KWG Longs,

flyby recently posted:

"I agree I also have millions of shares and I do not believe this is the right time for this 300 to 1. Once the Chinese are onboard and the FN are partners then a 10 to 1 or 20 to 1 is plausible."

Thoughts from Keep Digging:

I actually disagree and believe there could not be a better time to offer the proposed Capital Reorganization.

Let's play this out...let's assume all the "smart money" on this Board get their way and the proposed Capital Reorganization and Multiple Voting Share class of shares is rejected and does not pass. Let's assume that in a few months KWG announces a deal with China Rail, which includes China Rail funding and building a railway connecting the Ring of Fire to the CN line in exchange for ferrochrome. Let's further assume that KWG also announces a magnificent partnership with First Nations and obtains social license to proceed.

All set? Are we ready to go? It's a hallow victory. We are no further ahead. How are we to deliver on our obligation? How are we going to pay China Rail back for the railway with ferrochrome? We need to build a mine and a processing facility to make ferrochrome in order to fulfill our obligation to China Rail and set the stage for a partnership that will hopefully result in an uncontrollably skyrocketing share price. We need to build a mine and a processing facility in order to make this deal work.

Where does the money come from?

Frank is forced into one of two options.

First he can issue more shares and again turn to retail investors like you and me. How many shares will he have to issue in order to raise the necessary capital to build a mine and a processing facility? I can assure to that it won't be a $1.5m private placement. It will be in the tens or hundreds of millions of dollars and will result in massive dilution. How does everyone feel about that?

With retail investors out of the question, Frank will then need to consider accessing institutional investors. But wait a minute, they are all prohibited by internal controls from purchasing 'penny stocks' and therefore cannot participate regardless of a deal with China Rail, the First Nations and our rich ore bodies. To get the share price up to access to the larger institutions, Frank is forced to do a share consolidation. How does everyone feel about that?

The proposed Capital Reorganization is a creative and effective way to access institutional investors with deep pockets and long time horizons as well as margin investors so that KWG can secure the capital needed to build the mine and processing facility and bring our deal with China Rail to fruition. Further, this proposed Capital Reorganization does not impact existing shareholders and does not create dilution. No new shares are being created. Retail investors can buy and hold the common stock (as we do now) while larger institutional players can buy and margin the multiple voting shares.

If Frank can get approval at the AGM on July 21 for this proposal, he can use this time (before we hear from China Rail) to shop Bay Street and Wall Street for potential investors in the Multiple Voting Shares so that we are ready to go with China Rail and First Nations. KWG must know something and are therefore making the necessary preparations. Give management the tools they need to get the job done.

My best to all KWG Longs,

Keep Digging