Kootenay Silver Inc (KTN)

[basserdan]

Kootenay and Fjordland Enter Into Option Agreement On Seven Properties In Southeastern British Columbia

Wednesday December 22, 2010, 10:57 am

Shares Outstanding: 37,276,600

VANCOUVER, Dec. 22 /CNW/ - Kootenay Gold Inc. (TSX.V:KTN; OTC:KOOYF) ("Kootenay") and Fjordland Exploration Inc. (TSX.V:FEX) ("Fjordland") have entered into an option agreement whereby Fjordland has the right to earn an undivided 60% interest in seven individual claim groups (Big Kahuna, Slocanny Granny, Red Lobster, Moly Pritchard, Big Smoke, MS Peg and GCP) (collectively known as the "Kootenay Gold Claims") located in Southeastern British Columbia in exchange for issuing an aggregate total of 7 million common shares of Fjordland to Kootenay; and financing $7 million of exploration expenditures on the properties within a four-year period. All terms of this agreement are subject to approval by the TSX Venture Exchange.

The Slocanny Granny, Red Lobster, Moly Pritchard and Big Kahuna properties host similar mineralization and geology to the recent Eagle Plains and Providence Capital discovery. They lie along the same Iron Mountain structural zone where Eagle Plains and Providence Capital drill discovery found two intervals of gold-bearing massive sulphide mineralization. Selected intervals from Hole 10 include:

* 14.0 m @ 5.1g/t Au, 1.86% Pb, 2.1% Zn, 75.3g/t Ag (upper sulphide interval)

* 56.5 m @ 1.9g/t Au, 0.44% Pb, 0.59% Zn, 21.5g/t Ag; elevated Cd,Sb,Sn,Bi,Cu (intensely altered, including lower sulphide interval at Sullivan-time horizon)

The other three projects, GCP, MS Peg and Big Smoke all lie within the Kimberly Gold Trend. GCP contains extensive anomalous gold mineralization in breccias not unlike the Iron Mountain Fault discovery while MS Peg has potential for high grade gold and the Big Smoke has massive sulfide Sullivan type potential.

A location map of the optioned properties may be viewed at: www.kootenaygold.ca/i/pdf/news/KTN_IronRange_dec2210.pdf

The optioned properties total 21,222 hectares, in the Belt-Purcell ranges, located adjacent to the Iron Range Project and within the 90-km long northeasterly-trending Kimberley Gold Trend. This Trend is defined by placer gold in streams, high angle, intersecting oblique-slip faults, Fe-oxide, Fe-carbonate, sericite/quartz/pyrite/albite/tourmaline alteration assemblages, numerous Au-Cu-Pb-Zn occurrences and IOCG (iron oxide copper gold) affinities. Four of the claim groups in the Option Agreement have had limited drilling activities and have new drill targets currently permitted for work.

Terms of agreement

To fulfill the terms of the option agreement, Fjordland must spend an aggregate total of $7 million on exploration over four years commencing December 20, 2010 the effective date of the option agreement. Fjordland must issue up to 7 million shares with 700,000 shares due on regulatory approval of the option agreement. The balance of 6.3 million shares will be issued to Kootenay in various increments at each anniversary date thereafter. Subsequent to exercise of the earn-in, Fjordland and Kootenay will form a 60/40 joint venture. Financing of further work on the 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.

The interest in the Kootenay Gold Claims is subject to the terms of the Kennedy Grubstake agreement, which includes an underlying 2% net smelter royalty (which includes a buy out option on 1.5% of the net smelter royalty for a $1.5 million payment).

The foregoing geological disclosure has 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 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.
Website: http://www.kootenaygold.ca

http://finance.yahoo.com/news/KOOTENAY-AND-FJORDLAND-ENTER-cnw-2357954521.html?x=0&.v=1

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Jim McDonald, CEO of Kootenay Gold, Discusses Major Silver Discovery and More (12-20-10)

Tekoa Da Silva speaks with Jim on Kootenay Gold's discoveries (KTN.V~KOOYF), additionally, Sprott Asset Management recently established a MAJOR position in Kootenay (audio 18:46)

http://www.contraryinvestorscafe.com/metals-and-mining/