Mr. Arturo Prestamo reports

SANTACRUZ SILVER AGREES TO NEW US$9.5 MILLION LOAN FACILITY; REPLACES EXISTING CORPORATE DEBT ARRANGEMENT

Santacruz Silver Mining Ltd. has agreed in principle to terms whereby it will receive $9.5-million (U.S.) under a senior secured loan facility with a lender syndicate headed by CrediPresto Group and including two other institutions.

Proceeds from the loan facility will be used to restructure the obligations owing by the company to JMET LLC under the prepaid forward silver purchase agreement between Santacruz and its affiliates and JMET. The proposed terms of the loan facility will provide for a deferral of principal repayments which should allow the company to solidify its balance sheet during current market conditions and should return the company to a positive working capital position.

A summary of the terms of the loan facility is as follows:

• $9.5-million (U.S.) loan payable to the CrediPresto syndicate, bearing interest at 15 per cent, payable quarterly in arrears, with principal repayments to be made in equal quarterly instalments during the third year after closing, subject to the requirement to make prepayments if certain funds are received by the company;
• A fee of 6 per cent of the gross proceeds of the loan facility will be payable to CrediPresto. The company will also issue 6.9 million warrants to CrediPresto. Each warrant will allow CrediPresto to purchase one common share of the company at a price of 15 cents per share for a period of four years. If the company's shares trade at or above 30 cents per share, then 3.45 million of the warrants will have an accelerated expiry date of two years.

Assuming the transaction closes, the remaining contracts under the price protection program established under the prepaid agreement will be liquidated and the company will issue two notes to JMET. As of the date of this announcement, it is anticipated the amount of the notes should not exceed an aggregate $3-million (U.S.), however, such amount is subject to the final value of the liquidated price protection contracts.

Arturo Prestamo, president and chief executive officer, stated: "We are very pleased to have come to terms with Credipresto for the replacement and restructuring of our long-term debt. The loan facility should allow the company to substantially improve its working capital position." He continued, "We are very pleased to have CrediPresto as our new financing partner. CrediPresto brings expertise in the mining industry as well as strong business relationships in Mexico. These attributes will translate into a solid financing partner for Santacruz. The terms of the loan facility will allow us to move forward with more confidence that the company can meet its debt obligations now that we have the Rosario mine back in full production and the recently acquired Veta Grande project coming on-line."

The loan facility and restructuring are subject to a number of closing conditions applicable and acceptable to the parties to the new and existing agreements, including TSX Venture Exchange approval. Closing is anticipated to occur by the end of the year.

We seek Safe Harbor.