Palmarejo Silver and Gold Corporation
TSX VENTURE : PJO

Palmarejo Silver and Gold Corporation

January 31, 2007 12:33 ET

Palmarejo Silver and Gold Corporation Development and Drilling Update

LONGUEUIL, QUEBEC--(CCNMatthews - Jan. 31, 2007) - Palmarejo Silver and Gold Corporation (TSX VENTURE: PJO) announces development and drilling updates on its projects located in the Temoris District, Chihuahua, Mexico.

PALMAREJO PROJECT DEVELOPMENT UPDATE

In summary:

- Earthworks for the processing facility well advanced and first concrete pour completed.

- Steel fabrication works on schedule with tank plate sections ready for delivery to site.

- Infrastructure development, including access roads and personnel camps, is progressing. Widening of the site access road is nearly complete

- Preparation of mine plan by Mine Design Associates is progressing

- Open pit development work scheduled to start in mid 2007.

During the December 2006 quarter, project development work has continued including:

Engineering, Procurement, Design and Construction Management

By the end of the year, the earthworks for the upper and lower plant sites were well advanced and the first concrete pour had been completed for the leach tank foundations.

Steel fabrication work in Chihuahua is progressing well and is on schedule. Tank plate sections have been rolled and are ready for transport to site once the concrete tank foundations have been completed.

Fabrication of the thickeners (6) and cyclone classifiers have been completed and are ready to ship. Other major orders such as the electrowinning circuit, intertank screens, vibrating screens, transformers, tank agitators, slurry pumps and filter presses are nearing completion.

Tenders for the pipe work, electrical and mechanical installation are to be awarded next quarter.

The mill modification work is in progress for the ball and SAG mills, with the major work being carried out in South Africa involving the cutting and flanging of the mill shells to enable transportation to the Palmarejo project.

Infrastructure

Widening and modification of the 100 kilometer section of road between San Rafael and Palmarejo has been slowed by bad weather conditions. The work is now scheduled for completion by February 2007.

Construction of the tailings dam and environmental control dam (also part of the water supply system) is scheduled to commence in the following quarter now that the major rainfall period has passed.

The tender for the construction of the personnel camp has been awarded and earthworks commenced during the quarter. Major construction materials have been received on site.

Mining

Based on the preliminary results from the mine plan which is being prepared by Mine Design Associates (MDA) in Reno, Nevada, the supply of equipment required for open pit mining of the deposit has been determined with equipment suppliers to enable pit development work to commence mid 2007.

Tender documents have been prepared and are scheduled to be issued to prospective contractors in the near future.

Permits

The construction of the explosives magazines is scheduled to commence by the end of the next quarter. Completion of the magazines will allow the explosives permit application to be submitted to the Mexican military.

DRILLING UPDATE

Palmarejo

Drilling at the Palmarejo project during the December 2006 quarter was carried out with a single RC rig at the San Juan de Dios and Cerro de Los Hilos prospects. No drilling was completed on either the La Blanca or La Prieta structures. Since exploration drilling began at the Palmarejo project in November 2003, a total of 102,853 metres of reverse circulation ('RC') drilling and 39,122 metres of diamond core drilling have been completed.

Cerro de Los Hilos, located 2.2 kilometers south of Palmarejo, occurs on the Los Hundidos structure 500 metres north of the main Los Hundidos underground workings. Parallel arrays of narrow veinlets (5 to 30 cm wide) were exploited historically to depths of 1.5 to 2.0 metres in narrow slots over a 100 metre wide zone in the hanging wall of the Los Hundidos fault.

Six RC holes for 1,823 metres were drilled at Cerro de Los Hilos during the quarter. Many of the drill holes encountered wide intervals of barren to weakly anomalous sheeted quartz vein material. No further work is planned at Cerro de Los Hilos at this stage.



Details of the drill hole locations not previously reported are as
follows:
--------------------------------------------------------------------------
Total
Hole Northing Easting Elevation Azimuth Dip RC Core Depth
(m) (degrees) (Degrees) (m) (m) (m)
--------------------------------------------------------------------------
CHDH005# 3029729 756639 960 200 -70 347.47 0.00 347.47
--------------------------------------------------------------------------
CHDH006 3029729 756539 960 200 -50 304.80 0.00 304.80
--------------------------------------------------------------------------


Assay Results

Assay results for these drill holes not previously reported follow. Intercepts are generally perpendicular to the mineralized structures and therefore represent true widths.



-------------------------------------------------------------------------
Hole From To Interval Au Ag AuEq Comments
(m) (m) (m) (g/t) (g/t) (g/t)
-------------------------------------------------------------------------
CHDH005 50.29 51.81 1.52 1.19 23 1.5 Stockwork quartz
and 187.45 188.97 1.52 0.92 5 1.0 Stockwork quartz
-------------------------------------------------------------------------
CHDH006 166.12 167.64 1.52 1.15 0 1.2 Stockwork quartz
and 213.36 214.88 1.52 1.12 0 1.1 Stockwork quartz
-------------------------------------------------------------------------


Notes:
- Assays have been calculated using a 1.0 g/t AuEq cut off, no top cut and a gold to silver price ratio of 1:60; metallurgical recoveries and smelter returns are assumed to be 100%.

- QVBX equals quartz vein breccia.

- Internal voids (historic underground workings) and have been excluded from the reported mineralized intervals.

- # equals previously reported and included for completeness.

- Bulked intercepts are calculated by weight averaging the grades between the given depths and incorporating a maximum dilution of 2 metres internal waste at less than the 1.0 g/t AuEq cut-off.

San Juan de Dios is located 3 kilometers southeast of Palmarejo along the continuation of the Palmarejo mineralized corridor. A 15 RC hole program was drilled for 2,560 metres during the quarter. The aim of this program was to test the mineralization potential down-dip and along strike of well mineralized intercepts in the vicinity of the old workings and to follow-up mineralization intersected in PMDH639 (6.10 metres @ 12.25 g/t Au and 971 g/t Ag) at the most northerly extent of the structure towards La Finca.

The best assay results from the program are summarized below. Intercepts are generally perpendicular to the mineralized structures and therefore represent true widths.

- 3.05 metres @ 5.93 g/t Au and 309 g/t Ag (11.1 g/t AuEq) SJDH001

- 1.52 metres @ 2.70 g/t Au and 257 g/t Ag (7.0 g/t AuEq) SJDH005

- 1.52 metres @ 8.48 g/t Au and 14 g/t Ag (8.7 g/t AuEq) SJDH012

- 3.05 metres @ 1.57 g/t Au and 119 g/t Ag (3.6 g/t AuEq) SJDH013

Details of the drill hole locations are available at the following link: http://www.ccnmatthews.com/docs/pjo0131.pdf

Notes:

- Assays have been calculated using a 1.0 g/t AuEq cut off, no top cut and a gold to silver price ratio of 1:60; metallurgical recoveries and smelter returns are assumed to be 100%.

- QVBX equals quartz vein breccia.

- Internal voids (historic underground workings) and have been excluded from the reported mineralized intervals.

- # equals previously reported and included for completeness.

- Bulked intercepts are calculated by weight averaging the grades between the given depths and incorporating a maximum dilution of 2 metres internal waste at less than the 1.0 g/t AuEq cut-off.

The San Juan de Dios structure appears to be only narrow and weakly mineralized except for a small pipeshaped zone localized around the old workings. No further drilling is planned at San Juan de Dios at this time.

Guadalupe

Since exploration drilling began at the Guadalupe-Las Animas project in June 2005, a total of 12,047 metres of reverse circulation ('RC') drilling and 15,341 metres of diamond core drilling has been completed. During the December 2006 quarter 17 holes were drilled for 2,211 metres of RC and 4,105 metres of diamond core. Reverse circulation metres were significantly less than the previous quarter as a result of the RC rig spending three weeks re-entering old drill holes as part of a downhole surveying program completed at Guadalupe.

Emerging clavos have now been encountered at depths below 1,150 metres elevation suggesting that they have a vertical extent on the structure of at least 200 metres. Follow up deep drilling concentrated on delimiting the depth and strike extent of the clavos at the Guadalupe and Guadalupe Norte prospects. Additional deep drilling is planned to further evaluate the depth potential of these clavos.

La Patria

Fifty five reverse circulation ('RC') holes and 19 diamond core holes, for a total of 8,767 metres and 4,917 metres respectively, have been completed since drilling began at La Patria in the beginning of 2006. During the December quarter, 16 holes were drilled for 586 metres of RC and 3,115 metres of diamond core drilling.

Quality Assurance

Palmarejo Silver and Gold Corporation has put in place a rigorous QA/QC program consistent with Canadian Securities Administrators National Instrument 43-101 ("NI 43-101") and using best industry practice. The QA/QC program is independently supervised by Keith Blair, Msc, PGeo of Applied Geoscience of Reno, Nevada. Elements of the program include chain of custody of samples, standard and blank samples submitted to ALS Chemex, with each batch of samples, and a check assay program on a proportion of sample pulps with a second laboratory. Results from the QA/QC program have to date been satisfactory.

Qualified Person

The technical information contained in this release was compiled in accordance with the Listing Rules of the Australian Stock Exchange Limited, by a competent person who is a corporate member of the Australasian Institute of Mining and Metallurgy and who has consented to the inclusion of such technical information in the form in which it appears in this release. The competent person is Kenneth M. Phillips, geologist of VOP Mining Services Pty Ltd who is also a director of Bolnisi Gold NL, the Company's majority shareholder. Mr. Phillips is a qualified person under NI 43-101.

Forward Looking Statement

Some of the statements contained in this press release are forward-looking statements. Forward-looking statements are not historical facts and are subject to a number of risks and uncertainties beyond the Company's control, including statements regarding resource estimate, potential mineralization, exploration results, completion of work program and studies, and future plans and objectives of the Company. Resource exploration, development and operations are highly speculative, characterized by a number of significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate, including, among other things, unprofitable efforts resulting not only from the failure to discover mineral resources but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. There can be no assurance that such statements will prove to be accurate and actual results could differ materially from those suggested by these forward-looking statements for various reasons discussed throughout the Company's Annual Information Form dated October 12, 2006 and particularly in the section entitled "Risk Factors".

For more information about the Company and its projects, please refer to the NI 43-101 Technical Report dated October 1, 2006 and other documents available on SEDAR (www.sedar.com) or via the Company's website at (www.palmarejogold.com).

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • PALMAREJO SILVER AND GOLD CORPORATION
    James Crombie
    President & CEO
    450-677-2253
    450-677-2601 (FAX)
    jcrombie@pjogold.com
    or
    PALMAREJO SILVER AND GOLD CORPORATION
    Gerri Paxton
    Manager, Investor Relations
    450-677-2054
    450-677-2601 (FAX)
    gpaxton@pjogold.com