Key Gold Holding Inc.

Key Gold Holding Inc.

May 17, 2011 07:00 ET

Key Gold Holding Completes Acquisition of the Souart Gold Property and Reports on Completion of NI 43-101 Technical Report

QUEBEC CITY, CANADA--(Marketwire - May 17, 2011) -Key Gold Holding Inc. (TSX VENTURE:KGH) ("Key Gold") is pleased to announce that the TSX Venture Exchange has accepted the previously announced acquisition of the Souart Gold property (the "Property" or "Souart Gold Property") from arm's length vendors (see news release of December 9, 2010).

Key Gold has now completed the acquisition of the Souart Gold Property. Key Gold has paid $40,000, issued 1,030,000 common shares and undertook to complete $750,000 in exploration work within the next 12 months. If Key Gold elects to retain the property, it will be required to pay an additional $450,000 and issue another 4,470,000 common shares over the next three years and to complete an additional $1,000,000 in exploration over the next two years.

A finder's fee of 500,000 common shares of Key Gold will be paid to Ansacha Capital Inc. on this transaction.

The Souart Gold Property

The Property is located in the northwest of the Province of Québec, 100 kilometers east of the Town of Lebel-sur-Quévillon and 180 kilometers Southwest of Chibougamau, Province of Québec.

The region has a skilled workforce, access roads with infrastructures including water and electricity. Topographic relief is low and generally does not exceed 15 meters, typical of the glaciated Canadian Shield. The Property is in the vicinity of the Barry Lake Gold camp of West Central Québec where the Barry Deposit (269,000 tonnes at 4.10 g/t Au of Indicated resources and 450,000 tonnes at 4.68 g/t Au of Inferred Resources) and the Lac Rouleau Deposit (544,000 tons at 7.2 g/t Au) are located as well. The resource estimates for the Barry Deposit are compliant with NI 43-101. For the Lac Rouleau Deposit, these resource estimates are of historical nature and do not comply with NI 43-101.

Gold mineralization in the area was discovered nearby at Rouleau Lake in the 1930's. On the Souart Gold Property, gold was first observed by a prospector called Marston Wright in 1945. In 1949, Roybar Uranium & Gold Mines Ltd. completed 30 diamond drill holes. In 1950, Nubar Mines Ltd. developed a 44 meters deep shaft and drove 135 meters of drifts and crosscuts. Several exploration surveys were then completed by other companies (Glenelm Developers, Goldmaster Mines, Shell Canada, Tut Explorations, SDBJ and Oasis Resources). Between 1985 and 1990, Oasis Resources Inc. completed 152 DDHs followed with a resource calculation of 564,000 tons at 6.2 g/t Au. These resource estimates are of historical nature and do not comply with NI 43- 101.

No mineral resource was calculated on the Souart property recently.

The Property is 100% owned by Key Gold and it consists of 56 mining claims covering approximately 876 hectares and is in good standing as of the date hereof.

In February of 2011, Geologica Groupe-Conseil Inc. ("Geologica") were commissioned to author a technical compilation and review report (the "Report") on the Souart Gold Property. The purpose of the report is to present an independent Property review technical report summarizing previous work, reviewing the exploration potential of the Property and making recommendations towards future work on the Property. On April 3 and 4, 2011 Daniel Gaudreault, P. Eng., conducted a site visit of the Souart Gold Property. The research, site visit, and data compilation programs conducted with respect to this Report, have lead Geologica to the conclusion that the Souart Gold Property represents a solid gold and base metal exploration target which warrants a systematic and phased series of mineral exploration programs to adequately appraise the project's economic potential.

Geologica believes that the mineralized zones on the Souart Gold Property of Key Gold Holding offer the potential to increase the resources on the lateral and depth extensions. Outside and along strike of the "Main Structure" (along with the East, Central and West Zones), the location most amiable for gold mineralization on the property is the NE-SW trending magnetic anomalies and reverse faults.

The NE-SW contact separating two lithological (volcanosediments and altered sediments) units of contrasting magnetic susceptibilities remains highly favourable along trend. Gold occurrences are frequently associated with quartz-carbonate-tourmaline subvertical and related subhorizontal conjugate and subsidiary structures. Gold deposits and occurrences in the area are also associated with faults to the north and east of the property. These include Rouleau and Kent Lakes as well as the Windfall Faults.

Following results of past exploration works, several important elements can be elaborated:

  • The presence of several auriferous zones was recognized over 1,200 meters lateral extension and more than 300 meters deep, within sericitic schists of (deformed amphibolitized sediments);
  • The presence of an hydrothermal auriferous context, where gold is associated with stockworks and sulphides (pyrite and locally chalcopyrite);
  • The gold is mainly coarse and concentrated in conformity with the schistosity. This assemblage is probably responsible for high grade values and poor sample representativity;
  • At this stage of exploration and with previous observations, the non-compliant resources are 564,000 tons at 6.2 g/t Au on the Souart Gold Property of Key Gold.

To validate previous exploration efforts, a first phase program of $346,500 will consist of geoscientific compilation followed by verification and validation drilling with chosen twin diamond drill holes. If warranted, during Phase II a 10,000 metre drill program is planned in conjunction with the construction of a geological model and the calculation of a resource estimate. Both phases I and II are valued at $2,829,750. The exploration programs are designed to locate claim boundaries, the historical drill collars and to test the Souart Gold Property's precious and base metal mineral potential. These results will guide Key Gold's subsequent mineral exploration programs on the Property.

This release was approved by Rick Bonner, B. Sc., P. Geo., a director of the Corporation, who is a Qualified Person under National Instrument 43-101.

About Key Gold Holding Inc.

Key Gold Holding Inc. is a mineral exploration company that is mainly focused on the acquisition, exploration and development of gold and copper properties.

Forward looking Statement

This document contains certain forward looking statements which involve known and unknown risks, delays, and uncertainties not under the corporation's control which may cause actual results, performance or achievements of the corporation to be materially different from the results, performance or expectation implied by these forward looking statements.

Shares outstanding: 25,781,719

Neither 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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