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Kestrel Gold Inc. Enters Into a Definitive Agreement for Condoryacu Property and Issues Shares for Rio Diablillos

January 16, 2012

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 16, 2012) -

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, further to its news release dated December 7, 2011, it has entered into a definitive mineral assets purchase and sale agreement (the "Agreement") with Condoryacu S.R.L. (the "Vendor") to acquire a one hundred percent (100%) interest in the mineral rights to the Condoryacu and Maria Amalia exploration mining concessions (the "Properties") in North-western Argentina (the "Acquisition"). The Vendor is a private corporation incorporated pursuant to the laws of Argentina. The Agreement is subject to both the satisfactory meeting of certain closing conditions customary to transactions of the nature of the Acquisition and applicable regulatory body approvals, including the approval of the TSX Venture Exchange Inc. (the "Exchange"). The Exchange has conditionally approved the Acquisition. The Corporation anticipates closing of the Acquisition on or about January 31, 2012. The Corporation also announces that it has issued 500,000 common shares in the capital of the Corporation ("Common Shares") to the former shareholders of Rio Diablillos S.R.L. ("Rio") pursuant to the acquisition of Rio on May 31, 2011.

The Agreement

As stated in the Corporation's news release dated December 7, 2011, Kestrel, through its wholly owned subsidiary Rio, has agreed to acquire from the Vendor a one hundred percent (100%) interest in the Properties in exchange for cash consideration in the aggregate amount of USD$4,000,000 to be paid over a period of 36 months. Upon completion of the acquisition, 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, completion of satisfactory due diligence and the satisfactory meeting of closing conditions customary to transactions of this nature. Closing of the Acquisition is anticipated to occur on or before December 31, 2011. Upon closing of the Acquisition 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 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.

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.

Share Payment for Rio Acquisition

The Corporation has issued 500,000 Common Shares to the former shareholders of Rio. Pursuant to the terms of the share purchase agreement dated February 23, 2011 (the "Rio Agreement"), pursuant to which the Corporation purchased all of the issued and outstanding shares of Rio, the Corporation agreed to issue an aggregate of 2,000,000 Common Shares to the former shareholders of Rio over a period 18 months after completion of the transaction. At the date of this release, the Corporation has issued 1,000,000 Common Shares to the former shareholders of Rio. Rio owns the Huachi mineral property in Argentina. The Rio Agreement has been filed on the Corporation's SEDAR profile at www.sedar.com.

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 completion and timing of the closing of the Acquisition 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 in a timely fashion or at all, 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

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