Evolving Gold Announces the Spin Out of its Interest in the Kiyuk Property -
A Dividend-In-Kind Transaction

VANCOUVER, Dec. 9 /CNW/ - Evolving Gold Corp. (TSX: EVG) (FSE: EV7) (the "Company" or "Evolving Gold") is pleased to announce a proposed dividend-in-kind spin out transaction (the "Spin Out") involving the transfer of the Company's option to acquire the mineral claims forming the Kiyuk Lake gold property in southern Nunavut (the "Kiyuk Property") to a new company, Prosperity Goldfields Corp. ("Prosperity"). Evolving Gold will distribute common shares of Prosperity (the "Prosperity Shares") to Evolving Gold shareholders by way of a dividend-in-kind, subject to applicable securities laws and receipt of securities regulatory approval, with a proposed basis of one Prosperity Share for every ten Evolving Gold shares.

Prosperity is currently a wholly-owned subsidiary of the Company, and upon completion of the Spin Out, the Company expects Prosperity to become a publicly traded company. The Company believes that the creation of Prosperity will provide a mechanism for Evolving Gold shareholders to realize the full market value of the Kiyuk Property.

"Evolving Gold management is always looking for ways to increase shareholder value, and the Kiyuk Property has been an undervalued company asset for some time," comments Robert Barker, CEO of Evolving Gold. "Evolving Gold's primary focus is and has been on its major gold projects in the United States, Rattlesnake Hills in Wyoming, Carlin/Humboldt in the southern Carlin Trend of Nevada, and Jake Creek, also in northern Nevada. As a result, the Kiyuk Property, the Company's only Canadian property, has not received the attention it deserves. The Spin Out should facilitate independent financing and proper exploration strategies that are needed to advance the Kiyuk Property in an effective manner."

In connection with the Spin Out, the Company has transferred to Prosperity its interest in the option to acquire the Kiyuk Property in exchange for Prosperity Shares. Prosperity also completed a $1.5 million private placement with Evolving Gold pursuant to which Prosperity issued 10,000,000 units to Evolving Gold at a deemed price of $0.15 per unit, each unit consisting of one Prosperity Share and one half of one share purchase warrant. Pursuant to the terms of a funding agreement, all transaction costs related to the Spin Out up to a maximum of $300,000 have been and will be paid by Evolving Gold.  Prosperity has agreed to reimburse Evolving Gold for the payment of the transaction costs through the issuance of Prosperity Shares to Evolving Gold at a deemed price of $0.15 per Prosperity Share.  Assuming the maximum of $300,000 of transaction costs are incurred in connection with the Spin Out, Prosperity expects to issue up to 2,000,000 Prosperity Shares to Evolving Gold pursuant to the terms of the funding agreement.

Under the proposed dividend-in-kind, it is contemplated that each Evolving Gold shareholder will receive one Prosperity Share for every ten Evolving Gold shares held on the record date, and the number of Prosperity Shares to be issued will be rounded down to the nearest whole number of Prosperity Shares. Upon completion of the Spin Out and the receipt of Prosperity Shares for the reimbursement of transaction costs, Evolving Gold expects to hold approximately 48.5% of the outstanding Prosperity Shares.

Prosperity has filed a preliminary prospectus in all provinces and territories of Canada and this preliminary prospectus is available on SEDAR under Prosperity's profile.  When the final prospectus has been accepted for filing, a record date will be set for the distribution of the dividend-in-kind.  The preliminary prospectus contains important information relating to the transactions described in this news release. Evolving Gold's shareholders are urged to read the preliminary prospectus.

As described in further detail in the preliminary prospectus, no Prosperity Shares will be issued to shareholders who are (or are deemed to be) non-residents of Canada. Rather, such Prosperity Shares will be delivered to a trustee for sale in the open market following the dividend-in-kind and the net proceeds will be delivered to non-resident shareholders, net of any withholding taxes. Shareholders who fail to provide a declaration of Canadian residency in the form that will be provided will be deemed to be a non-resident for these purposes. Canadian shareholders who hold their shares in Evolving Gold through a brokerage or other account are therefore urged to contact their brokers to avoid being deemed a non-resident.

This news release does not constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction. The Prosperity Shares to be distributed have not been approved or disapproved by any Canadian or U.S. regulatory authority nor has any such authority passed upon the accuracy or adequacy of the preliminary prospectus.  The Prosperity Shares will not be distributed in any state or jurisdiction, including the United States, in an offer, solicitation or sale of the Prosperity Shares would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.  Any public offering of securities to be made in the United States can only be made pursuant to an effective registration statement.  The Prosperity Shares have not been registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws, and the Company has no intention of filing such a registration statement in connection with the dividend-in-kind of the Prosperity Shares.  Accordingly, shareholders of the Company who are resident in the United States or who are U.S. persons (as defined in Rule 902 of Regulation S under the U.S. Securities Act) will not be entitled to participate in the dividend-in-kind of the Prosperity Shares, except as set out above and in the preliminary prospectus of Prosperity.

On Behalf of the Board of Directors
EVOLVING GOLD CORP. 

"Robert Barker"
Robert Barker
CEO and Director

FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements which address future events and conditions, which are subject to various risks and uncertainties. Such statements include those related to the timing and benefits of the proposed Spin Out.  The Company's actual results and financial position could differ materially from those anticipated in such forward-looking statements as a result of numerous factors, some of which may be beyond the Company's control. These factors include: results of exploration activities and development of mineral properties; fluctuations in the marketplace for the sale of minerals; the inability to implement corporate strategies; the ability to obtain financing; currency fluctuations; general market and industry conditions; securities regulatory review of the preliminary prospectus and other risks disclosed in the Company's filings with Canadian Securities Regulators.

Forward-looking statements are based on the expectations and opinions of the Company's management on the date the statements are made. The assumptions used in the preparation of such statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Such assumptions include assumptions related to the receipt of securities regulatory approval of the Prosperity prospectus and the expected benefits of the Spin Out for Evolving Gold shareholders.  The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

For further information:

Investor Relations:
Graham Johnstone
Tel: [phone]
[email protected]