Coeur to Acquire Palmarejo and Bolnisi in Us$1.1B Merger

Vancouver — Aiming to become the world’s top primary silver producer, Coeur d’Alene Mines (CDM-T, CDE-N) has entered a 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 blessing of all three boards, would see Coeur issue 0.682 of a share for each Bolnisi share. Shareholders of Palmarejo — aside from Bolnisi — will receive 2.715 Coeur shares for each share held. Both offers also include a nominal cash component of a US0.3 per share. Under the agreement, Coeur will issue about 271.3 million new shares to absorb the two companies.

The prize in the deal is Palmarejo’s 122-sq.-km Palmarejo-Trogan property in the Temoris district of Chihuahua state, Mexico, which contains 14 silver-gold projects.

A late 2006 resource study on the main Palmarejo deposit outlined 14.5 million measured and indicated tonnes grading 2.08 grams gold per tonne and 191 grams silver for about 971,000 contained ounces gold and 89 million oz. silver. Another 4 million inferred tonnes averaging 1.3 grams gold and 138 grams silver were also tabled.

Construction at Palmarejo of a 2-million-tonne-per-year processing facility began in September 2006; it will have the capacity to produce about 12 million oz. silver and 136,000 oz. gold annually. Open-pit production is expected to start in late 2008 with a 10- to 12-year mine life. Capital cost estimates come in at about US$85 million, about US$50 million of which has been spent or committed to date.

The mine is expected to be one of the world’s largest and lowest cost primary silver operations with estimated operating costs of less than US$1 per oz. of silver, after gold credits.

The property contains several other similarly mineralized zones that are also being explored. Palmarejo’s Guadalupe project holds an inferred resource of 5.7 million tonnes at 0.83 gram gold and 106 grams silver, while 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, which hosts many of Mexico’s 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 is recorded on the property as far back as the early 1800s, most of which only reached shallow depths (less than 100 metres).

Bolnisi acquired its majority share position in Palmarejo in early 2005 in return for its interest in the Palmarejo-Trogan project. 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, and provides a flagship asset in a politically stable region.

Assuming the merger with Bolnisi and Palmarejo goes through, and a late 2008 production startup at Palmarejo, Coeur expects to produce about 31.6 million oz. and 288,000 oz. gold in 2009, making it the world’s top primary silver producer.

Coeur currently has silver projects in the U.S., Bolivia, Chile, Argentina, Tanzania and Australia.

Contingent on regulatory and shareholder approvals, the transaction is expected to close in the third quarter. The merger plan will require 75% support from Bolnisi shareholders, two-thirds of Palmarejo’s and more than half of Coeur’s to proceed.

Coeur shed US15 on the news, closing 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.

T.N.M. NUGGET

COEUR D’ALENE MINES’ TAKEOVER OF PALMAREJO AND BOLNISI

THE ASSET:122-sq.-km Palmarejo-Trogan property in Chihuahua, Mexico

THE DEAL:0.682 of a Coeur share for each Bolnisi share and 2.715 shares for each Palmarejo share, other than those held by Bolnisi; Valued at US$1.1B

RESOURCES:14.5 Mt (measured and indicated) grading 2.08 grams gold and 191 grams silver, 4 Mt (inferred) at 1.3 grams gold and 138 grams silver

MINE PLAN:Open-pit development (underground development to be evaluated); 5,500 tpd operation; 10-12 year life; US$85M capex (US$50.4M committed and spent to date); Average annual output of 12 M oz. silver and 136,000 oz. gold

OPERATING COSTS:Less than US$1/oz. silver, after gold credits

SCHEDULE:Production to begin in late 2008