Palmarejo Silver and Gold Corporation
TSX VENTURE : PJO

Palmarejo Silver and Gold Corporation

January 31, 2006 12:41 ET

Quarterly Update-Palmarejo Silver and Gold Corporation

LONGUEUIL, QUEBEC--(CCNMatthews - Jan. 31, 2006) - Palmarejo Silver and Gold Corporation (TSX VENTURE:PJO) - The following is an extract from the Quarterly report of Bolnisi Gold NL and contains drilling results for the Palmarejo Project not previously released. Bolnisi Gold is Palmarejo Silver and Gold Corporation's major shareholder beneficially owning 64.75 million shares, representing approximately 79.5% of the Company's outstanding capital.

Palmarejo Silver-Gold Project Gold and Silver Exploration Temoris, Chihuahua, Mexico

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.

The Palmarejo Project and Trogan licence area contain a number of mineralized 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.

For more information about the project, please refer to the NI 43-101 Technical Report dated October 20, 2005 available at www.sedar.com under Palmarejo Silver and Gold Corporation.

Palmarejo Drilling and Assay Results

During the December 2005 quarter, drilling continued on the Palmarejo Project and also on 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.

Since exploration drilling began at the Palmarejo Project in November 2003, a total of 79,182 metres of RC drilling in 439 RC drill holes and 24,916 metres of diamond core drilling in 135 diamond core drill holes has been completed. During the December 2005 quarter, a total of 9,306 metres of RC drilling and 6,873 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. In addition, one diamond core rig and one RC rig are drilling at the Guadalupe, Todos Santos-Canadensia and La Patria prospects.


Drilling at Palmarejo during the December 2005 quarter continued with the infill drilling program on the La Blanca and La Prieta structures to drill out the Rosario clavo and surrounds to measured/indicated resource status (refer Resources below). Some quality control twin holes are also in progress to further compare PQ, HQ and NQ core sampling with RC drilling.

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, drilling of the La Finca anomaly (possible clavo) on the La Prieta structure, 1,000 metres southeast of Hall's clavo, was completed. The Rosario clavo remains open at depth as does the 108 clavo along strike to the east on the La Blanca structure. Holes PMDH468 and PMDH482 indicate that both Hall's clavo on La Prieta and the 108 clavo on La Blanca are open to the east. These areas are expected to yield additional resources.

Drilling is continuing at Palmarejo and Guadalupe and, since the end of the quarter, has commenced at Todos Santos-Canadensia and at La Patria, 2,000 metres south of the Palmarejo mine.

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

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



- 15.2 metres @ 2.5 g/t Au and 353 g/t Ag (7.9 g/t AuEq)
(PMDH354D La Blanca)
- 7.6 metres @ 4.1 g/t Au and 574 g/t Ag (12.9 g/t AuEq)
(PMDH354D La Prieta)
- 13.7 metres @ 10.8 g/t Au and 401 g/t Ag (17.0 g/t AuEq)
(PMDH364 La Blanca)
- 22.8 metres @ 21.6 g/t Au and 1,295 g/t Ag (41.5 g/t AuEq)
(PMDH366 La Blanca)
- 41.1 metres @ 10.0 g/t Au and 854 g/t Ag (23.1 g/t AuEq)
(PMDH369 La Blanca)
- 4.6 metres @ 8.6 g/t Au and 1,250 g/t Ag (27.8 g/t AuEq)
(PMDH370 La Blanca)
- 4.6 metres @ 2.2 g/t Au and 820 g/t Ag (14.8 g/t AuEq)
(PMDH374 La Blanca)
- 22.9 metres @ 19.6 g/t Au and 243 g/t Ag (23.4 g/t AuEq)
(PMDH394 La Blanca - 108 clavo)
- 4.5 metres @ 5.2 g/t Au and 300 g/t Ag (9.8 g/t AuEq)
(PMDH400 La Blanca - 108 clavo)
- 18.3 metres @ 4.0 g/t Au and 206 g/t Ag (7.2 g/t AuEq) and
- 3.1 metres @ 2.9 g/t Au and 14 g/t Ag (3.1 g/t AuEq)
(PMDH401 La Blanca - 108 clavo)
- 13.5 metres @ 9.6 g/t Au and 202 g/t Ag (12.7 g/t AuEq)
(PMDH403D La Blanca - 108 clavo)
- 15.2 metres @ 9.5 g/t Au and 775 g/t Ag (21.4 g/t AuEq) and
- 7.6 metres @ 5.8 g/t Au and 466 g/t Ag (13.2 g/t AuEq) and
- 9.1 metres @ 1.2 g/t Au and 208 g/t Ag (4.4 g/t AuEq) and
- 4.6 metres @ 7.9 g/t Au and 553 g/t Ag (16.4 g/t AuEq) and
- 6.1 metres @ 1.1 g/t Au and 155 g/t Ag (3.5 g/t AuEq)
(PMDH380 La Prieta - Rosario clavo)
- 18.3 metres @ 1.2 g/t Au and 246 g/t Ag (4.9 g/t AuEq)
(PMDH386D La Prieta - Rosario clavo)
- 2.0 metres @ 6.7 g/t Au and 435 g/t Ag (13.4 g/t AuEq)
(PMDH382D La Prieta - Hall's clavo)
- 2.0 metres @ 24.2 g/t Au and 1,844 g/t Ag (52.6 g/t AuEq)
(PMDH390D La Prieta - Hall's clavo)
- 1.5 metres @ 3.3 g/t Au and 7 g/t Ag (3.4 g/t AuEq)
(PMDH413 - Cerro de los Hilos)


Drill collars for the December 2005 quarter not previously reported are
as follows: (Click on the link below
http://www.ccnmatthews.com/docs/palm1J31.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 mineralized intervals reported above.
- # equals previously reported and included here for completeness.


The significance of the clavos (ore shoots) to the Palmarejo Silver-Gold Project has previously been emphasized. It is currently estimated that the majority of precious metal content of the Palmarejo Project mineralization 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.

Significant results during the quarter have increased the strike extent of the 108 clavo, the easternmost clavo on the La Blanca structure, by at least 160 metres and the La Blanca structure remains open to the east.

Further infill drilling on the Rosario clavo, which occurs at the junction of the La Prieta and La Blanca structures, has returned some impressive intercepts with PMDH380 aggregating 42.5 metres in five separate intervals of excellent grades (see above).

Two short but high grade intercepts have been returned from Hall's clavo on the La Prieta structure.

A new prospect, Cerro de los Hilos (Hill of the Stringers), 2 kilometres south of Palmarejo, is a bulk tonnage, low grade target where previously completed surface trenching outlined a series of moderate grade, sheeted vein sets that combine with intervening wallrock for over 100 metres in true width. An initial result from Cerro de los Hilos is reported above.

Palmarejo Project Development Studies

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

Engineering, Procurement, Design and Construction Management

Tenders have been received from suppliers in Mexico for structural steelwork, plate work and civil work (concrete). The preferred tenderers have been selected and notified. The contract for work will be finalized next quarter.

A price estimate package for earthworks has been issued with some tenders still outstanding. Earthworks are scheduled to commence in March 2006.

Tenders for the SAG and ball mill and flotation circuit removal from the Los Frailes mine in Spain have been received and removal work is scheduled to commence by the end of the next quarter.

Following detailed test work, Electrometals Technologies Limited is the preferred tenderer for the supply of an electrowinning circuit ('EMEW') for the recovery of gold and silver. Luismin (part of Goldcorp Inc) have recently decided to install an EMEW circuit for part of the gold and silver recovery at one of their operations in Mexico. Earlier in 2005, Phelps Dodge Corporation in the US decided to install an EMEW circuit at one of its operations for the production of copper plate.

Metallurgy

All metallurgical test work for the Palmarejo Project has been completed.

Infrastructure

A transportation consultant from a freight company has completed a road survey for the transportation of the processing equipment to the Palmarejo Project. Quotations have been received from two contractors to upgrade the 100 kilometres of road between San Rafael and Palmarejo. A contract has been drafted for the road upgrade work and is scheduled to be signed during the next quarter.

Quotations for the supply of diesel generators and associated equipment for the processing facility power supply have been received for evaluation.

Mining

A final mining study will commence when the resource model is completed during the next quarter.

Surface Use Agreements

During the December quarter, agreement was reached with all landowning communities ('ejidos') which are affected by the Company's Palmarejo Project development plan. These agreements secure surface use rights and a temporary occupation agreement over 958 hectares identified by the Company as being required to facilitate the development, construction and mining of the Palmarejo Gold-Silver Project.

The Company has secured surface use and temporary occupation rights for 15 years, with a right to renew for a further 15 years, for annual payments totalling US$46,060 (US$48 per hectare).

Environmental Permit Application

Semarnat requested some additional biological information which has been submitted. Semarnat will review this further information in early February 2006 with a development and mining permit decision expected shortly thereafter.

Trogan Exploration Projects Gold and Silver Exploration Temoris, Chihuahua, Mexico (Planet Gold SA DE CV)

Mapping and reconnaissance exploration of the north-central part of the Trogan tenement continued during the December 2005 quarter and drilling continued on the Guadalupe Project.

TSP (alteration mineral) mapping with the Terraspec instrument acquired in December 2004 continues to be most productive and has identified mineralized vein and alteration systems in the Trogan tenements that have been initially identified by satellite interpretation and warrant further investigation. The following prospects have been identified within the Trogan tenements to date with most activity carried out on the Guadalupe prospect: Drilling is commencing on the La Patria, Todos Santos-Canadensia and La Patria prospects and preliminary drilling on Cerro de los Hilos and Los Hundidos commenced during the December quarter.



- Guadalupe/Las Animas;
- La Finca;
- Cerro de los Hilos (Los Hundidos);
- Todos Santos-Canadensia;
- La Patria;
- Maclovia;
- Santa Ursula/Esperanza (Victoria); and
- Guerra al Tirano district.


Guadalupe Drilling and Assay Results

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.


Details of the location of drill holes at Guadalupe and assay results
which have been reported by the Company during the December 2005
quarter are included on the Company's website. Some of the significant
assay results reported include:

- 29.5 metres @ 2.84 g/t Au and 193 g/t Ag (5.81 g/t AuEq) (TGDH035D)
- 6.5 metres @ 0.49 g/t Au and 99 g/t Ag (2.01g/t AuEq) (TGDH029D)
- 4.5 metres @ 0.92 g/t Au and 131 g/t Ag (2.93 g/t AuEq) (TGDH023D)
- 4.3 metres @ less than0.05 g/t Au and 356 g/t Ag (5.43g/t AuEq)
(TGDH033D)
- 3.5 metres @ 1.44 g/t Au and 143 g/t Ag (3.64 g/t AuEq) (TGDH034D)
- 2.5 metres @ 0.66 g/t Au and 292 g/t Ag (5.15 g/t AuEq) (TGDH028D)
- 2.5 metres @ 0.88 g/t Au and 136 g/t Ag (2.97g/t AuEq) (TGDH030D)

The following significant results are from drilling at Guadalupe during
the December 2005 quarter and reported in full below:

- 6.0 metres @ 1.76 g/t Au and 146 g/t Ag (4.01 g/t AuEq) (TGDH037D)
- 11.0 metres @ 0.52 g/t Au and 87 g/t Ag (1.86g/t AuEq) (TGDH042D)
- 5.5 metres @ 0.99 g/t Au and 135 g/t Ag (3.07 g/t AuEq) (TGDH043D)
- 9.0 metres @ 0.88 g/t Au and 107 g/t Ag (2.53g/t AuEq) (TGDH044D)
- 11.5 metres @ 2.24 g/t Au and 81 g/t Ag (3.49 g/t AuEq) (TGDH046D)
- 4.5 metres @ less than0.05 g/t Au and 181 g/t Ag (2.74 g/t AuEq)
(TGDH053)


Drill collars for the December 2005 quarter not previously reported are
as follows: (Click on the link below
http://www.ccnmatthews.com/docs/palm2J31.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 mineralized intervals reported above.
- # equals previously reported and included here for completeness.
- Bulk and Carry (i) equals Results reported using a 1.0 g/t AuEq cut
off with 1 metre internal waste.


Drill hole TGDH039D returned a very high silver value at 56 metres similar to the results from the GPE Sur link structure previously reported for drill hole TGDH033D.

The QVBX zone in drill hole TGDH040D is 25 metres wide and, although not strongly mineralized, it again demonstrates the necessity to drill apparently unmineralized at outcrop clay blooms - as per clavo 76 at the Palmarejo Project. The wide QVBX intersection has identified known structures beneath clay blooms. A further 3 drill holes (including TGDH043D) were planned to target this zone at depth and along strike.

Results for drill hole TGDH043D returned 5.5 metres @ 3.03 g/t AuEq. This hole was drilled targeting the area between the main Guadalupe clavo and the clay bloom area to the north. These results confirm continuity of mineralization along the Guadalupe structure for over 300 metres.

Results for drill hole TGDH044D returned 9 metres @ 2.53 g/t AuEq (with 1 metre internal waste). This hole, along with drill hole TGDH045D returned 6.5 metres @ 2.52g/t AuEq, was drilled targeting the southern strike extent of the Las Animas clavo. This result confirms continuity of mineralization at Las Animas and is open to the south and down dip.

Drill holes TGDH046D and TGDH047D were drilled to target the Las Animas clavo to the north-northwest of drill hole TGDH035D. Results for drill hole TGDH046D returned 3 major intercepts:

- 11.5 metres @ 3.49 g/t AuEq (with 1 metre internal waste);

- 3.5 metres @ 7.86 g/t AuEq (with 1 metre internal waste); and

- 2.5 metres @ 5.66 g/t AuEq.

The Au:Ag ratio is around 1:50 (significantly lower than the 1:300 Au:Ag ratio from drill results near surface).

Results for drill hole TGDH047D returned 3 narrow high-grade intercepts. TGDH047D was drilled to target the Las Animas clavo down-dip of TGDH046D and to the north of drill hole TGDH035D. This drill hole has clipped the lower part of the north-northwest plunging Las Animas clavo. The Las Animas clavo is still open to the north and down plunge.

This drilling program was designed to test potential for high grade silver-gold mineralization at depth along the Guadalupe structure. The results from TGDH035D confirm the Company's geological hypothesis of gold-silver occurrence at Guadalupe and give the Company confidence to continue with its drilling program.

Hole TGDH035D targeted the Las Animas clavo at depth and intersected the main structure between 140 metres and 160 metres (below surface). The mineralized QVBX is 19 metres wide and dips 45 degrees to 65 degrees northeast. Gold values are higher near the hanging wall and footwall contacts relative to the central part of the structure, however silver values are more uniform than gold throughout the mineralized interval. Both quartz-carbonate-base metals-silver and quartz-carbonate-pyrite mineralization styles are present.

Confirmation of high grades over significant widths at Las Animas supports the concept that additional clavos may exist at depth.

Significant mineralized intercepts of QVBX beneath the unmineralized clay blooms at surface in the north of the Guadalupe structure are a real possibility and testing will continue in the next quarter.

Corporate

During the December 2005 quarter, the Company exercised its right to call, and accepted the exercise of, 4,243,500 common share purchase warrants which were issued in March 2005. Each warrant was exercisable for one common share at a price of C$1.50 per share with proceeds of approximately C$6,365,250. The proceeds were applied to the Company's working capital.

In addition, Bolnisi Gold exercised its 12.5 million warrants. Each warrant was exercisable for one Palmarejo Gold's common share at a price of C$1.00 per share. The proceeds were applied to reimburse part of the debt due to Bolnisi Gold.

In December 2005, the Company changed its name to Palmarejo Silver and Gold Corporation. The purpose of the name change was to more accurately reflect the asset base of the Company.

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".

Palmarejo Gold Corporation is a gold and silver exploration company with projects in Mexico. Additional information on the Corporation and its projects is available on SEDAR (www.sedar.com) and on the Corporation'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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