital asset loan in advance. At September 30, 2010, the balance owing was reduced to $1.4 million (16.8 million Mexican pesos). In October 2010, the Company also repaid the remaining $1.4 million of FIFOMI loan facilities to completely extinguish the debt. The early repayment has released the Company’s security and all guarantees relating to the FIFOMI loans (Note 20(iv)).

The following is a summary of the debt facilities as at September 30, 2010:

10.     DEPOSITS ON LONG-TERM ASSETS

Deposits consist of advance payments made to property vendors, drilling service providers, and equipment vendors, which are categorized as long-term in nature, in amounts as follows:

11.     SHARE CAPITAL

(a)     Capital Stock

          Authorized – unlimited number of common shares without par value

11.     SHARE CAPITAL (continued)

(a)       Capital Stock (continued)

(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 grant date, subject to regulatory approval. All stock options are subject to vesting with 25% vesting upon issuance and 25% vesting each six months thereafter.

The changes in stock options outstanding for the periods ended September 30, 2010 and December 31, 2009 are as follows:

11.      SHARE CAPITAL (continued)

(b)      Stock Options (continued)

The following table summarizes both the stock options outstanding and those that are exercisable at September 30, 2010:

Subsequent to September 30, 2010, a total of 1,191,500 options were exercised for gross proceeds of $4,026,125.

11.     SHARE CAPITAL (continued)

(b)      Stock Options (continued)

During the nine months ended September 30, 2010, the Company granted stock options to officers and employees to purchase 560,000 shares (September 30, 2009 – 1,347,500 shares) of the Company. Pursuant to the Company’s policy of accounting for the fair value of stock-based compensation over the applicable vesting period, the fair value of stock options granted during the nine month period was $843,000 of which $390,457 was expensed in the current period and $452,543 will be amortized over the remaining vesting period of the stock options.

The weighted average fair value of each stock option granted during the nine months ended September 30, 2010 was $1.51 (2009 - $0.97) . The fair value of stock options is estimated using the Black-Scholes Option Pricing Model with the following assumptions:

The Black-Scholes option pricing model requires the use of the above noted estimates and assumptions including the expected volatility of share prices. Changes in these underlying assumptions can materially affect the fair value estimates, therefore, the Black-Scholes model does not necessarily provide an accurate measure of the ongoing actual fair value of the Company’s stock options.

(c)    Share Purchase Warrants

The changes in share purchase warrants for the nine months ended September 30, 2010, and the year ended December 31, 2009, are as follows:

11.     SHARE CAPITAL (continued)

(c)      Share Purchase Warrants (continued)

The following table summarizes the share purchase warrants outstanding at September 30, 2010:

(d)     Share Capital to be Issued

On June 5, 2006, pursuant to the acquisition of First Silver Reserve Inc., First Majestic and First Silver entered into a business combination agreement whereby First Majestic agreed to acquire the remaining 36.25% minority interest in First Silver. At September 30, 2010, prior shareholders of First Silver had not yet exchanged 114,254 shares of First Silver, exchangeable for 57,127 shares of First Majestic, resulting in a remaining value of shares to be issued of $276,495.

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.

12.       REVENUES

Details of the components of net revenue are as follows:

The La Encantada mill expansion project achieved commercial stage of production on April 1, 2010. Sales incurred during the pre-operating period were recorded as a reduction of capital costs and are excluded from sales revenue. As a result, sales of $4,718,618 (2009 - $nil) in connection with the sale of 262,403 silver equivalent ounces of precipitates during the quarter ended March 31, 2010 have been excluded from the above net revenue table.

13.    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.

These reportable operating segments are summarized in the table below:

13.     SEGMENTED INFORMATION (continued)

14.     CAPITAL LEASE OBLIGATIONS

In 2007 and 2008, the Company completed lease financings for $14.1 million (US$11.2 million) of mining equipment. The Company paid 50% prior to the arrival of the equipment, and financed the remaining 50% in quarterly payments over a period of 24 months at 9% interest over the term of the lease. In March 2009, the Company refinanced the balance of $3.6 million (US$2.9 million) to be paid over 24 monthly payments commencing in February 2009 with interest payable at 9% on the outstanding principal balance, secured by a guarantee from the parent company.

In January 2009, the Company completed additional lease financing arrangements for plant equipment, committing the Company to payments of $2.6 million (US$2.0 million) over a period of 36 months with monthly payments of $48,460 (US$38,420) consisting of principal plus 12.5% interest on outstanding balances, plus an additional 12 monthly lease payments of $43,640 (US$34,600) consisting of principal only.

In September 2010, the Company entered into a lease financing arrangement for $2.1 million (US$2.1 million) of mining equipment. The Company paid 15% prior to delivery of the equipment, and financed the remaining 85% over a period of 48 months at an interest rate of 7.9% .

The following is a schedule of future minimum lease payments under the capital leases as at September 30, 2010:

15.     ASSET RETIREMENT OBLIGATIONS

15.     ASSET RETIREMENT OBLIGATIONS (continued)

Asset retirement obligations allocated by mineral properties are as follows:

During the year ended December 31, 2009, 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 $6.1 million, which has been discounted using a credit adjusted risk free rate of 8.5%, of which $1.6 million of the reclamation obligation relates to the La Parrilla Silver Mine, $2.0 million of the obligation relates to the San Martin Silver Mine, and $2.5 million relates to the La Encantada Silver Mine. 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 the applicable laws and regulations. Such changes will be recorded in the accounts of the Company as they occur.

16.    OTHER LONG TERM LIABILITIES

In 1992, El Pilon entered into a contract with a Mexican bank, whereby the bank committed to advance cash to El Pilon in exchange for silver to be delivered in future instalments. The bank failed to advance the fully agreed amount, and El Pilon therefore refused to deliver the silver. El Pilon sued the bank for breach of contract. The Company believes it will retain the advance received from the bank, but the ultimate outcome is uncertain. The aggregate potential liability including interest and penalties amounts to $776,191 (December 31, 2009 - $753,657).

In September 2010, the Company entered into an agreement to acquire an additional 15 hectares of surface rights at Quebradillas for total consideration of $348,710 (4.2 million Mexican pesos), of which $39,277 (476,000 Mexican pesos) was paid upfront and the remaining $309,433 (3.8 million Mexican pesos) is payable over 25 monthly instalments of $12,377 (150,000 Mexican pesos). At September 30, 2010, the long-term portion of this liability was $167,792.

17.    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.

18.     COMMITMENTS

The Company is obligated to make certain mining property option payments as described in Note 7, in connection with the acquisition of its mineral property interests.

18. COMMITMENTS (continued)

The Company has office lease and annual operating costs commitments as follows:

The Company provided a deposit of one month of rent equaling $20,151.

As at September 30, 2010, the Company is committed to construction contracts of approximately $0.4 million (US$0.4 million) (December 31, 2009 - $2.1 million or US$2.0 million) relating to the completion of the induction furnaces installation project at the La Encantada Mine.

The Company is committed to making severance payments in the amount of approximately $2.1 million, (December 31, 2009 - $1.9 million), subject to certain adjustments, to four officers in the event of a change of control of the Company.

19.     NON-CASH FINANCING AND INVESTING ACTIVITIES

20.     SUBSEQUENT EVENTS

Subsequent to September 30, 2010: