Vancouver, British Columbia: Kootenay Silver Inc. (TSX VENTURE: KTN) ("Kootenay" or the "Company") is pleased to announce SRK Consulting Inc. (U.S.) of Lakewood, Colorado has been commissioned to provide an updated, independent resource calculation on the Company's flagship Promontorio Silver Project in Sonora, Mexico.

The Company reports the decision to include gold assay results in the updated resource estimation follows extensive metallurgical testing and technical analysis by ALS Minerals of Kamloops, British Columbia that confirmed up to 94.5% recovery of gold from pyrite concentrates from the Promontorio resource can be achieved using a post pressure oxidation treatment process.

States Kootenay CEO James McDonald "We are very pleased to proceed with an updated resource calculation on Promontorio and to include the extensive gold assays found to be contained within the Promontorio diatreme system as part of our updated resource estimation. The gold in Promontorio is found to be evenly distributed throughout the silver resources and as such holds potential to further boost and enhance the value of the contained mineral resource going forward."

Metallurgy Testing Conducted by ALS Minerals of Kamloops, B.C.
Kootenay recently concluded through metallurgical testing and technical analysis that the gold contained within the Promontorio diatreme system can be effectively recovered following a pressure oxidation process. fter pressure oxidation, 94.5% of the gold was extracted from a pyrite concentrate.

The testing was conducted on a pyrite concentrate derived from flotation testing completed by ALS Minerals in Kamloops British Columbia. The pyrite concentrate had a head assay of approximately 3.0 gpt Au and approx. 98% of the pyrite was oxidized. The pyrite concentrate was treated through a batch pressure oxidation testing unit at approx. 200 degrees Celsius and a pressure of 2000 kPa for 2 hours. Post oxidation, the residue was further treated through a standard bottle roll cyanidation test.

After 48 hours of direct cyanidation leaching, 94.5% of the gold contained in the pressure oxidation residue was leached into the solution phase. Results from the testing indicate that the gold in the pyrite concentrate can be effectively recovered through post pressure oxidation treatment.

The Company reiterates that it is important to note that the economics and capital costs of recovering the gold resources in this stream using pressure oxidation (or oxidation of any type)/cyanidation will require further evaluation and assessment, which is currently underway on Promontorio. There is no assurance to what the extent of the net benefit will be resulting from this work.

Current 30,000 Meter Drill and Resource Expansion Program
At present, three core drills are operating on Promontorio. The current 30,000 meter, multi-phase drill and resource expansion program is the largest and most expansive drilling campaign conducted on the Promontorio Silver Project to date.

Current NI 43-101 Compliant Silver Resource
The most recent updated NI 43-101 mineral estimate on Promontorio (See KOOTENAY News Release---August 21, 2012) contains a combined Measured and Indicated silver resource of 61,679,000 silver equivalent ounces (37.5M oz's Silver, 372M lb's Lead, 436.9M lb's Zinc). In addition to the Measured and Indicated silver resources, there are an additional 14,469,000 silver equivalent ounces in the Inferred category (9.6M oz's Silver, 77.6M lb's Lead, 85.3M lb's Zinc). (Measured and Indicated resources are contained in open pit resources of 36,018,000 tonnes grading an average of 51.35 gpt silver equivalent (31.18 gpt Ag and 0.98% Pb+Zn) and underground resources of 2,216,000 tonnes grading an average of 48.75 gpt silver equivalent (30.15 gpt Ag and 0.98% Pb+Zn). Inferred resources within open pit resources of 9,136,000 tonnes grading an average of 42.86 gpt silver equivalent (28.32 gpt Ag and 0.17% Pb+Zn) and underground resources of 3,077,000 tonnes grading an average of 53.90 gpt silver equivalent (35.94 gpt Ag and 0.88% Pb+Zn).

*Assuming 100% Metallurgical Recovery
*Prices used in Silver Equivalent (AgEq) Calculations:
Ag dollars/oz $28.90
Au dollars/oz $1,487.00
Pb dollars/lb $1.00
Zn dollars/lb $0.95

QA/QC
All holes reported here were drilled with HQ sized diamond drill core with some sections reduced down to NQ sized core. Core samples were cut using a core saw with 1 to 2 meter long sample intervals. All mineralized intercepts are drill core length drilled across a vertically inclined breccia system at angles of 45 to 70 degrees. Further Quality Assurance and Control procedures and details are disclosed on the Kootenay Silver Inc. website.

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

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For additional information, please contact:
James McDonald, CEO and President at 403-238-6986
Investor Relations at 604-601-5652; 1-888-601-5650
or visit: www.kootenaysilver.com

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.
This press release uses the terms "Measured", "Indicated", and "Inferred" resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. "Inferred Mineral Resources" have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of a Mineral Resource is economically or legally mineable.