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Kestrel Gold Inc. Announces Further Exploration And Purchase Option Contract For Rio Diablillos – Antofalla Property, Catamara Province, Argentina

March 7, 2011 – Vancouver, British Columbia: Kestrel Gold Inc.(the “Company”) (TSXV: KGC) is pleased to announce that it has entered into a further exploration and purchase option agreement (“Purchase Option Agreement”) to acquire a one hundred percent interest in the Antofalla Property representing approximately 8,700 hectares, located in the north-western Argentina in the Catamara Province. (“Antofalla” or the“Property”).

Highlights of Antofalla Property

Antofalla is comprised of six mining claims, located in northern Catamarca Province, approximately 200 km north of Olacapato, in northwestern Argentina. The property is road accessible throughout most of the year. “Antofalla” is an old mining district that primarily produced gold, silver and lead, at a small scale in the 17th and18th centuries.

Polymetallic mineralisation is preliminarily envisaged to be related to a carbonate base metal gold-silver low sulphidation epithermal system with hydrothermal chemical and textural signatures.

Historical mine workings are widespread over the 8,760 hectares of the Property and indicate regional structural components have influenced the spatial distribution of mineralisation and alteration.

The company will review all previous work done to date at the Property and focus on obtaining a good understanding of the different styles of mineralisation, alteration and associated structures present in the system. Exploration at Antofalla will be based on the findings.

Purchase Option Agreement Details

The Purchase Option Agreement was made between the optionor and Rio Diablillos (S.R.L.), an Argentinian company that Kestrel proposed to acquire (as announced on September 15, 2010 and February 23, 2011). Under the terms of the new Purchase Option Agreement, Rio has been granted the exclusive option to acquire an one hundred (100%) percent interest of all mineral rights in respect of the Property, in consideration of the payment of US$3,540,000, exercisable over a term of fifty eight (58) months, ending in November 2015; of which US$140,000 is payable within approximately one (1) year, a further US$150,000 is payable in approximately two (2) years, a further US$250,000 is payable in approximately three (3) years, a further US$1,000,0000 is payable in approximately four (4) years and a further US$2,000,000 is payable in approximately five (5) years. Antofalla is subject to a 1.5% net smelter return (“NSR”) payable in favour of the optionor, provided that Rio shall have the right to acquire a one hundred (100%) interest in the NSR in the first two (2) years after the initiation of commercial production, for a fixed amount of US$2,000,000.

Rio is a private corporation, incorporated under the laws of Argentina. The Acquisition of Rio 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. The Corporation anticipates closing of the Acquisition in the near future.

Pursuant to a loan agreement between the Corporation and Rio, the Corporation has agreed to loan up to US$3,000,000 to Rio for the exclusive purpose of performing mining exploration activities in Argentina, acquiring mining concession rights in Argentina, mining exploration and prospecting costs, purchasing mining exploitation rights in Argentina or costs related to those mining activities (the “Loan”). As of the date of this news release, the Corporation has loaned US$350,000 to Rio. The Loan is to be repaid over a thirty (30) month period commencing in August 2012, with interest at a rate of 2% per annum, and is secured against all of the issued and outstanding shares of Rio.

About Kestrel Gold Inc.

Kestrel Gold Inc. is a gold exploration company headquartered in Canada. Its principal projects are the King Solomon Dome and the Toe properties in Canada's Yukon Territory and, upon completion of the Acquisition, is anticipated to include the Huachi Mining Property and the Antofalla Mining Property, in Argentina. Kestrel Gold (KGC) is listed on the TSX Venture exchange.

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

For further information, please contact Kevin Nephin at 604-824-6056 or 604-799-2456
Email: [email protected] or visit our website at kestrelgold.com  

Cautionary Statements

This news release contains “forward-looking statements” within the meaning of applicable securities laws relating to the acquisition of various options in certain exploration properties in Argentina through the acquisition of all the issued and outstanding shares of an Argentina corporation. Readers are cautioned to not place undue reliance on forward-looking statements. Forward-looking statements are based on certain key assumptions made by the Corporation, including assumptions regarding the satisfaction of conditions to the completion of the transaction and the receipt of all regulatory and stock exchange approvals. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the transaction will not be successfully completed for any reason, including the failure to obtain the required approvals or clearances from regulatory authorities or the failure by any party to complete the conditions to the completion of the Acquisition. The forward-looking statements in this press release are made as of the date of this release and the Corporation undertakes no obligation to update publicly or revise any forward looking statements whether as a result of new information or otherwise, except as required by applicable securities laws. The Corporation undertakes no obligation to comment on analyses, expectations or statements made by third-parties in respect of the Corporation or its financial or operating results or (as applicable) their securities.

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

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.