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Kootenay Silver - Growing a Strong Portfolio in Mexico’s Silver Sector

Kootenay Silver — Taking a Lead Role in Mexico’s Silver Sector

Overview

Kootenay Silver (TSXV:KTN) for the past eight years has been actively developing precious metals assets contained within its 100-percent-owned Promontorio Mineral Belt in Sonora, Mexico. Those include its established 92-million-silver-equivalent-ounce NI 43-101 Promontorio resource and its new high-grade La Negra silver discovery.

In a series of recent milestone developments, the company announced a definitive agreement to acquire all of the issued and outstanding shares of Vancouver-based Northair Silver (TSXV:INM). The amalgamation of Kootenay and Northair immediately positions Kootenay as a leading consolidator of silver assets in Mexico.

The company also announced a major option agreement with Pan American Silver (PAS) (TSX:PAA, NASDAQ:PAAS) to advance its La Negra and Promontorio Mineral Belt assets. The option includes US$16 million in work and cash payments and a carried interest to commercial production.

Kootenay and Northair Consolidation

The consolidation with Northair will position Kootenay Silver as one of Mexico’s preeminent asset-based silver companies. The amalgamation includes Northair’s premier La Cigarra silver asset in Chihuahua, Mexico. La Cigarra contains a 52-million-ounce NI 43-101 silver resource that offers substantial potential for further expansion as a future open-pittable silver resource.

Creating a Leading Mexican Silver Company

  • Holder of one of Mexico’s largest silver asset bases.
  • Approaching 150 million ounces of contained silver Eqv. assets.
  • Strong cash position with over $4.1 million in treasury.
  • Ability to control and maintain costs as it targets further acquisitions.
  • Multiple joint ventures in generative portfolio.

Kootenay Option Agreement with Pan American Silver

Kootenay Silver’s option agreement with PAS is a major development that aligns the company with an esteemed mining company that operates seven silver mines in Mexico, Argentina, Peru and Bolivia. Highlights of the agreement are as follows:

  • PAS has right to earn a 75-percent interest in Promontorio Mineral Belt assets.
  • Provides Kootenay with a carried interest to commercial production.
  • Includes US$16 million in staged commitments over a four-year period.
  • Includes an initial CDN$2-million private placement financing.
  • Transaction represents a total of CDN$23 million in earn-in and cash commitments.

Investment Highlights

  • Leading consolidator of silver assets in Mexico.
  • Qualified silver asset base approaching 150 million silver Eqv. ounces.
  • Leverage for further growth and acquisitions in sector.
  • PAS option includes US$16 million in commitments and a carried interest to production.
  • Strong cash position with over $4.1 million in treasury.
  • Revenues from royalty payments and sales of generative properties.
  • Leading technical and mining finance team.

New Developments to Accelerate Future Growth

The consolidation with Northair will provide a substantial boost to Kootenay Silver’s treasury and its established silver asset base in Mexico, putting the company in a position of strength as it pursues further consolidation and acquisition opportunities in the sector.

Bringing US$16 million in cash payments and exploration investments, and a carried interest to commercial production underscores PAS’ confidence in the future viability of La Negra and the Promontorio Mineral Belt. The PAS option serves as a catalyst and a strong complement to Kootenay Silver’s new consolidation platform with Northair.

For Kootenay and Northair, the PAS option removes project finance uncertainty, technical risk and augments the consolidations ability to acquire further silver assets. Most importantly, the PAS agreement provides Kootenay and Northair with a pathway to commercial silver production supported by a world-class partner.

Promontorio Mineral Belt

The Promontorio Mineral Belt is a 25-by-15-kilometer, northwest-trending mineralized corridor that contains an established silver resource base and several emerging prospects. Exploration work on both the Promontorio resource and the newly discovered La Negra silver prospect have confirmed the Promontorio belt is a large silver-goldleadzinc diatreme-hosted complex, comparable to other diatreme-hosted projects in Mexico, such the Peñasquito and Pitarrilla.

Kootenay Silver - Taking a Lead Role in Mexico’s Silver Sector

Promontorio Silver Resource

The Promontorio resource is an extensively drilled and developed silver project that contains a NI 43-101 measured and indicated resource of 92 million ounces silver equivalent. The deposit remains open for expansion in three directions and to depth. The most recent drilling on the project returned a series of high-grade silver results from the NE zone, adjacent to the discovery area.

Kootenay Silver - Growing a Strong Portfolio in Mexico’s Silver Sector Click for full size

La Negra High Grade Silver Discovery

Discovery underscores the district-scale potential of the Promontorio Mineral Belt

The newly discovered La Negra breccia prospect lies 7 kilometers north of the Promontorio resource. Drill results to date have consistently returned multiple wide intersections of mineralization, starting at surface and remaining open along strike and to depth — indicating the potential for a low-cost, open-pit silver resource. Highlights from the results include:

  • 367 g/t silver over 14 meters
  • 141 g/t silver over 50 meters
  • 182 g/t silver over 40 meters
  • 156 g/t silver over 200 meters

Preliminary metallurgical tests show high silver recoveries by both leach extraction and flotation methods. These preliminary results indicate that high silver recoveries should be achievable by cost-effective milling and extraction methods, reinforcing La Negra’s potential to evolve into a low-cost, open-pittable silver resource.

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La Cigarra Silver Project

Northair’s La Cigarra silver project consists of 19,000 hectares and is located within the Parral Silver Belt of Chihuahua, Mexico. The property’s 6.5-kilometer mineralized system — open along strike and at depth — is along strike with Grupo Mexico’s Santa Barbara mine and Minera Frisco’s San Francisco del Oro mine.

La Cigarra contains an open-pittable resource of 51.47 million ounces of silver in the measured and indicated categories grading 86.3 g/t silver, and 11.46 million ounces of silver in the inferred category grading 80 g/t silver. Results from PEA-level metallurgy completed by Northair Silver demonstrate silver recoveries of up to 88 percent via both leach extraction and flotation methods.

The main resource area is defined at the San Gregorio and Las Carolinas zones; the deposit remains open along strike to the northwest and southeast, as well as at depth. Numerous high-priority targets were identified during the 2015 air mag survey, including the 3.8-kilometer north-northwest trending RAM zone, which the company plans to drill test in 2016.

Kootenay Silver - Growing a Strong Portfolio in Mexico’s Silver Sector

Click for full size

(1) “NI 43‐101 Technical Report on the Updated Mineral Resource Estimate on the San Gregorio/Las Carolinas Zones, La Cigarra Silver Project, Chihuahua, Mexico”, effective date January 14, 2015 prepared by GeoVector Management Inc.. Mineral resources are reported in relation to a conceptual pit shell at a silver cut‐off grade and a $22/oz silver price. .

Prospect Generator Portfolio

Including its option with Pan American Silver on La Negra and the Promontorio Mineral Belt, Kootenay has established five joint venture partnerships. Its other JVs include the Cervantes and San Diego properties (Alamos Gold) in Sonora, Mexico. The Fox and Two Times Fred properties in the Nechako region of British Columbia and the Silver Fox property (Antofagasta) in Southeastern British Columbia. The company is currently pursuing joint venture partnerships for seven other exploration projects located in Canada and Mexico.

Joint ventures on its generative portfolio serve as an added source of revenue for Kootenay through sales of properties, cash and earn-in payments and royalties.

Managment

Mr. James M. McDonald, PGeo—President and CEO

James McDonald co-founded and successfully developed National Gold (which merged with Alamos Minerals to form Alamos Gold) for which he was a Director and served on numerous committees until June 2012. He also co-founded and developed White Knight Resources. Mr. McDonald served as President of Genco Resources whilst it operated the La Guitarra Mine, an underground silver mine located in Mexico. He is Kootenay Silver’s qualified person under National Instrument 43-101.

Mr. Kenneth E. Berry, B.Comm—Chairman & Director

Mr. Berry has over 20 years experience in public capital markets. He previously served as an investment advisor and is a founding director of various public companies. His involvement in the junior resource sector has ranged from the start-up and acquisition phase of projects, through to exploration and development and he has been instrumental in raising over $300 million in successful financings.

Rajwant Kang, CPA, CMA—Chief Financial Officer and Corporate Secretary

Rajwant Kang has held various senior financial positions within public and private companies including, Salares Lithium, Gryphon Gold, Star Shipping and Steppe Gold. He brings an extensive knowledge of finance, accounting, compliance and public markets.

Dick Whittington, P.Eng—Director

Dick Whittington is a professional mining engineer with more than 35 years with major mining companies in Canada, Panama and Australia. His experience encompasses senior engineering and management roles for several large-scale mine development projects that includes numerous feasibility studies, mine evaluations, mine development, production, mergers and acquisitions and over $1 billion of major corporate financings.

Brian Groves, BSc Geophysics – Director

Brian has worked in the mining and exploration industries for more than 29 years. A graduate of The University of Sydney, Australia, Brian began his career in exploration as a geophysicist in Australia and North America. He has been involved in exploration for coal, gold, base metals and diamonds with junior, mid-tier and major companies such as AMAX Minerals, Noranda and Placer Dome where he served for 12 years ending as a Manager of Corporate Development, Canada.

Joseph Giuffre, BA LLB-Director

Has over 25 years of combined experience in business and legal matters, and has a transaction-based practice in the areas of corporate finance, securities and corporate and commercial, project finance, and mergers and acquisitions. He has extensive experience acting for Canadian public companies, many of which have progressed from private start-up companies to publicly listed emerging companies on several markets.

Jon Morda, CA -Director

Mr. Morda brings Kootenay over 20 years of experience in the mining industry, having served as Chief Financial Officer for several mineral exploration and gold producing companies. As a senior executive, Mr. Morda is highly adept in all areas of strategic corporate planning, operations, budgeting, accounting and taxation functions.

Dr. Tom Richards, BSc, PhD—Vice President of Exploration

An accomplished author and co-author of numerous publications involved in the science of Geology through central British Columbia, Dr. Richards was a Research Scientist with the Geological Survey of Canada during the 1970’s doing regional mapping in British Columbia. He conducted regional exploration in Canada, United States and Mexico to the early 1990’s as an independent geologist/prospector with Junior and Major mining companies (including Teck, Inco, Esso, Newmont, Falconbridge and Union Carbide) and throughout NW Argentina prior to joining Kootenay Silver in Mexico in 2007.

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