Mexican Silver Mines Ltd. (TSXV: MSM): Follow-Up #2

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January 29, 2008

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BONANZA-TYPE SAMPLES GRADING MORE THAN 7,000 GRAMS PER TON IN MEXICO

Business Summary

Mexican Silver Mines is a junior resource company developing three former silver producing properties in northeastern Mexico. Covering approximately 322,500 acres, the 100 percent owned properties have been mined from numerous deposits since the Spanish era; however, only limited exploration has been conducted. There are more than eight historic silver mines located on these properties.

The company is applying modern exploration techniques to fully exploit the exploration potential indicated by bonanza-type samples grading more than 7,000 grams per tonne silver and

30 percent zinc. 

Projects

The Providencia property

Covering 152,400 acres, is located to the northeast of Sabinas Hidalgo on the main road to Laredo, Texas.

It contains a number of high-target prospects--including the Vallecillo prospect and the La Blanca prospect. The Vallecillo prospect, named after the nearby village, is part of a historical mining district and contains six past producing mines. The La Blanca prospect, with additional old Spanish-era underground workings and more recent surface trenching (approximately 30 years old), is located an additional 25 kilometers to the north of Vallecillo.

Access to Providencia is gained through secondary but readily passable gravel roads north of the village of Vallecillo. Past Spanish workings at Vallecillo are located to the immediate north of the main highway and are accessible through all-season gravel roads.

Geology & Mineralization

The Providencia property is located in the province of the Sierra Madre Oriental. It is underlain by a series of Cretaceous sediments consisting of laminated and massive limestones, lutites and some conglomerates. Most of the eastern part of the license area is of low topographic relief, and is covered by flat-lying Tertiary conglomerates.

The only exposed bedrock is located in the Vallecillo area, a 4-kilometer-long mining district of thin manto and vein deposits aligned along a northeast-trending structural zone. The mineralization consists of a series of northeast-trending, vein- and manto-type occurrences over a strike length of several kilometers. There are a number of shafts, underground workings and surface open-cuts.

The La Blanca prospect was exposed several decades ago in a now water-filled surface open-cut. Silver-zinc-lead mineralization, possibly north-northwest-trending, is hosted in claystone.

Potential Exploration Work

Vallecillo displays significantly more lead-zinc-silver mineralization than La Blanca and is therefore considered to be a higher-priority target area for future exploration.

A NI-43-101-compliant technical report commissioned from ACA Howe International Limited recommends a complete structural and stratigraphic interpretation of the Vallecillo area, to include:

·         accessing and compiling of all relevant government and historical data

·         securing government geological services to facilitate access of state data

·         acquiring of underground mapping and sampling results for all of the old mines

·         detailed surface geological mapping of the district at a workable scale

·         acquiring any historic data on production/grades from any of the mines

·         purchasing state geologic survey geochemical data that is to be offered to the public in the coming months; specifically, the stream sediment data

·         testing IP lines across identified occurrences to determine response characteristics of the mineralization and host rocks.

Howe recommends that after zones of mineralization have been identified and located, an initial bulldozer trenching program be implemented for sampling purposes to identify the most favorable targets for follow-up diamond drilling. Initial limited drilling (Phase 1) is recommended to test for vein and mantos mineralization at depths of up to 200 meters.

For La Blanca, Howe recommends a program to attempt to accurately determine the characteristics of mineralization through trenching. A specific plan for this area would include:

·         draining and cleaning out the original trench with a bulldozer or backhoe

·         digging a trench perpendicular to the central portion of the original trench

·         extending trenches in all directions if warranted

·         detailed mapping and sampling of trenches

·         limited Phase 1 drilling under the La Blanca occurrence to determine the geological setting and potential for mineralization at depth.

As work proceeds, the airborne geophysical survey for La Blanca should be re-interpreted, especially for the possibility of regional structures crossing the immediate area and the area under the salt lake to the north of the original trench.  

Ral (La Iguana Property)

The centre of the La Iguana property (Ral) is located approximately 26 kilometers northwest of the La Providencia property. Access to the property requires a drive of approximately 100 kilometers from Sabinas Hidalgo to La Iguana - an old silver, lead and zinc operation.

Geology & Mineralization

The Ral property is underlain by Cretaceous limestone, shaly limestone, limey shale and chert. The sedimentary rocks have been cut by numerous Tertiary intrusive rocks of intermediate composition, forming large irregular bodies (up to two kilometers across) and dykes. Skarn and hornfels locally occur in the vicinity of the intrusions. There are a number of lead-zinc-silver occurrences and prospects, some of which produced moderate amounts of ore in the past. Mineralization is controlled by structure (faults and fractures), stratigraphy (mostly the Cretaceous Austin Formation) and intrusive contacts.  

The Anillo de Fuego area is located to the south of the town of Sabinas Hidalgo on the main road to Monterrey. The mineral prospects within the concession are located along the crest of the southern third of the Sierra Lampazos range approximately 75 kilometers northeast of Monterrey and a subsidiary northwest-southeast trending range located 45 kilometers northeast of Monterrey.

Access to the prospects in this concession area is gained through a network of secondary roads.

Anillo de Fuego

Geology & Mineralization

The Anillo de Fuego property is also located in the province of the Sierra Madre Oriental. Similar to Providencia, it is underlain by a series of Cretaceous sediments consisting of laminated and massive limestones and lutites. The range has a mostly moderate to rugged topographic relief.

There is no recorded occurrence of intrusive plugs or dikes in the area but the same stratigraphic sequence that hosts the Vallecillo mineralization is expected to be identified in the Anello del Fuego area. The favorable stratigraphy, in conjunction with the anticlinal structural high, offers an excellent target setting for both manto and chimney type silver and base metal mineralization.

History

Very little is known or documented on the historic mining and prospecting activities within the Anillo de Fuego area. Prospect pits and short shafts are evident throughout the project area. The real importance of historic mining activities in the area relates to the widespread nature of the mineralization as uncovered by the prospectors. Current exploration theory suggests that reconnaissance for silver and base metals in this type of carbonate terrain should be concentrated along the crest of anticlinal structures. The Spanish prospectors and miners in the area have literally defined the anticline by the identification of mineralization in a linear pattern.

Potential Exploration Work

The Anillo de Fuego lands were acquired as an advanced reconnaissance target region which hosts mineralization that is similar to that found at Vallecillo. While historic prospecting efforts uncovered minor mineralization in a number of pits, significant potential is recognized in that nearly all of the occurrences of mineralization are located directly on the crest of the anticline which makes up the 'backbone' of the range. From a geologic and exploration perspective, this alignment of prospects pits may represent leakage of more substantial mineralization which is concentrated along the highest structural part of the anticline. Favorable lithologic units at depth would constitute the main target horizons for this area.

The mineralization within Anillo de Fuego, while lesser in intensity that either Vallecillo or Iguana, is found along an extended area presenting a greater strike length of potential targets.  

Recent News: Mexican Silver reports further drill results from the Vallecillo drill program / DRILLING AND MAPPING / SAMPLING AT VALLECILLO DELINEATES A 3.5 KM LONG ZONE OF MINERALIZATION

Mexican Silver Mines Ltd. received assay results from drill holes V-05, V-06, V-11, V-12 and V-13 of its 13-hole phase 1 drill program recently completed on its Vallecillo project. A total of 3,081 meters were drilled by Mexican Silver in this phase of the Vallecillo drilling program. Mexican Silver highlighted certain assay results from drill holes V-01, V-02, V-03, and V-04 in its December 5, 2007 news release. Results remain pending for drill holes V-07, V-08, V-09, and V-10.

The Vallecillo district has been the site of silver-lead mining activities dating back to 1776, where mineralization is hosted within structures and mantos of the Eagle Ford formation in a sequence of interbedded limestones and silty carbonates. The largest historic mine in the district, the Dolores mine, has a known depth of 100 metres. All the other mines in the area, all located on Mexican Silver's Providencia property, have been mined from to depths of ranging from 5 to 20 meters. These historic mines were restricted in depth to the water table due to inadequate mining and water management techniques at the time. The Vallecillo district is located in the southern part of the Mexican Silver's100-per-cent-owned Providencia concession.

The assay results for these nine drill holes indicate a strong mineralized system at Vallecillo with a strike length of at least 3.5 km, which is open along strike and to depth.

To date, all holes except for V-05 have encountered mineralization and anomalous indications of the mineralizing system, across considerable widths. Conclusions about the geometry of the system can already be drawn and which suggest the design of the second phase of the drill program at Vallecillo. A final appraisal of the phase 1 drill program and planning of the second phase will be undertaken following receipt of the assay results for the remaining four drill holes.

Although assay results from four drill holes of the phase 1 drill program remain pending, the current results have already identified in drilling and surface mapping / sampling, a zone of mineralization along 3.5 km of strike. This zone is open along strike in both directions and to depth. Assay results from the remaining four holes of the phase 1 drill program at Vallecillo are expected to be received shortly.

Mexican Silver also announces that significant progress has been made in exploration of its properties located in the Mamulique and Iguana districts. Additional information regarding these exploration activities is anticipated to be announced soon.

Fundamental Considerations

On August 15, 2007, Mexican Silver had $ 13 million cash. They have spent $ 2million on intensive drilling since then. With the remaining cash of $ 11 million, Mexican Silver has the possibility to continue with its aggressive drill program for quite a while and will likely result in a news flow over the coming months which could well produce some pleasant confirmation on mineralization.

The liquid means represent about 40 cents per share for a share price of 40 cents.  Mexican Silver represents therefore an excellent exploration play at a very low cost.

Mexican Silver came to the market in May 2007 at a price of 75 cents. The share price started to rise immediately to $ 2.25 by August 2007 and has been drifting back ever since reflecting liquidations which are in no relation to fundamentals, especially as the company has enough cash and is in no need to raise more money for quite a while.

Exploration companies always represent a high risk investment but positive drill results could have a dramatic effect on the share price.

Management is the key to success: