KWG Resources Inc. holds an interest in numerous mineral exploration properties in Northwestern Ontario that cover a spectrum of mineral deposit types, including diamonds in kimberlite; copper and zinc in volcanogenic deposits; copper, nickel and PGE's in ultramafic intrusions; and chromium in mafic intrusions. Of particular interest is the property known as the SFK JV which covers the geological environment of three of these mineral deposit types; 1) the extension of the volcanic sequence with known copper - zinc deposits at McFaulds Lake, and 2) the Ring of Fire ultramafic intrusion which is host to the Big Daddy Chromite deposit and potential copper-nickel-PGE deposits such as the neighbouring Eagle One deposit.
KWG continues to hold an interest in the volcanogenic copper-zinc project at McFaulds lake through its Joint Venture with Spider Resources. On March 6, 2009, an option agreement was signed between Spider and UC Resources Limited ("UC"). UC shall be the operator of the property during the term of the option and shall have the option to earn up to a 55% undivided interest in the property by incurring a total of $4.5 million of exploration expenditures over a period of four years. KWG is also exploring for copper-zinc on its SFK JV described below.
Chromium (copper-zinc, copper-nickel-PGE); SFK JV
KWG Resources Inc. (KWG) and Spider Resources Inc. (Spider) are joint venture partners on the Freewest Resources Canada Inc. (Freewest) Option mining claims comprising 78 claim units (nominally 16 ha) in the McFauld's Lake area, contiguous with the western boundary of the Mcfaulds property under option to UC. Spider and KWG had earned a 50% interest in the 7 claims from Freewest by December 31, 2008. An amended agreement was signed September 14th, 2009. Under the Amended Option Agreement, Freewest has granted additional options to KWG and Spider under which each can earn an additional 5% undivided interest (10% in the aggregate) in the McFaulds joint venture property by incurring an additional $7.5 million in expenditures ($15 million in the aggregate) by March 31, 2012. Each of KWG and Spider can acquire: (i) an additional 1.5% interest in the McFaulds joint venture property by incurring $2.5 million in expenditures by March 31, 2010, which KWG and Spider have committed to spend; (ii) an additional 1.5% interest in the property by incurring an additional $2.5 million in expenditures by March 31, 2011; and (iii) an additional 2% interest in the property by incurring an additional $2.5 million in expenditures by March 31, 2012. If either KWG or Spider elects not to exercise any portion of its option under the Amended Option Agreement, the other has the right to exercise the option in its place.
Alternatively, if one or more of the optionees incurs at least $5 million in expenditures and delivers a positive feasibility study to the two other parties on or before March 31, 2012, such optionee or optionees, as the case may be, will be deemed to have earned the aggregate 10% interest in the McFaulds joint venture property, notwithstanding that less than $15 million of expenditures were incurred prior to that date. Any decision to undertake a positive feasibility study must be made by the operator of the McFaulds joint venture project, who must notify Freewest of any such decision on or before March 31, 2011.
The Amended Option Agreement further provides that KWG and Spider will alternate as operator of the McFaulds joint venture project for one-year terms, until March 31, 2012, with Spider acting as initial operator until March 31, 2010. The three parties will decide on the operator for the period after March 31, 2012 by way of majority vote.They also have an option to increase their combined stake by another 5% by arranging financing for Freewest to bring such mineralization into commercial production. The alliance amongst these three companies (Spider, KWG and Freewest) is referred to as the SKF JV. Spider is currently the designated operator which may change in the new agreement and Billiken Management Services Inc. conducts the work at Spider's direction.
Exploration on this property was initially focused on copper-zinc volcanogenic massive sulphides, with increasing attention towards mafic intrusion hosted copper-nickel deposits subsequent to Noronts discovery of the Eagle One deposit in August 2007. Drilling EM conductors in 2008 resulted in the discovery of chromite (Big Daddy). The near simultaneous discoveries of chromite by Noront to the south (Blackbird), and Freewest to the north (Black Thor) dawned the realization of the existence of a world class chromite deposit. In addition, magmatic feeders near the base the host ultramafic intrusion to the chromite have become targets for copper-nickel-PGE deposits. The 2009 exploration program addresses all these target types, with particular attention at drilling the chromite such that a resource calculation may be initiated.