Kootenay and Fjordland Enter Into Option Agreement on Seven Properties in Southeastern British Columbia

Shares Outstanding: 37,276,600

VANCOUVER, British Columbia, December 22, 2010 - Kootenay Gold Inc. (TSX.V:KTN) ("Kootenay") and Fjordland Exploration
Inc. (TSX.V:FEX) ("Fjordland") have entered into an option agreement whereby
Fjordland has the right to earn an undivided 60% interest in seven individual
claim groups (Big Kahuna, Slocanny Granny, Red Lobster, Moly Pritchard, Big
Smoke, MS Peg and GCP) (collectively known as the "Kootenay Gold Claims")
located in Southeastern British Columbia in exchange for issuing an aggregate
total of 7 million common shares of Fjordland to Kootenay; and financing $7
million of exploration expenditures on the properties within a four-year
period. All terms of this agreement are subject to approval by the TSX
Venture Exchange.

The Slocanny Granny, Red Lobster, Moly Pritchard and Big Kahuna
properties host similar mineralization and geology to the recent Eagle Plains
and Providence Capital discovery. They lie along the same Iron Mountain
structural zone where Eagle Plains and Providence Capital drill discovery
found two intervals of gold-bearing massive sulphide mineralization. Selected
intervals from Hole 10 include:

    - 14.0 m @ 5.1g/t Au, 1.86% Pb, 2.1% Zn, 75.3g/t Ag (upper sulphide
      interval)

    - 56.5 m @ 1.9g/t Au, 0.44% Pb, 0.59% Zn, 21.5g/t Ag; elevated
      Cd,Sb,Sn,Bi,Cu (intensely altered, including lower sulphide interval at
      Sullivan-time horizon)

The other three projects, GCP, MS Peg and Big Smoke all lie within the
Kimberly Gold Trend. GCP contains extensive anomalous gold mineralization in
breccias not unlike the Iron Mountain Fault discovery while MS Peg has
potential for high grade gold and the Big Smoke has massive sulfide Sullivan
type potential.

A location map of the optioned properties may be viewed at:
www.kootenaygold.ca/i/pdf/news/KTN_IronRange_dec2210.pdf

The optioned properties total 21,222 hectares, in the Belt-Purcell
ranges, located adjacent to the Iron Range Project and within the 90-km long
northeasterly-trending Kimberley Gold Trend. This Trend is defined by placer
gold in streams, high angle, intersecting oblique-slip faults, Fe-oxide,
Fe-carbonate, sericite/quartz/pyrite/albite/tourmaline alteration
assemblages, numerous Au-Cu-Pb-Zn occurrences and IOCG (iron oxide copper
gold) affinities. Four of the claim groups in the Option Agreement have had
limited drilling activities and have new drill targets currently permitted
for work.

Terms of agreement

To fulfill the terms of the option agreement, Fjordland must spend an
aggregate total of $7 million on exploration over four years commencing
December 20, 2010 the effective date of the option agreement. Fjordland must
issue up to 7 million shares with 700,000 shares due on regulatory approval
of the option agreement. The balance of 6.3 million shares will be issued to
Kootenay in various increments at each anniversary date thereafter.
Subsequent to exercise of the earn-in, Fjordland and Kootenay will form a
60/40 joint venture. Financing of further work on the properties will be on a
proportional basis under the direction of a management committee with voting
rights proportional to ownership percentage. Either party may be diluted on
the basis of a standard formula if they do not contribute to the planned
programs.

The interest in the Kootenay Gold Claims is subject to the terms of the
Kennedy Grubstake agreement, which includes an underlying 2% net smelter
royalty (which includes a buy out option on 1.5% of the net smelter royalty
for a $1.5 million payment).

The foregoing geological disclosure has been reviewed and verified by
Kootenay's CEO, James McDonald, P.Geo (a qualified person for the purpose of
National Instrument 43-101, Standards of Disclosure for Mineral Projects).
Mr. McDonald is a director of Kootenay.

ABOUT KOOTENAY

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

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

Cautionary Note to US Investors: This news release may contain
information about adjacent properties on which we have no right to explore or
mine. We advise U.S. investors that the SEC's mining guidelines strictly
prohibit information of this type in documents filed with the SEC. U.S.
investors are cautioned that mineral deposits on adjacent properties are not
indicative of mineral deposits on our properties. This news release may
contain forward-looking statements including but not limited to comments
regarding the timing and content of upcoming work programs, geological
interpretations, receipt of property titles, potential mineral recovery
processes, etc. Forward-looking statements address future events and
conditions and therefore involve inherent risks and uncertainties. Actual
results may differ materially from those currently anticipated in such
statements.

    For further information:

    James McDonald, CEO and President at +1-403-238-6986
    Ken Berry, Chairman at +1-604-601-5652; +1-888-601-5650
    www.kootenaygold.ca

For further information: James McDonald, CEO and President at +1-403-238-6986, Ken Berry, Chairman at +1-604-601-5652; +1-888-601-5650