KWG Longs,

I’ve noticed a fair amount of commentary and squabbling about what I see as small and trivial details associated with KWG, namely the 50:1 share restructure, “why doesn’t Gravelle do something”, “When is Frank going to sit down with Cliffs?”, “When is Cliffs going to do something?”, etc.

For those that are remotely interested, allow me to share what I see going on, the BIG PICTURE that I see and why I’m more excited than ever about KWG. ALL IN MY HUMBLE OPINION OF COURSE.

Forget a deal with Cliffs. Forget Cliffs leading the development of the ROF. Forget Cliffs as in my mind they are dead and are not the leading player in the ROF. For them, this is going to end up being the Sting of Fire. They failed to move at the appropriate time and in a thoughtful way and the ROF parade is going to pass them by. Recall the recent Sudbury Star article posted by Irish1111 on June 14 entitled “Province optimistic development will go ahead”. Some of the article is reproduced below:

“Cliffs Natural Resources' work in the Ring of Fire may have come to a screeching halt, but the minister of Northern Development and Mines said he's determined to see the project through.

"I do remain very optimistic about this project," Michael Gravelle, who's also the MPP for Thunder Bay, said on the phone. "I think it needs to be understood ... that this is a very transformational, large project, in a part of the province that's never seen development before.

"It's important that we get this process right. Clearly there are a number of parts that are crucial to this before we can move forward, and one of them is environmental assessment."

On Wednesday, Cliffs announced it was temporarily suspending the $3.3-billion project, which includes a smelter in Capreol, until the provincial government takes action on the file.”

Note that Gravelle does not comment on Cliffs suspension of the project. He remains clear that THE PROJECT will continue regardless of Cliffs decision. Recall Cliffs decision to halt the project was due largely to the fact that the provincial government stopped working with them on the file. I have reason to believe that the new provincial government is ignoring them, are working with someone else for a number of reasons and is building a case to walk away from Cliffs.

Gravelle also makes mention of the environmental assessment. I suspect this includes the environmental impact of the proposed road and the extraction activities. I think we all agree that Cliffs is likely to be denied their application for easement which makes the first point irrelevant. What comes next is worse in my mind: I am hearing from several sources that Cliffs is about to receive some bad news – that they cannot mine Black Thor as an open pit due to trivalent chromium (Cr-III) and hexavalent chromium (Cr-VI) contamination of the water tables. Mining underground will be difficult (and very expensive) which will likely lead them back to the Big Daddy deposit due to the higher grade and therefore ROI.

Cliffs is also making demands for an electricity deal; the smelter in Capreol is going to require huge amounts of electricity for processing and Cliffs wants a break on the rate. Apparently this is not sitting well with Gravelle and Wynne.

Let’s turn our attention back to what KWG is doing.

We know KWG has secured and is drilling their own Black Horse chromite deposit. They are not relying on any movement with Big Daddy. In a sense, this affords them a degree of freedom to explore the most expeditious, economical and sustainable monetization of their asset.

We know that they are likely to win the easement hearing based on the case law and various interpretations of the Mining Act that have been discussed and presented on this forum. KWG wants a railway built on their route and there seems to be evidence of growing support for the ONTC/New Deal/Port Authority proposal, including rethinking of the ONTC sell-off as we have seen a recent change in tone from the Provincial government.

Recall the Daily Timmins Press article posted by Irish1111 on June 20 entitled “Premier Open to Options with ONTC”. Following is a quote from Ms. Wynne from the article: “If we are truly interested in economic growth in the North, and we are, we have to understand that freight rail is an integral part of that. That’s one of the pieces that I know Minister Gravelle is very actively engaged in.” What company is the leading proponent of freight rail for the North? Who is Gravelle ‘very actively engaged with’? Give it some thought.

Recall in the June 17 Press release from KWG, KWG management commented on ROF Developments: “KWG is studying the feasibility of utilizing low cost natural gas with the Ring of Fire's high-grade chromite to facilitate the production of direct-reduction iron and ferro-chrome products for export. A sufficient export market share would enable the achievement and maintenance of profitable mining production rates.” This is a chromite processing method referred to as ‘frocking’ and is used in South Africa to process their chromite. The technology exists and is accessible. The beauty is that Canada has an abundance of cheap and reliable natural gas to employ this method – no need to go to Gravelle and Wynne for a contentious electricity rate deal. As well, since natural gas is so cheap and accessible in Canada and given the huge cost advantage of rail over road (see Rail vs. Road ROI Comparison that KWG Commissioned), KWG could become one of the lowest cost chromite producers in the world.

In my mind, the pieces are falling together for KWG. How many posts have we seen asking Frank to show them his cards and clearly demonstrate what he is up to? Give it some thought - Cliffs is dead and KWG is taking the lead and going this alone. The picture I paint above will require capital, investment and likely partnership and I believe that the share restructure proposal will facilitate that. Instead of chirping about a non-existent ‘share consolidation’, I invite you to take step back, view the larger picture and think about what it will take to get us there. There have been a lot of swings taken at Frank over the last few weeks and questions posed as to what he is thinking. I am starting to better appreciate what he’s thinking and I can only like where this is going.

All my best to all KWG Longs,

Keep Digging