Premier Diamond Corp.

March 26, 2007 19:13 ET

Premier Diamond Corp. Agrees to Acquire Mexican Silver Mines (Guernsey) Limited and Increase Amount to be Raised under Private Placement

CALGARY, ALBERTA--(CCNMatthews - March 26, 2007) - Premier Diamond Corp. ("Premier") (NEX:PDC.H) entered into a letter of intent dated July 4th, 2006 with Mexican Silver Mines (Guernsey) Limited ("Mexican Silver") and its principal shareholder that set forth the basic terms and conditions pursuant to which Premier would acquire all of the issued and outstanding securities of Mexican Silver (the "Proposed Transaction"). This letter of intent was superceded by an amended and restated letter of intent dated January 10, 2007 between Premier and Mexican Silver, which in turn has now been superceded by a securities purchase agreement (the "Purchase Agreement") that was entered between Premier and the security holders (the "Vendors") of Mexican Silver on March 14, 2007. Pursuant to the Purchase Agreement, Premier has agreed to purchase all of the outstanding securities of Mexican Silver, being 15,434,782 shares and 217,392 warrant rights, from the Vendors at a deemed price of $3,858,695 by the issuance of 15,434,782 common shares of Premier at a deemed price of $0.25 per share and 217,392 common share purchase warrants of Premier. Each such warrant will entitle the holders to purchase one additional common share of Premier for $0.50 during the period expiring on August 15, 2008. These issuances of securities by Premier will be exempt from the prospectus and registration requirements of applicable securities laws. Upon the Proposed Transaction becoming effective, Mexican Silver will be a wholly-owned subsidiary of Premier.

Mexican Silver is the holder of 99.99% of the issued and outstanding shares in the capital of Materias Primas y Minerales La Iguana S.A. de C.V. ("Materias Primas"). Materias Primas owns 100% undivided interest in approximately 322,000 acres (130,400 hectares) of mineral properties (the "Property") located in the Mexican state of Nuevo Leon, approximately 160 kilometers north of the city of Monterrey. The Property is situated at the northeast extremity of the Sierra Madre Oriental.

The completion of the Proposed Transaction contemplated by the Purchase Agreement is subject to certain conditions, including: (a) obtaining all necessary regulatory approvals, including the approval of the TSX Venture Exchange (the "Exchange") and the NEX, including, without limitation the Exchange being satisfied that after the completion of the Proposed Transaction the Corporation will satisfy the Exchange's minimum listing requirements for a Tier 2 Mining Issuer as prescribed by Policy 2.1 of the Exchange, (b) the approval of the Proposed Transaction by the shareholders of Premier at a meeting (the "Meeting") of shareholders to be called and held in due course, (c) the completion of the private placement of securities of Premier (the "Offering") and (d) other conditions under the Purchase Agreement which are typical for a purchase transactions of this nature. See "Equity Financing" below for a description of the Offering.

Mexican Silver Mines (Guernsey) Limited

Mexican Silver was incorporated the laws of Guernsey on June 19, 2006 as a private body corporate for the purpose of identifying and evaluating opportunities for the acquisition of an interest in mineral exploration and development properties in Mexico and, once identified and evaluated, to negotiate an acquisition or participation. In that regard, Mexican Silver acquired 99.9% of the outstanding securities of Materias Primas on September 27, 2006. Mexican Silver has no other material assets. The principal asset of Materias Primas is the Property. Mexican Silver has since completed a data review of previous work carried out on the Property, completed an airborne geophysical survey of the Property and commenced geological mapping of the Property and commissioned ACA Howe International Limited ("Howe") to prepare a technical report pursuant to National Instrument 43-101 in respect of the material portions of the Property. Howe is independent of Premier and Mexican Silver. Howe prepared and delivered to Mexican Silver and Premier the commissioned report which is dated effective January 14, 2007 and entitled "Technical Report on the La Providencia and Ral Properties Nuevo Leon Mexico" (the "Howe Report"), a copy of which is found on SEDAR at

The head office and registered office of Mexican Silver is located at PO Box, Farnely House, La Charroterie, St Peter Port, Guernsey GY1 3AJ. The securities of Mexican Silver are not listed on any exchange and Mexican Silver is not a reporting issuer in any jurisdiction or a SEDAR filer.

Materias Primas y Minerales La Iguana S.A. de C.V.

Materias Primas is a 99.9% subsidiary of Mexican Silver. Materias Primas was incorporated under the laws of Mexico on June 6, 2006 as a private corporation. The securities of Materias Primas are not listed on any exchange and Materias Primas is not a reporting issuer in any jurisdiction or a SEDAR filer.

The Property

The Property consists of three closely-situated groupings of exploration and exploitation claims, namely La Providencia, El Ral and Anillo de Fuego. The Property totals more than 322,000 acres (130,400 hectares) and includes eight historic producing silver mines that have been mined only to relatively shallow depths. The material groupings of claims are referred to as La Providencia and El Ral. The following information concerning the Property has been summarized from, and is qualified in its entirety by, the Howe Report. The Anillo De Fuego claim groupings were not reviewed by Howe.

Early sampling by Mexican Silver has returned values in excess of 7,000 grams per tonne silver on each of La Providencia and El Ral claims and 30 percent zinc on La Providencia claims (Dynes, B. 2006 (Draft). "The Iguana and La Blanca Ag, Pb, Zn properties, Monterrey area, Nuevo Leon, northern Mexico. May 2006). The samples were collected by William Dynes, a director of Premier, and remained in his custody until shipped directly to ALS Chemex Laboratories in Hermosillo, Mexico for sample preparation prior to shipment to Vancouver, British Columbia for quantitative analysis for lead, zinc and silver and 30-element ICP. Capability, Accreditation and Security Statements for both of the ALS-Chemex laboratories utilized are described in Appendix A to the Howe Report. Sample preparation and analytical procedures are also described in Appendix A to the Howe Report. Analytical results for Pb, Zn and Ag are listed in Table 8 of the Howe Report and the ICP results are attached as Appendix C to the Howe Report. The sampling was not meant to be definitive, but only to verify the presence of silver-lead-zinc mineralization and to give an initial indication of extent and degree of mineralization. The samples are not representative and, because of their nature, are probably somewhat biased.

The Property is located in the state of Nuevo Leon, approximately 160 kilometers north of the city of Monterrey. The Property is situated at the northeast extremity of the Sierra Madre Oriental.

Many of the world's largest carbonate-hosted silver-lead-zinc deposits occur in northern Mexico and many have been in production since the 1600s. These include the Santa Eulalia and Naica districts in Chihuahua, and the Providencia - Concepcion del Oro and San Martin districts in Zacatecas. Eight of seventeen districts have produced or had resources in excess of 10 million tons, with silver contents of 80 grams - 350 grams per ton and combined lead and zinc of about 10 percent; eight other districts had more than 0.5 million tons of similar grades (Megaw, P.K.M., Ruiz, J., and Titley, S.R., 1988. "High-temperature, carbonate-hosted Ag-Pb-Zn(Cu) deposits of northern Mexico." Economic Geology, vol. 83, pp 1856-1885). Howe and Premier have not verified this information and this information is not necessarily indicative of the mineralization of the Property.

Nuevo Leon state is located in the northeastern section of Mexico. Almost one-third of Nuevo Leon's population of 3.8 million people lives in Monterrey, the state's capital city. It is Mexico's third-most industrialized state, and most residents enjoy a good standard of living. One of its municipalities, San Pedro Garza Garcia (a suburb of Monterrey), has the highest per capita income in Latin America. Mining accounts for one percent of the economy.

In November 2006, Mexican Silver completed an airborne geophysical survey on the La Providencia and El Ral properties, and hired Howe to complete a NI 43-101-compliant technical report on these properties. This report was completed in mid-January 2007 (referred to herein as the "Howe Report"), and recommends a two-phase program. The first phase of which is listed below:

Phase 1 - La Providencia: government and historical data acquisition and compilation, follow-up drainage (stream sediment) geochemistry, test ground geophysical surveys, trenching and diamond drilling in the Vallecillo area; data compilation, trench dewatering and new trench excavation, orientation geophysical surveys and diamond drilling in the area of La Blanca.

Phase 1 - El Ral: data acquisition and compilation, induced polarization surveys and soil geochemistry; and geological mapping.

The total cost of the proposed Phase 1 program is estimated at US$518,300, including a 10 percent contingency. Phase 1 is expected to commence shortly following completion of the Proposed Transaction and is expected to be completed within six months of the commencement date.

Based on results obtained in the first phase, a Phase 2 program of diamond drilling in the Vallecillo area, and at La Blanca and around the La Iguana Mine is recommended. The total cost of this second phase is estimated at US$372,400, including a 10 percent contingency. The total of the Phase 1 and Phase 2 programs is US$890,700.


The La Providencia property, covering 60,000 hectares (152,400 acres), is located to the northeast of Sabinas Hidalgo on the main road to Laredo, Texas. Access to the mineral claims is gained through secondary but readily passable gravel roads north of the village of Vallecillo. Past Spanish workings at Vallecillo are located to the immediate north of the main highway and are accessible through all-season gravel roads.

Access to the La Providencia property is easily obtained through Highway 85, a good paved road from Monterrey to Laredo, to the small village of Vallecillo.

The La Blanca property, with additional old Spanish-era underground workings and more recent surface trenching (approximately 30 years old), is located an additional 25 kilometers to the north of Vallecillo and accessible via good gravel roads.

Geology & Mineralization

The La Providencia property is located in the province of the Sierra Madre Oriental. It is underlain by a series of Cretaceous sediments consisting of laminated and massive limestones, lutites and some conglomerates. Most of the eastern part of the license area is of low topographic relief, and is covered by flat-lying Tertiary conglomerates.

Exposed bedrock is located in the Vallecillo area, a 4-kilometer-long mining district of thin manto and vein deposits aligned along a northeast-trending structural zone. The mineralization consists of a series of narrow northeast-trending, vein- and manto-type occurrences over a strike length of several kilometers. There are a number of remnant pits and shafts.

The La Blanca prospect was exposed several decades ago in a now water-filled trench. Lead-zinc-silver mineralization, possibly north-northwest-trending, is hosted in Cretaceous lutites.

In late 2006, airborne magnetic- radiometric surveys were flown over the Vallecillo area and the La Blanca prospect. No anomalies of significance were detected on the La Providencia survey except for a series of interpreted mafic dykes south of the property.


The Vallecillo mines, located in the southwest portion of the La Providencia property, were originally worked by Spanish colonizers who apparently abandoned operations due to a combination of water problems and "constant incursions" by local peoples. The Vallecillo Silver Mining Company of New York bought the deposits in 1851.That company began operations at the old Jesus Maria mine, but water problems forced them to move about four kilometers to the east, to another Spanish-era operation, the Delores shaft.

By 1885 there were four shafts and an incline at the bottom of one of the shafts at Vallecillo within a distance of about 400 meters along the vein. The main working was the 150 meter deep Santiago shaft. Two other shafts had been sunk further to the west of this area, bringing the total known surface extent of the vein to approximately 500 meters. The Spanish had mined to a depth of about 50 meters and, as of 1885, mining had been done on five levels to a depth of about 120 meters. Workings had been developed to about 550 meters to the west, and 360 meters to the east of the Santiago shaft. It is unclear when production at Vallecillo ended.

In October 1982, the Consejo de Recursos Minerales conducted a study of the immediate Vallecillo area. The study briefly discussed the La Magnolia Mine, the Nuevo Mexico Mine, the La Colorada Mine, the Carmencita, the Indian and the La Cucaracha. They carried-out regional geologic mapping over an area of 286 square kilometers and completed a geologic-topographic study of the six mines mentioned above which covered a strike length of 772 meters and, in addition, visited three prospects and four collapsed and inaccessible mines as well as numerous shallow openings.

Potential Exploration Work

Vallecillo displays significantly more lead-zinc-silver mineralization than La Blanca. Howe concludes it should therefore be considered a higher-priority target area for future exploration.

The Howe Report recommends a complete structural and stratigraphic interpretation of the Vallecillo area, to include:

- accessing and compiling of all relevant government and historical data

- securing government geological services to facilitate access of state data

- acquiring of underground mapping and sampling results for all of the old mines

- detailed surface geological mapping of the district at a workable scale

- acquiring any historic data on production/grades from any of the mines

- purchasing state geologic survey geochemical data that is to be offered to the public in the coming months; specifically, the stream sediment data

- testing IP lines across identified occurrences to determine response characteristics of the mineralization and host rocks

Howe recommends that after zones of mineralization have been identified and located, an initial bulldozer trenching program be implemented for sampling purposes to identify the most favorable targets for follow-up diamond drilling. Initial limited drilling (Phase 1) is recommended to test for vein and manto mineralization at depths of up to 200 meters.

For La Blanca, Howe recommends a program to attempt to accurately determine the characteristics of mineralization through trenching. A specific plan for this area would include:

- draining and cleaning out the original trench with a bulldozer or backhoe

- digging a trench perpendicular to the central portion of the original trench

- extending trenches in all directions if warranted

- detailed mapping and sampling of trenches

- limited Phase 1 drilling under the La Blanca occurrence to determine the geological setting and potential for mineralization at depth.

As work proceeds, the airborne geophysical survey for La Blanca should be re-interpreted, especially for the possibility of regional structures crossing the immediate area and the area under the salt lake to the north of the original trench.


The centre of the La Iguana property (Ral) is located approximately 26 kilometers northwest of the La Providencia property. Access to the Ral property requires a drive of approximately 112 kilometers from Sabinas Hidalgo with the last three kilometers along a difficult road to the La Iguana Mine; an old silver, lead and zinc operation.

Geology & Mineralization

The Ral property is underlain by Cretaceous limestone, shaly limestone, limey shale and chert. The sedimentary rocks have been cut by numerous Tertiary intrusive rocks of intermediate composition, forming large irregular bodies (up to two kilometers across) and dykes. Skarn and hornfels locally occur in the vicinity of the intrusions. There are a number of lead-zinc-silver occurrences and prospects, some of which produced modest amounts of ore in the past. Mineralization is controlled by structure (faults and fractures), stratigraphy (mostly the Cretaceous Austin Formation) and intrusive contacts.

The best-known mineralization on the property is in the former La Iguana (Guadalupe) mine area. A report written in 1954 (Whiting, F.B., 1954 "Ore Controls at the Guadalupe mine, Nuevo Leon, Mexico. Economic Geology.") states that mineralization is located only in the fault zones, and that the style of mineralization is related to the host rock. Whiting is independent of Premier and Mexican Silver. Faults in shale, which tend to be a thin, highly sheared zone or a set of such zones, contain only small amounts of barite, galena and sphalerite. Locally, shale and, more commonly, limestone, contain lenses of massive barite up to about 0.7 meter thick, in turn containing zones of galena and sphalerite. The sulphide zones are common in the lower hillsides underlain by limestone, but are generally less than 0.3 meter thick and extend for up to 60 meter along strike or dip, and are randomly scattered along the faults. Many were mined in the past.

Potential for this zone is limited to the south where the fault is exposed on the hillside. The 1954 report (Whiting 1954) states that the average grade of mineralization in this ore shoot is about four percent lead and six percent zinc with about 25 percent barite; silver content averages about 1.5 ounce per ton (51 grams per ton) for each percent of lead. Whiting suggested that there may be additional potential around other dykes or along structures that are weakly mineralized at surface. This information has not been verified by Premier or Howe.

A 2006 report prepared for Mexican Silver (Dynes, B. 2006) stated that the mantos vary in composition from massive sphalerite and galena to massive barite, and that there are local vug fillings of coarse, massive fluorite. Mr. Dynes is a director of Premier. The thickness of the mineralization varies but averages approximately 0.5 meter. A 0.5-meter vertical sample taken near a portal of the La Iguana underground workings returned 5.5 ounces per ton (238 grams per tonne) silver, 1.1 percent lead, and 1.4 percent zinc. Grab samples of the mantos from deeper workings contain up to 218 ounces per ton (7,474 grams per tonne) silver, more than 25 percent lead and 3.4 percent zinc.

In 1978, Consejo de Recursos Minerales extensively sampled both dyke and manto mineralization in the underground workings of La Iguana. They outlined three zones with the average grades and thicknesses set out below. This information has not been verified by Premier or Howe.

Zone I (manto) - 140 g/t silver, 2.13% lead and 2.10% zinc across 0.8 m

Zone II (manto) - 146 g/t silver, 1.61% lead and 6.28% zinc across 0.8 m

Zone III (dyke) - 84.65 g/t silver, 2.48% lead and 2.84% zinc in a brecciated porphyritic dacite with 3-centimeter-wide veinlets.

In the Honorio area, located 0.5 km to the southeast of the Iguana ranch, four mineralized faults define the main structures that have been exposed in mine workings. The mineralization is reportedly exposed in other mine workings, but none have been visited by either Mexican Silver or Howe.

In November 2006, airborne magnetic- radiometric surveys were flown over the property. A number of magnetic anomalies correlate with the intrusions and there is evidence that the individual intrusions may be part of the same 10 kilometer by 10 kilometer batholithic intrusive body at depth.


La Iguana at one period was a mining camp of 3,000-5,000 people, a substantial number for its time. Significant underground development is in evidence on flat lying mantos and contact zones.

During a study of the Guadalupe/La Iguana Mine in 1952, researchers were informed by the local people that the mine had been idle since 1919. The deposit was examined by the Mexican government in 1978 during which time they surveyed and extensively sampled the underground workings.

A one day field visit was made to La Iguana by Howe. An examination of outcrops of both the intrusive and the skarn/sediments was made. A close inspection of the underground mine at La Iguana revealed characteristics that controlled high-grade ore.

Howe is unaware of any information about the history of the Voladora Mine or any of the other workings in the area.

Potential Exploration Work

The Howe Report recommends:

- careful data compilation of the geology and historic workings on the Ral property to gain a base understanding of the host rocks, intrusives, stratigraphy and mineralization.

- geological mapping of the property and detailed studies in the vicinity of Tertiary intrusions and around prospects and historical workings.

- ground IP, resistivity and magnetic surveys. It will be very important to evaluate the geophysical response from the Iguana Mine for evaluating responses in other areas.

Financial Information

The following table sets forth certain pro forma information upon Completion of the Proposed Transaction, based upon the unaudited balance sheet of Premier as at November 30, 2006 and the audited balance sheet of Mexican Silver as at December 31, 2006.

Mexican Pro Forma Resulting
Premier Silver Adjustments Issuer
November 30, December 31, ($) Pro Forma
Pro Forma 2006 ($) 2006 ($) (Unaudited) ($)
Balance Sheet (Unaudited) (1) (2)(3) (Unaudited)
Current assets $ 708,003 $ 6,843 $ 1,570,879 $ 2,285,725
Capital assets $ 0 $ 24,543 $ 0 $ 24,543
Mineral property costs $ 0 $ 4,213,166 $ 9,385 $ 4,222,551
Total assets $ 708,003 $ 4,244,553 $ 1,580,264 $ 6,532,820
Total liabilities $ 665,909 $ 175,750 $ 0 $ 841,659
Shareholders' equity $ 42,094 $ 4,068,803 $ 1,580,264 $ 5,691,161


(1) U.S. dollars converted into Canadian dollars at the exchange rate of
Cdn$1.1664 equals US$1.00.

(2) Assumes the completion of the Offering for gross proceeds of
C$2,190,000 less finder's fees.

(3) Includes issue of 840,000 units of Premier on January 10, 2007 for net
proceeds of $210,000. See "Equity Financing" below.

Directors and Officers

If all of the matters placed before the Meetings are approved, and the Proposed Transaction is completed, the following individuals will constitute the initial Directors and Officers of the issuer resulting from the Proposed Transaction.

Roger Norwich (Shropshire, England) - Chairman and Director

Roger is a dual graduate of Manchester University having studied geology in the early 1970s and medicine in the 1980s. He worked for the major American oil producer/explorer Texaco after graduation. He has worked in the UK North Sea, in particular on the Brent oilfield. In addition he was based in Midland Texas gaining experience of the Permian Basin. He is also the Chairman and a director of Nighthawk Energy plc, an energy company working in the USA that is listed on AIM.

Feisal Somji (Calgary, Alberta) - Director, Chief Executive Officer and President

Feisal Somji has more than 13 years' experience in the mineral exploration and development business and has been involved in early, late stage and mine development projects around the world. Mr. Somji has considerable experience in the areas of Corporate Finance and Corporate Governance, as well as mineral exploration management. Mr. Somji has had experience as an officer and director for several public companies involved in diamond, gold and platinum group element assets in Canada, Mexico, Brazil and Africa. He has also run his own private companies providing mineral exploration services to other companies. Mr. Somji holds a Bachelor of Science degree from the University of British Columbia and a Master of Business Administration from Queens University, in addition to a Diploma in Aviation with a Commercial Pilot's License from University College of the Fraser Valley.

Harry McGucken (North Vancouver, British Columbia) - Chief Financial Officer, Corporate Secretary and Director

Harry McGucken has more than 25 years of financial and managerial experience. Since 1985, Mr. McGucken has been involved at both the director and senior level management of a number of mineral exploration and development companies, in both the private and public sector. He has also been involved in private companies providing mineral exploration services to other companies.

William J. Dynes (Calgary, Alberta) - Director

Mr. Dynes is a Professional Geologist (Alberta) with 30 years of practical mining, mineral exploration, and corporate managerial experience. He started with Noranda Mines Ltd, Hendrix Lake division, in 1975, as a mineral assayer at their Boss Mountain Molybdenum Mine. He moved on to designing and managing mineral exploration programs in BC, Mexico, the Yukon, NWT, Africa and Brazil. Mr. Dynes had integral and direct involvement in the successful discoveries of the Jericho (Tahera Diamond Corporation) and Gaucho Kue (Debeers Canada) diamond deposits in the Northern Canada and in the setting up the Diamond Research Center at UBC. He has gained extensive experience in corporate management and the search for precious metals and diamondiferous kimberlites in Canada, Mexico and Tanzania. Mr Dynes has a Bachelor of Science Honors Degree from the University of British Columbia and is a Qualified Person for the purposes of NI 43-101.

Joseph O'Farrell (Dublin, Ireland) - Director

Mr. O'Farrell has 25 years of corporate experience in the oil and mining industry. He is a former director of Oil Quest Resources plc and currently a director of Nighthawk Energy plc, an energy company working in the USA that is listed on AIM. He has assisted a number of companies working in conjunction with corporate advisers and brokers in pre IPO fund raising and project acquisition.

Raul Ramirez Morton (Monterrey, Mexico) - Director

Obtained his degree in Business Management at the Monterrey Institute of Technology and a Certificate Degree in Administration and Management at Harvard Extension School, brings 15 years of Corporate Managerial Experience working with different companies in Mexico. In addition to this, he has considerable experience in helping International Companies establishing operations in Mexico.

Stock Options

The Corporation is seeking shareholder approval of a Stock Option Plan at the Meeting. No options are presently outstanding. Upon completion of the Proposed Transaction, the Corporation intends to grant Options to certain directors, officers, employees and consultants of the Resulting Issuer to acquire, in aggregate, up to 2,100,000 shares, exercisable at a price of $0.25 per share until the fifth anniversary of the grant of such options.

Equity Financing

Concurrent with the Proposed Transaction, Premier intends to complete a private placement of 9,600,000 units ("Units") at the price of $0.25 per Unit for aggregate gross proceeds of CDN$2,400,000 (previously defined as the "Offering"). The total amount of the Offering has been increased from $2,000,000 (8,000,0000 Units) as previously announced by Premier to $2,400,000 in light of the working capital requirements of the Corporation for the 12 month period following completion of the Proposed Transaction. Each Unit will consist of one common share and one-half of one share purchase warrant ("Warrant") of Premier. Each full Warrant will entitle the holder to purchase one additional common share of Premier at a price of $0.50 during the period expiring on the second anniversary of the issue of the Warrants, provided that if the trading price of the common shares is greater than $0.80 for ten consecutive days of trading at any time during the term of the Warrants, Premier will have the right to shorten the term of the Warrants to thirty days from the day on which Premier provides notice to the holders of the shortened exercise term.

Premier has accepted subscriptions for and closed upon 840,000 Units ($210,000) of the 9,600,000 units, prior to completion of the Proposed Acquisition (the "Initial Closing"). The warrants forming part of the units issued at the Initial Closing will have a one year term unless Premier is listed on the Exchange on or before the first anniversary of the date of the Initial Closing. If Premier is listed on the Exchange on or before the first anniversary of the date of the Initial Closing these Warrants will expire on the second anniversary of the Initial Closing. If the trading price of the common shares is greater than $0.80 for ten consecutive days of trading at any time during the one or two year term of these warrants, as the case may be, Premier will have the right to shorten the term of these warrants to thirty days from the day on which Premier provides notice to the holders of the shortened exercise term.

Closing of the final tranche of the Offering for total gross proceeds of up to $2,400,000 is anticipated to occur concurrent with the completion of the Proposed Transaction.

The proceeds of the Initial Closing ($210,000) will be used by Premier for general working capital purposes, including to fund expenditures incurred in connection with the Proposed Transaction and to fund the exploration programme to be carried out on Mexican Silver's property following completion of the Proposed Transaction.

Pursuant to a Finder's Fee Agreement between Premier and Canaccord Capital Corporation ("Canaccord"), the Company has agreed to pay Canaccord a finder's fee of 5% of the amount placed with subscribers introduced to Premier by Canaccord payable in cash. In addition, Premier has agreed to issue to Canaccord such number of warrants (the "Broker Warrants") equal to 5% of the Units sold to subscribers introduced to Premier by Canaccord. Pursuant to a Finder's Fee Agreement between Premier and Ascenta Finance Corp. ("Ascenta"), the Company has agreed to pay Ascenta a finder's fee of 7% of the amount placed with subscribers introduced to Premier by Ascenta payable in cash. In addition, Premier agrees to issue to Ascenta such number of Broker Warrants equal to 7% of the Units sold to subscribers introduced to Premier by Ascenta. Each Broker Warrant will entitle the holder to purchase one common share of Premier at an exercise price $0.50 per share for a period of two years from closing.

Sponsorship for the Proposed Transaction

Subject to completion of satisfactory due diligence, Blackmont Capital Inc. has agreed to act as sponsor in connection with the Proposed Transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the Proposed Transaction or the likelihood of completion.

Terms and Conditions of the Proposed Transaction

The Proposed Transaction is an arm's length transaction as the directors and officers of Premier have no ownership or other interest in Mexican Silver. As part of the regulatory approval process, Premier anticipates submitting for review to the TSX Venture Exchange (the "Exchange") an information circular. The Premier Shares will remain halted until such time as permission to resume trading has been obtained from the Exchange and submission of required documentation to the Exchange. Premier is a reporting issuer in Alberta and British Columbia.

Completion of the Propose Transaction is subject to a number of conditions including, but not limited to, Exchange acceptance and, if applicable pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in securities of Premier should be considered highly speculative.

All information contained in this news release with respect to Premier and Mexican Silver was supplied by Premier and Mexican Silver, respectively, for inclusion herein, and with respect to such information, Premier and its board of directors and officers have relied on Mexican Silver.

Mr. Reginald L. Comeau and Mr. Robert M. Kuehnbaum are the independent Qualified Persons who prepared the Howe Report. In accordance with the requirements of National Instrument 43-101, Mr. Comeau supervised the preparation of the technical and scientific contents of this news release. Mr. Comeau visited Property on August 14 and 15, 2006. Howe did not verify sampling taken by Mexican Silver because a) at La Blanca, Mexican Silver had sampled only dump material, b) at RAL, some of the MSM sampling was of dump material which could not be duplicated, and c) some of the Mexican Silver's sampling was from the underground workings at La Iguana Mine which Howe deemed unsafe for entry beyond 15-20 metres without appropriate equipment. A visit was made to the old La Iguana mine on the RAL property. One sample was collected across the mineralized manto along the main drift. The sample represents mineralization across approximately 1 metre. An additional sample was collected from some of the waste outside the entrance to the deposit and a third sample was collected as part of the scree dumped over the immediate hillside next to the portal entrance. Mr. Comeau bagged, labeled, taped closed, packaged and personally delivered the samples to the FedEx courier in Monterrey. The samples were shipped to the Howe office in Toronto and then shipped on to the SGS Laboratories in Toronto. Results from samples collected by Howe can be found in Table 9 of the Howe Report. Capability, Accreditation and Security Statements for SGS is located in Appendix B of the Howe Report.

The Exchange and NEX have in no way passed upon the merits of the Proposed Transaction and have neither approved nor disapproved the contents of this press release.

This news release may contain forward-looking statements based on assumptions and judgments of management of Premier and Mexican Silver regarding future events or results. Such statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those reflected in the forward-looking statements. Premier disclaims any intention or obligation to revise or update such statements accept as may be required by law.


Feisal Somji, B.Sc., MBA, President

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

Contact Information

  • Premier Diamond Corp.
    Feisal Somji
    (403) 236-5089
    (403) 398-0693 (FAX)