Kenai Resources Ltd.
TSX VENTURE : KAI

Kenai Resources Ltd.

August 09, 2011 09:00 ET

Kenai Resources Ltd.: Update on Sao Chico Gold Project, Brazil

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 9, 2011) - Kenai Resources Ltd. ("Kenai") (TSX VENTURE:KAI) is pleased to provide the following update on the Sao Chico gold project in north central Brazil.

  • Mining operations commenced earlier in the year for the trial mining phase at the permit rate of 50,000 tons per annum, initially with surface mining.
  • The recently installed gravity gold trial processing plant was commissioned, demonstrating the ability to reach design throughput capacity of 10 tonnes per hour of feed treating oxidized surface material.
  • Initial plant feed gold ore grades were low, attributable to a lack of defined Mineral Resources or Mineral Reserves (as those terms are defined pursuant to National Instrument NI 43-101) making grade control difficult, and the inability to mine very narrow gold-bearing veins with a high degree of selectivity.
  • Modifications are being made to surface mining practices to minimize the degree of excessive dilution of ore with waste rock.
  • Plant commissioning indicated the need for additional size reduction of ore feed, by finer grinding of the ore feed.
  • Plant operations have been suspended since June, allowing for plant modifications, including the installation of a grinding mill and other gravity circuit changes. Recommencement of processing is scheduled during August.
  • Further underground sampling results have confirmed excellent gold grades in the quartz/sulphide vein structure. Metallurgical test work results are awaited from this sampling during August.
  • A diamond drilling program is planned for commencement in August with the objective of confirming the high grade quartz/sulphide hard rock vein potential at Sao Chico.

Modifications to Kenai's Option Agreement with Gold Anomaly

Under its original September 21st, 2010 Option Agreement ("Original Agreement") with Gold Anomaly Limited ("GOA"), the owner of the rights to the Sao Chico project, Kenai has to date advanced A$2.5m in loan funds to GOA.

Kenai has executed an August 5th, 2011 agreement with GOA, formalizing changes agreed to since the Original Agreement, and triggering the release of A$1.0m in further loan funds from Kenai to GOA for the Sao Chico project resulting in a total of A$3.5m in loan funds to GOA. The material changes to the original terms agreed under the recent agreement include the following:

  • Kenai's option to acquire 50% of GOA's wholly owned subsidiary holding the mineral project rights to Sao Chico are is exercisable by September 3rd, 2012, or about four months later than originally provided for. A "Second Option" to acquire an additional 25% remains, for exercise by Kenai up to 24 months after the exercise by Kenai of the initial 50% option.
  • Kenai has agreed to advance a further loan of A$500,000 of loan funds (from the original A$3m to A$3.5m). Should Kenai exercise the Second Option, then these funds will be treated as a part-payment (of a total of A$2m) towards the exercise of that Second Option. If the Second Option is not exercised, the $0.5m will remain loan funds. Kenai continues to provide project management advisory services for Sao Chico to GOA.
  • Kenai will assume a direct project management role if it exercises its 50% equity option.

About Sao Chico:

The project is more completely described in Kenai's NI 43-101 Technical Report on the project, details of which were contained in Kenai's news release of January 20, 2011. It has since been filed on SEDAR and on Kenai's website at www.kenairesources.com.

Sao Chico is located within the Tapajos region in Brazil, the site of one of the biggest gold rushes in recent history. In the late 1970s and 1980s, approximately 500,000 garimpeiros rushed to the region to exploit extensive areas of newly discovered alluvial gold, producing approximately 20-30 million ounces of gold before the easily won alluvial gold deposits were largely depleted. Despite the gold rush, little modern exploration has been conducted over the region to date, with excellent potential to expand gold operations at Sao Chico. The Sao Chico project team has extensive experience and expertise of operating within the region, which will provide a focussed and systematic effort to gold production and exploration at Sao Chico.

As previously advised, Gold Anomaly via a wholly owned subsidiary will receive all cash flow generated by GOAB at Sao Chico until Kenai exercises its options to acquire 50% and then 75% equity in the Sao Chico mineral rights to the Sao Chico project.

About Kenai Resources:

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 epithermal gold projects in South-Eastern Oregon, both located in Malheur County, close to the Oregon border with Idaho. Kenai's current indicated and historical gold resources from the two Oregon projects are summarized as follows:

Project Tonnes Grade Ounces Au Status/Classification
Quartz Mountain 15,050,200 0.80 g/t Au 352,667 Indicated Resources
NI43-101 compliant
Hope Butte 5,000,000 0.91 g/t Au 146,300 Historical,
not NI 43-101 compliant

Footnotes:

  1. For Quartz Mountain, resources above a 0.34 g/t cutoff with silver converted to gold equivalent using a ratio of 49.5:1 silver to gold. Metallurgical recoveries were not considered. Indicated resources are as reported in an independent November 2006 NI 43-101 report, posted on SEDAR at that time.
  2. The Hope Butte resources are considered historic in nature, do not comply with current NI 43-101 standards, have not been verified by the Company and therefore should not be relied upon. It is uncertain if further exploration will result in the discovery of an economic mineral resource.

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.

The technical content of this news release has been reviewed by Kenai's Vice President Technical Services, Neil Cole, who 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.

Shares Outstanding: 62,406,734

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.

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