Palmarejo Silver and Gold Corporation
TSX VENTURE : PJO

Palmarejo Silver and Gold Corporation

October 31, 2006 12:03 ET

Palmarejo Silver and Gold Corporation Reports on Development and Construction Activities and New Drilling Results

LONGUEUIL, QUEBEC--(CCNMatthews - Oct. 31, 2006) - Palmarejo Silver and Gold Corporation (TSX VENTURE:PJO) is pleased to announce latest development and construction activities and drilling results at the Palmarejo Silver-Gold Project in the Temoris District, Chihuahua, Mexico. In addition, most recent Guadalupe and La Patria assay results are reported below.

PALMAREJO PROJECT DEVELOPMENT UPDATE

Highlights

- Construction of the processing facility at the Palmarejo Project has started.

- Structural steel work fabrication commenced at a work shop in Chihuahua.

- Upgrading of the access road is progressing.

- Importation of crushing equipment into Mexico commenced.

In parallel with the drilling program, a significant amount of feasibility study and project development work has continued including the following:

Engineering, Procurement, Design and Construction Management

During the September 2006 quarter, construction work commenced on the lower plant site area. The old plant and buildings were removed and the earthworks were started. The construction contractor established the construction camp and facilities for 300 personnel and mobilized to site the crushing/screening plant and concrete batch plant. Earthworks on the lower and upper plant sites are scheduled to be completed during the next quarter and the concrete foundations commenced to allow steel work erection to commence at the start of 2007.

The steel fabrication contractor placed orders for the steel to allow the completion of the structural steel and steel plate work.

Contractors were awarded contracts for earthworks, civil work, steel plate work and structural steel work. Two contractors were awarded the contracts and both recently completed similar work at other projects in the Sierra Madre. Both contractors have commenced work on the project with earthworks having commenced on the lower plant site and orders placed for the steel.

The first items of equipment for the construction were successfully imported into Mexico under the Company's Pitex permit. The equipment items were components for the crushing circuit.

Infrastructure

Work on upgrading the 100 kilometre section of road between San Rafael and Palmarejo is progressing well and completion is targeted for the end of the next quarter.

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.

Bid documentation has been prepared for the personnel camp and construction of this is scheduled to commence in the next quarter.

Mining Study

Mine Design Associates (MDA) in Reno, Nevada have commenced work on the mining study for Palmarejo. Part of this study is to produce bid documentation to be given to several mining contractors. Pit development work and haul road construction will commence early in 2007.

PALMAREJO PROJECT DRILLING AND ASSAY RESULTS

During the September 2006 quarter, drilling continued on the Palmarejo Project. 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 has been completed. During the September 2006 quarter, 48 holes were drilled for 5,654 metres of RC and 1,564 metres of diamond core.

The two bigger core rigs were moved to the Guadalupe project in July and August to drill deeper holes in Guadalupe Norte leaving only the RC buggy rig to drill 5 holes at La Finca, 28 holes at San Juan De Dios, and 5 holes at the Cerro De Los Hillos properties in the Palmarejo extended area. Drilling in the Rosario Deeps was suspended with the large Schramm RC rig still in the contractor's yard in Hermosillo for rebuilding and access roads and pads for drilling this target making slow progress. Before moving to Guadalupe the 44 and UDR200 core rigs were engaged in defining the margins and deeps of the 76 clavo with some outstanding results.

The emphasis has been on attempting to extend areas of high grade mineralization and further defining the margins of the high grade 076 clavo.

Details of the location of drill holes and assay results since the last quarterly report have been previously reported by the Company and are included on the Company's website.

As announced by the Company in September, the following are some of the impressive assay intercepts (true widths) mostly from the infill and margin definition drilling on the 076 clavo with the exception of PMDH580D which is an infill hole drilled on the Rosario clavo at the junction of the La Blanca and La Prieta structures (see press release of September 13, 2006 for more detail).


- 5.50 metres @ 2.80 g/t Au and 577 g/t Ag (12.4 g/t AuEq) and

- 10.50 metres @ 3.91 g/t Au and 317 g/t Ag (9.2 g/t AuEq) PMDH580D

- 16.26 metres @ 2.86 g/t Au and 254 g/t Ag (7.1 g/t AuEq) PMDH603D

- 8.20 metres @ 1.88 g/t Au and 353 g/t Ag (7.8 g/t AuEq) PMDH611D

- 25.00 metres @ 4.17 g/t Au and 385 g/t Ag (10.6 g/t AuEq) and

- 6.50 metres @ 27.73 g/t Au and 2,629 Ag (71.6 g/t AuEq) PMDH615D

- 30.32 metres @ 6.15 g/t Au and 495 g/t Ag (14.4 g/t AuEq) and

- 11.75 metres @ 19.49 g/t Au and 428 g/t Ag (26.6 g/t AuEq) PMDH622D

- 6.34 metres @ 19.24 g/t Au and 1,168 g/t Ag (38.7 g/t AuEq) PMDH626D



Details of the drill hole locations not previously reported are as
follows:
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Total
Elevation Azimuth Dip RC Core Depth
Hole Northing Easting (m)(degrees)(Degrees) (m) (m) (m)
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PMDH
595D
# 3031297 756571 1037 13 -52 0.00 254.65 254.65
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CHDH
001 3029628 756656 959 200 -70 298.70 0.00 298.7
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CHDH
002 3029628 756656 959 200 -50 249.94 0.00 249.94
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CHDH
003 3029686 756616 958 200 -70 320.04 0.00 320.04
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CHDH
004 3029686 756616 958 200 -50 289.56 0.00 289.56
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CHDH
005 3029729 756639 960 200 -70 In progress
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---------------------------------------------------------------------


Assay Results

Assay results for these drill holes not previously reported follow.
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From To Interval Au Ag AuEq
Hole (m) (m) (m)(g/t)(g/t)(g/t) Comments (i)
---------------------------------------------------------------------
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PMDH595D 176.00 177.00 1.00 1.93 72 3.1 La Blanca stockwork
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CHDH001 No significant result
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CHDH002 No significant result
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CHDH003 No significant result
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CHDH004 No significant result
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(i) Intercepts are generally perpendicular to the mineralized
structures and therefore represent true widths. Where intercepts
are oblique to structures calculated true widths are noted.


Notes for all reported assay results:

- 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.

- The internal voids are historic underground workings and have been excluded from the mineralized intervals reported above.

- Results are awaited for drill hole CHDH005.

- QVBX equals quartz vein breccia.

- HVBX equals Haematitic vein breccia.

- # equals previously reported and included here 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

The San Juan de Dios structure has been shown to be narrow and only weakly mineralized except for a narrow zone in the old workings and again in the last hole (PMDH639) drilled at the most northerly extent of the structure towards La Finca which reported:

- 4.57 metres from 70.10 metres @ 0.70 g/t Au and 98 g/t Ag (2.3 g/t AuEq) and

- 1.52 metres from 89.92 metres @ 2.24 g/t Au and 215 g/t Ag (5.8 g/t AuEq) and

- 6.10 metres from 100.58 metres @ 12.25 g/tu and 971 g/t Ag (28.4 g/t AuEq).

This will be followed up in the next quarter.

Details of the drill hole locations are available on the CCNMatthews website at the following address: http://www.ccnmatthews.com/docs/pjo1.pdf


TROGAN EXPLORATION UPDATE

In addition to the Palmarejo Project, satellite imagery interpretation, reconnaissance alteration mapping with a short wave infrared spectrometer and geological mapping has identified mineralized vein and alteration systems in the Trogan Exploration area located on four other strongly mineralized corridors including:

- the Guadalupe-Las Animas trend;

- Todos Santos-La Patria-La Virginia-Maclovia;

- the Guerra al Tirano trends; and

- the Los Hundidos trend.

Drill rig availability has limited the ability to fully explore each of these targets, with most activity to date having been carried out at Guadalupe-Las Animas. Initial drilling has been carried out on some of the other identified targets within the Trogan licence area with very encouraging results, including results from the first phase drilling at Todos Santos-La Patria-La Virginia-Maclovia during the September 2006 quarter.

Guadalupe-Las Animas

The Guadalupe project is located within the Trogan tenements, approximately 7.0 kilometres southeast of the Palmarejo Project and incorporates the Las Animas, Guadalupe and Guadalupe Norte prospects.

The Guadalupe project is located on the greater than 2.5 kilometre long Guadalupe fault system. Silver-gold mineralization is hosted by northeast dipping quartz breccia veins (QVBX) and an associated quartz stockwork envelope. Recent surface mapping of the Guadalupe structure north of the Guadalupe Norte prospect has identified a left-lateral fault flexure associated with strong clay alteration. This new exploration target is 500 metres beyond the limit of existing drill coverage.

A campaign of deep diamond and RC drilling has been in progress at Guadalupe Norte since March this year. The drilling has targeted high-grade ore shoots beneath high-level, barren clay alteration in a geological setting similar to the 076 clavo at Palmarejo.

During the September 2006 quarter, most exploration was focused on the Guadalupe Norte clay blooms and deeper drilling to intersect the mineralization lower in the epithermal profile. Heavy rainfall slowed progress and night shift drilling had to be curtailed at times because of dangerous road conditions.

Since exploration drilling began at the Guadalupe-Las Animas project in June 2005, a total of 10,072 metres of reverse circulation ('RC') drilling and 10,544 metres of diamond core drilling has been completed. During the September 2006 quarter 25 holes were drilled for 5,547 metres of RC and 2,256 metres of diamond core.

Details of the location of drill holes and assay results have been reported by the Company in previous press releases and are available on the Company's website.

Details of the drill hole locations not previously reported are available on the CCNMatthews website at the following address: http://www.ccnmatthews.com/docs/guadalupelasanimas.pdf


La Patria

Todos Santos-La Patria-La Virginia-Maclovia

The La Patria to Maclovia structure occupies 1.7 kilometres of a greater than 4.0 kilometre extent of the Todos Santos to Maclovia mineralized corridor. It lies roughly parallel to and 1.5 kilometres southwest of Guadalupe.

Drilling commenced in the March quarter at Todos Santos, Canadensia and La Patria. Some near surface well mineralized intersections were drilled at La Patria and the structure followed to the southeast in the Maclovia prospect area. Mineralization at Maclovia extended a considerable distance further than anticipated and when access was gained during the September 2006 quarter to the La Virginia prospect between La Patria and Maclovia, drilling produced some encouraging results such as LPDH051 down dip of the La Virginia mine which intersected several mineralized intervals such as 12.19 metres (true width) @7.3 g/t AuEq.

To date, a total of 54 RC holes have been drilled since the beginning of 2006 for a total of 8,678 metres and 7 diamond core holes for a total of 1,602 metres of core. Drilling is continuing and an initial resource estimate is in progress.

Drill Location and Assay Results

Details of the drill hole locations not previously reported are available on the CCNMatthews website at the following address: http://www.ccnmatthews.com/docs/pjo3.pdf

Guerra al Tirano

Drilling during the June 2006 quarter in the Guerra al Tirano district targeted two separate structures. No significant mineralization was encountered and no work was undertaken during the September 2006 quarter.

Quality Assurance

Palmarejo Silver and Gold Corporation has put in place a rigorous QA/AC program 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 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 Company's control, including statements regarding the development of the Company's project, 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 Annual Information Form dated October 12, 2006, and particularly in the section entitled "Risk Factors".

The Palmarejo Project and Trogan Exploration area is held by the Company's 100% owned Mexican subsidiary company, Planet Gold SA de CV. For more information about the Company's projects, please refer to the Company's documents filed on SEDAR (www.sedar.com) and the Company's website at (www.palmarejogold.com).

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

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