KGC Kestrel Gold Inc

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A
VIOLATION OF U.S. SECURITIES LAWS.


Kestrel Gold Inc.("Kestrel" or the "Corporation") (TSX VENTURE:KGC) is pleased
to announce that, further to its news release dated December 7, 2011, it has
entered into a definitive mineral assets purchase and sale agreement (the
"Agreement") with Condoryacu S.R.L. (the "Vendor") to acquire a one hundred
percent (100%) interest in the mineral rights to the Condoryacu and Maria Amalia
exploration mining concessions (the "Properties") in North-western Argentina
(the "Acquisition"). The Vendor is a private corporation incorporated pursuant
to the laws of Argentina. The Agreement is subject to both the satisfactory
meeting of certain closing conditions customary to transactions of the nature of
the Acquisition and applicable regulatory body approvals, including the approval
of the TSX Venture Exchange Inc. (the "Exchange"). The Exchange has
conditionally approved the Acquisition. The Corporation anticipates closing of
the Acquisition on or about January 31, 2012. The Corporation also announces
that it has issued 500,000 common shares in the capital of the Corporation
("Common Shares") to the former shareholders of Rio Diablillos S.R.L. ("Rio")
pursuant to the acquisition of Rio on May 31, 2011. 


The Agreement 

As stated in the Corporation's news release dated December 7, 2011, Kestrel,
through its wholly owned subsidiary Rio, has agreed to acquire from the Vendor a
one hundred percent (100%) interest in the Properties in exchange for cash
consideration in the aggregate amount of USD$4,000,000 to be paid over a period
of 36 months. Upon completion of the acquisition, the Corporation will also
grant to the Vendor a net smelter royalty equal to 1.5% of the net smelter
returns from production of metals from the Properties. 


Completion of the Acquisition is subject to, among other things, regulatory body
approval, completion of satisfactory due diligence and the satisfactory meeting
of closing conditions customary to transactions of this nature. Closing of the
Acquisition is anticipated to occur on or before December 31, 2011. Upon closing
of the Acquisition the Vendor shall transfer all of its right, title and
interest in the Properties to the Corporation.  


The Vendor is controlled by Hector Vittone, who is the President of Kestrel's
wholly owned subsidiary Rio Diablillos. As such Mr. Vittone is considered to be
a "Non-Arms Length Party" pursuant to the policies of the Exchange.


Highlights of Properties 

The Properties, consisting of approximately 400 hectares, are located in
northwestern Argentina in the physiographic region known as the "Puna",
characterized by a high plateau and an arid desert climate that facilitates
almost year-round mineral exploration and access by four-wheel drive vehicles.
Salta, approximately 150 kilometres east-north-east, is the nearest significant
sized city and has daily air service by several carriers. 


At the Properties, the main mineralized zone comprises a low outcrop of strongly
silicified and locally brecciated granodiorite. Vuggy, intensely silicified
(often chalcedonic) and locally brecciated fault controlled zones exhibit high
grade gold, silver and copper mineralization. Limonite, malachite and pyrite are
present, with the sulphides at surface being mainly oxidized. 


High grade, at surface precious metal and copper mineralization is believed to
be related to a complex structural environment that separates the areas referred
to as the Northern Outcrop and Southern Outcrop - the two most important regions
of the Condoryacu property found to date, which are some 300 metres apart. 


In April 2011, Kestrel collected three selective check surface grab samples that
returned up to 30.93 g/t Au and greater than 200 g/t Ag in sheared silica and
clay altered breccia from the "Southern Outcrop" and collected a selective check
surface grab sample at the "Northern Outcrop" of silica and clay altered
brecciated quartz feldspar porphyry, that returned 4.63 g/t Au. 


Drill programs in the early 2000's, were carried out by Cardero Resource Corp.
and Maximus Ventures Ltd. at the Southern Outcrop, which have returned estimated
true thicknesses of up to 12.23 metres of 14.15 g/t Au, 129.3 g/t Ag. 


Drill hole CY01-01A drilled down plunge intersected 76.39 metres of 18.03 g/t
Au, 115.3 g/t Ag and 2.16% Cu. This result indicates continuous mineralization
from surface to a depth of at least 75.2m below collar. 


The mineralized zone has been demonstrated to extend from surface to a depth of
110 metres and is open at depth. 


The Properties lie approximately 2 kilometres south-southwest of "Diablillos",
an advanced gold-silver project owned by Silver Standard Resources Inc.
currently at pre-feasibility mine stage. Kestrel believes that the structural
features controlling the distribution of gold-silver and base metals are related
in the two regions. 


Share Payment for Rio Acquisition 

The Corporation has issued 500,000 Common Shares to the former shareholders of
Rio. Pursuant to the terms of the share purchase agreement dated February 23,
2011 (the "Rio Agreement"), pursuant to which the Corporation purchased all of
the issued and outstanding shares of Rio, the Corporation agreed to issue an
aggregate of 2,000,000 Common Shares to the former shareholders of Rio over a
period 18 months after completion of the transaction. At the date of this
release, the Corporation has issued 1,000,000 Common Shares to the former
shareholders of Rio. Rio owns the Huachi mineral property in Argentina. The Rio
Agreement has been filed on the Corporation's SEDAR profile at www.sedar.com. 


About Kestrel Gold Inc. 

Kestrel is a gold exploration company headquartered in Canada. Its two principal
projects are the King Solomon's Dome property in Canada's Yukon Territory and
the Huachi property in Argentina. Kestrel (KGC) is listed on the Exchange. 


Technical aspects of this news release have been reviewed and approved by
William Taylor, P.Geo., designated as a qualified person under National
Instrument 43-101.


Cautionary Statements

This news release contains "forward-looking information" within the meaning of
applicable securities laws. These statements relate to future events or future
performance. The use of any of the words "could", "intend", "expect", "believe",
"will", "projected", "estimated" and similar expressions and statements relating
to matters that are not historical facts are intended to identify
forward-looking information and are based on the Corporation's current belief or
assumptions as to the outcome and timing of such future events. Actual future
results may differ materially. In particular, this release contains
forward-looking information relating to the completion and timing of the closing
of the Acquisition and the receipt of all applicable approvals for the
Acquisition. Various assumptions or factors are typically applied in drawing
conclusions or making the forecasts or projections set out in forward-looking
information. Those assumptions and factors are based on information currently
available to the Corporation. The material factors and assumptions include the
obtaining of the necessary director, shareholder and regulatory approvals,
Exchange policies not changing and completion of satisfactory due diligence.
Risk Factors that could cause actual results or outcomes to differ materially
from the results expressed or implied by forward-looking information include,
among other things: conditions imposed by the Exchange, the failure to obtain
the required approvals to the Acquisition in a timely fashion or at all, general
economic and business conditions and changes in the regulatory regulation. The
Corporation cautions the reader that the above list of risk factors is not
exhaustive. The forward-looking information contained in this release is made as
of the date hereof and the Corporation is not obligated to update or revise any
forward-looking information, whether as a result of new information, future
events or otherwise, except as required by applicable securities laws. Because
of the risks, uncertainties and assumptions contained herein, investors should
not place undue reliance on forward-looking information. The foregoing
statements expressly qualify any forward-looking information contained herein.

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