Kestrel Gold Inc.
TSX VENTURE : KGC

September 15, 2010 18:37 ET

Kestrel Gold Announces Proposed Acquisition of Huachi Mining Exploration Properties in Argentina

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 15, 2010) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.

Kestrel Gold Inc.(the "Corporation") (TSX VENTURE:KGC) is pleased to announce that the Corporation has entered into a letter of intent (the "Letter of Intent"), pursuant to which the Corporation proposes to acquire all of the issued and outstanding shares of Rio Diablillos (S.R.L.), a private corporation, incorporated under the laws of Argentina (the "Acquisition"), which holds an option and right to acquire a one hundred (100%) interest in 32 mining claims in one contiguous block (540 hectares) located in the Andean Pre-Cordillera of San Juan Province, Argentina (the "Huachi Mining Properties").

Highlights of the Acquisition

Pursuant to the terms of the Letter of Intent, subject to completion of satisfactory due diligence, a definitive purchase and sale agreement (the "Definitive Agreement"), the satisfaction of certain closing conditions customary to transactions of the nature of the Acquisition and receipt of applicable regulatory body approvals, the Corporation proposes to acquire all of the issued and outstanding shares of Rio Diablillos (S.A.L.), a private corporation, incorporated under the laws of Argentina. As consideration for the Acquisition, the Corporation proposes to issue up to 2,000,000 common shares in the capital of the Corporation (the "Acquisition Shares"), to be issued in equal instalments of 500,000 common shares over a period of eighteen (18) months, the first issuance of 500,000 common shares being issued upon the closing of the transaction, as well as 500,000 common shares on the sixth (6th), twelfth (12th) and eighteen (18th) month anniversary of the closing of the transaction. The Acquisition Shares will be issued at a deemed price of $0.25 per common share and subject to a four (4) month hold period from the closing date of the transaction.

If at any time or from time to time after the closing of the transaction, Rio Diablillos terminates the Option and Purchase Agreement (as hereafter defined) to acquire the Huachi Mining Properties prior to the time that all such common shares are required to be issued, then the obligation to issue any further common shares by the Corporation shall also terminate effective as of the same date that the Option and Purchase Agreement for the Huachi Mining Properties is terminated, provided however, that in the event the vendors deliver to the Corporation a mining property or mining properties of equal merit or value to the Huachi Mining Properties then, in such event, the Corporation will be obligated to issue all of the common shares contemplated hereunder.

Option Agreement

Pursuant to an option and purchase agreement, dated as of April 22, 2010 ("Option and Purchase Agreement") Rio Diablillos has been granted an exclusive option and right to purchase a one hundred (100%) percent interest in the Huachi Mining Properties, in consideration of the payment of US $6,450,000, of which a total of US $150,000 has been paid to date and the balance of US $6,330,000 is to be payable in instalments over a sixty six (66) month period from the date of the execution of the agreement, expiring on October 22, 2015. Pending closing of the transaction, the Corporation has entered into a loan agreement with Rio Diablillos in order to provide funds to allow Rio Diablillos to pay a portion of its current obligations under the Option and Purchase Agreement and to perform mining exploration activities in the Republic of Argentina in respect of the Option and Purchase Agreement and the Huachi Mining Properties. To date approximately US$150,000 has been advanced to Rio Diablillos under the interim loan arrangement.

Huachi Mining Properties

The Huachi gold prospect is located in the Andean Pre-Cordillera of San Juan Province, Argentina, 170 kilometers north of the city of San Juan, Argentina at an elevation of 3400 meters above sea level. The climate is arid semi-desert with very little snowfall in winter or rainstorms in summer. Access is by provincial road from the town of Angualasto and then by 5 kilometers of unpaved track.

The geology consists of a Lower – Middle Tertiary volcanic complex with late phase intrusions that have caused a large zone of alteration and mineralization which is approximately 2 kilometers (N-S) by 1.7 kilometers (E-W). The alteration zone is easily recognized in satellite images ("Google Earth" has it identified under the name "Huachi"). This zone consists of hydrothermal breccias, dykes, quartz veins and stockworks ranging from micro to mega in size, vuggy silica is present in some structures. The altered/mineralized zone is classified as "a High Sulfidation Epithermal Gold System "with a porphyry copper complex below it.

The structures and quartz veins have been mined for gold since the early 19th century. In 1890 the Somerville Brothers Mining Company (North America) had an important mining operation at Huachi with gold being recovered by cyanidation until 1914. Remains of the gold camp and plant are still visible. In the decade 1960 – 1970, some rudimentary mining and manual concentration was carried out. The current owner's family acquired the mining claims in 1979.

32 mining claims in one block (540 hectares) cover the alteration zone. This alteration is argillic and evidenced by heavy pyritization with pervasive silicification; crackle zones, stockworks and quartz veins are ubiquitous. The structure is complex, with gold mineralization present in: quartz veins and stockworks, fault structures, breccias and micro breccias (the Somerville Co. mined on the "Sentazon" structure which has confirmed dimensions of up to 15 meters width with 1500 meters of strike length).

Supergene processes oxidized the mineralized outcrops, further bleaching the large and impressive alteration zone. Rock sample geochemistry: (1065 chip samples) averaged .41 g/t Au with hand selected samples returning grades as high as 60 g/t Au. Vuggy silica assayed greater than 3g/t Au.

Kestrel Gold is very pleased to be given the opportunity to explore such a high quality gold property located within a "Mining Friendly Province" at a workable altitude in the Pre- Cordillera of San Juan, Argentina.

About Kestrel Gold Inc.

Listed on the TSX-V, Kestrel is committed to acquiring, exploring and development precious metal projects in North and South America. It has an experienced and committed board of directors and the financial ability to aggressively meet its objectives.

Technical aspects of this news release have been reviewed and approved by T.J. Termuende, P.Geo., hereby designated as a qualified person under National Instrument 43-101.

Cautionary Statements

This news release contains "forward-looking statements" within the meaning of applicable securities laws relating to a proposal to acquire an option in certain exploration properties in Argentina through the acquisition of all the issued and outstanding shares of an Argentina corporation and to undertake exploration activities thereto. Readers are cautioned to not place undue reliance on forward-looking statements. Forward-looking statements are based on certain key assumptions made by the Corporation, including assumptions regarding the ultimate terms of the proposed transaction, completion of a definitive agreement, the satisfaction of conditions to the completion of the transaction and the receipt of all regulatory and stock exchange approvals. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the transaction or option, that the ultimate terms of the transaction or option may differ from those that currently are contemplated or that the transaction or option will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities. The forward-looking statements in this press release are made as of the date of this release and the Corporation undertakes no obligation to update publicly or revise any forward-looking statements whether as a result of new information or otherwise, except as required by applicable securities laws. The Corporation undertakes no obligation to comment on analyses, expectations or statements made by third-parties in respect of the Corporation or its financial or operating results or (as applicable) their securities.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information