• Billed sales (Ps11,325.7), gross income (Ps2,812.1) and EBITDA (Ps2,227.0) for the first quarter all rose, up by +51.5%, +37.5%, and +42.1%, respectively, reaching record levels for a quarter.
• Production of refined silver (26.9 million ounces) and sales of refined silver (26.7 million ounces) and sodium sulfate (156,504 metric tonnes) all reached quarterly records as well.
• In the general ordinary meeting, our shareholders approved payment of a cash dividend of Ps5.5 per share.

1.- EXECUTIVE SUMMARY

In the first quarter of 2007, Peñoles reported record sales. Billed sales--excluding the results of metals and exchange-rate hedging--totaled Ps11,325.7 (US$ 1,025.8 million) and rose +51.5% over the same quarter of 2006; gross income was Ps2,812.1 (US$254.8 million), an increase of +37.5%, and EBITDA was Ps2,227.0 (US$201.9 million) rising +42.1%. Operating income came to Ps1,842.3 (US$167.0 million) +45.5% higher than in 1Q06.

Excluding extraordinary items in both periods, particularly from March 2006 when the company entered extraordinary income from the sale of the Pinos Altos gold project, net income in the first quarter of 2007 would be Ps1,045.6, an increase of +42.6% compared to the first quarter of 2006; including the extraordinary items, net income totaled Ps995.3 lower than the first-quarter 2006 profit of Ps1,189.5.

The following are the operating and market aspects that positively impacted the company's results for the quarter:
(i) Average prices of gold (US$650.3 per ounce), silver (US$13.29 per ounce), lead (US$0.8104 per pound) and zinc (US$1.5675 per pound) were all higher than in 2006, as follows: gold +17.4%, silver +37.1%, lead +43.9% and zinc +54.1%;
(ii) Higher sales volume of refined gold +19.8%, refined silver +11.3%, refined zinc +3.6%, sodium sulfate +8.3%, magnesiumsulfate +8.7% and ammonium sulfate +19.5%. The company sold a total of 801 tonnes of cathode copper from the Milpillas mine;
(iii) Higher revenues from the metallurgical complex, which processed a higher volume of concentrates from third parties; y
(iv) Lower unit cost of natural gas -15.2% and metallurgical coke -2.4%;
(v) Record production volume of refined silver (26.9 million ounces) and record sales volume of refined silver (26.7 million ounces) and sodium sulfate (156,504 tonnes);

In addition, expirations of our metals hedges generated an opportunity cost of Ps720.1 (vs. Ps260.1 in 1Q06), primarily because of a sharp rise in metal quotations. The expired contracts were taken out in earlier years to guarantee the company's future margins. However, because more of our mining production was unhedged, the company has benefited from higher metals prices on the rest of its volume.

Besides this, the unit cost of electrical energy received from the Peñoles thermoelectric plant was US$0.668 per KwH, 15.2% higher than the average in the first quarter of 2006. This was because the plant conducted its annual maintenance program in the first quarter of 2007.However, the cost of the period was US$4.6million less than what would have been paid to the Federal Electricity Commission for the same amount of energy.

The cost of goods sold rose +50.7%, due to:
(a) The higher cost of metal content in concentrates and other materials purchased form third parties and fed into the Met-Mex metallurgical complex to complement production from our own mines.
(b) Higher production costs, due to the increased cost of contractors, operating materials, energy, maintenance and major repairs, and personnel costs.
Internal inflation for Peñoles, which is calculated based on the basic basket of its main raw materials, was 11.1%, much higher than the rise in the National Consumer Price Index in the same period (1.04%).This sharp increase was due to the rise in the cost of electrical energy, which accounts for 16.2% of production costs.

At the same time, however, higher metals prices improved the fees Peñoles charges for treating concentrates, because of its impact on the price scale, which partly offset the above-mentioned cost increases.

Our investment in prospecting rose +53.2% last year. This money was used in replacing and expanding the reserves of our mines in operation, and the discovery of new deposits in both Mexico and South America .

Total financing cost was Ps48.1 higher, due to:

1) A higher net financial loss, which rose by Ps52.9, due primarily to a higher average liability position in long-term debt (US$103.6mn) stemming from the restructuring of debt by Industrias Peñoles in the second quarter of 2006.

2) Net foreign exchange loss was Ps35.0 higher, because of the peso's devaluation against the dollar. At the close of the period, the exchange rate was Ps11.0507 per dollar, compared to Ps10.8755 at the close of 2006, a devaluation of 1.6%.

3) Higher net monetary position gains, an increase of Ps39.8 due to higher inflation (1.04%, vs. 0.87% in 2006) and a higher net liability monetary position.

The following table sums up these results:

	1Q2007 1Q2006 % de var.     Billed sales $11,325.7 $7,475.2 +51.5%     Net sales (*) $10,605.6 $7,215.7 +47.0     Gross income 2,812.1 2,045.2 +37.5     EBITDA 2,227.0 1,567.0 +42.1     Operating income 1,842.3 1,266.1 +45.5     Total Fin. Cost 79.2 31.1 +154.7     Other expenses (income) 98.8 (907.6) n/a     Net income w/oExtraordinaries 1,045.6 733.4 +42.6     Net income 995.3 1,189.5 -16.3

(*) Includes the results of metals and exchange-rate hedging.

As for the operating results, compared to the same period of the preceding year, our remarks are as follows.

In the Mining Business, metallic content was affected by lower production at Fresnillo, Sabinas and Naica.At Fresnillo, reduced production was the result of the exploitation of zones with lower grade, in order to take advantage of high metals prices, particularly on silver; at Sabinas, the reduction was due to the startup of the new lead-copper separation circuit, which produces cleaner concentrates and will allow for a gradual increase in production; and at Naica, production was affected by flooding problems at the start of the year that lowered the pace of production for four weeks. The mine is currently operating normally and at its capacity.

In the metals business, thanks to higher entries of concentrates and semi-processed materials rich in metal content, production of refined silver reached a record 26.9 million ounces, and production of refined gold rose +18.8%.

At the close of the period, Peñoles reported a total debt of US$667.5 million. This debt was made up primarily of the following long-term portions:
(i) US$102.3 million from a private placement in 1997.
(ii) US$377.0 million from a restructuring of debt in the second quarter of 2006.
(iii) US$150.0 million from a loan obtained at the end of 2004 to build theMilpillas copper project% .

In the first quarter of 2007, the flow of cash from operations totaled Ps1,520.2, +51.0% higher than in the same period of 2006. Among the main uses of these resources were :
(i) A Ps644.1 increase in working capital, primarily :
(a) An increase in inventories (Ps121.9) due to higher metals prices and the entry of materials rich in precious metal content and zinc concentrates.
(b) A reduction in suppliers (Ps701.6) for payments to metal shippers.
These effects were partly offset by a reduction in accounts receivable (Ps120.9), primarily in connection with recoveries of export portfolio.
(ii) Investment in property, plant and equipment totaling Ps342.7, for replacement of equipment and projects, primarily at Fresnillo, Met-Mex, La Ciénega, Penmont, Sabinas, Tizapa and Química del Rey .

We continued prospecting in the Fresnillo District in Zacatecas, and at the El Saucito project in particular we made progress toward building the prospecting ramp that will allow us to study mineralized bodies more precisely. To date we have identified resources of more than 1.2 million equivalent ounces of gold.At the Juanicipio project, in partnership with Mag Silver of Canada, we have identified resources equivalent to more than 50 million ounces of silver.

2.- ECONOMIC CLIMATE AND METALS PRICES

	1Q06 4Q06 1Q07   Inflation (%) :   ..In the period 0.87 1.55 1.04   ..12 months 3.42 4.05 4.24   FX rate (pesos/dollar) :   ..Close of period 10.9510 10.8755 11.0507   ..Average 10.5839 10.8874 11.0121

	Gold ( US$/Oz) Silver ( US$/Oz) Lead ( US$cts/lb) Zinc ( US$cts/lb)     1st quarter 2006 553.98 9.70 56.33 101.70     2nd quarter2006 627.40 12.22 49.91 149.33     3rd quarter 2006 621.50 11.65 53.96 152.56     4th quarter2006 614.47 12.59 73.80 190.67     Average2006 604.34 11.54 58.50 148.56     1st quarter 2007 650.27 13.29 81.04 156.75     % Chge. 1Q07 vs 1Q06 +17.4 +37.1 +43.9 +54.1     %Var. 1Q07vs 4Q06 +5.8 +5.6 +9.8 -17.8

Quarterly highlights :

Gold: Average quotations rose +5.8% in the quarter, compared to the fourth quarter of last year.This metal benefited from demand among physical consumers in India, interest on the part of speculative funds relating to the launch of the Exchange Traded Fund (ETF) in India, tensions between the U.S. and Iran over nuclear programs, a collapse at a mine owned by Anglogold in Tanzania, and low levels of sales by central banks belonging to the European Central Bank Gold Agreement (EGBGA).

Silver: Average quotations rose +5.6% from the fourth quarter of 2006 to the first quarter of 2007.Silver kept up its correlation with the gold market and industrial metals.

Lead: Average quarterly prices of this metal rose +9.8% from the fourth quarter of last year. Quotations were driven by an explosion at the Port Pirie refinery owned by Zinifex, Ivernia's announcement of the temporary suspension of lead shipments, low inventory levels on the LME (LondonMetal Exchange), strong fundamentals and technical problems at the MountIsa refinery in Australia, owned by Xstrata.

Zinc: Zinc: The average price of this metal fell -17.8% from the immediately preceding quarter.Zinc quotations were affected by a rise in LME inventories, liquidations resulting from a reshuffling of investment in this market, the reduction in the demand for this metal in the U.S.

3.- OPERATING RESULTS: PRODUCTION VOLUME

	Unidad 1T06 4T06 1T07     Mining Division :     Milled ore (Mton) 2,057 1,993 2,029     Deposited ore (a) (Mton) 1,931 2,639 2,925     Gold (kg) 2,950 2,822 3,213     Silver (ton) 375 324.9 343.2     Lead (ton) 16,550 13,665 12,764     Zinc (ton) 53,163 50,688 49,657     (a) La Herradura: open-cut mine     Metals and Chemicals Division :     Gold (kg) 10,880 11,668 12,921     Silver (ton) 755.8 778.5 836.5     Lead (ton) 36,640 31,487 34,105     Zinc (ton) 53,349 56,515 53,428     Sodium sulfate (ton) 150,000 155,500 149,000     Magnesium oxide (ton) 16,430 23,316 17,138     Ammonium sulfate (ton) 52,918 41,192 41,238     Magnesiumsulfate (ton) 8,200 47,00 7,100

Mining Division ( metallic content in concentrates and other materials):
* Change 1Q07 vs. 1Q06:
- Gold (+8.9%): higher milled ore at Penmont, higher grade and milled ore at La Ciénega and higher recovery at Tizapa.
- Lead (-22.9%): lower milled ore and grade at Naica, lower grade and recovery at Sabinas and lower grade at La Ciénega and Fresnillo.
- Silver (-8.5%): lower grade at Fresnillo, lower grade and recovery at Sabinas and La Ciénega and lower milled ore and grade at Naica.
- Zinc (-6.6%): lower milled ore and grade at Naica, lower grade and recovery at Sabinas and Fresnillo and lower grade at La Ciénega.

* Change 1Q07 vs. 4Q06 :
- Gold (+13.8%): higher milled ore and recovery at Penmont and Fresnillo and higher milled ore at La Ciénega.
- Silver (+5.6%): higher milled ore and recovery at Fresnillo, higher milled ore at Sabinas and higher milled ore and grade at Penmont and La Ciénega.
- Lead (-6.6%): lower milled ore at Naica.

Metals Division ( production of refined metal ):
* Change 1Q07 vs. 1Q06 :
- Gold (+18.8%): %): higher receipts of semi-processed content-rich materials at the lead foundry and lead-silver refinery.
- Silver (+10.7%): higher receipts of content in concentrates from third parties at the lead-silver refinery.
- Lead (-6.9): lower receipts of lead in bullion at the lead foundry.
- Ammonium sulfate (-22.1%): production declined because of a reduction in acid inventories in 2006, and higher receipts of solution.
- Magnesium sulfate (-13.4%): due to maintenance of the hydroxide reactor and delays in the arrival of equipment.


* Change 1Q07 vs. 4Q06:
- Gold (+10.7%): higher entries of content-rich concentrates at the lead foundry and at the lead-silver refinery.
- Lead : (+8.3%): in the fourth quarter of 2006, less lead was treated from semi-processed materials at the lead foundry, due to poor coke quality.
- Silver (+7.4%): higher entries of content in concentrates at the lead-silver refinery.
- Zinc (-5.5%): due to lower entries of content-rich concentrate, both from our own mines and from third parties, at the zinc refinery.
- Magnesium sulfate (+51.1%): Production volume was lower in the fourth quarter of 2006 because production had been stepped up in previous months due to a drop in brine during the cold season.
- Magnesium oxide (-28.2%): lower production due to an adjustment in the sales program and maintenance of the reactor.

4.- FINANCIAL RESULTS

A) Comparison of 1Q07 vs. 1Q06:

	( Millions of pesos ) 1Q07 1Q06 Chge.(Ps) % Chge .     Net sales (*) $10,605.6 $7,215.7 3,389.9 47.0     Gross income 2,812.1 2,045.2 766.9 37.5     Gross margin 26.5% 28.3%     EBITDA 2,227.0 1,567.0 660.0 42.1     EBITDA margin 21.0% 21.7%     Operating income 1,842.3 1,266.1 576.2 45.5     Operating margin 17.4% 17.5%     Net income 995.3 1,189.5 -194.2 -16.3     Net margin 9.4% 16.5%

(*) Includes gains from metals and FX hedges.

The following is an analysis of the main changes:

Net sales of Ps10,605.6 rose +Ps3,389.9 (+47.0%), which breaks down as follows:
a) Higher sales volume +Ps1,037.0 primarily of gold, silver, zinc, sodium sulfate, magnesiumsulfate and ammonium sulfate;
b) Higher prices +Ps2,414.4 on the majority of products sold;
c) Higher average exchange rate (Ps11.0121 vs Ps10.5839 per dollar) +Ps263.8;
d) Higher losses due to metals and FX hedging -Ps459.9; and
e) Effect of restating results in constant pesos of the current quarter and others+Ps134.6.

In dollar terms, net sales totaled US$960.6 million, made up of billed sales of US$1,025.8 million and hedging losses of US$65.2 million.

The cost of goods sold rose +Ps2,623.0 as follows:
a) Higher production costs, +Ps330.1 (+18.3%) due to the increased cost of contractors, electrical energy, operating material and maintenance on equipment inside the mine;
b) Higher Cost of metal--net of treatment fees--+Ps2,494.7 due to higher prices, a higher exchange rate and a higher volume of metals purchased from third parties; y
c) Inventory movements, restatement and consolidation effects, -Ps201.8.

Because the increase in net sales, +Ps3,389.9, was greater than the increase in the cost of goods sold, +Ps2,623.0, gross income improved by +Ps766.9 bringing the gross margin (in proportion to sales) to 26.5 percent.

Operating expenses--not including depreciation--totaled Ps585.1, rising +Ps106.9 as a result of:
a) Higher prospecting expenses, +Ps64.6 primarily at the Fresnillo, La Ciénega and La Herradura mines;
b) Higher SG&A expenses, +Ps42.3.

As a result of the rise in Gross income (+Ps766.9), offset slightly by higher operating expenses (+Ps106.9), EBITDA was Ps2,227.0, an increase of +Ps660.0 (+42.1%), and the EBITDA margin was 21.0 percent.

Due to higher EBITDA (+Ps660.0), offset partly by higher depreciation charges (+Ps83.8), Operating income increased +Ps576.2, to 17.4% of sales.

During the reported period, total financing cost was Ps79.2, higher than the 1Q06 charge of Ps31.1. The +Ps48.1 change was due to:
a) Higher net interest expense, +Ps52.9 resulting from an increase in interest on bank loans, and lower returns on bank deposits. The rise in interest expense was chiefly the result of a higher average position in long-term liabilities, resulting from the restructuring of IPSA debt in the second quarter of 2006;
b) Net foreign-exchange losses of Ps43.4 compared to a 2006 gain of Ps8.4, meaning a negative change of +Ps35.0; y
c) Higher net monetary position gains, -Ps39.8 mainly because of the rise in inflation ;

The other expenses (income) line showed a charge of Ps98.7 compared to a benefit of Ps907.8 in the first quarter of last year, which was related to the proceeds of the sale of Pinos Altos to Agnico Eagle.

Net income tax and profit-sharing provisions brought a charge of Ps552.9, which was -Ps192.3 less than in the same period of last year. The change was due to a drop in pretax earnings, to Ps1,664.3 in 1Q07 compared to the year-earlier income of Ps2,142.8.

Equity in the earnings of unconsolidated subsidiaries were -Ps4.8, improving by+Ps155.4 over the year-earlier loss of -Ps160.2, caused by better results from the companies in which Peñoles owns a minority stake.

Minority interest totaled Ps111.4 in 1Q07, compared to Ps47.9 in 1Q06, due to better results from Tizapa and La Herradura.

B) Comparison of results in 1Q07 vs. 4Q06:

	( Millions of pesos ) 1Q07 4Q06 Chge.(Ps) % Chge.     Net sales (*) $10,605.6 $9,992.7 612.9 6.1     Gross income 2,812.1 2,340.3 471.8 20.2     Gross margin 26.5% 23.4%     EBITDA 2,2227.0 1,834.9 392.1 21.4     EBITDA margin 21.0% 18.4%     Operating income 1,842.3 1,488.1 354.2 23.8     Operating margin 17.4% 14.9%     Net income 995.3 900.4 94.9 10.5     Net margin 9.4% 9.0%

(*) Includes results of metals and FX hedging.

Net sales totaled Ps10,605.6, an increase of +Ps612.9 (+6.1%), which was the result of:
a) Higher volume +Ps364.2 resulting from an increase in the sales volume de gold, silver, lead and magnesiumsulfate;
b) Higher prices +Ps63.4 on the majority of products sold; except for zinc and copper;
c) A higher average exchange rate +Ps111.2 (Ps11.0121 vs. Ps10.8874 per dollar);
d) Lower losses from derivatives trading (futures and options on metals and the exchange rate), +Ps222.4;
e) Effects of restating figures in constant pesos of the current quarter and others -Ps148.3.

The cost of goods sold rose Ps141.1, driven up by the increased cost of purchased metal stemming from higher quotations and a greater volume purchased (+Ps600.8); offset in party by higher revenues from concentrate treatment fees resulting from increased entries from third parties and with a lower `production costs, in particular for contractors, maintaining equipment inside the mine, natural gas, and shipping .

The rise in net sales (+Ps612.9) was greater than the increase in the cost of goods sold (Ps141.1), so gross income improved by +Ps471.8, and the gross margin (in proportion to sales) was 26.5 percent .

Operating expenses--not including depreciation charges--totaled Ps585.1, an increase of Ps79.7 resulting from :
a) Higher SG&A expenses, +Ps104.2.
b) Lower prospecting expenses, -Ps24.5, primarily due to a decline in prospecting activity at Tizapa and regional zones.

Driven by higher Gross income (+Ps471.8); and partly offset by a rise in operating expenses (+Ps79.7), EBITDA went from Ps1,834.9 to Ps2,227.0, an increase of +Ps392.1, and the EBITDA margin was 21.0 percent of sales.

Total financing cost was a charge of Ps79.2 for the first quarter, compared to a benefit of -Ps22.0 in the preceding quarter.The increase of +Ps101.2 was due to:
a) Lower net interest expense, -Ps65.9;
b) A +Ps91.6 change in net foreign-exchange results because in the first quarter, Peñoles accrued foreign-exchange losses of Ps43.4, compared to earnings of -Ps48.1 in the preceding quarter; y
c) Lower net monetary gains, +Ps75.5 because of a drop in the inflation index.

The other expenses line showed a charge of Ps98.7, compared to Ps59.7 in the previous quarter, due mainly to provisions for write-offs and a restatement of the value of fixed assets and mining work, and payment of donations.

The income tax and profit-sharing line showed a charge of Ps552.9, up from Ps488.5 in the preceding quarter. The rise in the charge for this quarter (+Ps64.4) was the result of an increase in pretax earnings, Ps1,664.3, compared to Ps1,450.5 in the fourth quarter of 2006.

Equity in the earnings of unconsolidated affiliates was a loss of Ps4.8, due to the recognition of losses in the companies in which Peñoles owns a minority stake.

Minority interest brought a profit of Ps111.4, compared to a loss of Ps38.1 in the preceding quarter, due to better results from Tizapa and La Herradura.

5.- PROJECTS

We continued prospecting in the Fresnillo District in Zacatecas, and at the El Saucito project in particular we made progress toward building the prospecting ramp that will allow us to study mineralized bodies more precisely. To date we have identified resources of more than 1.2 million equivalent ounces of gold.At the Juanicipio project, in partnership with Mag Silver of Canada, we have identified resources equivalent to more than 50 million ounces of silver.

6.- SHAREHOLDERS' MEETING

Pursuant to the resolution passed in the General Ordinary Shareholders' meeting on April 25, Peñoles will pay out a cash dividend of Ps5.50 per share on each of the 397,475,747 shares issued and outstanding, payable as of Wednesday, May 9, 2007.