Palmarejo Silver and Gold Corporation
TSX VENTURE : PJO

Palmarejo Silver and Gold Corporation

October 31, 2005 09:16 ET

Palmarejo Gold Corporation Announces its Results for the Financial Year Ending on June 30, 2005

LONGUEUIL, QUEBEC--(CCNMatthews - Oct. 31, 2005) - Palmarejo Gold Corporation (the "Company" or "Palmarejo") (TSX VENTURE:PJO) is pleased to report its results for the financial year ended June 30, 2005. The audited consolidated financial statements and related notes, and the management's discussion and analysis for the year ended June 30, 2005 are available through CCN Matthews website at www.ccnmatthews.com. They are also available on Palmarejo's website (www.palmarejogold.com) and on the Sedar's website (www.sedar.com).

Financial Results

For the 248-day period ended June 30, 2005, the Company incurred a loss of $4,265,000 or $0.14 per share. High loss per share are the result of a low basic and diluted weighted average number of common shares outstanding, a large number of the shares having been issued 101 days prior to the end of the period.

Interest income related to the average cash equivalent available to the Company for the period amounted to $73,000.

For the 248-day period, the Company incurred administrative expenses and business development of $139,000 and $127,000 respectively consist mainly office, travel and investors relation expenses.

Common shares issue expenses amounted to $1,624,000, net of $235,000 paid in cash and recorded in consolidated deficit.

Stock based compensation related to options granted to purchase common shares of the Company (see note 5c to the June 30, 2005 Consolidated Financial Statements) amounted to $2,488,000 for the period. The contributed surplus was increased by the same amount.

Gain on foreign exchange for the period amounted to $41,000 and resulted mostly from timing differences between the date where investments denominated in AU dollars were made and the exchange rate as at June 30, 2005, and from differences in rates from March 21, to June 30, 2005 for monetary items also denominated in AU dollars.


An analysis of administrative and development expenses totalling $267,000 for the 248-day period can be summarized as follows:



Remuneration $117,000
Professional fees, legal, accounting and other $40,000
Investor's relation and travelling expenses $72,000
Insurance, rentals and other office expenses $36,000
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$267,000
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Consolidated Cash Flows

Operating Activities

After making adjustments for non-cash items in respect of share based compensation, common shares issue expenses, gain on foreign exchange, and net change in non-cash operating working capital items, cash used in operations totaled $1,902,000 for the 248-day period.

Financing Activities

On March 21, 2005, the Company issued 8,500,000 common shares at $1.00 each upon release of an amount of $8,500,000 from escrow. The additional amount of $295,000 for the 248-day period was for shares issued pursuant to the exercise of warrants. Common share issue expenses paid from cash acquired from Bonita at reverse takeover date amounted to $235,000.

Investing Activities

Cash acquired from the reverse takeover amounted to $235,000.

Since the acquisition on March 21, 2005, exploration expenditures on the Palmarejo project has amounted to $12,258,000 ($4,318,000 in cash), of which $830,000 for geology, $6,872,000 in drilling and assaying costs, $1,070,000 for tenement payments, and $3,485,000 for technical costs and other. These costs take into account the redistribution of the acquisition cost of the Palmarejo project of $7,546,000. These acquisition costs were covered by the issue of common shares and an account payable to Fairview Gold Pty Limited, a 100% owned subsidiary of Bolnisi.

Investments on the property are summarized in note 4 "Exploration projects"" to the June 30, 2005 Financial Statements.

Balance Sheet

At June 30, 2005, the Company's assets stood at $15,493,000 and included $2,575,000 in cash and cash equivalents, and $12,258,000 in exploration projects.

At June 30, 2005, working capital shows a deficit of $1,604,000, net of current liabilities amounting to $4,284,000.

As at June 30, 2005, the capital stock amounts to $11,513,000. The contributed surplus related to warrants and stock base compensation amounts to $4,195,000 and the deficit totals $4,500,000.

Outlook

As at June 30, 2005, the Company had liquidity of $2,575,000. The Company believes that, together with its controlling shareholder, it will be able to meet its commitments through the financial year ending June 30, 2006.

The Company is undertaking exploration and development activities on the Palmarejo area, the principal objective of which is to advance the Palmarejo project through the feasibility process. Activities are currently focused on upgrading the inferred mineral resources to measured and indicated resources, as well as conducting the necessary metallurgical, engineering and environmental studies for feasibility. Additional exploration drilling activities aimed at expending the inferred mineral resources are also being carried out.

It is currently expected that feasibility study at Palmarejo will commence in the first quarter of 2006, and take up to 12 months to complete. Subject to the results of the above, this work could be used in the calculation of mineral reserves, and the completion of a feasibility study. There can be no guarantee that mineral reserves will be defined at the Palmarejo project.

In addition to the work on Palmarejo, the Company is also conducting exploration activities in the Trogan exploration area. This work includes core and reverse drilling at Guadalupe, as well as geological mapping, trenching and geochemical in such areas as Los Hundidos, La Patria and Victoria, with the objective of finding additional mineral resources in these areas.

Bolnisi has expressed the intent to exercise warrants when required. In addition, the Company may receive up to $6,356,000 from the exercise of the financing warrants by November 2005.

Exercise of call right on warrants

On September 22, 2005, the Company announced its decision to call the warrants issued upon the closing on March 21, 2005 of the Business Combination transaction involving the Company (the "Warrants"). As set forth in the original subscription agreement in respect of the purchase of the warrants of Palmarejo Acquisition which were exchanged for the Warrants, the Company has a call right pursuant to which it can accelerate the exercise of the Warrants any time after June 19, 2005, which is 180 days from December 21, 2004, if the closing price of the Company's common shares is above $1.75 for 20 consecutive trading days.

The closing price of the Company's common shares on September 21, 2005 was $2.80 and the closing price has been above $1.75 for 20 consecutive trading days. At that date, there were 3,605,500 financing warrants outstanding. Warrants that have not been exercised by November 21, 2005 will expire.

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 completion of work program and studies, potential mineralization, exploration results 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 filing statement dated March 14, 2005, and particularly in the section entitled "Risk Factors".

Additional information is available on SEDAR (www.sedar.com) and on the Company's website (www.palmarejogold.com).

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

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