Palmarejo Silver and Gold Corporation
TSX VENTURE : PJO

Palmarejo Silver and Gold Corporation

October 13, 2006 11:44 ET

Palmarejo Silver and Gold Corporation Announces its Results for the Year Ended June 30, 2006

LONGUEUIL, QUEBEC--(CCNMatthews - Oct. 13, 2006) - Palmarejo Silver and Gold Corporation (the "Company" or "Palmarejo")(TSX VENTURE:PJO) is pleased to report its results for the year ended June 30, 2006. The audited consolidated financial statements and management's discussion and analysis for the year ended June 30, 2006 are available through CCN Matthews' website at the following address: http://www.ccnmatthews.com/docs/pjo_fin.pdf. They are also available on Palmarejo's website (www.palmarejogold.com) and on Sedar (www.sedar.com).

Palmarejo is a precious metal exploration and development company, who's principal asset is the Palmarejo Project located in Chihuahua State, Mexico. The Company is in the late stages of resource definition of the Palmarejo Project and has begun development and construction activities. Additionally, Palmarejo is actively exploring on its 12,000 ha land package surrounding the Palmarejo Project, where two further projects, Guadalupe and La Patria, have returned encouraging results to date.

Palmarejo is 73.8% owned by Bolnisi Gold NL (DSG), an Australian Stock Exchange (ASX) listed company.

Financial Results

For the year ended June 30, 2006, the Company incurred a net loss of $1,081,000 or $0.01 per share compared to a net loss of $4,265,000 or $0.14 per share for the initial 248-day period ended June 30, 2005. The loss for the comparative period included expenses of $1,624,000 incurred as a result of the March 21, 2005 Business Combination Transaction (described in Note 2 of the audited financial statements) and stock-based compensation costs of $2,488,000 related to the grant of 5,530,000 options in December 2004.

Interest income totaled $700,000 during the year compared to $73,000 during the initial 248-day period. The increase is attributable to the significant increase in the Company's cash and short-term investments position following the private placement (for net proceeds of $71,362,000) completed in April 2006.

Administrative expenses, which consist mainly of remuneration, professional fees, investor relations and travel expenses and stock exchange and transfer agent fees, totaled $1,101,000 for the year ended June 30, 2006 compared to $267,000 for the initial 248-day period ended June 30, 2005. Expenses of $267,000 in the comparative period reflect the fact that activities of the Company only started once the Business Combination Transaction was completed in March 2005.

Stock-based compensation related to options granted to purchase common shares of the Company amounted to $1,216,000 for the year and $2,488,000 for the initial 248-day period.

After making adjustments for non-cash items in respect of stock-based compensation, gain on foreign exchange and net change in non-cash working capital items, cash used in operations totaled $468,000 for the year ended June 30, 2006 compared to $1,902,000 in 2005.

Investing activities

During the year ended June 30, 2006, the Company invested a total amount of $25,093,000, including $23,780,000 in exploration and project development expenditures and $1,313,000 in recoverable sales taxes. Exploration and project development expenditures include $10,432,000 of drilling costs, $6,867,000 for various engineering activities and $5,542,000 for the purchase of a processing plant.

Financing activities

On April 19, 2006, the Company completed a private placement financing of 7,894,737 special warrants at a price of $9.50 per special warrant for total gross proceeds of $75,000,000. On June 19, 2006, each holder of special warrants received, without further consideration, one common share and one-half common share purchase warrant. Each whole warrant is exercisable at a price of $12.50 at any time prior to October 19, 2007. Net proceeds from this offering totaled $71,362,000.

During the year ended June 30, 2006, a total of 4,231,000 warrants issued pursuant to the financing of the Business Combination Transaction were exercised (following the Company's decision to call for their exercise) for total cash proceeds of $6,347,000 (287,500 of such warrants were exercised during the initial 248-day period ended June 30, 2005). The 6,500 unexercised financing warrants expired on November 22, 2005. Also, a total of 752,575 brokers' warrants were exercised for cash proceeds of $842,000 (224,925 brokers' warrants were exercised in the initial 248-day period ended June 30, 2005 for cash proceeds of $216,000).

In November 2005, Bolnisi exercised its 12,500,000 warrants, each warrant exercised for one common share of the Company, at a price of $1.00 per share. The proceeds were applied to reimburse a portion of the debt due to Fairview.

During the year, a total of 685,002 options (5,000 during the initial 248-day period) were exercised for cash proceeds of $704,000 ($5,000 during the initial 248-day period).

Balance Sheet

At June 30, 2006, the Company's assets stood at $104,351,000 compared to $15,493,000 on June 30, 2005, and included $57,347,000 in cash and short-term investments, $5,542,000 in plant and equipment and $31,248,000 in exploration projects compared to $2,575,000, Nil and $12,258,000, respectively on June 30, 2005.

At June 30, 2006, the working capital totaled $67,059,000, compared to a deficit of $1,604,000 on June 30, 2005 and shareholders' equity amounted to $103,097,000 on June 30, 2006 compared to $11,208,000 on June 30, 2005.

As at October 12, 2006, the Company has the following common shares and convertible securities outstanding: 90,540,739 common shares, 3,947,368 warrants and 4,793,332 stock options. As at the same date, Bolnisi owns 66,855,237 common shares, representing 73.8% of the total number of issued and outstanding common shares of the Company. Bolnisi also holds 1,052,618 warrants acquired from their participation in the April 2006 private placement.

The Company has liquidities of approximately $57.0 million as at October 12, 2006. The Company, together with its controlling shareholder, believes that it will be able to meet its cash requirements for the remainder of the 2006 calendar year and well into 2007.

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 resources and reserves, 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.

Risks and Uncertainties

For a complete discussion of risk factors, please refer to the "Risk Factors" section of the Company's Annual Information Form dated May 25, 2006 and available on Sedar (www.sedar.com).

Palmarejo Silver and Gold Corporation is a silver and gold exploration company with projects in Mexico. 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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