Kootenay Gold, Copper Creek Gold sign Santa Lucia deal

2010-10-26 09:33 PT - News Release

Also News Release (C-CPV) Copper Creek Gold Corp


Ms. Mitzi Mogden of Kootenay Gold reports

KOOTENAY GOLD OPTIONS SANTA LUCIA GOLD PROPERTY, SONORA, MEXICO

Kootenay Gold Inc. and Copper Creek Gold Corp. have entered into a letter of agreement whereby Copper Creek has the right to earn a 60-per-cent interest in the Santa Lucia property, Sonora, Mexico. Kootenay has granted Copper Creek the right to earn an undivided 60-per-cent interest in the property in exchange for cash payments totalling $60,000 over three years; issuing a 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.

NI 43-101 technical report identifies compelling drill targets

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 and Suazal. A conservative estimate of gold reserves from these mines is at least $15-billion.

Drilling demonstrates grade to depth

Historical drill intercepts from the south, central and Genero zones -- three of the four mineralized zones known (so far) -- demonstrate that mineralization extends to depth along three km (kilometres) of prospective strike length.

High-grade samples

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.

Unexplored CSAMT anomaly

A controlled-source audio-frequency magnetotelluric 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.

New discoveries near old workings create blue sky

Increased potential for multigram gold -- up to and exceeding one ounce per tonne gold and accompanied by multiounce 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, B.C., 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 do several things. It must spend $2-million on exploration over four years. It must make cash payments totalling $60,000 over three years. It must 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 the party does 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 per cent, of which 1 per cent can be purchased for $250,000 (U.S.), whilst the remaining four mineral concessions are subject to a 2.5 per cent NSR, of which 1.25 per cent can be purchased for $1-million (U.S.).