Kootenay Options Four Properties to SG Spirit Gold; The Drill-Ready Prospects are Located in the Kootenay Region of Southeastern British Columbia

Shares Outstanding: 44,373,100

VANCOUVER, Feb. 2 /CNW/ - Kootenay Gold Inc. (TSX.V: KTN) ("Kootenay") has entered into an Option Agreement with SG Spirit Gold Inc. (TSX.V: SG) ("Spirit Gold" or the "Company"), whereby Spirit Gold can earn an undivided 60% interest in four properties, three of which are drill ready. The properties: Chenier, Sweet Spot, Enigma and Ruby Steel (the "Option Properties") comprise a total of 8,664.6074 ha. located in the highly prospective Kootenay region of southeastern British Columbia; Sweet Spot is proximal to the recent Iron Range discovery made by Eagle Plains Resources Ltd. and Providence Capital Corp.

Stated Kootenay Consulting Geologist Dr. Bob Thompson, "The newly formed J/V provides SG Spirit Gold the opportunity to participate in the exciting gold-base metal play underway in the Purcell Mountains by drilling the Sweet Spot property and at the same time drill three additional properties in the west Kootenay region, all of which possess large-scale potential. Kootenay's interest in four prospective upcoming drill programs is a very positive development that will allow the Company to maximize the potential of its ongoing generative programs in the region".

Terms of the Option
To earn the 60% interest in the Option Properties Spirit Gold must spend an aggregate of $4,500,000 on exploration expenditures on the properties within four years of the February 1, 2011 Effective Date ($600,000 in the first 12 months; funds to be forwarded to Kootenay or nominee as an advance against drilling expenses). In addition Spirit Gold must issue an aggregate of 4,800,000 shares to Kootenay during the four year period (600,000 shares on receipt of transaction approval from the TSX Venture Exchange). Subsequent to exercise of the earn-in, Spirit Gold and Kootenay will form a 60/40 joint venture. Financing of further work on the Option Properties 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. Conditions precedent which must be satisfied by the Company include: receipt of approval from the TSX Venture Exchange and successful completion of a Private Placement raising not less than $1,000,000 for the Company.

Option Properties Highlights
Chenier is interpreted as a high-level alkali porphyry copper-gold system (AR 28960) emplaced during the Eocene (approximately 50 million years ago). At least two readily accessible drill targets are located within zones of potassic alteration fringed by propylitic and (or) hematitic haloes. It is a polymetallic system: Gold in quartz veins and quartz float occurring peripheral to the main target areas range from 25 to 15,900 ppb; and skarn which is also peripheral to the alteration system assayed 0.27% Pb and 0.3% Zn; chalcopyrite-hematite breccias collected from the iron-oxide alteration zone assayed 0.17% and 0.23% Cu;. The Chenier Property has been prospected (AR 28578), geologically mapped (AR 28960) and geophysically surveyed (AR 29299). The property is located in the Okanagan Highlands, 13 km southwest of the Beaverdell Mining Camp, and 30 km north of the town of Rock Creek, southeastern British Columbia.

Sweet Spot is interpreted as a large-tonnage base metal (Pb-Zn) prospect with precious metal affinities. It occurs within faulted Middle Aldridge Formation, the same strata and near the same structures that host the Iron Range Au-Pb-Zn discovery of Eagle Plains Resources Inc. and Providence Capital Corp.  Historical drilling on and near the Sweet Spot (AR 21786 and 23840) consisted of 4 holes, one of which was drilled on a soil anomaly at the Sweet Spot; this hole intersected approximately 200 m of anomalous lead and zinc. The property is located 15 km southeast of the town of Yahk in southeastern British Columbia.

Enigma is a Besshi-type massive sulfide occurrence in breccias produced by intrusion of mafic magma into semi-consolidated, saturated sediments. Two readily accessible massive sulfide drill targets outcrop within a prospective zone 100 m thick and at least 4 km long; pyrrhotite-rich massive sulfide assayed up to 0.42 % Cu and 0.23% Zn with anomalous gold. Enigma has been prospected and mapped (AR 30210): it is part of an Upper Triassic-Lower Jurassic back-arc basin assemblage and is the same age as the Windy Craggy Besshi-type deposit in northwestern British Columbia. In Japan, the United States and Africa, multiple Besshi-type ore bodies occur in mineralized belts 10's to 100's of km in length. The Enigma represents an exciting new exploration target in in Triassic rocks of southern British Columbia. The property is located 7 km north of the town of New Denver at the northern end of the Slocan silver belt.

Ruby Steel is in the southern extension of the famous Slocan Silver Belt. The property is drained by gold-bearing placer creeks, and it is adjacent to the past producing Ottawa mine (minfile report: 82FNW155) where silver was produced from quartz veins. Despite more than 100 years of exploration history in the region, none of the vein systems on the Ruby Steel Property have been drilled. In 2010, multi-gram to multi-ounce gold-bearing samples were collected from turn-of-the-century pits and trenches, and from newly discovered vein systems. Six sites have been identified as potential drill targets - all are accessible by road. The geological setting of Ruby Steel is the same as that for silver deposits 10 km farther north: faulting, fracturing, veining, fluid circulation and the deposition of silver and gold accompanied displacement on the large, east-dipping, Slocan Lake detachment fault. This geological process has accounted for precious-metal deposits in southwestern United States, China and the Middle East. (More information available at the Kootenay Gold Inc. web site: http://www.kootenaygold.ca/s/RubySteel.asp).

The foregoing geological disclosure has been reviewed and verified by Robert Thompson, Phd, P.Eng (a qualified person for the purpose of National Instrument 43-101, standards of disclosure for mineral projects).

ABOUT SPIRIT GOLD
The Company possesses a large mineral property inventory: slightly over 50,000 hectares (123,500 acres) in southeastern British Columbia, Canada.  The Company's mission is: to define quality mineral exploration opportunities that can be developed in a sustainable and environmentally responsible manner and that can contribute to the economic and social well-being of local communities.

In recent years the Company has concentrated its efforts on the Kimberley Gold Trend ("KAT"), which blankets a large portion of the Company's properties. The KAT is a metal-rich boomerang-shaped region roughly 30 km wide and 100 km long, extending from the Purcell Mountains in the west, across the Rocky Mountain Trench where it bends north to occupy a swath of the western Rocky Mountains.

ABOUT KOOTENAY
Kootenay Gold is actively developing mineral projects in the Sierra Madre Region of Mexico and in British Columbia, Canada. The Company's flagship property is the former producing Promontorio Silver mine in Sonora State, Mexico. The Company's objective is to develop near term discoveries and long term sustainable growth. Kootenay's management and technical team are proven professionals with extensive international experience in all aspects of mineral exploration, operations and venture capital markets. Multiple, ongoing J/V partnerships in Mexico and Canada maximize potential for additional, new discoveries while maintaining minimal share dilution.

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.                              

SOURCE Kootenay Gold Inc.

For further information:

James McDonald, CEO and President at 403-238-6986
Ken Berry, Chairman at 604-601-5652; 1-888-601-5650
or visit:www.kootenaygold.ca

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Kootenay Gold Inc.

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