(Figures in millions of constant pesos)

• Billed sales hit a record of US$439.6 million in the quarter, rising +13.6% over the same quarter of last year.
• Gross income was up +11.8%, operating income +10.7%, and EBITDA +10.1% in the same period; all of these are quarterly records.
• Net income reached a quarterly record, with earnings of Ps548.7, vs. Ps357.1 in the first quarter of 2004.
• Refined silver production also reached a new record of 22.0 million ounces in the first quarter.
• The company completed its sale of the Mezcala gold project in Guerrero to Goldcorp (WheatonRiver) for US$70.0 million.

1.- EXECUTIVE SUMMARY

In the first quarter of 2005, gross income was Ps1,356.3, EBITDA totaled Ps952.6 and Operating Income came to Ps641.2, rising considerably by +11.8%, +10.1% and +10.7%, respectively, over the same period of last year.All of these are quarterly records.

Net income also hit a quarterly record of Ps548.7 compared to Ps357.1 in the first quarter of 2004; an increase of 53.6 percent.

Billed sales came to Ps4,930.7 (not including the results of metals and foreign-exchange hedging) rising +13.6%; this amount, equivalent to US$439.6 million, is a new sales record in dollar terms for a quarter.

The record results of this first quarter continue the clear trend toward improvement began in the second quarter of last year, as shown in the table below:

		Pesos
	Billed Sales (*) Gross income EBITDA Operating Income Net income     2nd. quarter of 2004 $4,209.8 $1,019.0 $629.3 $331.1 $80.2     3rd. quarter 4,003.4 1,066.4 696.8 398.2 218.8     4th. quarter 4,328.5 1,238.0 853.0 560.9 394.7     1st. quarter of 2005 4,930.7 1,356.3 952.6 641.2 548.7

(*) Not including results of metal and foreign-exchange hedging.

This quarterly results benefited from:
(i) higher quotations on zinc (US$0.5973 per pound, +23.0% vs. the first quarter of 2004), lead (US$0.4440 per pound, +15.9%), Gold (US$427.23 per ounce, +4.6%) and Silver US$6.99 per ounce, +4.2%);
(ii) higher sales volume of refined metal: Gold +16.6%, Silver +4.2% and zinc +4.0%;
(iii) higher average exchange rate (Ps11.1821 per dollar, +1.7%) favoring sales in peso terms; and
(iv) lower electricity costs (US$0.0479 per kwh, -9.6%).

Because the company purchased more metal to complement the production from its own mines, and because of higher metals prices and a higher average exchange rate, the cost of goods sold rose by +17.5%.However, the rise in metals prices had a positive impact on treatment fees for concentrates charged to third parties, because of the impact on the price scale.

Similarly, investment in exploration rose 76.9% because of a higher rate of exploration at Francisco I. Madero, Fresnillo, La Herradura, Pecobre and some regional exploration in Mexico.

Total financing cost in the first quarter was a charge of Ps45.6, compare to Ps5.4 in the same period of last year. The change is attributed to the fact that foreign-exchange gains were Ps29.3 higher in 2004 because the peso strengthened more against the dollar, and a lower inflation index in this first quarter, resulting in lower monetary position earnings.

One outstanding aspect of this past quarter was the proceeds of the sale of the Mezcala gold project in the state of Guerrero. Peñoles decided to sell this property to Goldcorp (WheatonRiver), since despite its identified reserves of 2.4 million ounces of gold, the future growth of this property was limited by its location between the Los Filos and Nukay ore deposits, both owned by WheatonRiver. Goldcorp paid US$70.0 million for the assets; however, net revenues from exploration and development were Ps548.2.Net income would have been Ps333.8, excluding this extraordinary event.

As a result of these revenues, income tax rose along with minority interest, since Newmont Gold owned 44% of Mezcala.

The following table sums up these results:

		% change
	1Q05 1Q04 4Q04 vs. 1Q04 vs. 4Q04     Net Sales (*) $4,915.6 $4,241.0 $4,319.7 +15.9 +13.8     Gross earnings 1,356.3 1,213.0 1,238.0 +11.8 +9.6     EBITDA 952.6 865.3 853.0 +10.1 +11.7     Operating income 641.2 579.1 560.9 +10.7 +14.3     Total financing cost 45.6 5.4 (7.5) +744.4 n/a     Net income 548.7 357.1 394.7 +53.6 +39.0

(*) Includes metal and exchange-rate hedging gains

On the operating side, the results of the metals and chemicals businesses helped the company to obtain the above-mentioned financial results. The lead-silver refinery treated 3.8% more material, and the zinc refinery 7.0%, both because of greater operating continuity and the availability of concentrates and materials, as well as a constant supply of electricity from Termoeléctrica Peñoles. This brought higher production volume of refined gold (+15.3%), zinc (+6.0%) and silver (+2.5%) In the case of refined silver, volume hit a quarterly record 22.0 million ounces.In magnesium oxide, production advanced by +47.9%, preparing to supply a higher demand for refractory grade, caustic and electrofused product.

In the case of the mining business, the production of gold content rose 8.5% due to higher grades at the La Ciénega and La Herradura mines.Silver production dropped -5.8% due to the exploitation of lower-grade areas at the Fresnillo mine.Nevertheless, as the preparation of cuts to supply the recent capacity expansion continues, silver production will rise steadily.As for lead production, lower grades at the Naica mine caused a decline of -3.6%.At this mine in particular, intensive geological studies are under way in order to identify new mineralized areas.

The company expects the startup of new capacity at the Fresnillo and Sabinas mines in late 2004, and at the La Ciénega mine, which will begin operations in the second quarter of this year--to offset the slight drop in production of all metals in the first quarter.

Comparing the results of the current quarter against those of the immediately preceding quarter (4Q04), there were also substantial improvements.Net sales rose +13.8%, spurred on mainly by higher sales volume.Gross income, operating income and EBITDA rose by +9.6%, +11.7% and +14.3% respectively.Net earnings totaled Ps548.7 in the first quarter of 2005, rising +39.0% because of the increase in gross earnings and the extraordinary effects of the Mezcala gold project sale.

In March 2005, Peñoles reached an agreement with the Canadian mining firm Agnico-Eagle Mines Ltd. Regarding the Pinos Altos gold project in the state of Chihuahua, Mexico. Agnico-Eagle will invest US$2.8 million in evaluating and confirming reserves for the project over a period of seven months.Once the assessment is complete, Agnico-Eagle will have the option of acquiring the project for US$65.0 million. Although Pinos Altos has high-quality deposits, its identified volume is not enough to meet Peñoles' investment criteria for this size of operation.

At the close of the period, Peñoles reported a total debt of US$516.5 million.The primary components of this debt were:
(i) a private offering in 1997 for US$380 million, at a fixed rate of 8.25%, and which will begin repayment in 2006 through quarterly payments of US $15.2 million; and
(ii) US$94.0 million drawn from a total US$155.0-million credit for building the Milpillas copper project.

In the current quarter, resources generated by operations totaled Ps1,178.9, an increase of +34.7% over the first quarter of 2004, due mainly to higher operating results and a slight decline in working capital.In addition, the company invested Ps216.9 million during the quarter in property, plant and equipment, mainly for building the Milpillas project, and expanding capacity at La Ciénega.At the close of the period, the company had Ps1,900.2 in cash on hand, equivalent to US$168.2 million.

The company's most important projects continue to advance on schedule. These include:
(i) capacity expansion at the La Ciénega mine (gold - Durango), from 133,510 to 164,890 ounces of gold a year (+23.5%), slated for startup in the second quarter of 2005; and
(ii) construction of the Milpillas copper project in Sonora, which will begin operations in the fourth quarter of 2005. Production at this mine is expected to average 55,000 metric tons of fine copper per year.

2.- ECONOMIC ENVIRONMENT AND METALS PRICES

	1Q04 4Q04 1Q05     Inflation in the period (%) 1.57 1.76 0.69     Exchange rate (pesos/dollar):       Close 11.1540 11.2648 11.2942     Average 10.9923 11.3272 11.1821     Peso devaluation (%) at the close:     In the period -0.73 -1.28 +0.26     12 months +3.59 +0.26 +1.26     Devaluation-inflation spread (points):     In the period -2.30 -3.04 -0.43     12 months -0.64 -4.93 -3.02

	Quotations Gold ( US$/Oz) Silver ( US$/Oz) Lead ( US$cts/lb) Zinc ( US$cts/lb)     1st. quarter 2004 408.44 6.71 38.30 48.54     2nd. quarter 2004 393.14 6.25 36.78 46.61     3rd. quarter 2004 401.29 6.49 42.29 44.44     4th. quarter 2004 433.97 7.25 43.48 50.51     Average 2004 409.21 6.68 40.21 47.53     1st. quarter 2005 427.23 6.99 44.40 59.73     %Chge. 1Q2005 vs 1Q2004 +4.6 +4.2 +15.9 +23.0     %Chge. 1Q005 vs 4Q2004 -1.6 -3.6 -2.1 +18.2     Mining Division share of sales 19.6% 36.9% 7.0% 32.1%

Remarks on key trends in the quarter:

Gold: quotations were favored in the first quarter by financial market uncertainty over the threat of terrorist attacks, the dollar's weakness against the euro as rumors circulated that the Federal Reserve has struggling to sustain the current-account deficit, and the diversification of central bank reserves, most of which are denominated in dollars.

Silver: prices were strong on increased interest among speculators on the Comex, and benefited also from strong prices and gold and industrial metals, because of its dual nature as both a precious metal and a base metal.

Lead: during the quarter, this metal was encouraged by strong performance among industrial metals and firm fundamentals. According to the International Lead and Zinc Study Group (LAZSG), lead faced a deficit in 2005, compared to a surplus in 2003, and also drew strength from cold weather in some heavy battery-consuming regions. Inventories continued to trend downward, which added further support.

Zinc: throughout the period, zinc prices were helped by various factors, including the ongoing decline in inventories, strong performance of industrial metals, and interest among funds.During the quarter, the Zhuzhou refinery in China cut back production due to a scarcity of electricity, and Japan announced the shutdown of the Toyoha mine.In addition, positive remarks from analysts regarding strong demand for this metal in the American galvanized steel industry gave it more support.

3.- OPERATING RESULTS

		Production Volume
	1QO4 4Q04 1Q05     Mining Division:     Ore milled (Mton) 1,786 1,963 1,939     Stacked deposited(a) (Mton) 2,038 2,139 2,076     Gold (kg) 2,623 2,673 2,846     Silver (ton) 353.0 372.6 332.4     Lead (ton) 15,179 13,801 14,635     Zinc (ton) 52,056 52,163 52,737     Copper (ton) 3,589 2,297 3,072     (a) La Herradura: open-pit mine.     Metals & Chemicals Division:     Gold (kg) 6,813 5,489 7,856     Silver (ton) 667.5 612.6 684.0     Lead (ton) 36,535 31,456 36,512     Zinc (ton) 56,254 62,473 59,641     Copper (ton) 2,346 2,090 2,132     Cadmium (ton) 233 226 222     Bismuth (ton) 250 260 250     Sodium sulfate (ton) 149,500 151,500 149,500     Magnesium oxide (ton) 11,873 20,010 17,558     Ammonium sulfate (ton) 57.929 52,044 43,797     Magnesium sulfate (ton) 7,300 4,300 3,450

Mining Division (metallic content in concentrates and other materials):

*Change 1Q05 vs. 1Q04:
- Gold (+8.5%): higher grade at La Ciénega and La Herradura.
- Silver (-5.8%): mainly at Fresnillo due to lower grade, offset in part by higher milling due to capacity expansion.
- Lead (-3.6%): lower milled ore and grade at Naica.

*Change 1Q05 vs. 4Q04:
- Gold (+6.5%): higher grade and rich solution treated at La Herradura.
- Silver (-10.8%): lower milled ore and grade at Fresnillo.
- Lead (+6.0%): higher grade at Sabinas and Francisco I. Madero, offset by lower grade at Fresnillo and Naica.

Metals division (production of refined metal):

*Change 1Q05 vs. 1Q04:
- Gold (+15.3%): higher receipts of content-rich semi-processed materials
- Zinc (+6.0%): operating continuity.
- Magnesium oxide (+47.9%): to supply a higher demand for refractory grade, caustic and electrofused product in the domestic and European markets.
- Ammonium sulfate (-24.4%): due to inventory control at Met-Mex and lower sales to the primary sector.
- Magnesium sulfate (-52.7%): lower crystallization potential in the brine, a corrective shutdown, and scarcity of raw materials.

*Change 1Q05 vs. 4Q04:
- Gold (+43.1%): higher direct entry of rich concentrates to the refinery.
- Silver (+11.6%): higher entries of content-rich concentrates from third parties to the lead foundry.
- Lead (+16.1%): higher entry of content-rich concentrates and operating continuity.
- Magnesium oxide (-12.3%): to adjust production to demand from the market mainly for refractory and caustic magnesium.
- Ammonium sulfate (-15.8%): due to inventory controls at the Met-Mex foundry plant.
- Magnesium sulfate (-19.8%): due to lower crystallization potential in the brine.

4.- FINANCIAL RESULTS

A) Comparison of results from first quarter 2004 vs. first quarter 2004:

	(Millions of pesos) 1Q05 1Q04 Chge. ($) % Chge.     Net sales (*) $4,915.6 $4,241.0 674.6 15.9     Gross income 1,356.3 1,213.0 143.3 11.8     Gross margin 27.6% 28.6%     EBITDA 952.6 865.3 87.3 10.1     EBITDA margin 19.4% 20.4%     Operating income   641.2 579.1 62.1 10.7     Operating margin   13.0% 13.7%     Net income   548.7 357.1 191.6 53.6     Net margin 11.2% 8.4%

(*) Includes metal and exchange-rate hedging gains.

The main changes are discussed below:

Higher Net sales, +Ps674.6 (+15.9%) rising from Ps4,241.0 to Ps4,915.6. The increase breaks down as follows:
a) Higher prices +Ps480.0, on virtually all products sold;
b) Higher sales volume +Ps222.3, due to higher sales of Gold, Silver and zinc, as well as concentrates from the Mining Division to third parties, which offset lower lead sales due to lower availability of the product;
c) Lower losses from metals and exchange-rate hedging, +Ps84.9;
d) Higher average exchange rate +Ps65.6; and
e) Effect of restating 2004 figures in pesos of the current period, -Ps178.2.

In dollar terms, net sales came to US$438.3 million, including record (billed) sales of Ps439.6 and hedging losses of US$1.3 million.

Higher cost of goods sold, +Ps531.3 (+17.5%) resulting from:
a) Higher production costs, +Ps117.8, due to higher energy costs (higher unit costs and consumption of coke, as well as higher unit costs on diesel and fuel oil), higher costs on direct materials at the Mining Division, and increased corrective maintenance performed on equipment inside the mine and reserve adjustment;
b) Higher Metal costs--net of treatment fees--+Ps411.0, mainly due to higher volume, metals prices and the average exchange rate on metals purchased form third parties; and
c) Inventory movements, consolidation and restatement effects, +Ps2.5.

Because the rise in net sales (+Ps674.6) more than offset the rise in the cost of goods sold(+Ps531.3), Gross Earnings came to Ps1,356.3 increasing +Ps143.3 (+11.8%) in the period.

Operating expenses –excluding depreciation- totaled Ps403.7, an increase of +Ps56.0 (+16.1%) caused by:
* Higher exploration expenses, +Ps49.5 due mainly to work at Francisco I. Madero, Fresnillo, La Herradura and Pecobre; and
* Higher SG&A expense, +Ps6.5.

Because the increase in gross earnings offset the slight increase in operating expenses, EBITDA rose to Ps952.6, an increase of +Ps87.3 (+10.1%).

An increase of +Ps25.1 in depreciation, amortization and depletion was primarily the result of capacity expansions at Fresnillo and Sabinas.

With EBITDA rising (+Ps87.3), and offset in part by the increase in depreciation charges, (+Ps25.1), operating income increased +Ps62.1, to 13.0% of sales.

Total financing cost came to Ps45.6, above the 2004 figure of Ps40.2. The increase was the result of:
a) A decline in foreign-exchange gains,-Ps29.3, since in the first quarter 2005 these gains totaled Ps4.1, compared to a Ps33.4 benefit in the same quarter of 2004. Foreign-exchange gains were affected in this quarter by the peso's depreciation of Ps0.0294 per dollar, compared to an appreciation of Ps0.0820 in 2004;
b) Lower interest expense, +Ps17.0; and
c) A lower monetary position benefit -Ps27.9, chiefly the result of a lower inflation index.

On the other expenses (revenues) line, the company reports revenues of Ps548.1, compared to the 2004 gain of Ps19.9.Most of the other revenues in the period came from the sale of the Mezcala gold project in Guerrero to Goldcorp-WheatonRiver, for a net amount of Ps548.2.

The income tax and profit-sharing provisions (net) line shows a charge of Ps395.5, a growth of +Ps187.7 over the same period of 2004. The change was the result of pre-tax earnings of Ps1,143.6 in 2005, compared to only Ps593.6 in the year-earlier period.

Equity in the results of unconsolidated associates dropped by -Ps4.4, mostly because of the proportional consolidation of results from the Coahuila-Durango line.

On the minority interest line, the company reports earnings of Ps194.1, compared to Ps27.8 in the same period of last year. The increase came mainly from El Bermejal, a joint venture with Newmont Gold, in the sale of the Mezcala gold project.

B) Comparison of results: first quarter of 2005 vs. fourth quarter of 2004:

	(Millions of pesos) 1Q05 4Q04 Chge. ($) % Chge.     Net sales (*) $4,915.6 $4,319.7 595.9 13.8     Gross income 1,356.3 1,238.0 118.3 9.6     Gross margin 27.6% 28.7%     EBITDA 952.6 853.0 99.6 11.7     EBITDA margin 19.4% 19.7%     Operating income   641.2 560.9 80.3 14.3     Operating margin   13.0% 13.0%     Net income   548.7 394.7 154.0 39.0     Net margin 11.2% 9.1%

(*) Includes metal and exchange-rate hedging gains.

The principal changes are discussed below:

Net sales totaled Ps4,915.6 rising +Ps595.9 (+13.8%), as follows:
a) Higher sales volume +Ps587.3, primarily of Gold, Silver and lead (increased product availability), and higher sales of concentrates from the Mining Division to third parties;
b) Higher prices, Ps96.7, primarily on zinc and lead;
c) Higher losses from metals and exchange-rate hedging, -Ps6.3;
d) Effect of restating 2004 figures in pesos of the current period, -Ps31.5.
e) Lower average exchange rate ($11.1821 vs $11.3272 per dollar) -Ps50.3.

In dollar terms, net sales came to US$438.3 million, including record (billed) sales of Ps439.6 and hedging losses of US$1.3 million.

The cost of goods sold increased by Ps477.6, resulting from:
a) Higher Metal costs--net of treatment fees--+Ps570.7, mainly due to higher prices metals purchased form third parties and lower revenues from the treatment of concentrates for third parties at the lead foundry;
b) Lower production costs, -Ps83.0 (-5.2%), due to lower coke costs, lower charges for raw materials, and less operating materials used at the Mining Division; and
c) Inventory movements, consolidation and restatement effects, -Ps10.1.

Because the rise in net sales (+Ps595.9) more than offset the rise in the cost of goods sold(+Ps477.6), Gross Earnings increased by Ps118.3 in the period.

Operating expenses –excluding depreciation- totaled Ps403.7, an increase of +Ps18.7, caused by:
* Higher SG&A expense, +Ps19.4, because of increased professional fees, memberships and subscriptions; and
* Lower exploration expenses, -Ps0.7.

Because the increase in gross earnings (+Ps118.3) offset the slight increase in operating expenses (+Ps18.7), EBITDA rose to Ps952.6, an increase of +Ps99.6 (+11.7%), and the EBITDA margin reached 19.4%.

Total financing cost was Ps45.6 in the period, compared to a gain of Ps7.6 in the fourth quarter of 2004.The change was the result of:
a) a decline in foreign-exchange gains,-Ps13.5 compared to the fourth quarter of 2004. The reduced f-x earnings in this quarter were due to the peso's relatively mild depreciation (Ps0.0294 per dollar) compared to its appreciation in 4Q04 (Ps0.1458 per dollar), which generated a foreign-exchange income;
b) higher interest expense (+Ps19.1); and
c) a lower monetary position benefit -Ps20.4, chiefly the result of a lower inflation index.

On the other expenses (revenues) line, the company reports revenues of Ps548.1, compared to the 4Q04 outlay of Ps312.5.Most of 2005 revenues came from the sale of the Mezcala gold project in Guerrero to Goldcorp-WheatonRiver, for a net amount of Ps548.2.The fourth-quarter 2004 charge stemmed from an adjustment in the book value of the Francisco I. Madero unit.

The income tax and profit-sharing provisions (net) line shows a charge of Ps395.5, compared to a credit of Ps114.9 in the preceding quarter. This change is due to pre-tax earnings of Ps1.143.6 in this most recent quarter, while in the fourth quarter of 2005 the company entered the effects on deferred taxes of a change in the income tax rate.

Equity in the results of unconsolidated associates was a loss of Ps5.2, mostly because of the proportional consolidation of results from the Coahuila-Durango line.

On the minority interest line, the company reports earnings of Ps194.1, compared to Ps12.7 in the previous quarter. The increase came mainly from El Bermejal, a joint venture with Newmont Gold, in the sale of the Mezcala gold project.


5.- PROJECTS.

The company's most important programs are still proceeding on schedule. These include:

(i) capacity expansion at the La Ciénega mine (gold - Durango) from 1433,510 to 164,890 ounces of gold per year (+23.5%), which is programmed for startup in the second quarter of 2005; and
(ii) construction of the Milpillas copper project in Sonora, which will start up in the fourth quarter of 2005.Production out of this mine will average 55,000 metric tons of fine copper per year.

6.- STOCKHOLDERS' MEETING AND BOARD OF DIRECTORS.

Pursuant to the resolution of the General Ordinary Stockholders' Meeting of April 13, 2005, owners agreed to pay a cash dividend of Ps1.26 per share on each of the 397,475,747 issued and outstanding shares, payable starting Monday, April 25 of this year.