Kootenay Silver approaches milestone

The open pit mineral resources for the Promontorio Project are comprised of an estimated 44,504,000 tonnes grading an average of 64.32 gpt silver equivalent (“AgEq”) classified as Measured and Indicated Mineral Resources, with an additional 14,564,000 tonnes grading an average of 51.95 gpt AgEq classified as Inferred Mineral Resources. This resource is stated above a 20.00 gpt AgEq cut-off grade and is contained within a potentially economically mineable pit shell.

Underground mineral resources are approximately 215,000 tonnes grading an average of 56.96 gpt AgEq classified as Measured and Indicated Mineral Resources, with an additional 1,265,000 tonnes grading an average of 61.17 gpt AgEq classified as Inferred Mineral Resources. This resource is stated above a 45.00 gpt AgEq cut-off grade to reflect the higher mining costs expected to be associated with underground production.

The updated Measured and Indicated Resource contains an estimated 92,035,000 oz AgEq with another 24,326,000 oz AgEq categorized as Inferred, summarized in Table 1:

Table 1: Resource Statement for the Promontorio Deposit, Sonora State, Mexico: SRK Consulting (U.S.) Inc., Effective Date March 31, 2013*

Notes: * Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves.
¹ Open pit resources stated as contained within a potentially economically minable pit shell;
² Pit optimization is based on assumed silver, gold, lead, and zinc prices of $31/oz, $1650/oz, $0.96/lb, and $0.89/lb respectively, mill recoveries of 74%, 70%, 81% and 88% respectively, a 1.5% NSR, Estimated mining costs of $1.20/t, and estimated processing and G&A cost of $12.00/t; and an estimated POX cost of $2/tonne ($30/tonne of pyrite concentrate)
³ Break-even cut-off grades used were 20 gpt AgEq for open pit mill material and 45 gpt AgEq for underground material;
⁴ Silver equivalency is based on unit values calculated from the above metal prices, and assumes 100% recovery of all metals; and
⁵ Mineral resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding.

The following material changes incorporated into the updated resource estimation contributed to the significant increase in the mineral resource:

• Additional metallurgical test work has allowed for the inclusion of Au in the mineral resources, which has a significant impact on the AgEq grades and relative ounces.
• The estimated Measured and Indicated gold resources contained within the mineralized diatreme system total 508,000 ounces with an additional 155,000 ounces Inferred.

States Kootenay President and CEO James McDonald “This is an exciting day for Kootenay and its shareholders. The Company is extremely pleased with the findings of the resource estimate and proud to be approaching the 100 Million ounces, silver equivalent milestone. Two key factors contributed to the success of the updated resource estimate. First, the important addition of the gold content to the resource has added significantly to the resource value. Secondly, resulting from the addition of gold, the resource is now contained in a single larger optimized Whittle Pit, as opposed to two individual smaller pits reported in the August 21, 2012 resource estimate. We look forward to providing a further resource update at the conclusion of our current drill and resource expansion program.”

This mineral resource estimate has been completed by Matthew Hastings MSc, P.Geo and reviewed by Frank Daviess, MAusIMM, RM-SME, Associate Principal Resource Geologist with SRK. A site visit was conducted by Allan Moran, of SRK, R.G., C.P.G, who has reviewed pertinent geological information in sufficient detail to support the data incorporated in the mineral resource estimate. Mr. Daviess is an Independent Qualified Person as defined under National Instrument 43-101 (“NI 43-101”) and is responsible for the mineral resource estimate presented in this release. Eric Olin, of SRK, MSc, MBA, RM-SME reviewed the metallurgical information contained in this release.

Drilling data includes a total of 45,118 samples from 65,092 meters of drilling. Of the 45,118 samples in the database, 22,658 lie within the wireframes and were used in the resource estimation. Wireframes are three-dimensional closed solids constructed in Vulcan(tm) and based on a combination of logged geology and assay information. These wireframes limit the estimation.

Three-dimensional wireframes were constructed for the modeled domains using Leapfrog 3D(tm) modeling software as well as Vulcan(tm). SRK modeled both the Pit and NE zones independently, and corrected inconsistencies with the Leapfrog solids using Vulcan.

The average sample length for all samples is 1.44 meters. Samples were composited to 3 m lengths within the breccia, stockwork, and PC zones. For the estimation, SRK used Ordinary Kriging in the densely-drilled areas and Inverse Distance Weighting for the areas with more widely-spaced drilling. SRK applied appropriate block model validation techniques for a resource estimation at this stage of project development.

Pit optimization was conducted using Whittle(tm) software and evaluating the block model which was constructed in Vulcan(tm). The purpose of the pit-optimization exercise is to satisfy the conditions of “reasonable prospects for economic extraction” as defined in the CIM Guidelines using pit shells based on a very simple “break-even” cash flow model. These pits are not representative of detailed mine plans or even the “best” pit design for the Project. A cut-off for the mineral resource of 20 gpt and 45 gpt AgEq for open pit and underground potential was used respectively.

Measured, Indicated and Inferred Mineral Resources are categorized as Measured being where at least 3 drill holes occur within a 25 meters ellipsoid, Indicated being where at least 3 drill holes occur within a 50 meters ellipsoid and Inferred being where at least 2 drill holes occur within a 75 meters ellipsoid. Blocks estimated using Inverse Distance Weighting in the widely-spaced drilling intermediate to the two primary zones are categorized as Inferred.

Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves.

Mineral Processing and Metallurgical Test Work

G&T Metallurgical Services Ltd, Kamloops, BC, Canada completed preliminary metallurgical programs on drill core composites from the Promontorio property for Kootenay in 2009, 2012 and 2013.

Several significant factors were noticed in SRK’s review of the metallurgical process work conducted to date. The metallurgical program investigated a standard polymetallic sequential flotation flowsheet that includes:

• Crushing;
• Grinding;
• Lead Flotation;
• Zinc Flotation; and
• Pyrite/Arsenopyrite Flotation

Pressure oxidation (POX) of the pyrite/arsenopyrite concentrate is required to extract the contained gold by cyanidation.

SRK estimates metal recoveries shown in Table 2 are based on the average results from the preliminary metallurgical test programs conducted in 2009, 2012 and 2013. Overall gold recovery is estimated at 70% and is based on 65% gold recovery into the pyrite flotation concentrate followed by 94% cyanidation gold extraction from the pyrite concentrate after pressure oxidation, plus an average 9% gold recovery into the lead flotation concentrate.

Table 2: Metallurgical Recovery Assumptions

* Includes 94% cyanidation extraction from pyrite concentrate + gold contained in lead concentrate

QA/QC

The majority of holes were drilled with HQ sized diamond drill core with some sections reduced down to NQ sized core. Core samples were cut using a core saw with 1 to 2 meter long sample intervals. A select few holes drilled using reverse circulation methods were included in the resource estimation, but generally in the areas of more widely-spaced drilling between the two primary zones. Further Quality Assurance and Control procedures and details on assays are disclosed on the Kootenay Silver Inc. website.

SRK, with inputs from Kootenay on specific sections, will be the author of an NI 43-101 Technical Report on the Mineral Resource Estimate for the Promontorio Project, to be filed within 45 days of this release.

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 NI 43-101, Standards of Disclosure for Mineral Projects). Mr. McDonald is a director of Kootenay.

Kootenay Silver Inc. is actively developing mineral projects in the Sierra Madre Region of Mexico and in British Columbia, Canada. Its flagship property is the former producing Promontorio Silver mine in Sonora State, Mexico. Kootenay’s objective is to develop near term discoveries and long-term sustainable growth. Its 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.