These are notes from a conversation I had with Peter Smith this week. I must admit, when talking to Peter Smith and attempting to take notes, it can get complicated. His geological knowledge is overwhelming and difficult to keep up with. So I had to confirm with geological buddies to make sure I was accurate.

Personally, it’s a welcoming feeling to be discussing McFaulds again. I’ve been so focused on Fermont area and Magpie, that I forgot how comfortable it was discussing the geological structure under C-1. It is like a rock on the beach you remember sitting on from your past, listening to Tom Jones “I (Who Have Nothing).” However, I keep ROF in perspective, it is blue sky and we’ve got Lac Lamalee, Champion, and Magpie as our bread and butter this year.

The following gives you a good sense about where our CEO’s head is at. It also gives a sense about what we are actually investing in and taking part ownership of. For those who don’t care to know about the details about product you are buying, and just want to know if the SP will pop, then this is my opinion:

June and July will bring our SP close to $2.00 due to both Magpie and Lac Lamalee iron drilling, visuals, perhaps assays, and a Magpie interim report. With good fortune, by July we could be in possession of 900 million tons of iron at Magpie and 600 million tons at Lac Lamalee –maybe more. That’s 1.5 billion tons of indicated iron, plus 17.5 percent of CHM’s 3 billion tons (Champion is currently at 1.5 billion tons with 3 to 4 drills, but is about to begin 8 drills cranking probably doubling their ore this summer).

CHM NR http://tmx.quotemedia.com/article.php?newsid=40327668&qm_symbol=CHM

I also believe Champion is extremely motivated to take control of Fancamp’s 17.5% before they double their current tonnage and will make another offer before summer. I also believe a major will make an offer to Champion soon, and that is a core reason why CHM is motivated to take over FNC’s percentage. Deals can go through easier with 100% ownership.

Also, FNC is motivated to get the SP up there, as warrants at 80c need to be exercised in September or we miss out on financing. On the other hand we reduce outstanding shares. FNC also has acceleration clauses on all the warrants so if they can get the SP above $1 for 30 days they can force the warrants to be exercised. Also, the Magpie PP will close and it may benefit the SP if large players who might be involved, give permission for their names to be made public.

And as always, there are those blue sky properties: nickel, gold, copper, chromite. And of course the promised Magpie IPO.

For me, Smith’s detective work of finding the geological clues is the exciting aspect of delivering investment multiples this year. Though not necessary, for those who wish to know the details of product called Fancamp, read on:

- BEGINNING OF CONVERSATION -

LONGEST CHROMITE INTERSECTION EVER

Fancamp’s ROF chromite is “quite extraordinary.” It’s probably the “longest chromite intersection, ever.” Hit at 800mtrs below surface. Don’t know the thickness so we don’t know the shape, but probably continues. It has a strike length of roughly 300 meters, roughly east-west direction, all on Fancamp’s ground.

FNC NR http://tmx.quotemedia.com/article.php?newsid=40553654&qm_symbol=FNC

Here is a little comparison:

FNC-43.5% over 200M (not thickness)

Black Thor-30.1% (best was 40.4% over 46.3M)

Big Daddy-30.73%

Blackbird-38.2%

Based on surface gravity reflection, there is a “bullseye type feature.” Gravity measurements are wide spaced, roughly 100 meters, suggests chromite comes to surface in the northern sector of the western most claim.

The chromite find was unexpected because FNC started drilling in a south-westerly direction toward a fault zone. Drill didn’t flatten out as much as desired, thus not extending as close to fault zone as hoped.

Instead, stayed 82 to 83 degrees. Gravity showed something, but didn’t expect to run into a chromite intersection. Smith said this intersection is probably related to Blackbird II.

SUBSTANTIAL RESOURCE FOR LATER

It is of “enormous significance” down the road, “Fancamp has a pretty substantial chromite resource by itself. “ When Noront does underground mining, FNC has value next to them. Wes said at PDAC last month he is considering going underground “running a circular ramp surrounding Eagle 1” and exploring off that. Fancamp’s ground will be an “integral part of any underground mining operation.”

C-1 IS ULTIMATE SOURCE OF NICKELIFEROUS SULPHIDES

Until then Smith thinks we’ve got massive nickeliferous sulphides. But he’s unsure how deep. He knows it’s there because of the couple of meters found from hole #2 a few years back. He described the mineralization as “indistinguishable” from Eagle 1. But the chromite doesn’t give any indication of where the nickel is, except where it isn’t. Chromite develops in a sulphur-free environment and that’s not where nickel develops.

But the chromite discovery doesn’t change his theory about where to find nickel. However, as I write later, his theory has evolved and has a clearer picture where the nickel lay. Smith maintains that Fancamps C-1 ultrabasic intrusion is the “ultimate source of all the nickeliferous sulphides that we see in this immediate area, including Eagle 1.” And “Eagle1, in my estimation, is a fault offset of C-1.”

“The fault trends in a northwesterly direction. However, the downthrow side of the fault is the southwestern side where C-1 occurs. ”The level of the crust in the Noront side, E-Nest, is much deeper on the Noront side then the level on the Fancamp side. Not sure how far down for the massive sulphides. Eagle 1, which comes right to the surface, represents horizontal slices through the crust at a much deeper level then the horizontal slice we see across the fault on FNC C-1 and NOT AT-1.

PLUMES

These are complex intrusions through the fault zones. There’s a lot more ultrabasic material that we can see on C-1. “They are plumes, if you like, coming sort of straight up.” The plumes are better preserved on FNC side. Noront’s side is eroded away leaving “root zones.” “Eagle-1 is a sulphide rich root zone.” Smith is confident there are sulphide rich root zones on Fancamp’s side, as well as under Noront’s At-1.

Again, he’s not sure how deep, despite gravity and magnetic geophysic targets. He would have loved to have gone all the way to the target and found massive sulphides. But drilling deep is a problem Noront ran into as well. FNC got stuck at 1048 meters where they ran into metamorphosed ultra-basic material, which are host rocks to mineralizations, but valueless. They had to pay 40 thousand for explosives to blow the rods.

But since they stopped there, they’ll put a loop on the surface and send down to the bottom a geophysics probe for a 100 to 150 meter radius for narrowing the target of strong conductors in the fault zone. Along the way down, scan for alteration zones.

I asked Peter if he intersected those meters of massive sulphides he previously discovered a few years ago in the first drill program. He said that they haven’t and that gives investors a good idea of how an exploration program proceeds. Those intersects were important because they were close to the “eastern contact between the C-1 intrusive and the adjoining granididierite. ”This is why he chose to do a series of short holes on the second drill program (previous to current program). He said they found small amounts of massive sulphides, but nothing like the first program’s intersects.

RULER ON THE FAULT - GUIDING CURRENT DRILL PROGRAM

This current third drill program is an alteration from the second program with a new idea guiding the drill holes. The second program’s short holes made Smith’s team stand back and look at it again.Combined with Noront’s published geophysics of the magnetics of their plotted holes a new revelation dawned.

“It suddenly struck me that Eagle 1 is bounded on its southern margin by a fault you could put a ruler on. It comes right onto Fancamp’s Ground on this southeastern trending fault.”

The original intersection of massive sulphide was in a fault zone. Smith says you can see the fault –which is a series of faults – having a “left lateral displacement.” “The Eagle 1 intrusion is offset about 400 meters towards the northwest. ”The massive sulphides in the fault zone are “sort of left behind slices of that mineralization.”

So Smith has this realization guiding FNC’s current drill program. He is more than ever convinced that at depth FNC has the same massive nickleiferous sulphides as E-nest. “I have very little doubt that that is the case.”

IMMEDIATE DRILL PLAN

FNC’s immediate plan is drilling another 900meter hole based on the downhole geophysics. Indirectly in the quest for massive sulphides define the chromite’s strike vertically as the drills pass through the chromite.

LAC LAMALEE PLAN

“It’s never been drilled, amazingly enough. ”FNC plans to drill 3000meters with 300 to 400 meters depth, because the iron comes right to the surface. FNC defined the targets with mags. He described the geology as a folded fold, “which is a positive thing, because it creates a huge amount of iron formation in a relatively small area.”

The iron was originally lying horizontal, than folded once creating “long linear targets.” But then it was folded again, creating “shortened and thickened” targets. For mining, this is what one is looking for. They plan to do some gravity scans in the future. Drilling between mid June to end of June.

He anticipates 300 million to 600 million tons of iron initially from Lac Lamalee, eventually rivaling or surpassing FireLake North.

However, even though I got the impression FNC won’t be in possession of Lac Lamalee for too long - as CHM will make a play for it as well as out 17.5% and NSR - Smith and Granger won’t let it go for cheap. Concurrently, I hope FNC takes Lac Lamalee to IPO for protection and profit, just as they did with Magpie.

EASTERN TOWNSHIPS

Peter Smith discussed in great deal three theories leading to one conclusion that Fancamp has Gold within the reworked saprolite, that hasn’t shifted too much, in the bedrock immediately beneath the placer a few hundred meters from the two branches of the Gilbert River.However, he discouraged talking too much about it because he doesn’t want to get everyone’s hopes up until the 4 or 5 assays are returned and he can confirm his working hypothesis.

I suspect we’ll be getting a NR about it all soon, but one can call and inquire about the gold theories in the meantime. I agree that getting people worked up about blue sky prospects isn’t what you want in a CEO. But I have to admit, a little boldness from Smith in the NR’s wouldn’t hurt either.

Certainly an investor can hype for him as I will do now. I was never excited about Beauce until now. In fact I felt the expenditures stole the steam out of the SP. But if we have gold before the year is out, then we will all have healthy portfolios. Stay tuned on this. We could have a Probe scenario, where everyone’s pondering the possibilities of seducing Cliff’s interest towards their chromite and bam, gold discovery-causing SP multiples.

MAGPIE

Two drills begin in mid-June to take the ore from inferred to indicated. Hopefully all drilling and perhaps assays will be done by the end of august. Then use the assays to adjust the metallurgical report and increase the evaluation, and get the IPO done.It seemed to me he wants to get is done as soon as possible. I know we investors are impatient, and so is he. Good.

Magpie has 80 million tons indicated and roughly 220 million tons inferred. By end of August Smith plans to have 800million to 1 billion tons indicated. “That should be easily possible, like shooting fish in a barrel. ”Peter said they’ve got a good idea on the quality because the “homogeneity of this titaniferous magnetite is remarkable. ”When he sees 43% iron in one place and 10% TiO2 in another, and then somewhere else entirely he see 42% iron and 11%Tio2, the variability is low. This pattern is repeated. Interesting that he also threw in, “Finding copper over 10 meters would be interesting too.”

I told him that the FNC stock is ready to explode. He agreed. I mentioned, again, that an interim metallurgical report or anything with numbers could assist the explosion. His response is “I hear you, and we know this.” Smith would like to get a few drills down first. He wants to do this IPO the right way.

DESOLATION LAKE

My mind was toast from note taking and I forgot to ask about Desolation Lake. I recommend throwing questions out on the posts for whoever calls Smith, Granger, Larsen, Hussey, or Wes next.

- END OF CONVERSATION -

-StockGreed

Further Readings

http://www.probemines.com/s/McFauld.asp?ReportID=403790

Probe Mines has assembled a significant land package within all three geologic settings, and has to date identified VMS mineralization on its Tamarack and Victory properties. An NI 43-101 resource estimate has been completed on its high-grade Black Creek chromite asset. The deposit includes a measured and indicated 8.645 million tonnes averaging 37.41% Cr2O3 and an additional inferred 1.6 million tonnes averaging 37.78%.

http://www.b2i.us/profiles/investor/ResLibraryView.asp?BzID=1041&ResLibraryID=43294&G=206

CLEVELAND, Feb. 3, 2011 /PRNewswire/ -- Cliffs Natural Resources Inc. (NYSE: CLF) (Paris: CLF) today, in connection with its ongoing discussions with stakeholders, released preliminary project information for potential development of its Black Thor chromite deposit in the McFaulds Lake or Ring of Fire area of Northern Ontario.

Cliffs Chromite Project involves the largest known North American chromite deposit, located in one of the most remote areas of Ontario, the Far North. Exploration to date has consisted of geophysics and diamond drilling to delineate the Black Thor chromite zone. The current inferred mineral resource estimate indicates the Black Thor deposit contains approximately 69.5 million tonnes at a grade of about 31.9% Cr2O3.

The project information released today presents a 'base case,' which reflects one set of realistic options for the major inter-related components of the project – from mining of the chromite ore to ferrochrome production. These 'base case' project components do not necessarily represent the final design, location or scope of the project. During the course of prefeasibility, feasibility and detailed design studies, other viable options may be identified and considered.

"Cliffs is currently conducting pre-feasibility studies to more accurately determine the viability of this project," stated Bill Boor, President, Ferroalloys. "Our work has progressed to a point that enables more detailed and meaningful stakeholder discussions that will impact our decisions about the project”

More Cliff development details at:

http://www.cliffsnaturalresources.com/Operations/CliffsFerroalloys/Documents/Cliffs%20Chromite%20Booklet.pdf