Kootenay Gold Inc. has designed a warrant exercise incentive program to encourage the early exercise of up to 9,103,500 of its outstanding unlisted warrants, which excludes any warrants held by insiders of the company. There are currently three tranches of exercisable warrants, which are shown in the attached table.

Warrants outstanding Issued Price Expiry

2,750,000 Feb. 29, 2008 $1.15 Feb. 28, 2013
2,824,000 June 18, 2008 $1.15 Dec. 18, 2012
3,529,500 Dec. 22, 2010 $1.20 Dec. 20, 2012

Pursuant to the program, the company is offering an inducement to each warrantholder that exercises their warrants during a 21-calendar-day early exercise period consisting of an additional one-half of one transferable share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share for a period of 24 months from the date of issuance of such incentive warrant at a price of $1.50 per common share. The early exercise period will commence tomorrow, Tuesday, Jan. 24, 2012, at 9 a.m. PST and expire on Feb. 13, 2012, at 4:30 p.m. PST. The incentive warrants will be subject to a four-month hold period from the date of issuance.

Comments Kootenay chief executive officer James McDonald: "This is an opportunity for warrantholders to exercise their warrants early and receive an incentive to do so, which will strengthen the company's current cash position and provide additional working capital to continue exploration of its Promontorio silver project. The Promontorio project continues to report excellent grades of silver mineralizaton extending from the 43-101 pit resource to both the Northeast and Southwest zone."

Depending upon the number of warrants exercised during the early exercise period, the company expects to:

Receive gross proceeds of up to $10.6-million on or before the early exercise expiry date;

Issue up to 9,103,500 shares pursuant to the exercise of warrants by holders in accordance with the original and amended terms of the warrants;

Issue up to 4,551,750 incentive warrants to warrantholders pursuant to the early exercise of the warrants on or before the early exercise expiry date.

The terms and conditions of the program, and the method of exercising warrants pursuant to the program are set forth in a letter which is being delivered to the registered address of each eligible warrantholder, along with a representation and warranties confirmation confirming that the securities exemptions to be relied upon by the company under the warrantholder's previous subscription agreement are still true in relation to the issuance of the incentive warrants. Warrantholders who wish to participate in the program will agree to exercise their warrants and deliver the other necessary documents in consideration of the issuance by the company of the incentive warrants. The form of letter will be posted on the company's profile on SEDAR and available on the company's website.

Holders of warrants who elect to participate in the program will be required to deliver to the company at Suite 920, 1055 West Hastings St., Vancouver, B.C., Canada, V6E 2E9, by 4:30 p.m. (Vancouver time) on or before the early exercise expiry date, the following:

A duly completed acknowledgement that the subscribers representation and warranties to the company as per their original subscription agreement are still valid;

A duly completed and executed share purchase warrant subscription form attached as Schedule A to their warrant certificate;

The original warrant certificate;

The applicable aggregate exercise price payable to the company in Canadian dollars by way of certified cheque, money order, bank draft or wire transfer.

Any warrants that are not exercised prior to the early exercise expiry date will remain outstanding and continue to be exercisable for common shares of the company on their current terms.