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NEWS

Kestrel Gold Inc. Enters Into a Letter of Intent to Add Condoryacu Property to its Argentina Portfolio

December 7, 2011

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.

Kestrel Gold Inc.("Kestrel" or the "Corporation") (TSX VENTURE:KGC) is pleased to announce that it has entered into a letter of intent (the "Letter of Intent"), to acquire a one hundred percent (100%) interest in the mineral rights to the Condoryacu and Maria Amalia properties in North-western Argentina (the "Properties") from Condoryacu S.R.L. (the "Vendor"), a private corporation incorporated pursuant to the laws of Argentina (the "Acquisition"). The Corporation's decision to purchase the Properties was strongly influenced by its position as an at surface mineral project with no overburden and high precious metal grades obtained from past geological work.

Highlights of the Acquisition

Pursuant to the terms of the Letter of Intent, the Corporation, through its wholly owned subsidiary Rio Diablillos S.R.L. ("Rio Diablillos"), proposes to acquire from the Vendor a one hundred percent (100%) interest in the Properties. As consideration for the Acquisition, the Corporation proposes to pay the Vendor an aggregate of USD$4,000,000 over a period of 36 months as set out below.

  • USD$50,000 on or prior to December 15, 2011;
     
  • USD$50,000 upon execution of a definitive agreement with respect to the Acquisition (the "Definitive Agreement");
     
  • USD$250,000 on or before six months from the date of the Definitive Agreement;
     
  • USD$650,000 on or before 12 months from the date of the Definitive Agreement;
     
  • USD$1,000,000 on or before 24 months from the date of the Definitive Agreement; and
     
  • USD$2,000,000 on or before 36 months from the date of the Definitive Agreement.

Upon execution of the Definitive Agreement, the Corporation will also grant to the Vendor a net smelter royalty equal to 1.5% of the net smelter returns from production of metals from the Properties.

Completion of the Acquisition is subject to, among other things, regulatory body approval, due diligence and the execution of the Definitive Agreement, which is anticipated to occur on or before December 31, 2011. Upon execution of the Definitive Agreement the Vendor shall transfer all of its right, title and interest in the Properties to the Corporation.

The Vendor is controlled by Hector Vittone, who is the President of Kestrel's wholly owned subsidiary Rio Diablillos. As such Mr. Vittone is considered to be a "Non-Arms Length Party" pursuant to the policies of the TSX Venture Exchange (the "Exchange").

Highlights of Properties

The Properties, consisting of approximately 400 hectares, are located in northwestern Argentina in the physiographic region known as the "Puna", characterized by a high plateau and an arid desert climate that facilitates almost year-round mineral exploration and access by four-wheel drive vehicles. Salta, approximately 150 kilometres east-north-east, is the nearest significant sized city and has daily air service by several carriers.

At the Properties, the main mineralized zone comprises a low outcrop of strongly silicified and locally brecciated granodiorite. Vuggy, intensely silicified (often chalcedonic) and locally brecciated fault controlled zones exhibit high grade gold, silver and copper mineralization. Limonite, malachite and pyrite are present, with the sulphides at surface being mainly oxidized.

High grade, at surface precious metal and copper mineralization is believed to be related to a complex structural environment that separates the areas referred to as the Northern Outcrop and Southern Outcrop - the two most important regions of the Condoryacu property found to date, which are some 300 metres apart.

In April 2011, Kestrel collected three selective check surface grab samples that returned up to 30.93 g/t Au and >200 g/t Ag in sheared silica and clay altered breccia from the "Southern Outcrop" and collected a selective check surface grab sample at the "Northern Outcrop" of silica and clay altered brecciated quartz feldspar porphyry, that returned 4.63 g/t Au.

Drill programs in the early 2000's, were carried out by Cardero Resource Corp. and Maximus Ventures Ltd. at the Southern Outcrop, which have returned estimated true thicknesses of up to 12.23 metres of 14.15 g/t Au, 129.3 g/t Ag.

Drill hole CY01-01A drilled down plunge intersected 76.39 metres of 18.03 g/t Au, 115.3 g/t Ag and 2.16% Cu. This result indicates continuous mineralization from surface to a depth of at least 75.2m below collar.

The mineralized zone has been demonstrated to extend from surface to a depth of 110 metres and is open at depth.

Commenting, Kevin Nephin, Chief Executive Officer of Kestrel stated: "The addition of the Condoryacu property to Kestrel's Argentinean portfolio is anticipated to give us the opportunity to consider a modest, low cost, - high grade precious metal mining operation in a region that is already well established in terms of mining logistics and infrastructure. Kestrel's short to medium term strategy is to take this forward by proceeding with metallurgical tests on bulk samples and initiating an economic resource estimate based on a National Instrument 43-101 compliant study."

It is important to note that the Properties lie approximately 2 kilometres south-southwest of "Diablillos", an advanced gold-silver project owned by Silver Standard Resources Inc. currently at pre-feasibility mine stage. Kestrel believes that the structural features controlling the distribution of gold-silver and base metals are related in the two regions.

About Kestrel Gold Inc.

Kestrel is a gold exploration company headquartered in Canada. Its two principal projects are the King Solomon's Dome property in Canada's Yukon Territory and the Huachi property in Argentina. Kestrel (KGC) is listed on the Exchange.

Technical aspects of this news release have been reviewed and approved by William Taylor, P.Geo., designated as a qualified person under National Instrument 43-101.

Cautionary Statements

This news release contains "forward-looking information" within the meaning of applicable securities laws. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Corporation's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. In particular, this release contains forward-looking information relating to the intention of the parties to enter into the Definitive Agreement, the timing of execution of the Definitive Agreement, the terms and conditions of the Acquisition, the completion of due diligence by the Corporation and the receipt of all applicable approvals for the Acquisition. Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to the Corporation. The material factors and assumptions include the obtaining of the necessary director, shareholder and regulatory approvals, Exchange policies not changing and completion of satisfactory due diligence. Risk Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: conditions imposed by the Exchange, the failure to obtain the required approvals to the Acquisition, general economic and business conditions; and changes in the regulatory regulation. The Corporation cautions the reader that the above list of risk factors is not exhaustive. The forward-looking information contained in this release is made as of the date hereof and the Corporation is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

Kestrel Gold Inc.
Kevin Nephin
604-824-6056 or 604-799-2456
kvnephin@telus.net
www.kestrelgold.com