Key Gold Holding Inc.

Key Gold Holding Inc.

September 01, 2010 11:24 ET

Key Gold Announces the Acquisition of the Musset Lake Copper Property Containing a Near Surface Historic Mineral Resource of 110 Million Tonnes Grading 0.23% Copper

QUÉBEC CITY, QUÉBEC--(Marketwire - Sept. 1, 2010) - KEY GOLD HOLDING INC. (TSX VENTURE:KGH) ("KGH" or the "Company") Robert Séguin, president, is pleased to announce that Key Gold has signed a Binding Letter of Agreement (the "Agreement") to acquire a 100% interest in the Musset Lake Copper Property (the "Property") consisting of 82 mining claims covering 3,998.1 hectares or 40 km2. The Property is located 90 km north of Schefferville (Quebec) and can be accessed in the summer by helicopter and/or float-plane. There is road access from Schefferville to New Millenium's KéMag Iron Property located 40 km to the southeast.

Geology of the Musset Lake Copper Property

The Property hosts four copper showings centered on the Franelle Copper Prospect ("Franelle"). Franelle is hosted by a northerly striking near vertical dipping gabbroic intrusive that is approximately 200 m wide and strikes the length of the claims (about 5,000 m). Copper mineralization is disseminated in all parts of the gabbro in varying concentrations. Enriched zones and fracture controlled, higher grade mineralized zones are also present. Copper minerals observed are chalcopyrite, chalcocite, malachite and bornite. Accessory minerals are magnetite, ilmenite and epidote. Franelle was discovered during a regional reconnaissance program by Canada Tungsten in 1975. Six holes were drilled in 1977 with the following results:

DDH # Grade % Copper Core Length (m)
77-1 0.19 49.5
77-2 0.21 52.7
77-3 0.29 173.4
incl. 0.59 33.2
incl. 0.80 14.9
77-4 0.51 50.3
incl. 0.86 25.3
77-5 0.19 19.1
77-6 0.19 202.5

The drilling was followed by an estimation of "reserves" (GM33646, 1977; Ministère des ressources naturelles et de la faune Québec or MRNFQ) totalling 110,000,000 tonnes grading 0.23% Copper. This Mineral Resource is strictly historical in nature and is non-compliant to the NI 43-101 Mineral Resources and Mineral Reserves standards, and should therefore not be relied upon. A Qualified Person has not done sufficient work to upgrade or classify these historical Mineral Resources as current NI 43-101 compliant, and there is no guarantee that any future exploration will convert part or all of the historical Mineral Resources to current Mineral Resources.

The Property was then optioned to Outland Resources which drilled 4 holes in 1987. The drilling was not filed for assessment work but the core was logged and sampled by Fonteneau Resources (GM53415). Hole 87-1 intersected 3 zones of mineralization; 0.74% Copper over 23.2 m, 0.37% Copper over 20.1 m and 1.05% Copper over 3 m. In hole 87-2, 9.8 m of core was sampled for an average grade of 0.83% Copper. Additional drilling was done in 1995 by Black Pine Limited (GM53794). The results confirmed previous drilling results and are summarized below:

DDH # Grade
% Copper
Core Length
96-1 0.28 19.8
incl. 0.65 3.0
96-2 0.26 12.2
incl. 0.68 1.5
96-3 0.36 23.3
incl. 0.56 8.2
96-4 0.24 40.8
incl. 0.52 3.0
96-5 0.29 43.4
incl. 0.65 14.0
96-6 1.35 4.9
incl. 3.19 1.8
96-7 0.36 31.7
incl. 0.54 8.2
96-8 0.56 39.0
incl. 0.67 10.1
96-9 0.22 43.0
incl. 0.52 4.9
96-10 0.22 66.8
incl. 0.48 6.1
96-11 0.24 81.1
incl. 0.38 27.4
96-12 0.17 50.0
incl. 0.73 1.8
96-13 0.20 77.1
incl. 0.52 7.3
96-14 0.32 80.8
incl. 1.49 1.5
96-16 0.15 56.7
incl. 0.47 1.5
96-17 0.19 51.8
incl. 0.73 3.0
96-26 0.23 62.4
incl. 0.53 9.0
96-27 0.42 79.2
incl. 0.80 9.1
96-29 1.12 32.0
incl. 2.42 13.7

Brassard (MB84-03, 1984) discovered two additional copper zones; the Bennelle and Beluet showings. The Bennelle Showing is 1.1 km long by 50 m, and is characterized by chalcopyrite and bornite in gabbro. Grab samples and pack-sac drilling samples indicated copper grades similar to the Franelle Showing with locally high concentration of copper in bornite and covellite. The southeast portion of the dyke is Uranium enriched. The Beluet Showing is characterized by chalcopyrite and azurite in sandstone, the surrounding host rock.

The Agreement

Under the terms of the Agreement, KGH in order to acquire a 100% interest in the Property shall pay C$30,000 and issue 2,250,000 common shares to the vendors upon receipt of the approval of the TSX Venture Exchange (the "Exchange"). The shares are subject to a four month hold period from their date of issuance. The vendors retain a 2% Net Smelter Returns Royalty (the "NSR") on the claims. The NSR is subject to a buy-back clause, whereby KGH can purchase 1% for C$1,000,000 at any time. Moreover a finder fee of 300,000 common shares is payable for services rendered.

Concurrently with the acquisition and subject to regulatory approval, Key Gold intends to complete a financing by way of private placement through the issuance of common shares at a subscription price of C$0.125 per share for aggregate gross proceeds of up to C$600,000.

In addition, Key Gold has entered into agreements to convert into equity certain debts amounting to up to $150,000 owing to arm's length creditors at a price of $0.125 per share, subject to regulatory approval.

The technical information in this news release was prepared, revised and approved by Jean Lafleur, P. Geo., Technical Advisor to the Company, a Qualified Person under NI 43-101 standards and independent of the issuer.

About Key Gold Holding Inc.

Key Gold Holding Inc. is a junior mining exploration company listed on the TSX Venture Exchange whose mission, among others, is to invest in small-scale gold production projects and to provide expertise in financial and mining engineering with the objective of maximizing return on investments and shareholders' value.

Shares outstanding: 11 740 434

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 news release. Statements made in this news release that are not historical facts are "forward-looking statements" and readers are cautioned that any such statements are not guarantees of future performance, and that actual developments or results, may vary materially from those in these "forward-looking" statements.

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