Coeur acquiring Palmarejo and Bolnisi in US$1.1 billion merger

Vancouver – With an eye to grab top primary silver producer status, Coeur dAlene Mines (CDM-T, CDE-N) has entered a merger deal to acquire Australian-based Bolnisi Gold (BXLGF-O, BSG-A) and its 73.6%-owned subsidiary Palmarejo Silver and Gold (PJO-V, PJOFF-O) in an all-share deal valued at about US$1.1 billion.

The agreement, which has the respective blessing of all three boards, would see Coeur issue 0.682 of a share for each share of Bolnisi. Shareholders of Palmarejo, other than Bolnisi, will receive 2.715 Coeur shares for each share held. The planned issuance will see Coeur printing about 271.3 million new shares to absorb the two companies.

The prize in the deal is Palmarejos 122 sq. km Palmarejo-Trogan tenement in the Temoris District of Chihuahua State, Mexico that contains a portfolio of 14 silver-gold projects.

A late-2006 resource study on the main Palmarejo deposit reviewed 14.5 million measured and indicated tonnes grading 2.08 grams gold per tonne and 191 grams silver per tonne for a contained metal tally of about 971,000 oz. gold and 89 million oz. silver. An additional 4 million inferred tonnes were also tabled averaging 1.3 grams gold and 138 grams silver.

Development of Palmarejo commenced in September 2006 with construction of a 2-million-tonne-per-year processing facility initiated that will have output capability of about 12 million oz. silver and 136,000 oz. gold annually. Open pit production is expected to commence in late-2008 with a 10-to-12 year mine-life. Capital cost estimates come in at about US$85 million.

The mine is expected to be one of the worlds largest and lowest cost primary silver operations with estimated operating costs of less than US$1.00 per oz. of silver after gold credits.

The property contains several other similarly mineralized zones that are also undergoing extensive exploration. Its Guadalupe project holds an inferred resource of 5.7 million tonnes at 0.83 gram gold and 106 grams silver; and La Patria has 3.6 million inferred tonnes of 1.49 grams gold and 35 grams silver.

Palmarejo’s property lies near the western edge of the Sierra Madre Occidental volcanic belt, host to many of Mexicos major mineral deposits. Gold and silver mineralization is primarily associated with structurally-controlled, low-sulphidation polymetallic-carbonate veins within the Lower Volcanic Sequence andesites. Locally, there is some overprinting of high-level, high-grade gold-silver veins. Regional north-northwest trending fault structures are a main control for the veins, with west-northwest dilatant zones forming the high-grade shoots (or “clavos”).

Extensive historic underground silver and gold mining dating as far back as the early-1800s is recorded on the property, most of which only reached shallow depths (less than 100 metres).

Bolnisi acquired its majority share position in Palmarejo on vend-through of the Palmarejo-Trogan project in early-2005. The company also holds a couple of gold-silver projects in northwestern Mexico: El Realito and Yecora.

With Coeur posting 2006 production figures of 13.6 million oz. silver and 116,000 oz. gold, the Palmarejo acquisition would effectively double that output once it comes on-stream.

Assuming all regulatory and shareholder approvals, the transaction is expected to close in the third quarter of 2007. The merger plan will require 75% support from Bolnisi shareholders, two-thirds of Palmarejos and more than half of Coeurs shareholders to proceed.

Shares of Coeur shed a few percent on the news, slipping US15 to close at US$3.90 apiece in New York trading. Palmarejo shot up 28% in Venture-board trading, posting a $2.42 gain to close at a new high of $11.11 per share.