KWG Longs,

There appears to be plenty of thoughts, perspectives and opinions on the proposed Capital Reorganization. I have read the entire Notice and Management Circular and had it reviewed by a securities lawyer at one of the top law firms here in Toronto. Here’s what I’m happy to share. Even happier to see further comment, opinion and discussion:

1.The proposed Capital Reorganization will not necessarily cause or result in dilution. The exchange rate between the Multiple Voting Shares (“MVS”) and the Common Shares (“CS”) is set at a fixed rate of 1 to 300. Management always retains the right to issue more shares to raise additional capital so the threat of further dilution always exists and is not in anyway less or more likely under the proposed Capital Reorganization. However, it is erroneous to suggest that the proposed Capital Reorganization in and of itself will result in dilution.

2.Why does KWG need to do this now before a deal with China Rail is likely within the next 5 months? KWG is getting its house in order in anticipation of a deal with China Rail. Recall the deal is for funding to build a railway in exchange for ferrochrome. Even with a railway deal in hand, KWG still needs to secure financing to build a mine and a ferrochrome processing facility. They need to do this now because they are anticipating and planning for a deal in the coming months and will not have the luxury of waiting for the AGM in 2017. This is management thinking and planning ahead.

3.As Frank said in the cover memo accompanying the Notice of Meeting and Management Circular, like most junior exploration and mining companies, access to capital is often limited to retail investors. To gain access to the more important (longer term and deeper pockets) institutional investors, companies need to trade at certain levels. If the proposed Capital Reorganization goes through and institutions are able to provide another source of demand for KWG shares, we can reasonably expect appreciation in the share price given the fixed MVS to CS ratio.

4.Again, from Frank’s memo, there exists demand from large current shareholders for the option to buy our shares on margin. This would provide another avenue for demand again resulting in share price appreciation given the fixed MVS to CS ratio.

5.Inherent in the acquisition of shares in any organization is the trust in and respect for management that the investor demonstrates. By most measures, Gravelle has been entirely useless in moving the ROF file forward. With a billion dollars in unspent infrastructure dollars, Frank architects a deal with China Rail to fund a railway to access the ROF. Cliffs needed all sorts of government subsidies for electric power to process the chromite. Frank furthers a novel and proprietary process for processing chrome using cheap and plentiful natural gas. Last, no deal exists between the government and our First Nations as both sides continue to talk. Frank comes out of left field with a partnership agreement that is inclusive, meaningful and attractive to our First Nations. While I would never suggest pure and unchecked blind trust of any management team, I think most of us on this board can reasonably see a pattern of behavior, decision-making, innovation and skillful management in the KWG team. I happen to think that this proposed Capital Reorganization is a small part of something bigger that we will understand and better appreciate in the near future.

6.When investing, I always look at the shares owned by management and the incentives facing the members of management. I own 3m shares of KWG. According to page 3 of the Management Circular, Frank owns almost 24m shares. As a result of the proposed Capital Reorganization, if any undesirable results occur such as dilution/share depreciation, etc., Frank is going to take it almost 8 times harder than I will. I sleep just fine knowing this multiplier exists to keep Frank’s personal interest aligned with mine.

7.In order to gain access to institutional investors to fund a mine and a ferrochrome processing facility to bring the China Rail deal to fruition and KWG to a meaningful revenue generating state, we need to get the share price far higher. The proposed Capital Reorganization is a creative and innovative solution to this problem with minimal disruption and threat to existing shareholders. I hate to suggest it, but the only other solution available to Frank would be a share consolidation. I have been through these numerous times and have only emerged in a profitable position less than 10% of the time. Don't complain about what you may have to accept down the road because of what you rejected today. You decide for yourself but I would take the proposed Capital Reorganization over a share consolidation any day of the week.

Do your due diligence, read the materials sent to you, ask lots of questions and make up your own mind what is best and vote accordingly.

Without reservation, I am voting my 3m shares in support of the proposed Capital Reorganization.

My best to all KWG longs,

Keep Digging