Kenai Resources Ltd.
TSX VENTURE : KAI

Kenai Resources Ltd.

April 02, 2012 12:27 ET

Kenai Resources Ltd.: Trial Gold Mining Planned at Sao Chico, Brazil

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 2, 2012) - Kenai Resources Ltd. (TSX VENTURE:KAI) ("Kenai") is pleased to announce that it is planning trial mining at the Sao Chico gold project in northern Brazil following an internal review of the recent high grade gold drill results in the central Waldimiro Structure, underground mine planning and the results of metallurgical testwork.

An application is being prepared and will be lodged during April for a GUIA(1) (Guia de Utilizacao, ie trial mining use permit) licence to mine and process an initial high grade underground tonnage. Subject to finance and permitting, production using mechanised mining and highly selective shrinkage stoping will commence at the maximum 50,000 underground tons of high grade gold bearing material permitted under the GUIA in the first quarter of 2013. The high grade gold potential of the Waldimiro Structure can be seen in the longitudinal section in Figure 1 and from the data in Table 1.

The decision to plan for underground GUIA production also followed discussions with a neighbouring gold project, to consider processing the high grade Sao Chico underground tonnage at the existing mill facilities to produce gold doré. That project is fully permitted, including tailings storage facilities. A detailed review of available plant capacity and possible flow sheet modifications will be required prior to a final decision being made.

Metallurgical testwork results have been received from SGS Lakefield laboratories, from several unoxidised samples taken from the underground Waldimiro Drive. Gold recoveries of 99% were obtained from three different methods, ie whole ore cyanidation leaching, gravity separation and flotation, and gravity separation and cyanidation. From 30 samples, an average in-situ density of 2.71 tonnes per cubic meter was estimated.

Ongoing drilling at the project is also planned in conjunction with trial mining. As fully detailed in the news release of November 29th, 2011, Kenai believes that the Sao Chico project is highly prospective. The Sao Chico project is located within the wider AP 12836 exploration licence covering 1,436 hectares, with the AP now held in the name of Gold Aura do Brasil Mineração Ltda ("GOAB").

(1) A Guia de Utilizacao has a 12 month life. Application can be made for a 12 month extension. During the GUIA period a mining license application will be prepared with the intent that this be approved at the end of the GUIA period. Approval for the GUIA is expected to take around six months.

To view Figure 1 please visit the following link: http://media3.marketwire.com/docs/KENMAP42.pdf

Table 1
SAO CHICO DRILLHOLE INTERCEPTS WITH ASSAY VALUES OVER 1 g/t GOLD

Drillhole Number From meters To meters Interval meters
Core Recovery
Gold Assay g/t Au Interpretation of Structure
11-SC-002 38.25 40.11 1.86 100% 17.7 Waldimiro Structure
11-SC-003 94.30 95.35 1.05 100% 1.03 Waldimiro Structure
11-SC-004 49.10 50.30 1.20 96.0% 77.3 Waldimiro Structure
52.83 53.50 0.67 32.8% 1.07 Waldimiro Structure splay
11-SC-005 142.13 143.71 1.58 98.3% 115.9 Waldimiro Structure
11-SC-006 65.15 66.40 1.25 99.3% 1.07 Separate upper vein to south
113.85 115.54 1.69 100% 1.58 Waldimiro Structure splay
121.55 123.55 2.00 100% 13.4 Waldimiro Structure splay
126.02 127.10 1.08 100% 4.17 Waldimiro Structure splay
132.78 133.90 1.12 100% 115.3 Waldimiro Structure
133.90 134.93 1.03 100% 27.2 Waldimiro Structure
11-SC-007 158.50 160.50 2.00 98.4% 60.1 Waldimiro Structure
11-SC-009 51.00 53.00 2.00 98.2% 2.36 Separate upper vein to south
108.60 110.60 2.00 94.4% 1.26 Waldimiro Structure
11-SC-012 40.00 41.60 1.60 100% 10.8 Highway Vein
11-SC-013 118.85 120.35 1.50 98.4% 13.7 Highway Vein
120.35 121.77 1.42 100% 1.85 Highway Vein
11-SC-019 81.62 83.13 1.51 98.0% 1.06 Waldimiro Structure
11-SC-021 83.94 85.25 1.31 99.6% 38.7 Separate upper vein to south
199.75 201.66 1.91 100% 1.51 Waldimiro Structure
201.66 203.5 1.84 100% 9.41 Waldimiro Structure
11-SC-022 191.94 193.9 1.96 97.7% 1.06 Waldimiro Structure

Notes:

  1. For the total of 22 intercepts with assay values above 1 g/t gold, the arithmetic average assays are 23.5 g/t gold, 16.4 g/t silver, 0.27% lead, 0.52% zinc and 0.03% copper.
  2. In terms of the currently interpreted cut-off grade (refer Note 4 below), there have been no significant gold assays recorded in the Stage 1 drill program in drillholes 11-SC-001, 003, 008, 010, 011, 014-018 and 020.
  3. Intervals shown are downhole meters. All holes were drilled at approximately 55° dip to the north, except for one scissor hole 11-SC-017, drilled with a 55° south declination. Azimuths are taken from downhole surveys, as shown in Figure 2. True widths are assessed as approximately 77% of the downhole intercepts shown.
  4. Kenai's current conceptual underground mining assessment is for a cut-off grade of 3.5 g/t gold, for highly selective shrinkage stoping mining, in a sub-vertical 85° south dipping vein structure, with a minimum diluted mining width of 1.6 meters, assuming a gold price of US$1500 per ounce, mineral processing recovery of 96%, and total unit cash operating costs for an initial first year GUIA 50,000 tons per annum operation of US$152 per tonne mined and processed.

Kenai's NI 43-101 Technical Report on the Sao Chico project is now being updated that will include an initial mineral resource estimate for the project. Ground based geophysics is planned in the Sao Chico project area for delineation of additional drilling targets.

A feasibility study of the trial mining has not been completed and there is no certainty the proposed operation will be economically viable. A PEA (Preliminary Economic Assessment) report is being prepared for the initial 50,000 ton GUIA trial mining operation. The PEA will consider priorities for further core drilling to improve knowledge of the potential of the two recently discovered high grade gold zones at the Sao Chico deposit, and the as yet untested potential along strike and to the north of the demonstrated high grade zones.

Background to the Sao Chico, Brazil project

The Sao Chico gold project is located along a prominent NW-SE trend, the Tapajós Gold Trend, which is the most mineralized zone within the Tapajós Mineral Field in central-northern Brazil. The Tapajós field was the site of the biggest gold rush in Brazilian history in the late 1970's and 1980s when approximately 500,000 garimpeiros (artisanal miners) rushed to the area to exploit extensive areas of newly discovered alluvial gold. Approximately 20 to 30 million ounces of gold (unofficial government figures) were produced from these operations before the easily won alluvial gold deposits were largely depleted. The garimpeiros have little expertise in underground mining and environmental considerations and were thus urged by the government to consolidate their small claims and form joint ventures with established mining companies. The area has had little exploration by modern exploration methods compared to other equivalent gold fields in the world.

About Kenai Resources Ltd.

Kenai is a Canadian company focused on precious mineral project exploration and development, towards early significant gold production. In addition to the Sao Chico gold project in Brazil, Kenai is also involved in exploration of the wholly-owned Quartz Mountain and Hope Butte gold epithermal gold projects in South-Eastern Oregon, both located in Malheur County, close to the Oregon border with Idaho.

On behalf of the Board of Directors of Kenai Resources Ltd.

Greg Starr, President and CEO

Forward-Looking Statements: Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed and elsewhere in the company's periodic filings with Canadian securities regulators. The economic viabilities of the resources estimates discussed in the release have not been established and may not be. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The company does not assume the obligation to update any forward-looking statement.

Kenai's Vice President Technical Services, Neil Cole, is responsible for technical information in this release. Mr Cole has sufficient experience which is relevant to the style of mineralization under consideration and to the activity which is being undertaken and planned to qualify as a Qualified Person under NI 43-101. Mr Cole has verified the technical data disclosed in this release, including references to planned exploration and operational activities, and the sampling of the gold-bearing reef structures. Mr Cole has consented to the inclusion in this release of such technical information in the form and context in which it appears.

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