Kootenay Gold Options Santa Lucia Gold Property, Sonora, Mexico
October 26, 2010
Shares Outstanding: 37,276,600
KOOTENAY GOLD OPTIONS SANTA LUCIA GOLD PROPERTY, SONORA, MEXICO
Vancouver, B.C. - Kootenay Gold Inc. (TSX.V: KTN) (“Kootenay”) and Copper Creek Gold Corp. (TSX.V: CPV) (“Copper Creek”) have entered into a letter of agreement whereby Copper Creek has the right to earn a 60 percent interest in the Santa Lucia property, Sonora, Mexico. Kootenay has granted Copper Creek the right to earn an undivided 60 percent interest in the property in exchange for cash payments totaling $60,000 over three years; issuing an aggregate total of 800,000 common shares of Copper Creek to Kootenay; and financing $2 million of exploration expenditures on the property within a four-year period. All terms of this acquisition are subject to approval by the TSX Venture Exchange.
43-101 TECHNICAL REPORT IDENTIFIES COMPELLING DRILL TARGETS
1. Prime Location: Santa Lucia is part of the Sierra Madre Occidental gold-silver belt, host to many epithermal deposits including: Mulatos, Dolores, Pinos Alto, Ocampo, Suazal amongst many others. A conservative estimate of gold reserves from these mines is at least $15 B
2. Drilling Demonstrates Grade to Depth: Historical drill intercepts from the south, central and Genero zones -- 3 of the 4 mineralized zones known (so far) -- demonstrate that mineralization extends to depth along 3 km of prospective strike length
3. High-Grade Samples: obtained along a 300-metre length at the Santa Lucia gold and silver project indicate the potential for a large high-grade system with grab sample assays that include:
- Gold: 37.5 grams per tonne (“g/t”), 28.2 g/t, 26.1 g/t, 23.4 g/t, 12.35 g/t and 9.15 g/t;
- Silver: 769 g/t, 473 g/t, 82 g/t, 1,525 g/t, 482 g/t, and 574 g/t.
4. Unexplored CSAMT Anomaly: A controlled-source audio-frequency magneto telluric anomaly about 2.5 km long, situated beneath known gold-bearing drill core and exploration pits, is consistent with the presence of a vein- stockwork-system at depth
5. New Discoveries near Old Workings create Blue Sky: Increased potential for multi-gram gold -- up to and exceeding 1 oz Au/t and accompanied by multi-ounce silver -- is supported by surface samples from new discoveries in the Fortuna zone
EXPLORATION STRATEGY
An exploration program will be determined by the partners with Copper Creek as operator. The main objective will be to drill test the CSAMT target and associated gold bearing structures.
Sampling, assaying and quality assurance/quality control
Each sample was assigned a unique letter-number code and the codes tabulated; the samples were placed in rice sacks, which were sealed and then delivered. All samples were recorded and delivered to the ALS Chemex sample preparation lab in Hermosillo, Sonora, Mexico. Receipt of the samples was signed off at the preparation lab. Pulps of each sample were prepared in Hermosillo and sent to ALS Chemex, North Vancouver, British Columbia, an ISO 9001-2000-certified full-service analytical laboratory.
The foregoing geological disclosure was reviewed and verified by Kootenay's Chief Executive Officer, James McDonald, PGeo (a qualified person for the purpose of National Instrument 43-101, standards of disclosure for mineral projects). Mr. McDonald is also a director of Kootenay.
Terms of agreement
To fulfill the terms of the option agreement, Copper Creek must spend $2 million on exploration over four years, cash payments totaling $60,000 over three years and issue up to 800,000 shares with 200,000 shares due on regulatory approval of the letter agreement and 200,000 common shares of Copper Creek on or before the first year anniversary and each of the second, third and fourth anniversaries thereafter, of the execution date. Securities issued pursuant to the Agreement will be subject to applicable hold periods. Subsequent to exercise of the earn-in, Copper Creek and Kootenay will form a 60/40 joint venture. Financing of further work on the Santa Lucia property will be on a proportional basis under the direction of a management committee with voting rights proportional to ownership percentage. Either party may be diluted on the basis of a standard formula if they do not contribute to the planned programs. If either party is diluted below 10 per cent, their interest will convert to a 1.5-per-cent NSR (net smelter return) royalty. Of the five mineral concessions comprising the Santa Lucia Property, one mineral concession currently has an underlying NSR of 2%, of which 1% can be purchased for US$250,000, whilst the remaining four mineral concessions are subject to a 2.5% NSR, of which 1.25% can be purchased for US$1 million.
ABOUT KOOTENAY
Kootenay is actively developing mineral projects in the Sierra Madre Region of Mexico and in British Columbia, Canada. The Company flagship property is the former producing Promontorio Silver Mine in Sonora State, Mexico.
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For additional information, please contact:
James McDonald, CEO and President at 403-238-6986
Ken Berry, Chairman at 604-601-5652; 1-888-601-5650
www.kootenaygold.ca
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or the accuracy of this release.
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. 2010 number 22