Kootenay Gold Inc.

Kootenay Gold Inc.

December 04, 2006 13:46 ET

Kootenay Gold Inc. Announces Milestone Acquisition of Historic Promontorio Mine and Adjoining Land Concession in Sierra Madre Silver Region, Mexico

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Dec. 4, 2006) - Kootenay Gold Inc. (TSX VENTURE:KTN) ("Kootenay") is pleased to announce that they have entered into an agreement with Siete Companas de Plata, S.A de C.V. ("Siete"), Exploration Canada De Oro, SA DE CV ("ECO") and the Mexican Government Agency ("FIFOMI") to acquire an unencumbered 100% registered and beneficial interest in the former producing Promontorio Mine Site and the surrounding properties and mineral rights known as the Promontoro Concession. The claims cover approximately 37,000 hectares, and are located in the historic silver and gold producing Sierra Madre Region of Northwest Mexico.

Stated Kootenay CEO James McDonald, "The acquisition of a mineral property with the scope and merit that the Promontorio Mine and adjoining property offers is clearly a major development for Kootenay and one that sets the stage for accelerated growth and development well into the future."

Purchase Price

Subject to regulatory approval, the agreement calls for Kootenay to pay up to US$1,375,000 in cash, issue up to 850,000 shares of Kootenay to ECO and Siete and for Kootenay to pay a debt owing to FIFOMI in connection with the Promontoro Concession. ECO and Siete will also receive a Net Smelter Royalty ("NSR") of 2% of which Kootenay has the option to purchase up to 1% for an additional US$1,000,000 in cash (or a combination of cash/shares) and Kootenay has first right of refusal to purchase the remaining 1% NSR. Kootenay has also negotiated a settlement with FIFOMI on the properties outstanding debt; under the terms of the agreement Kootenay will pay FIFOMI 4,179,939 pesos (US$400,000) over a five-year period.

Technical Summary

The Promontorio property is accessible by road from Ciudad Obregon, a major city located 75 km to the Southwest which has an international airport. Located just 1.5 km east of the mine site is a large level area which was formerly used as an airstrip and would be relatively in expensive to reactivate.

The claims cover approximately 37,000 hectares and are underlain by large precious and base metal enriched hydrothermal systems hosted within a variety of rock types within a caldera type setting.

Historic work focused on a single breccia where disseminated to semi massive sulfides occur in andesitic sub volcanics in one of several areas of strong hydrothermal alteration. An historic resource was calculated by Engineer Ramon Fernandez form the Comision De Fomento Minero a federal government agency which is not compliant under NI 43-101. Based on underground exploration work from the 1920's and 1970's air track drilling Fernandez calculated a resource of 384,000 tonnes grading 0.12% copper, 2.8% lead, 1.74% zinc, 367 grams (10.73 oz) per tonne silver and 1.5 grams (Ag g/t equivalent equals 17oz) per tonne gold to a depth of 100 meters, across a width of 23 meters and a strike of about 70 meters. This calculation is historic in nature, does not conform to NI 43-101 standards and cannot be verified and therefore should not be relied upon. Limited historic data available indicates the mineralized breccia continues beyond the limits of historic exploration. There are several other breccias identified that have had no drilling.

In addition to the breccias classic epithermal type gold and silver, enriched veins and structures are also found on the property as are areas of copper and copper tourmaline mineralization hosted by intrusives. The copper mineralization suggests that both epithermal and breccia hosted mineralization may be related to a copper porphyry system.

Kootenay Gold plans to proceed with the first stage of exploration designed to begin evaluating and prioritizing the different hyrothermal systems. Specific work will include detailed geologic mapping, rock sampling, airborne geophysics, grid establishment, trenching and a drill program to confirm the grades and widths reported in the historic resource calculation.

Technical information contained in this release has been reviewed by James McDonald, P.Geo., Director and CEO of Exploration for Kootenay, a Qualified Person as defined in National Instrument 43-101.

About Kootenay. Kootenay is an emerging gold and silver company focused on acquiring 100% interests in mineral properties through acquisitions and exploration discoveries. During the past four years Kootenay has successfully made four new mineral discoveries in the Rossland Republic Gold Trend of British Columbia known as the JJ North, JJ South, Connor Creek and the Sunrise Properties. In addition to its mineral discoveries, the company acquired the Santa Lucia and the Sabina Property in Northwest Mexico. Joint-venture agreements with several companies have actively advanced these projects, as the company continues to expand its operations within Mexico and acquire projects with the potential for large-scale discoveries.

Cautionary Note to US Investors: This news release may contain information about adjacent properties on which we have no right to explore or mine. We advise U.S. investors that the SEC's mining guidelines strictly prohibit information of this type in documents filed with the SEC. U.S. investors are cautioned that mineral deposits on adjacent properties are not indicative of mineral deposits on our properties. This news release may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations, receipt of property titles, potential mineral recovery processes, etc. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.

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

Contact Information

  • Kootenay Gold Inc.
    James McDonald
    (403) 238-6986
    Kootenay Gold Inc.
    Ken Berry
    (604) 683-2214 or 1-888-268-8688
    Website: www.kootenaygold.ca