KSU and KWG Longs,

I hope that you have all read and thought about the recent press release concerning Canada Chrome filing applications with the Ministry of Natural Resources (MNR) for thirty-two aggregate permits at sites along the 308 km proposed railway route. I have read and heard some comments about the usefulness of this given the matter currently before the Commissioner. I think this is a superficial interpretation of this release. However, I ask that you think more strategically as this is a VERY significant development that I don’t think many fully realize or have even thought about.

IMO, it is unlikely the Cliffs will be successful in their easement application. The merits of KWGs arguments have been discussed on this forum not to mention that the lawyer representing KWG in this matter actually wrote the Mining Act. I am confident that our argument is sound.

However, let’s assume for a moment that Cliff’s is successful in their easement application. With what material do they think they are going to build their all weather road? Page 150 of KWG’s Preliminary Economic Assessment published on May 26, 2011 (and available on Sedar) indicates that material for building a railway (or road) will be taken from the surrounding area. The actual quote from the PEA is as follows “The railroad will run along the edge of the rock ridges until it intersects with the glacial sand ridge which it will follow to the mine site. Aggregate and rock sources for the embankment and track construction have been identified along the route. Fifty-four bridges, some over 600-metres in length, will be constructed.”

I think that it is sheer brilliance on the part of KWG management; KWG has 30% of the Big Daddy (the richer and more economical Cr to mine), the corridor into the Ring of Fire, 32 Aggregate Permits along the most viable route as well as positive relations with the FNs. If there was ever a time to start practicing your ‘check mate’, I think we are nearing that time. And knowing Frank, I think some additional insurance policies are probably being worked on as I type this.

Recall from the same 2011 PEA the expected project returns from mining the Big Daddy, including the construction of the railway. A payback period of 2.5 years?!?! IRR of over 30 after-tax?!?! Unbelievable. The assessment included relying on some aggregate material from the surrounding area for construction of the railway.

To simplify, think of the following conversation that will likely happen soon if it did not happen last night following the press release:

Bill Boor: Hi Joey. I’m here for my ferrochrome update.

Joseph Carrabba: Ah yes. How are things in the Ring of Fire?

Boor: Well sir, the Neskatanga have been denied party status to our easement application. Now it is just us and Canada Chrome. Things don’t look great. KWG has a strong argument but we are proceeding.

Carrabba: And if we win?

Boor: Then we’ll build the all weather road, sir!

Carrabba: How are we going to build the road? With what material?

Boor: I’ll look into a Home Depot near the Ring of Fire, sir.

Carrabba: There is nothing for hundreds of miles! We need material for a transportation corridor from the local area!

Boor: Ohhhh. Then this press release is not great for us. KWG has applied for 32 aggregate permits in the area surrounding the proposed corridor.

Carrabba: (Reading the press release). Boor, get your Cliffs company-issued white surrender flag and go see Frank Smeenk. Maybe bring along your Cliffs company-issued knee pads as well.

Boor: Yes sir!