Palmarejo Silver and Gold Corporation
TSX VENTURE : PJO

Palmarejo Silver and Gold Corporation

August 02, 2005 13:00 ET

Palmarejo: Report on Activities for the Quarter Ended June 30, 2005

LONGUEUIL, QUEBEC--(CCNMatthews - Aug. 2, 2005) - Palmarejo Gold Corporation (TSX VENTURE:PJO) is pleased to report a summary of its activities for the quarter ended June 30, 2005. For more information about the Company's projects, please refer to the NI 43-101 Technical Report dated December 10, 2004 available at www.sedar.com under Palmarejo Gold Corporation.



Quarterly Highlights

- Continued excellent drilling results from the Palmarejo Project.
- Environmental and water permit applications lodged with Mexican
authorities.
- Significant progress made in studies on engineering, metallurgy
and design work.
- Several exploration targets identified in Trogan tenements.
- Very encouraging first drilling results from the Guadalupe
Project.


Palmarejo Gold-Silver Project (Including Trogan) Gold and Silver Exploration Temoris, Chihuahua, Mexico

Mexico is a democratic republic with a stable political environment and a sophisticated western style legal system. Mexico has been a party to the North American Free Trade Agreement since 1994 and thus has a comparable tax and trade regime to the USA.

Mexico has a mining history of more than 400 years and the government actively encourages mining by giving mineral development precedence over surface usage rights.

The Company has, through its Mexican subsidiary company, Planet Gold SA de CV ('Planet Gold'), entered into acquisition agreements over a number of tenements, collectively known as the Palmarejo Project, and has applied for a number of exploration licences collectively known as Trogan, which surround the Palmarejo Project tenements located some 15 kilometres northwest of the town of Temoris in Chihuahua State, Mexico. The Palmarejo Project and Trogan licence area extends some 16 kilometres from Tres de Mayo in the south-southeast to beyond Palmarejo in the north-northwest covering approximately 12,101 hectares.

The Palmarejo Project and Trogan licence area contain a number of mineralised properties of interest which are under investigation by the Company. The most important of these to date is the Palmarejo mine property in the Chinipas municipality in the far north of the area of interest which covers the old Palmarejo gold-silver mine based on the La Prieta and La Blanca gold-silver bearing structures.

During the June quarter, the first drilling program, comprising 17 reverse circulation ('RC') and 6 diamond core holes, was undertaken at the Guadalupe Silver-Gold Project. The Guadalupe Project is approximately 7 kilometres southeast of the Palmarejo Project on the 100% owned San Carlos tenement and is within the Trogan exploration licence area.

Tenement Acquisitions and Summary

During the June 2005 quarter, Planet Gold further increased the tenement area to which it has rights by entering into an acquisition agreement over an exploration tenement (title number 210320) covering approximately 76 hectares known as Victoria. Details of this acquisition agreement are described below.



The tenements and acquisition agreements which comprise the Palmarejo
Project and Trogan licences are:

- twelve Palmarejo Project tenements totalling approximately 721
hectares owned 100% by Planet Gold;
- two Trogan exploration licences totalling approximately 3,852
hectares owned 100% by Planet Gold;
- six Trogan exploration licence applications totalling
approximately 7,301 hectares owned 100% by Planet Gold; and
- three acquisition agreements which can be terminated with 30
days' notice by Planet Gold:

- The first acquisition agreement grants Planet Gold a 4 year
exploration right from 9 October 2003 over 6 tenements
covering approximately 49 hectares for escalating six monthly
payments totalling US$230,000 (of which US$65,000 has been
paid). At the conclusion of the 4 year period, or at any
earlier date at the Company's discretion, 100% ownership of
the tenement area will be transferred to Planet Gold for a
total outlay of US$300,000 including all 6 monthly payments.
- The second acquisition agreement grants Planet Gold a 4 year
exploration right from 20 April 2004 over 2 tenements
covering approximately 101 hectares for escalating six
monthly payments totalling US$115,600 (of which US$16,200 has
been paid). At the conclusion of the 4 year period, or at any
earlier date at the Company's discretion, 100% ownership of
the tenement area will be transferred to Planet Gold for a
total outlay of US$195,600 including all 6 monthly payments.
- The third acquisition agreement grants Planet Gold a 3 year
exploration right from 5 May 2005 over 1 tenement covering
approximately 76 hectares for escalating six monthly payments
totalling US$180,000 (of which US$20,000 has been paid). At
the conclusion of the 3 year period, or at any earlier date
at the Company's discretion, 100% ownership of the tenement
area will be transferred to Planet Gold for a total outlay of
US$300,000 including all 6 monthly payments.


Drilling

Since exploration drilling began at the Palmarejo Project in November 2003, a total of 54,743 metres of RC drilling in 326 RC drill holes and 11,765 metres of diamond core drilling in 67 diamond core drill holes has been completed. During the June 2005 quarter, a total of 17,642 metres of RC drilling and 2,342 metres of diamond core drilling were completed at the Palmarejo Project.

There are currently 2 RC drill rigs and 3 diamond core drill rigs on site at the Palmarejo Project. Furthermore, 1 RC and 1 diamond core have commenced drilling at the Guadalupe prospect, located some 7 kilometres southeast of Palmarejo on the Trogan exploration licence area. The Guadalupe RC rig will soon be temporarily relocated to Palmarejo.

Drilling at Palmarejo during the June 2005 quarter continued on the infill drilling program on the La Blanca and La Prieta structures predominantly within the Rosario, 76 and 108 clavos. The program to drill out the Rosario clavo and surrounds to measured/indicated resource status on 20 x 20 metre centres was well advanced during the quarter, although assaying and analysis of drill samples is still in progress. Concurrently, the remainder of the identified Palmarejo clavos, the 76, 108, Tucson and Hall's clavos are being drilled to, at least, indicated status while further drilling to determine the, as yet unfound, limits of the deposit continues. Further, with road access almost completed, the La Finca anomaly (possible clavo) on the La Prieta structure 1,000 metres southeast of Hall's clavo, is being prepared for drilling in the next quarter.

Details of the location of drill holes and assay results since April 1st, 2005 are set out in full below.

Some of the more significant assay results, which demonstrate the lengths of strongly mineralised intervals, generally perpendicular to the structures, that are being drilled, include:



- 2.1 metres @ 57.9 g/t Au and 3,225 g/t Ag (107.5 g/t AuEq)
(PMDH200D)
- 7.6 metres @ 5.3 g/t Au and 444 g/t Ag (12.2 g/t AuEq) (PMDH221)
- 4.5 metres @ 9.1 g/t Au and 562 g/t Ag (17.7 g/t AuEq) (PMDH222)
- 32.0 metres @ 1.6 g/t Au and 181 g/t Ag (4.4 g/t AuEq) (PMDH224)
- 42.7 metres @ 2.6 g/t Au and 219 g/t Ag (5.9 g/t AuEq)
including 10.7 metres @ 9.4 g/t Au and 681 g/t Ag (19.8 g/t AuEq)
(PMDH228)
- 25.9 metres @ 5.1 g/t Au and 283 g/t Ag (9.5 g/t AuEq) (PMDH231)
- 20.1 metres @ 0.9 g/t Au and 102 g/t Ag (2.5 g/t AuEq) (PMDH233D)
- 18.3 metres @ 18.4 g/t Au and 1,127 g/t Ag (35.8 g/t AuEq)
(PMDH234)
- 10.7 metres @ 4.5 g/t Au and 459 g/t Ag (11.6 g/t AuEq)
and 38.0 metres @ 1.2 g/t Au and 197 g/t Ag (4.2 g/t AuEq)
(PMDH239)
- 7.6 metres @ 4.4 g/t Au and 378 g/t Ag (10.2 g/t AuEq) (PMDH242)
- 16.8 metres @ 2.0 g/t Au and 285 g/t Ag (6.4 g/t AuEq) (PMDH245)
- 10.7 metres @ 5.3 g/t Au and 587 g/t Ag (14.3 g/t AuEq) (PMDH248)
- 9.2 metres @ 4.2 g/t Au and 527 g/t Ag (12.3 g/t AuEq) (PMDH251)
- 8.9 metres @ 70.6 g/t Au and 3,728 g/t Ag (128.0 g/t AuEq)
(PMDH255D)
This intercept was at the bottom of the hole which had to be
abandoned due to fractured ground.
- 6.1 metres @ 2.6 g/t Au and 427 g/t Ag (9.2 g/t AuEq) (PMDH256)
- 9.1 metres @ 3.6 g/t Au and 873 g/t Ag (17.0 g/t AuEq) (PMDH257)
- 10.6 metres @ 3.1 g/t Au and 436 g/t Ag (9.8 g/t AuEq) (PMDH260)
- 19.8 metres @ 6.0 g/t Au and 465 g/t Ag (13.2 g/t AuEq) (PMDH261)
- 12.2 metres @ 2.9 g/t Au and 313 g/t Ag (7.7 g/t AuEq)
and 29.0 metres @ 2.2 g/t Au and 275 g/t Ag (6.4 g/t AuEq)
(PMDH262)
- 6.1 metres @ 3.8 g/t Au and 468 g/t Ag (11.0 g/t AuEq) (PMDH264)
- 6.1 metres @ 3.0 g/t Au and 406 g/t Ag (9.2 g/t AuEq) (PMDH265)
- 7.6 metres @ 3.5 g/t Au and 369 g/t Ag (9.2 g/t AuEq) (PMDH266)
- 15.2 metres @ 3.2 g/t Au and 301 g/t Ag (7.8 g/t AuEq) (PMDH267)
- 7.6 metres @ 4.0 g/t Au and 403 g/t Ag (10.2 g/t AuEq) (PMDH268)
- 10.6 metres @ 3.2 g/t Au and 250 g/t Ag (7.0 g/t AuEq) (PMDH269)
- 9.1 metres @ 3.6 g/t Au and 504 g/t Ag (11.4 g/t AuEq) (PMDH277)
- 6.1 metres @ 1.7 g/t Au and 408 g/t Ag (8.0 g/t AuEq) (PMDH278)
- 12.2 metres @ 18.9 g/t Au and 1,395 g/t Ag (40.4 g/t AuEq)
(PMDH283)
This intercept was at the bottom of the hole which had to be
abandoned due to fractured metal (lost down hole gear) in the
hole.


The significance of the clavos (ore shoots) to the Palmarejo Gold-Silver Project has been emphasised. It is currently estimated that in excess of 70% and possibly as much as 85% of precious metal content of the Palmarejo Project mineralisation occurs in clavos that have been drilled with some intensity to date - the Rosario, Tucson and Hall's clavos on the La Prieta structure and the Rosario, 76 and 108 clavos on the La Blanca structure. These clavos are being drilled out at 20 metre and 40 metre centres to measured and indicated status with intervening ground at a lesser hole spacing.

Drill Hole Locations

Details of the reported drill hole locations are as follows:

http://www.palmarejogold.com/i/pdf/2005-08-02_NR.pdf

Assay Results

Assay results from RC drill holes since April 1st, 2005 report are:

http://www.palmarejogold.com/i/pdf/2005-08-02_NR.pdf



Notes:

- Assays have been reported using a 1.0 g/t AuEq cut off, no top
cut and a gold to silver price ratio of 1:65.
- The internal voids are historic underground workings and have
been excluded from the mineralised intervals reported above.
- Results are awaited for RC drill holes PMDH293 to PMDH318,
PMDH320 and PMDH322 to PMDH338.
- Results are awaited for diamond core drill holes PMDH136D,
PMDH240D, PMDH258D and PMDH285D.
- In addition to these reported results, a number of geotechnical
drill holes have been completed.
- QVBX = quartz vein breccia.
- # = reported previously.

Project Development Studies

In parallel with the drilling program, a significant number of
studies towards project development work have commenced which will
contribute towards a feasibility study including:

- Metallurgy

Metallurgical testwork continues, principally at SGS Lakefield
Oretest. Variability test work has commenced with results to date
showing only very minor variation to previously announced results
from the initial testwork samples.

Metallurgical testwork has been performed on core samples from
several different holes, RC chip samples, outcrop sample and bulk
rock samples from the underground workings.

The testwork has included pilot plant work, flotation, cyanide
leaching, carbon-in-leach (CIL) tests, determination of
comminution parameters (Bond work indices), rock breakage
characteristics (SMC and JK drop weight tests), advance media
competency tests (in progress), electrowinning, cyanide
destruction (in progress), settling and filtration tests.

Results of the test work have determined that primary crushing
followed by SAG milling (being confirmed by AMC testwork) and
ball milling will be used for the comminution section and will
provide feed for the flotation section. After the flotation will
be intensive cyanidation of the concentrate and CIL for the
treatment of the flotation tail. Metal from the CIL and the
intensive cyanidation solutions will be recovered by
electrowinning. The final tailings will undergo cyanide
destruction prior to discharge to the tailings storage.

The required grind size is 80% passing 75 microns. The Bond ball
mill work index is fairly high at 19.5 kWh/tonne and is
consistent throughout the samples tested. Testwork indicates
that the flotation stage will recover 85% of the gold and silver
to the concentrate making up 5% of the total weight of material
processed. The intensive cyanidation of the flotation
concentrate is forecast to recover 97% of the gold and silver
from the concentrate. The CIL will enable 85% of the gold and
60% of the silver to be recovered. The final gold and silver
recoveries are expected to be 95% and 92%, respectively.

An additional 1,000 kilograms of diamond core has been shipped to
SGS Lakefield Oretest for further confirmatory (pilot plant)
metallurgical tests.

- Engineering, Procurement, Design and Construction Management
('EPCM')

A contract has been awarded to Intermet Pty Ltd for the EPCM for
the Palmarejo processing facility. Flow sheet development for
the various areas of the processing facility is almost complete,
allowing detailed design to commence.

- Geotechnical Studies

On site geotechnical studies, including drilling, have been
completed and an indicative site layout, including the locations
of the process plant, water and tailings dams and waste dump.
Testing of the geotechnical samples is in process.

Pells, Sullivan, Meynink completed a geotechnical report for the
Rosario pit and waste dump area and have provided some pit slope
data for a possible pit design which is due to be completed in
the next quarter.

- Infrastructure

A quotation for the construction of a high voltage mains power
line to the site has been received from the Mexican Federal Power
Authority. Quotations for power generation by diesel generators
have also been obtained.

A preliminary independent assessment of the road upgrade works
required for access to the project during construction and
operation has been completed and a proposal for a complete road
works study and cost estimate is being prepared.

- Equipment

Following the completion of process flow sheets, plant and
equipment sourcing has commenced. Some crushing and grinding
circuit equipment is already owned and may be included in the
Palmarejo processing facility. Other major items have been
located and are available.

Chihuahua is well served by mining equipment and reagents
suppliers.

- Mining

Preliminary mining cost estimates for Palmarejo have been
received from mining contractors. These costs will be used for
the pit optimisation work. Once a final pit design is complete,
firm bids will be sought for contract mining.

- Environmental and Permitting

The Company's environmental and permitting consultants,
Heuristica Ambiental, have filed the application for a mine and
development permit with SEMARNAT in Mexico City.

The water permit application has been filed in Culiacan, Sinaloa
with CNA, the Water district office that controls water rights
and permits for the Palmarejo area. The water permit application
will require a signed agreement with the landowning communities
(ejidos) and these negotiations are in progress. The environmental
permit will not be affected by having or not having a signed
agreement with the ejidos.

Once the mine and development permit has been issued and signed
agreements with the ejidos completed, it will be necessary to
file for change of use of soil at SEMARNAT Chihuahua (the
Forestry Department under SEMARNAT).

This requires a single payment to cover post-mining restoration
and is in lieu of a bond.


Trogan Exploration

Mapping and reconnaissance exploration of the north-central part of the Trogan tenement continued during the June quarter and the first drilling program, comprising 17 RC and 6 diamond core holes, was commenced on the Guadalupe Project.

TSP (alteration mineral) mapping with the Terraspec instrument acquired in December 2004 continues to be most productive and has identified mineralised vein and alteration systems in the Trogan tenements that have been initially identified by satellite interpretation and warrant further investigation. The following targets have been identified within the Trogan tenements to date with the most significant exploration activities carried out on the Guadalupe Project:



- Guadalupe/Las Animas;
- La Finca;
- Los Hundidos;
- Maclovia;
- Victoria;
- Todos Santos-Canadiensis; and
- Guerra al Tirano district.


The Guadalupe Project consists of a series of northeast dipping quartz veins that can be traced for 1,500 metres along strike with the northern portion of the structure known as Guadalupe and the southern portion known as Las Animas.

Geological mapping at Guadalupe/Las Animas was completed during the June quarter. Four lines of alteration samples (40 samples) were collected for Terraspec analysis. Further alteration samples were taken from road cuts and drill pads.

During the June quarter, assays of 9 mine dump samples taken near the old Guadalupe mine were received and include:

http://www.palmarejogold.com/i/pdf/2005-08-02_NR.pdf

Surface mapping and observation indicates that this outcropping and near surface mineralisation is very high in the epithermal system and higher than that at the Palmarejo Project. As a consequence, a predominance of silver over gold is expected at the higher levels of the system and gold grades are anticipated to increase with depth. Mineralisation has been identified in black sulphide bands hosted within a multi-phased hydrothermal quartz vein breccia.

Drilling commenced in the June quarter. A total of 1,559 metres of RC drilling in 17 RC drill holes and 718 metres of diamond core drilling in 6 diamond core drill holes have been completed at Guadalupe to date.

Assay results have been received for the first 6 RC holes. Full details are listed below, but some highlights include:



- 18.3 metres @ 0.3 g/t Au and 217 g/t Ag (3.6 g/t AuEq) (TGDH001)
- 3.0 metres @ 0.9 g/t Au and 286 g/t Ag (5.3 g/t AuEq) (TGDH002)
- 6.1 metres @ 0.1 g/t Au and 502 g/t Ag (7.8 g/t AuEq) (TGDH003)


Both the Guadalupe and Las Animas structures have only been tested to a maximum depth of 50 metres below natural surface. Diamond core drilling will continue to test the down-dip and strike extents of the Guadalupe structure.

The best results were obtained in drill holes 1 to 3 on the Guadalupe structure where the 'clavo' (mineralised shoot) is up to 10 metres wide.

RC hole TGDH002 was abandoned due to high water inflow prior to intersecting the main Guadalupe structure but a 3 metre wide stockwork in the hanging wall returned 3 metres @ 0.9 g/t Au and 286 g/t Ag (5.3 g/t AuEq). Drill hole TGDH 002 has been extended with core and intersected the main Guadalupe structure from 70 metres.

Results from the Las Animas structure are encouraging. Holes 4 to 6 intersected a narrow part of the 'clavo' only 25 metres below natural surface. Subsequent drilling down dip of these holes has shown that the structure widens at depth.

Details of the reported drill hole locations are as follows:

http://www.palmarejogold.com/i/pdf/2005-08-02_NR.pdf

Assay results from the 6 RC drill holes at the Guadalupe Silver-Gold Project include:

http://www.palmarejogold.com/i/pdf/2005-08-02_NR.pdf



Notes:

- Assays have been reported using a 1.0 g/t AuEq cut off, no top
cut and a gold to silver price ratio of 1:65.
- The internal voids are historic underground workings and have
been excluded from the mineralised intervals reported above.
- Results are awaited for RC drill holes TGDH007 to TGDH017.
- Results are awaited for diamond core drill holes TGDH002D,
TGDH007D, TGDH014D and TGDH018 to TGDH020D.
- QVBX = quartz vein breccia.


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 Corporation's majority shareholder. Mr. Phillips is a qualified person under Canadian Securities Administrators National Instrument 43-101 ("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 Corporation's control, including statements regarding completion of work program and studies, potential mineralization, exploration results and future plans and objectives of the Corporation. 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 Corporation'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 Corporation's website (www.palmarejogold.com).

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