Columbus Silver to Merge with Santa Fe Gold Corporation

VANCOUVER, BRITISH COLUMBIA -- (Marketwire - Sept. 27, 2010) - Columbus Silver Corporation (TSX VENTURE: CSC) (“Columbus Silver“) is pleased to announce the signing of a non-binding Memorandum of Understanding (the “MOU“) with Santa Fe Gold Corporation, to complete a business combination (the “Merger“) by way of a court approved plan of arrangement.

Pursuant to the MOU, Santa Fe would acquire all of the outstanding common shares of Columbus Silver in exchange for Santa Fe common shares at an agreed exchange ratio of 1 Santa Fe share for every 5.82515 Columbus Silver shares (the “Exchange Ratio“). This represents an approximate 100% premium to Columbus Silver shareholders based on Columbus Silver's 20-day average closing share price as at September 22nd, 2010, the last day prior to CSC halting its stock pending this announcement.

The Merger effectively transitions Columbus Silver from an early stage explorer to a producing gold and silver company with production from Santa Fe's Summit Mine located in New Mexico. Any ore developed at Columbus Silver's Mogollon Project can be processed at Santa Fe's nearby mill in Lordsburg, New Mexico. Columbus Silver shareholders will therefore derive value from planned production growth and the potential of rising commodity prices, while participating in the upside offered from a broad portfolio of gold and silver exploration properties.


Under the MOU announced today:

- Columbus Silver shareholders will receive 0.17167 Santa Fe common shares per Columbus Silver common share which implies a price per Santa Fe common share of US$1.13, using the September 22nd exchange rate of C$1.00 = US$0.97.

- The number of shares that Columbus Silver warrant and option holders are entitled to receive upon exercise will be adjusted proportionately to reflect the Exchange Ratio. The original expiry terms will be maintained.

- In connection with the Merger, Columbus Silver's majority shareholder Columbus Gold Corporation (“Columbus Gold“) would convert outstanding debt owed by Columbus Silver totalling C$1,402,428.04 plus accrued interest to date of C$192,581.85 into 15,564,935 common shares of Columbus Silver calculated at a price of $0.10 per share on the principal amount and at $0.125 per share on the accrued interest (the “Debt Conversion“).

- In connection with the Merger, Columbus Gold and Santa Fe would complete a bridge financing to Columbus Silver in the form of a non-brokered private placement of 3,000,000 shares at a price of C$0.10 per share, for total gross proceeds of C$300,000 (the “Placement“). It is proposed that Santa Fe will subscribe to $100,000 and that Columbus Gold will subscribe to $200,000. The proceeds of the Placement will be used for working capital requirements and to pay for the legal fees and other transaction costs associated with the Merger. The Placement is not conditional upon the completion of the Merger. The Placement is subject to stock exchange and other regulatory approvals.

- Following completion of the Merger and the other transactions contemplated herein, it is estimated that Santa Fe will be owned 91.37% by current Santa Fe shareholders and 8.63% by current Columbus Silver shareholders.

- Following completion of the Merger and other transactions contemplated herein, it is estimated that Columbus Gold will own 3,808,474 common shares of Santa Fe, representing 3.74% of Santa Fe. Columbus Gold has agreed to subject all but 789,679 of those shares to a 180-day lock-up agreement.

- On a fully diluted basis, it is estimated that Santa Fe will be owned 90.5% by current Santa Fe shareholders and 9.5% by current Columbus Silver shareholders.

- The Merger values Columbus Silver at approx. C$10,237,733 based on shares issued and outstanding after giving effect to the Debt Conversion and Placement.

- On completion of the merger, it is anticipated that Columbus Silver's President & CEO, Robert Giustra, will be appointed to the board of directors of Santa Fe.

- The Merger will be completed by way of a court-approved plan of arrangement whereby Columbus Silver will amalgamate with a newly formed wholly-owned subsidiary of Santa Fe and will voluntarily delist its common shares from the TSX Venture Exchange.

- The Merger is subject to the final approval of the boards of directors of both companies and is conditional on stock exchange, regulatory approvals and court approvals. The Merger is also subject to Columbus Silver shareholder approval to be voted at a special meeting to be called to approve the Merger. Full details of the Merger will be included in the Management Information Circular to be filed with the regulatory authorities and mailed to Columbus Silver shareholders in accordance with applicable securities laws. The Merger is also subject to a 45-day due diligence period.

Robert F. Giustra, President and CEO of Columbus Silver, commented, “This is a very positive development for the shareholders of Columbus Silver and of Santa Fe. The successful completion of this Merger will position the combined company to deliver both near and long-term value to its shareholders through existing production growth as well as significant development and exploration upside from a diverse portfolio of precious metal properties.“

Santa Fe's President and CEO, Pierce Carson, said, “This transaction is strategically important to Santa Fe and will significantly increase our controlled gold and silver resources available for processing at our fully-permitted and operating flotation mill near Lordsburg, New Mexico. Furthermore, Columbus Silver's portfolio of high quality US silver-gold properties provides excellent upside exploration potential. Two of these properties already have historic drilled resources aggregating over 500,000 ounces of gold equivalent ounces. The combination with Columbus Silver is a notable step forward in Santa Fe's objective to become a significant North American precious metals producer.“


About Columbus Silver

Columbus Silver is a silver exploration and development company operating in the Western United States which controls a 100% interest (subject to royalties) in 7 silver properties in Utah, Arizona, New Mexico and Nevada. Columbus Silver's principal asset is its Mogollon silver-gold project in Catron County, New Mexico. Mogollon covers an extensive, silver-gold bearing epithermal vein field with reported historic production during the period 1905 to 1942 totalling 15,700,000 ounces silver and 327,000 ounces gold from approximately 1.7 million tons (1.5 million tonnes) of ore. Drilling at Mogollon in the 1980's was successful in outlining a partially delineated silver-gold deposit at the Consolidated Mine containing an historical resource of approximately 845,000 tons (767,000 tonnes) averaging 9.35 opt (320 g/t) silver and 0.15 opt (5.1 g/t) gold. A proposed drilling program was recently permitted at Mogollon. There are dozens of potentially mineralized veins at Mogollon with a combined strike length of more than 45 miles (72 km) that have never been drill tested, providing potential for considerable resource expansion.


About Santa Fe Gold

Santa Fe Gold is a U.S.-based mining and exploration enterprise focused on acquiring and developing gold, silver, copper and industrial mineral properties. Santa Fe controls: (i) the Summit mine and Lordsburg mill in southwestern New Mexico; (ii) a substantial land position at the Lordsburg mill, comprising the core of the Lordsburg Mining District; (iii) the Ortiz gold property in north-central New Mexico, estimated to contain two million ounces of gold; (iv) the Black Canyon mica mine and processing facility near Phoenix, Arizona; and (v) a large resource of micaceous iron oxide (MIO) in western Arizona. Santa Fe Gold intends to build a portfolio of high-quality, diversified mineral assets with an emphasis on precious metals.

For more about Santa Fe, visit www.santafegoldcorp.com.


Caution: A qualified person has not done sufficient work to classify the historical estimates contained herein as current mineral resources. The Company is not treating the historical estimates as current mineral resources and the historical estimates should not be relied upon.

Andy Wallace is a Certified Professional Geologist (CPG) with the American Institute of Professional Geologists and is the Qualified Person under NI 43-101 who has reviewed and approved the technical content of this news release as it pertains to information respecting Columbus Silver. Mr. Wallace is a VP of Columbus Silver's U.S. subsidiary and a partner of Cordilleran Exploration Company (“Cordex“), which is conducting exploration and project generation activities for Columbus Silver.


ON BEHALF OF THE BOARD,

Robert F. Giustra
President & CEO, Director



This release contains forward-looking information and statements, as defined by law including without limitation Canadian securities laws and the “safe harbor“ provisions of the US Private Securities Litigation Reform Act of 1995 (“forward-looking statements“), respecting the proposed merger and transactions ancillary thereto. Forward-looking statements involve risks, uncertainties and other factors that may cause actual results to be materially different from those expressed or implied by the forward-looking statements, including without limitation the ability to acquire necessary authorizations; successful completion of due diligence; the entering into a definitive agreement; obtaining approval of the TSX Venture Exchange; obtaining approval of shareholders; obtaining court approval; obtaining applicable US approvals; cost increases; possibility of a competing offer arising; unforeseen circumstances; risks associated with the exploration projects or title thereto held by Columbus Silver Corporation; mineral reserve and resource estimates (including the risk of assumption and methodology errors); dependence on third parties for services; non-performance by contractual counterparties; title risks; and general business and economic conditions. Forward-looking statements are based on a number of assumptions that may prove to be incorrect, including without limitation assumptions about; that diligence inquiries will be successful; that the transaction will progress beyond the due diligence phase and move toward definitive and binding agreements; that required approvals mentioned above will occur; the timing and receipt of required approvals; that shareholders will vote in favor of the transaction; that applicable securities exemptions will be available for the amalgamation; that required service providers will be available to assist with the transaction; that items required for mandated disclosure are available; general business and economic conditions; availability of financing; and ongoing relations with employees, partners and joint venturers. The foregoing list is not exhaustive and we undertake no obligation to update any of the foregoing except as required by law.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.



Contact Information

Columbus Silver Corporation
Ray Lagace, Investor Relations
604-638-3474 or Toll Free: 1-888-818-1364
604-634-0971 (FAX)
info@columbussilvercorp.com
www.columbussilvercorp.com