Palmarejo Silver and Gold Corporation
TSX VENTURE : PJO

Palmarejo Silver and Gold Corporation

October 31, 2005 12:02 ET

Quaterly Update-Palmarejo Gold Corporation

LONGUEUIL, QUEBEC--(CCNMatthews - Oct. 31, 2005) - Palmarejo Gold Corporation (TSX VENTURE:PJO) is pleased to report a summary of its activities for the quarter ended September 30, 2005. For more information about the Company's projects, please refer to the NI 43-101 Technical Report dated October 21, 2005 available at www.sedar.com under Palmarejo Gold Corporation.



Quarterly Highlights

- Continued excellent drilling results from the Palmarejo Project.
- New Palmarejo Project resource statement.
- Environmental and water permit applications proceeding with
Mexican authorities.
- Significant progress made in studies on engineering, metallurgy
and design work.
- Major processing plant equipment purchased.
- Commencement of drilling at other exploration targets identified
in Trogan tenements.
- Further encouraging drilling results from the Guadalupe Project.


Palmarejo Gold-Silver Project (Including Trogan Exploration) Temoris, Chihuahua, Mexico (Planet Gold SA DE CV)

The Company has, through its 100% owned 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 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.

Drilling and Assay Results

During the September 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 69,876 metres of RC drilling in 375 RC drill holes and 18,043 metres of diamond core drilling in 90 diamond core drill holes has been completed. During the September 2005 quarter, a total of 15,133 metres of RC drilling and 6,278 metres of diamond core drilling were completed at the Palmarejo Project.

There are currently 3 RC drill rigs and 4 diamond core drill rigs on site at the Palmarejo Project and a further diamond core rig is drilling at the Guadalupe prospect, located some 7 kilometres southeast of Palmarejo on the Trogan exploration licence area.

Drilling at Palmarejo during the September 2005 quarter continued on the infill drilling program on the La Blanca and La Prieta structures predominantly to drill out the Rosario clavo and surrounds to upgrade the resource status to measured/indicated status (refer Resources below).

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, commenced.

Drilling is continuing at Palmarejo, La Finca and Guadalupe and has, since the end of the quarter, commenced at Cerro de los Hillos, another target within the Trogan licence area, 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 mineralised intervals, generally perpendicular to the structures, that are being drilled, include:



- 11.5 metres @ 4.4 g/t Au and 206 g/t Ag (7.5 g/t AuEq) (PMDH124D
La Blanca)
- 10.3 metres @ 14.6 g/t Au and 408 g/t Ag (20.9 g/t AuEq) (PMDH231D
La Blanca)
- 9.2 metres @ 1.3 g/t Au and 265 g/t Ag (5.4 g/t AuEq) and
6.0 metres @ 5.7 g/t Au and 1,016 g/t Ag (21.3 g/t AuEq) (PMDH237D
La Blanca)
- 8.9 metres @ 70.6 g/t Au and 3,727 g/t Ag (127.9 g/t AuEq)
(PMDH255D La Blanca)
- 3.0 metres @ 1.9 g/t Au and 338 g/t Ag (7.1 g/t AuEq) (PMDH293 La
Blanca)
- 16.8 metres @ 2.4 g/t Au and 364 g/t Ag (8.0 g/t AuEq) and
12.2 metres @ 3.6 g/t Au and 454 g/t Ag (10.6 g/t AuEq) (PMDH296
La Prieta)
- 12.2 metres @ 2.1 g/t Au and 500 g/t Ag (9.8 g/t AuEq) and
- 3.1 metres @ 8.3 g/t Au and 1,190 g/t Ag (26.6 g/t AuEq) (PMDH301
La Blanca)
- 15.2 metres @ 2.0 g/t Au and 322 g/t Ag (7.0 g/t AuEq) (PMDH309 La
Prieta)
- 4.5 metres @ 1.7 g/t Au and 289 g/t Ag (6.1 g/t AuEq) (PMDH311 La
Prieta)
- 1.5 metres @ 9.2 g/t Au and 10 g/t Ag (9.4 g/t AuEq) (PMDH322 La
Blanca)
- 6.1 metres @ 8.3 g/t Au and 345 g/t Ag (13.6 g/t AuEq) (PMDH337 La
Blanca)
- 9.1 metres @ 5.8 g/t Au and 996 g/t Ag (21.1 g/t AuEq) (PMDH338 La
Blanca)
- 10.9 metres @ 3.2 g/t Au and 326 g/t Ag (8.2 g/t AuEq) and
13.8 metres @ 3.3 g/t Au and 386 g/t Ag (9.3 g/t AuEq) and
4.4 metres @ 23.8 g/t Au and 3,669 g/t Ag (80.3 g/t AuEq)
(PMDH340D La Prieta)
- 22.9 metres @ 1.9 g/t Au and 244 g/t Ag (5.6 g/t AuEq) (PMDH341 La
Blanca)
- 16.7 metres @ 2.3 g/t Au and 258 g/t Ag (6.3 g/t AuEq) (PMDH342 La
Blanca)
- 30.5 metres @ 6.1 g/t Au and 139 g/t Ag (8.2 g/t AuEq) (PMDH349 La
Blanca)
- 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 @ 2.3 g/t Au and 342 g/t Ag (7.6 g/t AuEq) (PMDH359 La
Blanca)
- 9.1 metres @ 3.3 g/t Au and 399 g/t Ag (9.4 g/t AuEq) and
- 10.7 metres @ 1.2 g/t Au and 316 g/t Ag (6.1 g/t AuEq) (PMDH360 La
Prieta)
- 12.2 metres @ 5.5 g/t Au and 537 g/t Ag (13.8 g/t AuEq) (PMDH363
La Blanca)
- 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)

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 equivalency ratio
was based on a gold price of US$375 per ounce and a silver price
of US$5.77 per ounce.
- The internal voids are historic underground workings and have been
excluded from the mineralised intervals reported above.
- Hole PMDH340D is a metallurgical hole drilled down the plane of La
Prieta.


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.

Resources

In September 2005, an updated resource estimate, as tabulated below, was completed by Mine Development Associates ('MDA') of Reno, Nevada for the Palmarejo Gold-Silver Project. Mr. Michael Gustin of MDA completed a NI 43-101 Technical Report to support the resource estimate. The report dated October 21, 2005 is available on Sedar and on the Company's website.

Since the previous resource statement, drilling at Palmarejo was concentrated on infill and extensional drilling to increase the level of confidence in resources and further progress towards project development. Drill results up to and including PMDH314, completed in June 2005, are included in the September 2005 resource estimate. Drilling has continued since this June 2005 cut-off date with drill hole results and intercepts received since the resource cut-off date, including assay results reported above, expected to be incremental to the resource boundaries of known clavos and expected to add to the next resource update.

As reported in the September 2005 resource estimate, 48% of the resources tonnage, containing 51% of the gold and silver, is now classified in the Measured and Indicated resource categories, whereas the entire resource previously published was in the lesser Inferred category.

With further resource drilling already completed since the June 2005 cut-off date for the September 2005 resource estimate and continuing with seven drill rigs , the percentage and tonnes of mineralisation in the Measured and Indicated categories is anticipated to increase when the next resource estimates are completed. The next resource estimate, which will be based on drill results up to and including PMDH375, is expected to be completed before the end of the year.

The economically mineable part of the Measured and Indicated resources should be converted to Ore Reserves after appropriate assessments and studies have been carried out, including assumed mining, metallurgical, economic, marketing, legal, environmental, social and government factors. The majority of these studies have been in progress by the Company for some time.



Palmarejo Project Resource Statement at September 2005
(1.0 g/t gold equivalent (AuEq) cut-off)
------------------------------------------------------------------
Resource Tonnes Au Ag AuEq Au Ag AuEq
Category (Millions) (g/t) (g/t) (g/t) (Oz) (Moz) (Moz)
------------------------------------------------------------------

------------------------------------------------------------------
Measured 4.4 1.63 218 4.98 230,000 30.84 0.70
------------------------------------------------------------------
Indicated 5.4 1.52 225 4.98 265,000 39.31 0.87
------------------------------------------------------------------
Total 9.8 495,000 70.15 1.57
------------------------------------------------------------------


------------------------------------------------------------------
Resource Tonnes Au Ag AuEq Au Ag AuEq
Category (Millions) (g/t) (g/t) (g/t) (Oz) (Moz) (Moz)
------------------------------------------------------------------
Inferred 10.6 1.40 196 4.42 477,000 66.47 1.50
------------------------------------------------------------------


Notes:
- A 1g/t gold equivalent lower cut (controlled by AuEq 1:65 price
ratio) applied. The equivalency ratio was based on a gold price of
US$375 per ounce and a silver price of US$5.77 per ounce.
- Only those blocks with higher than this interpolated grade are
applied above.


Methodology

Gold and silver resources at Palmarejo were modelled and estimated by evaluating the drill data statistically, constructing geologic and mineral domains on cross sections at 25 metre intervals throughout the extent of the structures comprising the mineralisation included in this Palmarejo resource estimate, refining the mineral domain interpretations on level plans constructed at 5 metre intervals from the highest point on the property to the base of known mineralisation in this Palmarejo resource estimate, carrying out geostatistical analysis to establish estimation parameters and estimating gold and silver grades into a three-dimensional block model.

A total of 406 sections and plans were individually interpreted.

All modelling of the resource was performed using Surpac. Grade interpolation was by inverse distance cubed into constrained mineral domains. Modelled grade ranges had bottom cut-offs of 0.3 g/t Au and 35 g/t Ag and caps of 85.0 g/t Au and 6,000 g/t Ag.

A void model representing old underground workings which, where accessible, have been checked by underground surveying, was incorporated into the resource equation and is excluded from the Resource Statement above. The total tonnage previously mined underground is estimated at 490,000 tonnes, or 2.4% of the current in situ resource tonnage. That 490,000 tonne estimate is additional to the 20.4 million tonnes in situ resource tonnage.

Quality control on sampling has been independently reviewed on two occasions since the commencement of drilling in November 2003 and found to be of an acceptable standard.

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

Intermet Pty Ltd has issued budget tender packages to suppliers in Mexico covering structural steelwork, plate work and civils (concrete).

A price estimate package for earthworks will be issued next quarter with the earthworks contract expected to be awarded in December 2005.

SAG milling test work has been completed, confirming the suitability of SAG milling for the Palmarejo Project material tested, and two identical 5MW mills have been purchased from the Los Frailes mine in Spain plus rougher and cleaner flotation cells. One mill will be operated as the primary SAG mill and the second as a secondary ball mill. This equipment was installed new in 1996 and operated for less than 3 years. The jaw crusher has been ordered from Metso and the apron feeder ordered from RCR Tomlinson in Perth.

Metallurgy

The Advanced Media Competency test work has been completed using two bulk samples. Orway Metallurgical Consultants Pty Ltd has given recommendations for the crushing/SAG milling circuit based on all comminution test work data and Intermet Pty Ltd have designed the comminution circuit.

The pilot plant processing of more or less 1,000 kilograms of core sample has been completed with similar flotation performance to previous test work results. A quantity of concentrate was generated and has been leached to produce solution for the final confirmatory electrowinning test work with Electrometals Ltd.

Thickener test work has been completed achieving good results for the flotation concentrate and carbon-in-leach (CIL) tailings. Initial cyanide detoxification test work on the tailings material has produced very good results indicating low reagent requirements to achieve acceptable residual cyanide levels.

Geotechnical Studies

Environmental Geochemistry International Pty Ltd completed geochemical analyses on 52 waste rock samples selected by site geologists from the Palmarejo Project.

The results of testing indicate that the majority of waste rock will not be problematic with respect to acid rock drainage or element leaching. Provided that the samples included in the testing program are representative of waste rock at the Palmarejo Gold Silver Mine, it is expected that the available neutralising content of the waste rock will be adequate for neutralising acid generated and that disposal of the waste rock will largely result in a non-acid forming dump. However, it is recommended that column leach tests are commissioned to confirm the expected low solubility of metals and low leaching potential of representative waste rock types.

Based on the findings of the current investigations and assuming that the samples provided are representative of all waste rock mined, there is no indicated need for segregation or selective placement of waste rock for acid rock drainage (ARD) control. However, because the results indicated that the high inherent acid neutralising capacity (ANC) of the sample will be the key factor controlling ARD generation, it is recommended that additional samples are collected and assayed for acid-base characteristics during project development and operations to confirm the expected net acid forming (NAF) classification of individual rock types and run-of-mine waste rock dumps.

Infrastructure

Quotations have been received from two contractors to upgrade the 100 kilometres of road between San Rafael and Palmarejo. A transportation consultant from a freight company will visit Mexico in November to survey the road from Guaymas port on the west coast of Mexico to Palmarejo to ensure the mills and other equipment can be transported to site from the port.

Caterpillar in Mexico have provided a quotation for the supply of generators and associated equipment for the processing facility.

Mining

AMDAD Pty Ltd will complete a preliminary conceptual mining schedule and mine design. This will be updated when the next resource estimate is completed.

Environmental and Permitting

As previously reported, the Company's environmental and permitting consultants, Heuristica Ambiental, have filed the application for a mine and development permit with SEMARNAT in Mexico City and with CNA in Culiacan, the Water district office that controls water rights and permits for the Palmarejo area.

Under Mexican permitting law, SEMARNAT have 60 working days from filing to either request further information or to proceed to grant a permit which will allow the commencement of development and mining. During the September 2005 quarter, SEMARNAT requested some further information and their requests have been met. If no further requests for information are made by SEMARNAT, the development and mining permit should be received in late November 2005.

The water permit application requires agreement to be reached with affected landowning communities (ejidos). During the September 2005 quarter, agreement was reached with the two most significant ejidos, sufficient to allow the water permit application to be processed, and negotiation is in progress with a third ejido.

TROGAN EXPLORATION

Mapping and reconnaissance exploration of the north-central part of the Trogan tenement continued during the September 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 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;
- Cerro de los Hillos
- 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.

In addition to the Palmarejo drilling results, during the September
2005 quarter a drilling program, designed to test potential for high
grade silver-gold mineralisation at depth along the Guadalupe
structure, was commenced. Details of the location of drill holes and
assay results have been reported in full by the Company and are
reported on the Company's website, however, results included:

- 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 than 0.05 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)

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 equivalency ratio
was based on a gold price of US$375 per ounce and a silver price
of US$5.77 per ounce.
- The internal voids are historic underground workings and have been
excluded from the mineralised intervals reported above.

Drill holes TGDH024D to TGDH030D were drilled to confirm structural
continuity between Las Animas and Guadalupe. All holes crossed the
structure between 80 metres and 100 metres below surface. True width
of the Guadalupe/Las Animas structure averages 8 metres.
Mineralisation is characterised by quartz-vein breccia with high
grade commonly localised near the footwall contact of the structure.

Confirmation of high grades over significant widths at Las Animas
permits confidence that additional clavos may exist at depth.
Furthermore, numerous zones of high level clay alteration remain to
be tested along strike to the north beyond the limit of existing
drill coverage. Future drilling is planned to test down-dip and
along strike of the main Guadalupe structure, and to further
delineate the Las Animas clavo.

In addition to the above, subsequent to the end of the September 2005
quarter, the following results were received:

Drill hole locations:

---------------------------------------------------------------------
---------------------------------------------------------------------
Hole Northing Easting Elevation Declination Azimuth Depth
(m) (degrees) (degrees)
---------------------------------------------------------------------
---------------------------------------------------------------------
TGDH037D 3027598 760974 1443 -65 180 251.45
---------------------------------------------------------------------
TGDH038D 3027496 760976 1418 -75 225 220.25
---------------------------------------------------------------------
---------------------------------------------------------------------


Assay results:

---------------------------------------------------------------------
---------------------------------------------------------------------
Hole From To Interval Au Ag AuEq Comments
1:65
---------------------------------------------------------------------
---------------------------------------------------------------------

---------------------------------------------------------------------
TGDH037D 200.0 206.0 6.0 1.8 146 4.0 Guadalupe
Deeps
and 206.5 207.0 0.5 0.5 93 1.9 Guadalupe
Deeps
and 208.0 209.5 1.5 1.3 35 1.8 Guadalupe
Deeps
and 211.0 211.5 0.5 1.0 6 1.1 Guadalupe
Deeps
---------------------------------------------------------------------
TGDH038D 178.0 181.0 3.0 2.0 141 4.2 Guadalupe
Deeps
and 183.0 186.0 3.0 0.7 89 2.0 Guadalupe
Deeps
and 198.0 199.0 1.0 0.8 101 2.3 Guadalupe
Deeps


The results from the deeper drill holes, TGDH035D to TGDH038D, confirm the Company's geological hypothesis of gold-silver occurrence at Guadalupe and support the exploration model that gold grades improve at depth, giving the Company confidence to expand its drilling program at Guadalupe/Las Animas, subject to rig availability.

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.


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 for various reasons discussed throughout the Company'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 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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