Kootenay Announces Initial Resource Estimate; Plans to Proceed With $1.5
Million Multi-Phase Drill Program on Promontorio Silver Project

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VANCOUVER, Aug. 18 /CNW/ - Kootenay Gold Inc. (TSX VENTURE:KTN.V) is pleased to announce it has obtained an independent mineral resource estimate from AGP Mining Consultants (AGP) for the Pit Discovery Zone at its Promontorio Silver-Lead-Zinc Property in Sonora, Mexico. A Multi-Phase drill program is now planned to expand the Pit Zone resource and test a 700 meter mineralized corridor trending to the North East. In addition, a systematic exploration program will prioritize targets from the Promontorio pit area in the south for approximately 25 kilometres to the northwest (see July 21, 2010 news release).

The AGP resource estimate comprises Indicated Mineral Resources of 5.22 million tonnes averaging 52.7 g/t silver, 0.86% lead and 0.96% zinc, containing 8.9 million oz Silver, 99.3 million pounds of lead and 110.8 million pounds of zinc. AGP also estimated that Promontorio contains 0.65 million tonnes averaging 55.7 g/t silver, 0.94% lead and 1.00% zinc in the Inferred category, containing 1.17 million oz Silver, 13.4 million pounds of lead and 14.3 million pounds of zinc (See Table below).

Jim McDonald, Kootenay CEO states, "The resource estimate is further validation that Promontorio is a maturing project displaying all the earmarks to develop into a substantial mineral entity. The resource identified to date, coupled with existing data and upcoming concurrent exploration and drill programs on multiple prospective targets, within known areas of widespread mineralization, bode extremely well for the projects' future development."

The 2010 mineral resource estimate is reported below at two different cut-offs for two depth ranges to reflect the mining methodology likely to be employed at Promontorio. AGP used a cut-off of $12.50 USD for resource the first 200 m of the deposit and for resources below that, a cut-off of $32 USD was selected. Resources at Promontorio are presented in the table below.

    
    -------------------------------------------------------------------------
    Upper 200m (greater than $12.50 RMV*)
    -------------------------------------------------------------------------
                                       Grade              Contained Metal
    -------------------------------------------------------------------------
    Category       Tonnes      Ag    Pb    Zn   RMV     Ag       Pb      Zn
                 (millions)  (g/t)  (%)   (%)  ($/t)  (m oz)  (m lbs) (m lbs)
    -------------------------------------------------------------------------
    IND greater
     than 12.5       2.19    53.7  0.73  0.87  50.40    3.8     35.2    42.0
    -------------------------------------------------------------------------
    INF greater
     than 12.5       0.23    58.9  0.85  0.95  56.10   0.44      4.3     4.8
    -------------------------------------------------------------------------
    Below 200m (greater than $32.00 RMV*)
    -------------------------------------------------------------------------
                                       Grade              Contained Metal
    -------------------------------------------------------------------------
    Category       Tonnes      Ag    Pb    Zn   RMV     Ag       Pb      Zn
                 (millions)  (g/t)  (%)   (%)  ($/t)  (m oz)  (m lbs) (m lbs)
    -------------------------------------------------------------------------
    IND greater
     than 32         3.03    52.0  0.96  1.03  56.70    5.1     64.1    68.8
    -------------------------------------------------------------------------
    INF greater
     than 32         0.42    53.9  0.98  1.03  58.00   0.73      9.1     9.5
    -------------------------------------------------------------------------
    * Recoverable Metal Value (RMV) is expressed as a dollar value (USD)
        and was calculated as the sum of the silver, lead, and zinc
        contributions modified by their recoveries determined by preliminary
        metallurgical testing conducted by G and T Laboratories in Kamloops,
        B.C. (see news release October 6, 2009). The metal prices and
        recoveries used are tabled below.

    ----------------------------
    Metal   Price      Recovery
    ----------------------------
    Ag      $15/oz     82%
    ----------------------------
    Pb      $0.97/lb   85%
    ----------------------------
    Zn      $0.91/lb   91%
    ----------------------------
    

The resource is located at the junction of two mineralized trends (NNW and NE) as evidenced by geological mapping, mineral showings and geophysical data such as ground I.P. and airborne magnetic, EM and resistivity data. These geophysical data suggest that mineralization may extend to the northeast and southwest. Drilling has identified mineralization comparable to that seen within the Promontorio resource 700m north east of the pit drilling; KP-80-10 returned 29m averaging 78g/t silver, 1.43% combined lead/zinc and 1.17 g/t gold including 4.5m averaging 115 g/t silver, 5.13% combined lead zinc and 1.11 g/t gold from 88m. (see May 12 2010 news release).

AGP modelled two zones of mineralization based on assay values from 50 drill holes completed by Kootenay Gold in 2007 and 2008 in the vicinity of the historical pit. The two zones define zones of mineralization greater than a recoverable metal value of $10USD. Zone 1 is a small sub-vertical mineralized domain measuring 70 by 20 m and extends down dip 140 m. Zone 2 is a steeply dipping pipe shaped domain measuring 140 by 60 m at surface and extends 450 m deep. Mineralization occurs outside of the modelled zones; however AGP was not able to interpret continuous zones between drill holes at the current drill hole spacing.

AGP estimated mineral resources based on 3022 drill core assay values contained within the mineralized zones. Assay values in Zone 1 for silver, lead and zinc were capped to 750 g/t, 6% and 6% respectively, and assay values in Zone 2 for silver, lead and zinc were capped to 300 g/t, 9% and 8% respectively. Capped assays were then composited to 2 metre lengths and block grades were interpolated from the composites using Inverse Distance weighted to the second power for Zone 1, and Ordinary Kriging for Zone 2. A block was classified as indicated if at least 6 composites from 2 drill holes were found within 30 m along strike and 60 m down dip, and as inferred if at least 6 composites from 2 drill holes were found within 60 m along strike and 120 m down dip. Blocks were interpolated with not more than 15 of the nearest composites. A bulk specific gravity of 3.12 was applied to the mineralized zones based on the average of laboratory results on 63 samples from 5 drill holes.

The mineral resource estimate was completed by Michael Waldegger, P.Geo. of AGP Mining Consultants (AGP), an independent qualified resource evaluator, with an effective date of August 12, 2010 and complies with National Instrument 43-101 for the Standard of Disclosure for Mineral Projects as adopted by the Canadian Securities Regulators. The technical report on the Promontorio deposit in Sonora, Mexico will be filed within 45 days of this news release.

DRILL PROGRAM

Supported by highly encouraging results to date, Kootenay plans to initiate a $1.5 million, multi-phase drill program commencing in September 2010. Drill testing will seek to identify the extensions from the known resource and will focus on several High-Priority Targets that bear similar geological characteristics to the main discovery zone.

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 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.

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.

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