The first comprehensive exploration of the project was carried out by Kennecott beginning in 1994. Kennecott consolidated the land position and completed extensive geochemical, geophysical and drilling programs to evaluate the area. The objective was to find a large tonnage porphyry copper deposit. Although a very large mineralized alteration system was revealed, a porphyry copper deposit was not identified. The extensive work by Kennecott did, however, result in the identification of a silver-zinc-lead-gold zone. This was not of sufficient interest to Kennecott on a stand-alone basis.

Western acquired 100% of the Peñasquito project from Kennecott in March 1998. Western's acquisition was based on the large size of the system, the potentially positive economics of the silver-zinc-lead-gold zone, and the numerous untested exploration targets.

During 1998, Western carried out exploration work focussed on the first silver-zinc-lead-gold zone identified, now called the "Chile Colorado Zone". Subsequently, an agreement was entered into with Mauricio Hochschild, a private Peruvian company specializing in high-grade, underground mines. Hochschild carried out a drill program that yielded good results overall. These results, however, indicated a large bulk-tonnage target, a type of project that Hochschild was unwilling to pursue. The project was returned 100% to Western, along with all the Hochschild drill core and data.

In 2002, Western drilled an additional 20,462 meters of large-diameter core. The drill program was developed in conjunction with the engineering firm SNC Lavalin. Sufficient drilling was completed to allow the completion of the independent mineral resource estimate made public March 20, 2003. The Chile Colorado zone is now confirmed to contain over 200 million ounces of silver, making it one of the largest known silver resources. A scoping study is now evaluating the project's economics.

Recent Developments: WESTERN SILVER DISCOVERS NEW MINERALIZED ZONE AT PEÑASQUITO: Results further enhance property as a district-scale silver-gold-lead-zinc mineral system

Western Silver Corporation has announced the discovery of a new mineralized zone, El Chamisal, at its wholly-owned Peñasquito silver, gold, zinc and lead property in central Mexico.

This new discovery is located approximately two kilometers northeast of the property's Chile Colorado zone which has been independently confirmed as one of the largest undeveloped silver deposits in the world.

“Today's drill results reinforce our belief that Peñasquito is a district-scale mineral system with multiple deposits at different locations on the 147-square mile property,” said Western's Mexican Exploration Manager, Thomas Turner. “We are encouraged that in addition to silver, we intersected significant grades of gold, lead and zinc at El Chamisal. Our drilling also enabled us to expand and further delineate other known zones of mineralization on the property,” he said.

The El Chamisal discovery emerged from results of twenty-eight core and eleven shallow reverse circulation (RC) holes drilled at Peñasquito during the past three months.

The highlights of the drilling program include:

• El Chamisal. Mineralization was intersected in RC holes S-48 and S-49. Hole S-48, a vertical hole, contains 30 meters beginning at 88 meters averaging 0.42 g/t gold, 38 g/t silver, 0.62% lead and 0.76% zinc. Both holes contain narrow higher-grade intervals. The significance and extent of this new mineralized zone will be evaluated by further core drilling.

• Peñasco. Eight core and seven RC holes have begun to delineate the extent of this large mineralized zone. Of particular note are holes WC-98 and WC-100 that extend mineralization to the southern boundary of the Outcrop breccia. The Peñasco zone, as presently understood, occupies an area extending for 600 meters east-west by 500 meters north-south and is at least 370 meters thick. Mineralization remains open to the east-northeast.

• Chile Colorado . Seventeen core holes totaling 6,795 meters were completed. The objectives of the drilling were to add holes where necessary to complete deposit delineation on 50-meter centers and to identify limits of the mineralized zone. Drilling confirms the continuity of the Chile Colorado deposit, demonstrates that mineralization remains open to the west-northwest and at depth, and defines limits of the zone to the south and southeast. SNC-Lavalin is currently completing a new ore resource calculation which will be incorporated into a pre-feasibility study currently in progress by M3 Engineering & Technology of Tucson Arizona.

A 40,000 meter drilling program will begin during February to evaluate the Peñasco, Azul NE, El Chamisal, El Sotol and La Palma targets. Details of the latest drilling are discussed below

Fundamental Considerations: The rising silver demand

Silver is used for industrial applications, decoration, photography, jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption. In 2000, 378 million ounces of silver were used for industrial applications, while over 230 million ounces of silver were committed to the photographic sector, and 281 million ounces were consumed in the jewelry and silverware markets.

Silver is in demand because it has a number of unique properties including its strength, malleability and ductility, its electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges. Silver’s unique properties restrict its substitution in most applications. Choose from the following list to learn more about some of the various applications of silver:

Electrical and Electronics

Silver is the best electrical conductor of all metals and is hence used in many electrical applications, particularly in conductors, switches, contacts and fuses. Contacts, a junction between two conductors that can be separated and through which a current can flow, account for the largest proportion of electrical demand. Silver is invaluable in the manufacture of circuit breakers and motor controls.

In electronics, silver is also widely used. Uses include silk-screened circuit paths, membrane switches, electrically heated automobile windows, and conductive adhesives. Every time a home owner turns on a microwave oven, dishwasher, clothes washer, or television set, the action activates a switch with silver contacts that completes the required electrical circuit.
 

Medical Applications

While silver's importance as a bactericide has been documented only since the late 1800s, its use in purification has been known throughout the ages. Early records indicate that the Phoenicians, for example, used silver vessels to keep water, wine and vinegar pure during their long voyages. In America, pioneers moving west put silver and copper coins in their water barrels to keep it clean.

In fact, "born with a silver spoon in his mouth" is not a reference to wealth, but to health. In the early 18th century, babies who were fed with silver spoons were healthier than those fed with spoons made from other metals, and silver pacifiers found wide use in America because of their beneficial health effects.

Silver also has a variety of uses in pharmaceuticals. In fact, silver sulfadiazine is the most powerful compound for burn treatment. It is used by every hospital in North America for burn victims to kill bacteria and allow the body to naturally restore the burn area. It is used world-wide. In another application polyurethane central veínous catheters are impregnated with silver sulfadiazine and chlorhexidine to eliminate catheter-related bacteria.

In a world concerned with the spreading of virus and disease, silver is increasingly being tapped for its bactericidal properties and used in treatments for conditions ranging from severe burns to Legionnaires’ Disease.

Water Purification

Silver is employed as a bactericide and algaecide in an ever-increasing number of water purification systems in hospitals, remote communities and, more recently, domestic households. Silver ions have been used to purify drinking water and swimming pool water for generations. New research into silver compounds is providing physicians with powerful, clinically effective treatments against which bacteria cannot develop resistance.

Photography

When Joseph Nicephore Niepce created the first photographic image obtained through a camera-like device in 1813, it was silver nitrate that made it possible.

Although digital photography is increasing, silver-based photography will retain its pre-eminence due to its superior definition and low cost. An estimated 230 million troy ounces of silver were used worldwide in 2000 for photographic purpose.

William Conrad Roentgen's discovery of x-rays in 1895, led to his discovery that they activate silver halide crystals. This revolutionized medical diagnosis. Radiographic use of silver worldwide consumed 78 million troy ounces in 2000. Medical uses aside, X-ray inspection is essential to ensure integrity of metallic castings from small truck axles to the huge aircraft-carrier steam valves used to propel airplanes from a flight deck. Of all the inspection techniques, it is the image on a silver halide x-ray film that provides the clearest indication of flaws deep within metallic components.
 

Batteries

The silver battery provides the higher voltages and long life required for quartz watches. In fact, over 1.4 billion silver oxide-zinc batteries are supplied to world markets yearly, including miniature sized batteries for watches, cameras, and small electronic devices and larger batteries for tools and commercial portable TV cameras.
 

Coins

23,851,873 ounces of silver were issued in the form of silver coins in 1995.
 

Bearings

Steel bearings electroplated with high purity silver have greater fatigue strength and load carrying capacity than any other type and are hence used in various hi-tech and heavy-duty applications.
 

Jewelry and Silverware

Silver possesses working qualities similar to gold but enjoys greater reflectivity and can achieve the most brilliant polish of any metal. To make it durable for jewelry, however, pure silver (999 fineness) is often alloyed with small quantities of copper. In many countries, Sterling Silver (92.5% silver, 7.5% copper) is the standard for silverware and has been since the 14th century.
 

The copper toughens the silver and makes it possible to use sterling silver for cutlery, bowls and other decorative items such as picture frames.
 

Brazing and Soldering

In 2000, 38 million ounces of silver were used for brazing and soldering in industrial and electronics applications.
 

Catalysts

A worldwide inventory of some 23 million ounces of silver are in daily use for catalytic oxidation in chemical reactors, principally in the plastic industry.
 

Electroplating

The ease of electrodeposition of silver accounts for silver’s widespread use in coating. The plating thickness of some items, such as fuse caps, is less than one micron. Coatings of two to seven microns are normal for heavy-duty electrical equipment.
 

Solar Energy

Silver paste is used in 90 percent of all crystalline silicon photovoltaic cells, which are the most common solar cell. All silicon cells used in space to power satellites use silver in the form of evaporated metal to make the electrical contact.
 

Technical Considerations