Kootenay Announces Non-Brokered Private Placement of up to $6,000,000

Shares Outstanding: 37,276,600

VANCOUVER, British Columbia, December 9, 2010 - Kootenay Gold Inc. ("Kootenay") (TSX Venture: KTN.V) is pleased to
announce a Non-Brokered private placement (the "Private Placement") of up to
7.06 million units (each "Unit") at a purchase price of $0.85 per Unit, for
aggregate gross proceeds to Kootenay of up to $6,000,000. Sprott Asset
Management LP for and on behalf of certain Sprott Funds and Managed Accounts
has agreed to purchase $4,000,000 of the Non-Brokered Placement.

Private Placement

Each Unit will consist of one common share ("Common Share") of Kootenay
and one-half of one transferable share purchase warrant ("Warrant"). Each
whole Warrant will entitle the holder to acquire one Common Share at an
exercise price of $1.20 for a period of 24 months from the closing date of
the Private Placement. Finder's fees in cash or units and finder's warrants
may be paid in connection with the Private Placement. All of the securities
issued pursuant to the Private Placement will be subject to a minimum four
month hold period. The Private Placement and payment of any finder's fee
are subject to acceptance by the TSX Venture Exchange.

The net proceeds from the Private Placement will be used to finance
additional work on Kootenay's Promontorio property, its other properties and
for general working capital.

Drilling the Promontorio Silver Property
Kootenay's current 10,000-meter Drill Phase is part of an important program
to substantially expand the known 43-101 mineral resource at Promontorio. The
first four holes have been drilled along a single fence across the western
side of the Pit Zone, establishing mineralization another 100 meters outside
the current 43-101 resource which includes the high grade intercept of 262.4
g/t Ag and 1.1 % Pb+Zn over 13.5 meters including 819 g/t Ag and 2.57% Pb+Zn
over 3 meters in hole PC 004.

ABOUT KOOTENAY

Kootenay is actively developing mineral projects in the Sierra Madre
Region of Mexico and in British Columbia, Canada. The Company flagship
property is the former producing Promontorio Silver Mine in Sonora State,
Mexico.

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

To view an interview with James McDonald visit:
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