Quality Silver Assets are Scarce
.....We Have Several

---

Kootenay Silver Inc. (TSX VENTURE: KTN.V) ("Kootenay") is pleased to announce drilling has commenced on its 30,000 meter, multi-phase drill and resource expansion program on its flagship Promontorio Silver Project in Sonora, Mexico. At present, two core rigs are operating on the project with a third rig currently in transit to the property.

States Kootenay CEO James McDonald, "We are very pleased and excited to announce our aggressive, multi-phase drill and resource expansion program on the Promontorio Silver project is underway. Due to the accelerated nature of the program, shareholders can expect a steady stream of upcoming drill results coming from the Promontorio camp, as the resource expansion program ramps up over the coming weeks and months."

In conjunction with the multi-phase drill and resource expansion program, the Company reports it is currently finalizing the expansion of its on-site camp facilities at Promontorio to accommodate the recent increase in camp personnel and work force. Additions to the 2-shift, 24 hour per day fully serviced camp include the final construction of new air-conditioned bunk houses and a fully equipped medical room.

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 scoping and baseline studies to further advance the permitting process;
• Continued metallurgical testing to further define precious 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

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 61,679,000 silver equivalent ounces contained in two potentially mineable open pits. In addition to the resources that fall within the optimized Whittle Pit, there are 9,136,000 silver equivalent ounces in the inferred category and underground potential of another 2,116,000 silver equivalent measured plus indicated ounces with 5,333,000 ounces of inferred.

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.

Subject to the approval of the TSX Venture Exchange, Kootenay has issued an aggregate total of 2,100,000 incentive stock options, which are exercisable for a period of five years at an exercise price of $1.05 to directors, officers and consultants of the company.

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.

-30-

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 20