Mr. Robert Archer reports

PINNACLE APPOINTS AURAMET CAPITAL PARTNERS, L.P. AS LEAD PROJECT FINANCIER FOR EL POTRERO PROJECT

Pinnacle Silver and Gold Corp. has signed an agreement with Auramet Capital Partners LP, appointing Auramet as lead project financier to arrange, or provide to Pinnacle, non-equity project financing of up to $5-million (U.S.) for the development of the high-grade El Potrero gold-silver project in Durango, Mexico.

The agreement provides for Pinnacle and Auramet to work toward a mutually agreeable project financing based on, and subject to, due diligence and operational and financial progress during a seven-month exclusivity period, and other conditions typical of transactions of this nature. In addition, Auramet shall have the right of last offer to provide project financing, but is not obligated to do so. The agreement contains a standard non-solicitation clause with respect to any competing proposal and a break fee of $400,000 (U.S.) in the event that Pinnacle accepts another offer.

"This agreement is a significant step forward, and we sincerely appreciate the support of Auramet as we advance El Potrero towards production," stated Robert Archer, Pinnacle's president and chief executive officer. "In keeping with our business model, our goal has been to secure a non-dilutive means of financing the development of the project in a timely fashion. Having a well-known metal trader and financier such as Auramet to partner with, not only brings a lot of credibility but will give us financial flexibility without being captive to the volatility of capital markets as we move through the various stages of development. Having enjoyed a long-standing relationship with the Auramet team, I am confident that they will be a reliable partner going forward. By participating in our last financing, they have already demonstrated strong support for our management team, business model and the Potrero project itself."

The development of El Potrero is advancing rapidly, with underground delineation drilling in progress, two phases of metallurgical testing implying robust head grades in the order of 7.7 grams per tonne gold and 116 g/t silver, potential recoveries in excess of 97 per cent Au and about 70 per cent Ag, a feasibility study completed for the 3.3-kilometre power line extension, baseline studies for a water licence and other permits under way, and community agreements in various stages of completion.

About the Potrero property

El Potrero is located in the prolific Sierra Madre Occidental of western Mexico and lies within 35 kilometres of four operating mines, including the 4,000-tonne-per-day Cienega mine (Fresnillo), the 1,000-tonne-per-day Tahuehueto mine (Luca Mining) and the 250-tonne-per-day Topia mine (Guanajuato Silver).

High-grade gold-silver mineralization occurs in a low-sulphidation epithermal breccia vein system hosted within andesites of the Lower Volcanic series and has three historic mines along a 500-metre strike length. The property has been in private hands for almost 40 years and has never been systematically explored by modern methods, leaving significant exploration potential.

A previously operational 100-tonne-per-day plant on site can be refurbished/rebuilt and historic underground mine workings rehabilitated at relatively low cost to achieve near-term production once permits are in place. The property is road accessible with a power line within 3.3 kilometres.

Pinnacle will earn an initial 50-per-cent interest immediately upon commencing production. The goal would then be to generate sufficient cash flow with which to further develop the project and increase the company's ownership to 100 per cent subject to a 2-per-cent net smelter royalty. If successful, this approach would be less dilutive for shareholders than relying on the equity markets to finance the growth of the company.

About Pinnacle Silver and Gold Corp.

Pinnacle is focused on the development of precious metal projects in the Americas. The high-grade Potrero gold-silver project in Mexico's Sierra Madre belt hosts an underexplored low-sulphidation epithermal vein system and provides the potential for near-term production. In the prolific Red Lake district of Northwestern Ontario, the company owns a 100-per-cent interest in the past-producing, high-grade Argosy gold mine and the adjacent North Birch project with an eight-kilometre-long target horizon. With a seasoned, highly successful management team and quality projects, Pinnacle Silver and Gold is committed to building long-term, sustainable value for shareholders.