Mr. James McDonald reports

KOOTENAY ANNOUNCES CERVANTES PROJECT OPTIONED TO AZTEC METALS

Kootenay Silver Inc. has optioned its Cervantes gold/copper project located in Sonora, Mexico, to Aztec Metals Corp. Cervantes is a gold/copper porphyry prospect located approximately 50 kilometres northeast of the company's Promontorio silver resource in Sonora, Mexico, which, based on geologic observations, the company believes has potential for hosting leachable gold resources. The project is the result of Kootenay's generative program and was staked through its wholly owned Mexican subsidiary, Minera JM (MJM).

Kootenay president and chief executive officer James McDonald states: "We are very pleased to enter into an option agreement with Aztec Metals on our Cervantes gold/silver prospect in Sonora, Mexico. The agreement with Aztec represents our third successful option agreement in the past 12 months of our generative program. The agreement serves as a strong complement to our previously announced option agreements over this same period, including optioning the Silver Fox property to the major copper mining company Antafogasta and the San Diego property to Alamos Gold. As we continue to advance our top priority La Negra silver discovery in Sonora, Mexico, our success finding and leveraging exciting new projects adds significantly to the intrinsic value in Kootenay, while providing maximum exposure to new discoveries and minimal share dilution through our generative program."

The Cervantes project

Previous work conducted by Kootenay shows the Cervantes concession to be underlain by a suite of mineralization styles of which the California gold/copper porphyry is most significant. Important peripheral mineralized zones to the porphyry include the sediment-hosted shear-zone Brasil with polymetallic gold/silver, low sulphidation epithermal veins and breccia. The mineralized systems are hosted within Paleozoic fine-grained clastics intruded by high-level, quartz-eye porphyritic intrusions. Mineralization is associated with major fault structures controlling a pull-apart basin.

The primary prospects within the Cervantes concession were discovered or identified as a result of Kootenay's generative discovery program. All sampling results have been previously reported by Kootenay. To view a map of the Cervantes geology, visit the company's website.

Brief descriptions of the principal mineralized zones follow and have been previously reported.

La California gold/copper porphyry prospect

A northeast-trending keel-like stock measuring approximately two kilometres long and between 200 to 500 metres wide. The porphyry system is divided into two parts: California East Au/Cu porphyry and the California West (Jasper zone).

La California East

The porphyry is highly fractured and marked by intense stockwork veining and locally by breccia zones. Alteration is dominantly quartz, sericite, pyrite and locally silicic (stockwork quartz veining and silica flooding). Textures of limonites goethite, jarosite and hematite within the stockwork system are indicative of a leached cap and are strongly suggestive of secondary copper enrichment at depth.

Prospector sampling taken by Kootenay showed gold and copper assays taken within a 500-by-500-metre area that is coincident with argillic and sericitic alteration and leach-cap limonites. Ninety prospector and chip samples were taken. Fifty-eight samples gave values greater than 100 parts per billion (0.1 gram per tonne), with high values of 19, 9.8, nine, 5.1 and 4.4 grams per tonne gold. The average value of gold from the porphyry and its immediate surroundings is 1.03 grams per tonne gold (and 351 ppb or 0.35 gram per tonne for all samples less than two grams per tonne). Copper averages 554 ppm (0.05 per cent), values consistent with published values from other supergene enriched porphyries in southwest United States. Visible secondary copper minerals (malachite) were noted only outside the leach-cap weathering zone.

The California East porphyry was subject to historic exploration drilling by Penoles SAB. de CV, which reportedly drilled 14 holes during 1996 and 1997. The only information recovered of this work is from third party reports and, due to the lack of verifiability, is not discussed.

To view a map of the Brasil sampling visit the company's website.

California West porphyry (Jasper zone)

The extension of the main California East porphyry lies 300 metres to the west and is strongly sheared and argillized. Host rocks comprise quartz-eye rhyolite porphyry and horrnfelsed Paleozoic dirty limestone/calcareous siltstones. Limited sampling (25 grab samples) gave values of gold from background to maximum values of 13.8, 1.85 and 0.68 gram per tonne, silver up to 53 grams per tonne and anomalous molybdenum (to 480 parts per million). Copper (as secondary neotocite) and gold-silver mineralization are spatially associated with the porphyry Jasperoid and chalcedony occur both as replacement of country rock and pods of open-space infills that appear suggestive of a retrograde alteration on the edges of a porphyry system. A series of northwest-trending resistant quartz-hematite strataform ribs crop out to the immediate west of the jasperoid zones.

To view a map of the California sampling visit the company's website.

Brasil polymetallic gold/silver prospect area

The Brasil prospect lies 1,200 metres south of the California porphyry. Gold-silver-polymetallic mineralization within a 100-by-300-metre area is associated with a series of near-bedding parallel shears with argillization and erratic quartz veining accompanied by strong goethite, jarosite and hematite. Individual mineralized shears are typically less than 1.5 metres thick, but the stacking of parallel shears over at least a 50-metre interval may provide a bulk-tonnage target. Thirty-two samples (mostly grab) have been collected over the Brasil area with 22 with values of gold greater than 0.1 gram per tonne and 11 greater than one gram per tonne including highs of 11.5, 6.2, 4.3, 3.6 and three grams per tonne. A single 116-gram-per-tonne silver assay was noted with 13 greater than 10 grams per tonne. Anomalous copper, lead and zinc accompany the precious metal mineralization. The Brasil prospect is controlled by the same structures controlling the California porphyry and is interpreted to represent a distal phase of the porphyry-style mineralization.

Other areas of anomalous mineralization: Cervantes concession

Cayo Norte: Four hundred metres north of the California East porphyry. Reconnaissance exploration has noted epithermal silica veins and breccias hosting gold values from background to highs of 6.5, 6.4, 4.7, 4.2 and 1.4 gpt gold in grab samples.

Terms of the agreement

The terms of the agreement allow Aztec to earn a 65-per-cent interest by spending an aggregate total of $1.5-million (U.S.) in exploration expenditures over four years (by July 25, 2019), to pay an aggregate total of $150,000 (U.S.) in staged payments to the company by July 25, 2019, and issue an aggregate total of one million common shares of Aztec in staged payments on each anniversary with the final issuance payable 60 days after the fourth anniversary of July 25, 2019. Aztec will also be responsible for annual Mexican assessment work and mining concession taxes during the term of the agreement.

Upon earning the initial 65-per-cent interest and within 60 days of such date, Aztec will have the right to elect and acquire the remaining 35-per-cent interest by completing a preliminary economic assessment report (scoping study) by the fifth anniversary date (July 25, 2020), paying $5 (U.S.) per gold or gold equivalent ounce of estimated recoverable, payable gold or gold equivalent ounce of the contained metal for the measured, indicated and inferred resources based on the scoping study. On acquisition by Aztec of 100-per-cent interest, Kootenay will receive a 2.5-per-cent net smelter royalty. If Aztec decides not to exercise the second option in order to acquire the remaining 35 per cent, a joint venture will be formed to further develop the project. If, at any time during the process of exploration and/or development after the completion of the scoping study and before the completion of a feasibility study or production decision, an additional resource is delineated on the property, Aztec shall have the right to acquire the remaining 35-per-cent interest under the same terms of acquiring the initial resource outlined previously.

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

We seek Safe Harbor.