PROMONTORIO - Kootenay Silver Announces 30,000 Meter, Multi-Phase Drilling and Resource Expansion Program Slated to Commence on Promontorio Silver Project, Sonora, Mexico

November 7, 2012

Kootenay Silver Inc. (TSX VENTURE: KTN.V) (the "Company") is pleased to announce that, further to its press release dated October 31, 2012, announcing that the Company had closed a fully subscribed, $8,253,000 brokered private placement financing, it has secured drilling contracts and has begun mobilizing drill rigs to commence a major, multi-phase, 30,000 meter drill and resource expansion program on its flagship Promontorio Silver Project in Sonora, Mexico. The upcoming drill and resource expansion program is expected to employ up to five drill rigs at full capacity, representing the single largest drilling campaign conducted on the Promontorio project to date.

States Kootenay CEO James McDonald "We could not be more pleased to close our financing and to proceed with the next major step in the advanced development of Promontorio. The multi-phase drill and resource expansion program will focus on continuing to expand the known silver resource to the NE and SW of the main deposit, and on five adjacent, high-priority, mineralized stockwork breccia targets that offer significant potential for further resource expansion. The overall objective of the multi-phase program will be to continue to define the continuity and parameters of the contained silver deposit, and to drive the overall size of the silver resource to upwards of 100 million silver equivalent ounces by the conclusion of the program."

Upcoming 30,000 Meter, Multi-Phase Drill and Resource Expansion Program

The Company is currently mobilizing drill rigs, expanding camp facilities and coordinating personnel in preparation for the multi-phase drill and resource expansion program. Slated to commence by mid Nov 2012, initial drilling will focus on systematically expanding the known silver resource, beginning with the unconfined portions of the higher-grade resource located in the Pit and NE zones, as defined by previous drilling. Multiple core holes will also be drilled to offset significant intercepts located along strike and between the two primary zones. Multi-phase drilling will include several oriented triple-wall diamond core holes located in the conceptual pit walls to obtain sufficient data to support a preliminary pit slope design. Drilling will also focus on five high-priority, mineralized stockwork breccia targets defined by surface exploration and limited drilling.

Current Drilling and Development Initiatives

The resource expansion program on Promontorio, which is designed to increase the overall size of the contained silver resource and to expedite the path to a production decision, will comprise the following components:

  • Drilling focused on expanding the known resource to the SW and NE and definition of high-grade zones.
  • Step-out drilling on five premier breccia targets that sit outside of known silver resource.
  • Infill drilling to render 'inferred resources' into the 'measured and indicated' category;
  • Continued baseline studies to further advance the permitting process;
  • Continued metallurgical testing to further define metal recoveries with emphasis on determining gold recovery of the Dorotea region, where gold content is higher than the resource area;
  • Oriented core holes to aid in preliminary pit design for open-pit mining;
  • Monitoring wells for hydrologic measurements needed for pit design and process water assessment.
  • Commence Preliminary Economic Assessment Study.
Updated NI 43-101 Resource Estimate - Preliminary Economic Assessment Study

A Preliminary Economic Assessment is planned at the conclusion of the program . This study will include an updated resource estimation incorporating the results of the new drilling, conceptual mining plans, hydrological studies, geotechnical information, site layout, metallurgical studies, and mill plans, environmental studies, permitting, and closure plans. This data will form the basis of a preliminary economic model and provide a foundation for advancement to a pre-feasibility study.

The recent updated NI 43-101 mineral resource (See Kootenay News Release---August 21, 2012) contains a combined measured and indicated 59,463,000 silver equivalent ounces contained in two potentially mineable open pits as detailed in Table 1. In addition to the resources that fall within the optimized Whittle Pit there are 9,136,000 silver equivalent ounces in the inferred category with underground potential of another 2,216,000 silver equivalent indicated ounces with 5,333,000 ounces of inferred.

Table 1: Resource Statement for the Promontorio Deposit, Sonora State, Mexico:
SRK Consulting (U.S.) Inc., July 31, 2012*


Open Pit Reported at a 15 g/t AgEq Cutoff
AgEq Oz (000's) Ag Oz (000's) Pb Lbs (000's) Zn lbs (000's) Tonnes (000's) Grade
AgEq (gpt) Ag (gpt) Pb (%) Zn (%)
Measured 17,092 10,428 102,613 120,342 9,170 57.97 35.37 0.51 0.60
Indicated 42,371 25,675 257,043 301,592 26,848 49.09 29.74 0.43 0.51
M+I 59,463 36,104 359,656 421,934 36,018 51.35 31.18 0.45 0.53
Inferred 9,136 6,038 47,351 56,354 6,630 42.86 28.32 0.32 0.39
Underground Reported at a 35 g/t AgEq Cutoff
AgEq Oz (000's) Ag Oz (000's) Pb Lbs (000's) Zn lbs (000's) Tonnes (000's) Grade
AgEq (gpt) Ag (gpt) Pb (%) Zn (%)
Indicated 2,216 1,371 13,284 14,987 1,414 48.75 30.15 0.43 0.48
Inferred 5,333 3,555 30,217 28,960 3,077 53.90 35.94 0.45 0.43
Total Reported at multiple cutoffs
AgEq Oz (000's) Ag Oz (000's) Pb Lbs (000's) Zn lbs (000's) Tonnes (000's) Grade
AgEq (gpt) Ag (gpt) Pb (%) Zn (%)
Measured 17,092 10,428 102,613 120,342 9,170 57.97 35.37 0.51 0.60
Indicated 44,587 27,046 270,327 316,579 28,262 49.06 29.72 0.43 0.50
M+I 61,679 37,474 372,940 436,921 37,432 51.25 30.68 0.44 0.51
Inferred 14,469 9,593 77,568 85,314 9,707 46.36 32.57 0.39 0.41

Notes:
* Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves estimate
  1. Open pit resources stated as contained within a potentially economically minable pit shell
  2. Pit optimization is based on assumed silver, lead, and zinc prices of $34/oz , $1.07/lb, and $0.97/lb respectively, mill recoveries of 82%, 85% and 91% respectively, a 1.5% NSR, mining costs of $1.20/t, and a processing and G&A cost of $12.00/t
  3. Break-even cutoff grades used were 15 g/t AgEq for open pit mill material and 35 g/t AgEq for underground material;
  4. Silver equivalency is based on unit values calculated from the above metal prices, and assumes 100% recovery of all metals.
  5. Mineral resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding
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

Ken Berry, Chairman at 604-601-5652; 1-888-601-5650

or visit: www.kootenaysilver.com

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.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

2012 number 19