Toronto,Ontario - Sept 3, 1998

South American Gold and Copper Company Limited Announces Signing of Letter of Intent for Joint Development of Choquelimpie Gold-Silver-Copper Project in Northern Chile

Toronto, Ontario - South American Gold and Copper Company Limited (TSE symbol "SAG") announced today the signing of a Letter of Intent with Sociedad Contractual Minera Vilacollo ("SCMV") for the joint development of the Choquelimpie Gold-Silver-Copper project located 115 kilometers due east of the northern Chilean port city of Arica.

The Choquelimpie district has been mined for gold and silver for over 450 years. Between 1987 and 1992 a joint venture led by Shell mined and heap leached 7,700,000 tons of oxide ore which produced some 398,904 oz of gold and 2,192,062 oz of silver before operations ceased in 1992. Control of SCMV was subsequently acquired by its current shareholders. SCMV has continued leaching the old Shell dumps at the mine site as well as conducting further exploration.

Dr. David R.S. Thomson, EVP Exploration of SAGC, summarized the geological setting of Choquelimpie as follows: "The gold, silver and copper mineralization at Choquelimpie is mainly pyrite and enargite, with lesser chalcopyrite. These occur as finely to coarsely disseminated sulphides, up to massive between breccia fragments. Alteration runs from prophylitic to argillic sericitic and from sericite and quartz to strong silicic over an area exceeding 5 square kilometers, which lies within a 12 square kilometer zone contained in the eroded remains of a late Miocene strato volcano. A dacitic intrusion, which has been affected by strong 60* and lesser 180* fracturing which provided many of the veins mined in the past, occupies the center of the alteration zone. A swarm of near vertical structures, up to 40 meters wide and trending at 330*, occur in a zone 1,200 meters by 3,000 meters. These structures largely controlled subsequent hydrothermal breccias, which provided the host rock for the bulk of the later mineralization. Breccias also follow the structures striking at 60* and 180*, but to a much lesser extent.

"Between 1987 and 1992 Shell drilled some 100,000 meters at Choquelimpie. Nearly all the holes were drilled vertically. Of these, some 87,000 meters were reverse circulation, generally drilled on a 25 meter grid. The objective was to delineate low-grade oxide mineralization for the open pit, heap leach operations. Sulphide mineralization was not the primary target. While the association of the mineralization with the breccias was clearly understood at the time, the fact the breccias are very largely controlled by near vertical 330* trending breaks was not.

"Of much greater proportional value in our evaluation of the breccias, has been the work carried out over the last two years by SCMV. Horizontal sampling within the Choque and Vizcacha open pits, based on standard one meter samples, show that there are concentrations of higher gold values within the breccias. Subject to further confirmation, a potential grade of 5 g/t gold equivalent can be inferred for these breccia orebodies, with widths varying from 9 to 15 meters. Included are higher grade sections which can reach up to 12.4 g/t gold equivalent over 9 meters. SCMV also sank a 12 meter shaft in the bottom of the Suri pit where the highest grade oxide mineralization was known to occur. This shaft encountered high grade sulphide ore, which had little evidence of supergene enrichment. Two hundred and eighty two meters of drifting and crosscutting were run out from this shaft and gave an average of 13.92 g/t Au, 72.1 g/t Ag and 2.04 % Cu, or 18.95 g/t gold equivalent, over an average width of 6.4 meters and a length exceeding 70 meters along a 330* break. In addition, exposure in a drift, percussion drilling into the walls of the drift, as well as five reverse circulation drill holes, show that the mineralization extends a further 74 meters to the north. This makes the probable overall length a minimum of 144 meters. The metal price used for gold equivalent grades are US$ 280 per ounce of gold, US$ 5 per ounce of silver and US$ 0.75 per pound of copper.

"Parallel to the Suri orebody and 35 meters to the west, there is another sulphide breccia structure 10 to 12 meters wide and 115 meters below the 282 meters of drifting on the Suri orebody described above. The walls of the old workings in this second structure have been drilled with percussion holes that show gold mineralization is present. Unfortunately assays cannot be relied upon, as recovery was poor. Scattered samples were taken, where possible, over 30 meters in the walls of a drift in the mined area. These gave an average of 17.5 g/t gold over the 4.2 meter width of the old workings. The sampling in the two open pits and the work off the Suri shaft has shown that, in spite of irregular mineralization, metal values in the breccia orebodies can be consistent and make attractive targets. This conclusion could not have been reached based on the previous vertical drilling alone.

"An important aspect of the overall mineralogical zoning is brought out by the fine disseminated arsenopyrite and pyrite, with barite and sporadic orpiment in argillic-sericitic alteration, assaying 2 to 3 g/t gold in an open pit in the northeastern section of the mineralized zone. This mineralization is very different to the mineralization in the Suri workings 1,000 meters to the southwest. Here there is strong silicification with coarsely disseminated to massive pyrite and enargite. The mineralization in the northeastern pit is consistent with the upper part of a mineral system, while the mineralization at Suri is consistent with being nearer to the center and deeper. This setting is very similar to other well known mines in a volcanic environment such as El Indio and Pascua in Chile, Cerro de Pasco and Morococha in Peru and Lepanto in the Philippines, all of which were more exposed by erosion than Choquelimpie. In all of these other deposits, mineralization extends to depths of more than 500 meters".

Dr. Thomson further stated: "our potential resource estimations are based on the known sulphide bearing breccias which host the bulk of the mineralization at Choquelimpie. Not included in the estimations are the low grade envelopes around the breccias, nor is any allowance made for possible extensions, additional hidden breccias or mineralization following the 60* breaks mined in the past. Assuming a fifth of the controlling structures carrying breccia make ore, this gives a potential gold resource to a depth of 200 meters, which is the depth to which known old workings have reached, in the order of 8,900,000 tons assaying near 5 g/t gold equivalent or 1,400,000 oz contained gold equivalent. Using the same parameters, but taking the ore to a depth of 500 meters, the potential tonnage is near 22,250,000 tons and the gold equivalent potential is in the order of 3,500,000 ounces of contained gold for ore running near 5 g/t gold equivalent. This will include a significant amount of 8 - 10 g/t gold equivalent.

"Present reserves in the Suri structure are estimated to be 84,000 equivalent ounces contained in 165,000 tons of a measured and inferred gold resource assaying 15.81 g/t gold equivalent ounces, (11.43 g/t gold, 63 g/t silver, 1.77% Cu) over a width of 7.8 meters, a length of 144 meters and an overall depth of 52 meters. Mining dilution has been taken at 20% with credit for existing values in the wall rock. These reserves can expect to be increased to near 347,000 tons, or some 176,000 contained gold equivalent ounces with a similar grade and accessible to adit mining in six months, for an expenditure of approximately US$630,000."

Once sufficient reserves have been developed, an underground 500tpd operation could produce as much as 70,000 ounces of gold equivalent a year, if present resource grades are maintained. Cash cost would be near US$ 165 per ounce of gold equivalent with gold head grades near 16 g/t eq. This includes substantial smelter and refining charges. Further metallurgical testing and analysis of alternative treatments could lead to substantially reducing the cash cost per ounce. SCMV estimates the plant can be built and placed in production for US$ 5,000,000, within twelve months from the time sufficient proven and probable ore has been developed. This is estimated to take six months. The operation will serve as the springboard for systematically increasing production from within the large district. In the near future, ore will come from the breccia controlled bodies mined underground in the Suri area. Later, with an improved gold price, lower grade material, which is not presently included in the potential resource, can be incorporated in much larger low grade open pit operations averaging 0.8 to 1.5 g/t gold. This is in addition to underground exploitation of the breccias where the gold equivalent grades will determine the longer term future scale of operations. Dr. Thomson stated that he believes "Choquelimpie is a district with a demonstrable potential to produce well over 150,000 ounces of gold per year for many years."

SCMV owns 4,500 hectares of mining claims which more than cover the Choquelimpie alteration zone and a further 22,700 hectares of exploration leases which have been placed over nearby altered areas. Permits beyond those that presently cover the mining and operations areas have been applied for. SCMV has been assured there is no valid reason for them not to be approved.

The major shareholders of SCMV are the Browne Koester Group and Ingenieria y Construcciones Mas Errazuriz. Both are based in Santiago, Chile. The Browne Koester Group, through QDS S.A. supplied all the executives and key personnel for the operation of the Can Can Mine. This is a 900 tpd underground gold-silver mine located near Copiapo, Chile, which has been operated at an average cash cost per equivalent oz Au of US$ 199 per ounce, based on 1,500,000 tons of ore mined to date, yielding 314,000 oz Au equivalent. Prior to operating the Can Can Mine, the Browne Koester Group operated the successful Santa Dominga Mine located near La Serena, Chile. It is also the major shareholder of Constructora BDS S.A. a leading Chilean mining construction company with substantial experience in mine plant construction for clients such as Codelco, Escondida, El Indio, Los Pelambres and Exxon's Soldado and La Disputada de Las Condes mines.

Ingeniería y Construcciones Mas Errazuriz S.A. is a leading Chilean mining contractor with clients including El Indio, Codelco, Zaldivar, Endesa and Collahuasi in Chile, as well as other mining contracts in Argentina, Brazil and Bolivia. It is also a 50% owner of Redpath Mas Errazuriz Construcciones S.A. that is currently developing several projects for Barrick at El Indio.

Stephen W. Houghton, President & CEO of SAGC, stated: "the 50/50 joint venture brings the proven low cost operating experience of the SCMV group together with SAGC's geological team headed by Dr. Thomson, who has had a long and successful career identifying precious metal deposits such as El Indio, Pascua and the Maricunga District. We believe that the very promising high grade potential of Choquelimpie along with our geological knowledge of this type of deposit, combined with the excellent operating track record of the major shareholders of SCMV, will make this Joint Venture very rewarding for our shareholders as well as for the shareholders of SCMV."

Under the terms of the Letter of Intent between SAGC and SCMV, SAGC is required to invest US$ 1,000,000 in the first year of the Joint Venture; US$ 2,000,000 in the second year and US$ 3,500,000 in each of years three and four in order to earn a full 50% interest in the Joint Venture for a total investment of US$ 10,000,000. SAGC will earn and retain a 5% interest in the joint venture for each US$ 1,000,000 which it invests in the project. On signing the Joint Venture Agreement, SCMV will have the right to nominate two of its senior executives as Directors of SAGC and will vest in a five year share purchase warrant exerciseable into 7% of the then outstanding primary common shares of SAGC, at an exercise price of Cdn. $ 0.065 per share. On completion of a bankable feasibility study for up to a 500 ton per day sulphide plant operation, SCMV will vest in a further share purchase warrant, exerciseable into 3% of the then outstanding primary common shares of SAGC, at an exercise price of Cdn. $ 0.065 per share. SAGC currently has 55,079,919 primary shares outstanding.

SAGC intends to finance the initial first year Capital Contribution of US$ 1,000,000 to the Joint Venture, through a private placement of its common stock in which Officers and Directors have committed to contribute up to Cdn. $ 1,000,000. In addition, Citibank N.A., SAGC's financial advisors on the sale of the Company's Catedral/Rino Limestone Project, have expressed confidence in completing a successful transaction for the sale or joint venture of the Project.

SAGC is a minerals exploration development company with extensive properties in Chile and Peru. Its commons shares are listed on the Toronto Stock Exchange under the symbol SAG.

For further information in Canada and the US; Stephen W. Houghton, President and CEO; William C. O'Donnell, EVP and CFO. Telephone: (212) 983-9300, Fax: (212) 983-9314. Visit our website at http://www.sagc.com. For further information in Santiago, Chile, David R.S. Thomson, EVP or Mario Hernandez, EVP, Telephone (562) 232-5578, Fax: (562) 233-1037.