Kootenay Closes CDN$6,000,000 Non-Brokered Private Placement

VANCOUVER, December 23, 2010 - Shares Outstanding: 44,335,600

Kootenay Gold Inc. ("Kootenay") (TSX Venture: KTN) is pleased to announce
the completion of its previously announced non-brokered private placement.
The private placement was fully subscribed raising gross proceeds of
approximately CDN$6,000,000. Sprott Asset Management LP for and on behalf of
certain Sprott Funds and Managed Accounts purchased CDN$4,000,000 of the
Non-Brokered Placement.

A total of 7,059,000 units were issued. Each unit ("Unit"), priced at
CDN$0.85 per Unit consists of one common share ("Share") of Kootenay and
one-half of one transferable common share purchase warrant ("Warrant"). Each
whole Warrant entitles the holder to purchase one Share at a purchase price
of CDN$1.20 per Share until December 22, 2012. Cash fees in the aggregate
amount of CDN$137,700 were paid to arm's length parties and certain advisory
fees were paid in relation to the private placement. All of the securities
issued pursuant to the Offering will have a hold period which expires
April 23, 2011.

Stated Kootenay President and CEO James McDonald, "We are pleased to
close our financing. The new influx of capital further strengthens our
treasury as we continue to accelerate drilling on our flagship Promontorio
Silver Project."

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.

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.

To view an interview with James McDonald visit:
www.kootenaygold.ca

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

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