Kootenay Options Prospective Gold/Silver Concessions to First Mexican Gold and International Millennium Mining

Shares Outstanding: 44,373,100

VANCOUVER, Feb. 17 /CNW/ - Kootenay Gold Inc. (TSX.V: KTN) is pleased to announce that it has entered into an Option Agreement with First Mexican Gold Corp (TSX.V: FMG) and International Millennium Mining whereby they can earn an undivided 60% interest in four properties, located in Sonora State, Mexico.

The Option Agreement allows First Mexican and IMI to acquire a 60% undivided interest by paying US$25,000 on signing, issuing an aggregate 1,200,000 common shares of FMG over 5 years and spending US$2 million on the property over 5 years.  Plus Kootenay retains a 1% NSR interest which can be purchased for US$1 million.  The earn-in period can be accelerated at the discretion of FMG.  At completion of the earn-in a JV Agreement will be formalized.

States Kootenay President and CEO James McDonald, "We are very pleased to have First Mexican and IMI as a partner. Their aggressive consolidation of an 11,506 hectare land package contiguous with the Corex Gold Corp's Santana Property is an exciting development. Our exploration team has been diligent in advancing this prospect over recent months. The high grade gold results returned from assays and the multiple 1Kg+ Silver Targets identified to date supports that initiative and underlines the highly prospective nature of the prospect.

Adds Kootenay Chairman Ken Berry, "The First Mexican Gold joint venture provides our shareholders with multiple opportunities for new drill discoveries. As we continue to prioritize the aggressive ongoing development of our core asset the Promontorio Silver Project in Sonora, Mexico, we have now successfully joint ventured 18 of our 100% owned precious metals properties in Canada and Mexico. Collectively, these strategic partnerships afford Kootenay minimal financial exposure and up to $20.7 million in exploration expenditures over the next 5 years."

The property package comprises 3,606 hectares and is considered very prospective for gold and silver mineralization with numerous historic workings present.  The claims include La Cabana 1 Frac I, La Cabana 1 Frac II, La Cabana 1 Frac III and Cuatas which are 100% owned by Kootenay.

Sampling has been conducted by Kootenay Gold with over 120 samples assayed with the highlights listed below.  The samples from the Minas Viejas area of the La Cabana Frac II property is on trend and very close to the recently reported samples (see FMG news release Feb 16, 2011) from Bailey zone of First Mexican.

Sample Highlights

  • sample # FA1322G returned  11.40 g/t gold, 92 g/t silver
  • sample # LM1041D returned  1.54 g/t gold, 672 g/t silver, .69% copper
  • sample # CA1032D returned  3.25 g/t gold, 4620 g/t silver, .698% copper
  • sample # CA984D returned  12.20 g/t gold, 877 g/t silver, 13.40% copper
  • sample # LM1046G returned  4.49 g/t gold, 504 g/t silver, 2.70% copper

Table of Key Sample Results

LOCATION SAMPLE NUMBER AU (g/t) AG (g/t) CU (%) SB ppm PB ppm
CUATAS            
Cruz de Mayo FA1322G 11.4 94 .046 2080  
  LM1041D 1.54 672 .69 620 510
Urquidez            
  LM1118F 0.179 2      
  MK788 0.145 7      
  MK796 0.128 4      
La CABANA FRAC II            
Minas Viejas CA1032D 3.25 4620 .698 11500 860
  MK782 1.03 182 .08 370 2990
  CA1034D 0.45 1595 .645 4830 70000
  CA1028G 0.257 3050 .127 5410 116000
  CA1029G 0.176 2540 .091 3400 115000
  CA1038G 0.117 1560 .304 1040 15600
Prom            
  CA984D 12.2 877 13.40 15450 15650
  FA1323D 0.46 53 .295 1200 14050
  LM1045CH 5.42 119 .077 3710 3980
  LM1046G 4.49 504 2.70 11750 33500
  TR588 0.421 5 .070 120 2450
  TR589D .017 3 4.50    

blanks = not significant;(Above samples are highlights and range from background values to those above. Samples ending with CH are channel samples, G are select prospector grab samples of out crop, D are samples from old mine dumps and F are samples of proximal Float.)

"The Kootenay Option Agreement allows First Mexican to acquire a significant interest in ground considered highly prospective and on trend with identified targets from our existing property package.  Initial reconnaissance has already begun and we intend to pursue exploration in the immediate area of the Bailey zone, we look forward to working with Kootenay going forward" said Jim Voisin, President and Chief Executive Officer of First Mexican.

The foregoing geological disclosure has also been reviewed and verified by Kootenay's CEO, James McDonald, P.Geo (a qualified person for the purpose of National Instrument 43-101, Standards of Disclosure for Mineral Projects). Mr. McDonald is a director of Kootenay.

About First Mexican Gold
First Mexican Gold Corp is an active explorer for precious metals in Mexico and holds an option to acquire 80% interest in the Guadalupe property package from a wholly owned subsidiary of International Millennium Mining Corp.  The Company now has an interest in 15,112 hectares in this high potential precious metals exploration area.

About Kootenay Gold
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

To view an interview with James McDonald visit:www.kootenaygold.ca

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Kootenay Gold Inc.

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